In no other country has neoliberalism been more influential, and state interventionism more of a taboo topic, than in the US over the last 40 years. The US was arguably the country where neoliberal criticism of Keynesianism, celebration of the power of markets, and vilification of government was taken to its most extreme consequences. Ronald Reagan’s famous assertion that “government is not the solution to our problem; government is the problem” encapsulated a view of the state as an inefficient and wasteful machinery that had to be kept at bay to allow the flourishing of private initiative. This was followed on the centre-left by similar anti-statist views, as exemplified by Bill Clinton’s famous assertion that “the era of big government is over” in his 1996 State of the Union address. Yet, the succession of crises we have been experiencing over the last decade are seemingly leading to a departure from neoliberal dogma, that if anything is even more pronounced in the US than it is in Europe.
Donald Trump’s trade wars with China and Europe had already upset many well-ingrained assumptions about what constituted acceptable economic policy. This change of paradigm is becoming only more apparent as a consequence of the economic policies of Joe Biden that have comprised large public investment programmes worth trillions of dollars and a strong emphasis on industrial policy, as seen with the recently approved CHIPS and Science Act, which aims to make the US a centre for the production of semiconductors, thus reducing the country’s reliance on East Asia and Taiwan for this strategic material. These various trends demonstrate that the faith in globalisation and the superior wisdom of markets that marked the neoliberal era are fading away and something new is afoot. But what kind of new paradigm is emerging? To address this question, we sat down with Felicia Wong, the President and CEO of the Roosevelt Institute, which has helped lead in this transition in policymaking in the US. As Wong highlights, “pure neoliberalism has lost its sway. But the new paradigm is still something that we're fighting our way toward”, as a major political and ideological struggle is developing between the left and the right in the direction of the post-neoliberal world.
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Paolo Gerbaudo.- In 2020 you wrote an influential landscape analysis arguing that we were witnessing a departure from neoliberal dogma. Could you explain why you think neoliberalism is gone?
Felicia Wong.- Neoliberalism criticises the government's role in the economy. For neoliberals, many tools of government are illegitimate, to be used only in case of emergency or for purposes of national security. But now, there is a wave in the opposite direction that is making direct government action—both investment and rule-making—a more normal part of managing the economy.
At the Roosevelt Institute, we have made the case for at least the last eight years that politics should reclaim all of the tools of government: from taxation to industrial policy, infrastructure and planning. For reasons of both scale and speed, many challenges of our time require affirmative government action: decarbonizing our economy and fighting climate change; creating greater race equity, gender equity, and wealth equity; building up stronger American manufacturing infrastructure. This bolder and more robust role for government goes against the neoliberal thinking of the 1980s onward, andI think that Americans and American mainstream politics have increasingly embraced the need for it.
At any rate, we have departed from the old Reagan playbook and even the old Clinton playbook. The libertarian, small government, low-taxes component of neoliberalism has lost much of its explanatory power and its policy dominance, though it remains standard in how many people think the economy works. Now, we need to make sure that the government really works in the public interest and that it is democratic.
P.G.- What are the reasons for neoliberalism’s decline? And is it really its end?
F.W.- Neoliberalism is no longer hegemonic in American politics, to a large extent because of its failures: bad economic indicators, rampant inequality, and obvious corporate excesses.
It is true that many elements of neoliberalism persist, because they are rooted in existing economic and power relations. Neoliberalism has allowed for the growth of mega-corporations with outsized market power in sectors like technology, pharmaceuticals, agriculture, and retail, and their power is very hard to rein in.
But in policy debates, the change is very evident: there is a strong push for economic policies that focus on greater equality and resilience. And attitudes toward globalisation have changed substantially: as Rana Foroohar says in her recent book Homecoming, we are heading toward a world that is more local and less globalised, and where more importance is given to creating resilient local economies, rather than offshoring jobs to countries with low wages.
P.G- To what extent is this change in political common sense a result of the Roosevelt Institute’s work?
F.W.- I think our work has had an impact, though of course there are many other factors. The Roosevelt Institute has grown a lot. We have been at the forefront of arguments for 'industrial policy', made economic arguments in support of a Green New Deal, and for a decade have made the economic case for more worker power and less extractive financial and corporate power. Both in terms of budget and staff, we're now five times the size we were when I started. Most importantly, many Roosevelt ideas have become ascendant, but that's certainly not because of the Roosevelt Institute alone. It’s more of a collective transformation. There are many other think tanks that have done work in this area.
We are relatively small; our budget is one-tenth the size of larger organisations. But we have found a strategic niche in what we describe as 'paradigm-shifting'. We bring together economists, political scientists, and communication experts to think about long-term transformation and the policies and ideas that are needed for that.
