US economy

Plans for a worker-led economy straddle divides


Donald Trump’s Make America Great Again slogan has never been about effecting any real change at home. It’s always been about punishing adversaries — even allies — via tariffs, both real and threatened. While Mr Trump’s ability to disrupt the status quo is singular, he has no idea how to create a sustainable, long-term growth model for the US. But a spate of Democratic 2020 candidates, and even some Republicans, have. They want to Make America Great Again too, via radical shifts in economic thinking that represent a 21st century industrial policy for the US.

Most notable among them is Elizabeth Warren, who last week announced her “plan for economic patriotism”. That phrase, along with her assertion that “the giant ‘American’ corporations who control our economy . . . have no loyalty or allegiance to America”, sounds like something that could come out of the president’s hawkish economic adviser Peter Navarro’s mouth. This is a calculated move — Democrats need to win back the red states hit hardest by globalisation.

But unlike the Trump camp, Ms Warren has a theory for how to create sustainable growth. She points out — correctly — that despite the pushback around state planning, which most Americans view as suspiciously “socialist”, it’s a myth that our government doesn’t make economic choices — they’ve simply made the wrong ones, choosing to support a debt-driven, two-speed economy rather than one that prioritises income and industry. As she puts it: “America chose to pursue a trade policy that prioritised the interests of capital over the interests of American workers. Germany, for example, chose a different path and participated in international trade while at the same time robustly — and successfully — supporting its domestic industries and its workers.”

Ms Warren believes, as do many conservative hawks, that you can’t compete with China by having an economy dominated by a handful of coastal innovators and hordes of lower-level workers. You need to make things in order to stay ahead on innovation, particularly when the internet of things and 5G is about to connect software, data and manufacturing in seismic new ways.

Her answer is to create a new “Department of Economic Development”, to “create and defend quality sustainable American jobs”. It would increase federal funding for core research, making sure that companies that benefit from it then manufacture in the US (particularly if they plan to sell to government); give taxpayers a cut of corporate profits that come from state funding; and better train the US workforce.

A shift to a worker-led economy, away from a consumer-led economy, defines the plan. Elements are being adopted or mirrored by other liberals like Joe Biden or Kirsten Gillibrand. But most surprising is the way in which Republican Marco Rubio — the senator from Florida who wants to be president someday — has come up with what is in some ways a very similar take on Making America Great. In May, he issued a report, in his capacity as chair of the Senate small business committee, on the challenges to capital investment in America, which crossed a number of red lines for Republicans. The report admitted that the US capital markets had become too self-serving and were no longer helping non-financial business, that prioritising shareholders above all should stop, and that public policy could play a role in directing capital to more productive places — away from Wall Street, and towards Main Street.

It’s a stunning document and says many things, not least that some Republicans are starting to bet on the idea that Trump may not survive his first term — some conservatives spoke out against tariffs on Mexico last week. The Rubio report reads very much like a potential candidate’s economic manifesto. But it also proves that even mainstream Republicans are beginning to question the trickle-down orthodoxy. Made in China 2025, Beijing’s manufacturing strategy, has made it clear to politicians on both sides that the US can no longer successfully compete with state-run capitalism unless it figures out how to funnel capital to the most productive places, connecting the dots between job creators and education.

That’s industrial policy, of course — it’s been a dirty word in the US for decades now. But it wasn’t always. As Cornell professor and legal scholar Robert Hockett, who has advised several presidential hopefuls, puts it: “All this represents a return to our own Hamiltonian development model, in which the public sector played a crucial coordinating role, empowering the private sector, and enabling its efforts not to be scattered, haphazard or wasted.”

Alexander Hamilton supported the creation of a national bank, and started a public-private partnership to provide cheap water-power and financial capital to investors in the early Republic. Subsequent administrations, from Lincoln to Roosevelt, Eisenhower and Kennedy, took pages out of his book. There will be differences in how Democrats and Republicans read it, particularly when it comes to issues like taxes and how to pay for infrastructure projects. But the idea that there might be a bipartisan way to Make America Great Again without alienating the rest of the world is the best news I’ve heard in some time.

rana.foroohar@ft.com



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.