The new rules of business in a post-neoliberal world

The Reagan-Thatcher revolution was born over 40 years ago. Taxes have been cut. Unions were crushed. Markets were deregulated and global capital was unleashed. But the economic pendulum is swinging. And in the last few weeks it’s become pretty clear that anything remotely related to the trickle down theory is now political kryptonite.

The most obvious example, of course, is the backlash against British Prime Minister Liz Truss’ bizarre plan to cut taxes on the wealthy after she announced big spending on energy subsidies. Trussonomics is now off the table and the Prime Minister’s own leadership is in jeopardy.

But not only Great Britain is facing the abyss of neoliberalism. I recently met a senior Biden administration official who told me that many CEOs are now coming to Washington asking for “a signal from the government – ​​where should we invest? Should we be in Vietnam or Mexico? In which sectors do you want us?”

While the administration is yet to identify winners and losers, the White House has already made the transition to a post-neoliberal era — and many in the business community are preparing for it as well. CEOs may not like the idea of ​​a deglobalized world with more regulation, greater government control, and a growing workforce. But they can usually find a way to make money as long as they understand the rules of the market.

So what are the new rules? The Biden administration recently released one clear blueprint of the economy it wants, which contained five key elements. One is worker empowerment, which it has endeavored to do by using federal budgets to support unionized workers. Another is to use as much fiscal policy as possible in a polarized Congress to empower working families in areas like health care and childcare that are increasingly unaffordable for many Americans.

But as Commerce Secretary Gina Raimondo told me a few months ago, governments should be about more than just tax cuts and wealth redistribution. This government wants to play a bigger role in directing the supply side of the private sector. Specifically, she wants to encourage the making of things, not just through the push to “buy American,” but through a more fundamental shift in policy focus from distribution to production.

That means industrial policy. And while there is still no fully articulated strategy in Washington, there are clear signs that laissez-faire economics is over.

One of them is the fact that many companies will soon have to choose between the US and China. Formal decoupling between the two countries is gaining momentum – there is a record number of American jobs being relocated out of China and calls for tougher rules on technology transfers.

Another reason is that resilience and redundancy are becoming increasingly important in critical supply chains. Just days ago, Micron became the second major company (after Intel) to announce a major semiconductor investment in the US, pouring $100 billion into a new foundry in upstate New York.

Government investment in electric vehicles is also bringing new jobs to beleaguered parts of the South and Midwest. While the strong dollar may thwart government hopes of developing a larger manufacturing and exporting economy, lower energy input costs in the US compared to Europe are currently a tailwind.

Support for economic “patriotism” is now the working principle on both sides of the political divide in Washington. Robert Lighthizer, former US trade representative under Donald Trump, was notoriously a fan of getting rid of America’s trade deficit. But recently, Democratic California Congressman Ro Khanna — a rising figure in progressive circles — called for the same thing, arguing for the US to achieve a trade surplus with the rest of the world by 2035.

As Khanna put it, “Trade deficits in some years are okay if they are offset by trade surpluses in other years. But the country has run a steady trade deficit since 1975. He believes the government should help rectify this by offering interest-free loans to factories and making more use of federal purchasing to fund markets.

I heard Khanna speak last week at the launch of “Reimagining the Economy,” a Harvard Kennedy School initiative led by economists Dani Rodrik and Gordon Hanson. It aims to replace neoliberal policy paradigms with something new, and is one of several such programs at major US universities. Many of these institutions are vying to become the epicenter of fresh economic thought, just as the University of Chicago was the epicenter of neoliberalism.

Summing up the challenge of the moment, Khanna said, “If we don’t fix the economy, we won’t have a multi-ethnic democracy.” This phrase itself represents something new — historically, the conversations between racial justice and class inequality have been separated in the US. But Democrats are increasingly trying to blend the two together as they work to find the contours of a post-neoliberal economy.

That was the subject of another major hoopla last week, sponsored by the Roosevelt Institute, at which progressive politicians (many from the administration) gathered to discuss the minutiae of American industrial policy. While these are not entirely clear, one thing is – all of this is the opposite of trickle-down.

rana.foroohar@ft.com

https://www.ft.com/content/e04bc664-04b2-4ef6-90f9-64e9c4c126aa The new rules of business in a post-neoliberal world

Adam Bradshaw

TheHitc is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehitc.com. The content will be deleted within 24 hours.

Related Articles

Back to top button