External conditions have contributed to this shift too. The Covid crisis and, before that, the low-growth recovery from the 2008 crisis have shown that the old economic thinking wasn’t working. In a way, Donald Trump’s presidency, with its breaking of the old neoliberal rules on trade and deficit, showed that a change in paradigm was possible. On the left, figures like Bernie Sanders and Elizabeth Warren have pushed for economic policy and paradigm change. Our work at Roosevelt complements that thinking, by conducting policy research and developing political visions in the long term, something politicians often lack resources to conduct.
P.G.- What is neoliberal consensus being substituted by?
F.W.- While the decline of neoliberalism is quite clear, what comes next is uncertain. The big question is whether the new paradigm will be more egalitarian, more progressive, and more inclusive or not. There's one version of the story that ends with a real sort of right-wing ethnonationalism, where instead of neoliberalism we are plunged into a hard-line conservatism. The risk is a kind of autocratic, authoritarian, or perhaps even fascist alternative to neoliberalism.
But that is not the only possible scenario. There is also a progressive and inclusive way out of the current impasse, and that is what progressives in the US have been fighting for, and what Biden has partly advanced.
P.G.- One of the levels where the change away from neoliberal wisdom seems to be most evident is in the context of industrial and commercial policy. How significant do you consider Biden’s actions in this area?
F.W.- Developing an industrial strategy has been a key objective of the Biden administration, and has been central in the legislation passed in the last two years. The administration’s policies have been focused on the supply side and the workers who are part of that supply side.
Some of these policies are aimed at stabilising the labour market, which is an essential step for pursuing an industrial strategy. Others are focusing on infrastructure, in which $1.2 trillion has been invested, and others still are targeting technology and strategic technological components. Perhaps the most notable example of that is the CHIPS and Science Act, which is a $250 billion investment in semiconductors and in basic research. The Biden administration has also launched measures aimed at developing our capacity in green manufacturing, covering everything from heat pumps to wind turbines to solar panels, though obviously electric vehicles get a lot of attention.
The government is thus taking a leading role in strengthening parts of the supply chain and our ability to build things in areas where the market hasn't been able to provide.
P.G.- Often these policies are also presented as having a social element. But to what extent is this reshoring strategy going to contribute to the economic improvement of impoverished former industrial regions in the US?
F.W.- If you look at the details of these laws, they call for building in regions of the United States that since the 1980s have really been decimated, the so-called Rust Belt of the Midwest and Northeast. The idea is getting manufacturing and jobs and infrastructure and broadband to these regions of the country.
The CHIPS bill calls for around 20 different regional hubs for semiconductor manufacturing, which at the moment happens to be almost 80% in Asia, east Asia, and in particular Taiwan. That's going to be very challenging to do, and much depends on policy design. But there is a real opportunity for communities and workers to benefit from this shift in policy.
P.G.- The Republicans are seen as likely winners of the midterm elections. Could this stop the move away from neoliberalism you are describing?
F.W.- If Republicans win one or both houses, it will certainly be extremely difficult for Democrats to do anything further legislatively. Some also claim that the Democrats have not done enough during their period in power. However, what is often overlooked is that the current Democratic coalition goes from people like AOC to people like Joe Manchin, and its majority is very narrow.
When Franklin Delano Roosevelt and Lyndon B. Johnson created the New Deal and the Great Society, they had something like 70% majorities in Congress. Right now, the Senate is almost evenly split, and that is why it has been so difficult and time-consuming to pass legislation. If Republicans win in the midterms, things will certainly get more difficult for the progressive economic agenda.
But I don’t think there will be a complete reversal of this post-neoliberal turn. The investment plans of the Biden administration have already been approved and money allocated: it only remains to be spent. Much of the attention now needs to turn to how we are going to implement the legislation that we have already passed. The policy design problem and the actual impact of this legislation have barely started.
P.G.- You have often emphasised that redistributive policies need to be accompanied by the development of democratic institutions. What do you mean by that, and why do you think that it is so important?
F.W.- There is no social justice without democracy. We need to involve citizens and workers in the decisions that are affecting them.
Regarding infrastructure projects, we need to make people part of the planning process. Any building project requires reconciling competing interests. The risk is that we repeat the mistakes made in the past with infrastructure projects that often badly affected working-class and Black communities, leading to segregation and exclusion. To avoid this, communities need to be affirmatively involved in the planning process. This is not easy, but we must manage these products differently in the future than we have in the past.
It’s also important to bring more democracy to the workplace. We are seeing a huge wave of unionisation, and unions are more popular now than they've been in the last 75 years. We need to make sure that workers are not just given better wages but also a say in their working conditions, on their schedule, and in things like workplace safety. Only by doing that can we make sure that the post-neoliberal world is more socially just and more democratic, and that people see that the government is theirs.
