The new economic paradigm becomes dominant when its former opponents also begin to observe the world using new optics. The Keynesian welfare state was at one time supported by conservative politicians as much as leftists. Key elements of the Keynesian paradigm - market regulation, redistribution, social security and countercyclical macroeconomic policy measures - were implemented in the United States by Republican presidents Dwight Eisenhower and Richard Nixon, working on social protection programs and appropriate labor regulations.
It was similar with neoliberalism. The first incentives were given by economists and politicians - Milton Friedman, Ronald Reagan, Margaret Thatcher - known for advocating for market deregulation. But the new paradigm only became dominant when it was embraced by centre-left politicians such as Bill Clinton and Tony Blair, who internalized most of the neoliberal economic teaching. They have implemented deregulation, financialization and hyper-globalization, with lightly given promises that the resulting problems of inequality and economic insecurity will somehow be solved.
We are now in the process of leaving neoliberalism, but it is not yet certain what will replace it. The absence of a clearly defined new paradigm does not have to be a bad thing. We do not need another economic orthodoxy with ready-made solutions for every problem and ready-made projects for all countries and all regions regardless of their different situations and needs.
But every economic policy must have a vision that can unite people. History teaches us that the vacuum created by the retreat of neoliberalism will be filled by a new paradigm and that this new paradigm will need support from all parts of the political spectrum. Given the degree of political polarization in today's world, it may seem to us that this is no longer possible. But signs of convergence are already visible.
It is possible that a new political consensus will develop around the concept of "productivism," an idea that emphasizes the need to disseminate productive economic opportunities across all regions and segments of the workforce. Productivism, in contrast to neoliberalism, foresees an important role for the state and civil society, has less trust in market mechanisms and is suspicious of large corporations. Productivism prioritizes production and investments over finance and the revitalization of local communities over globalization.
Productivism also moves away from the Keynesian welfare state, as it relies less on redistribution, social transfers and macroeconomic management, and more on supply-side interventions to create good jobs for all. Productivism differs from both previous paradigms in its skepticism towards technocrats and less pronounced hostility towards economic populism.
The rhetoric and some of the policies of the President of the United States, Joe Biden, contain many of these elements. For example, embracing industrial policies aimed at a green transition, rebuilding domestic supply chains with incentives to create good jobs in the country, blaming inflation on the profits of large corporations and refusing (at least for now) to lift trade tariffs against China imposed by the former President Donald Trump. When the current administration's top economist, Janet Yellen, talks about the good sides of bringing manufacturing facilities back to friendly countries, it's clear that times are changing.
Such a way of thinking is also found on the right. Alarmed by the rise of China, Republicans have joined with Democrats in demanding investment and innovation policies to boost manufacturing in the United States. Senator Marco Rubio, a former and likely future presidential candidate, advocates for industrial policies that provide financial, marketing and technological assistance to small businesses and manufacturers in the advanced technology sector. "If the most efficient market outcomes are bad for our people," Rubio said, "then we need industrial policies that work for the common good."
Many leftists agree. The chief architect of Trump's trade policy toward China, Robert Lighthizer, has won many admirers among progressives for his tough stances on the World Trade Organization. Robert Kuttner, one of the leading voices on the left, notes that Lighthizer's views on trade, industrial policies and economic nationalism are "more like progressive Democrats."
The Niskanen Center, named after the libertarian economist William Niskanen (a top adviser to Reagan), introduced the idea of "state capacity" as one of the pillars of its teaching, thus emphasizing the importance of the state's ability to provide public goods necessary for the development of a healthy economy. Oren Cass, an adviser to Republican Mitt Romney in the 2008 and 2012 presidential campaigns and a senior fellow at the neoliberal Manhattan Institute, also criticizes financialized capitalism and advocates for the return of supply chains to local communities.
Likewise, Patrick Deneen, one of the leading intellectuals of the American "populist right", is looking for "policies that work in favor of workers" and "state incentives for domestic production". During a recent interview, New York Times reporter Ezra Klein noted that "it's unusual how close his views are to the current agenda of the Democratic Party."
Traveling across America in their single-engine plane to investigate local economic development, James and Deborah Fallows concluded that pragmatism pushes political divisions into the background when it is necessary to encourage development, create new jobs, and build public-private partnerships. Faced with economic decline and job losses, local politicians readily team up with representatives of local communities, entrepreneurs and others to try something new. Their political affiliation has little bearing on what they will be willing to do.
Can such a crossing of ideas and cooperation between parties really produce a new economic paradigm? We don't know that yet. Republicans and Democrats are deeply divided over a range of social and cultural issues such as abortion rights and race and gender issues. Many Republicans, including prominent figures like Rubio, have not distanced themselves from Trump and the threat he poses to American democracy. Also, there is always the danger that the "new" industrial policies jointly supported by conservatives and progressives will lose momentum or be reduced to familiar measures of the past.
However, there are indications that a major reorganization of the broadest framework of economic policies is underway, focused on production, work and local, instead of finance, consumption and global. It is possible that productivism will develop into a new model of economic policies capable of attracting and reconciling irreconcilable political opponents.
(Project Syndicate; Peščanik.net; translation: Đ. Tomić)
Bonus video:
