For almost as long as I've been working in trade policy, Dani Rodrik has been pushing for more protectionism and industrial policy, less trade and globalization, and weaker international trade institutions. He calls his latest argument for this approach "productivism," and he recently wrote a short piece called "The New Productivism Paradigm?" in which he explains it as follows:
... a new bipartisan consensus may be emerging around “productivism,” which emphasizes the dissemination of productive economic opportunities throughout all regions and all segments of the labor force. Unlike neoliberalism, productivism gives governments and civil society a significant role in achieving that goal. It puts less faith in markets, is suspicious of large corporations, and emphasizes production and investment over finance, and revitalizing local communities over globalization.
Here are a few criticisms of, and questions about, this perceived paradigm shift.
First, as with many people who don't like "neoliberalism," he is sure that neoliberalism is ending: "Today we are in the midst of a transition away from neoliberalism ... ." During neoliberalism, he explains, political leaders "pushed for deregulation, financialization, and hyper-globalization, while paying lip service to ameliorating the consequent rise in inequality and economic insecurity." I'll get back to the future of neoliberalism later, but for now let me just respond to two of these points:
1) "hyper-globalization": It's difficult to understand how the current international economic regime could be referred to as "hyper-globalization," given that protectionism has remained a constant around the world over the period in question and that international trade institutions have fairly weak enforcement mechanisms. It's true that there has been globalization in the sense of reduced trade barriers, but I would say it's "modest" rather than "hyper."
2) "economic insecurity": When exactly was "economic insecurity" less of a problem? The 1950s? Some other period? Whatever period people have in mind when they say things like this, I think they should look more closely at the realities of the period, as it was a lot less secure for most people than they are imagining. That includes people in the West, but applies even more clearly to people in developing countries.
Second, he says he wants fewer technocrats: "productivism diverges from both of its antecedents by reflecting greater skepticism toward technocrats." But he also wants "industrial policies to facilitate the green transition, rebuild domestic supply chains, and stimulate good jobs." Who will be running these programs if not technocrats? The reality is that Rodrik's preferred policies are likely to be, if I could borrow a term from above, "hyper"-technocratic.
Third, he seems to think "friend-shoring" is a new invention: "When the administration’s most senior economist, Secretary of the Treasury Janet Yellen, extols the virtues of “friend-shoring” – sourcing supplies from US allies – over the World Trade Organization, we know the times are changing." But haven't we been "friend-shoring" for quite a while now, since the beginning of the GATT even? Isn't that what all those regional trade agreements and bilateral FTAs are? To a great extent, these are trade agreements that governments sign with their friends to increase bilateral trade and investment with them.
Fourth, he wants more suspicion of big corporations, noting that the Biden administration is "blaming large corporate profits as a culprit behind inflation." And yet he also notes that "Republicans have made common cause with Democrats in pushing for investment and innovation policies to bolster US manufacturing." But what exactly will this "bolstering" look like? From what we have seen so far, a big part of it appears to be giving subsidies to big corporations in key sectors (such as semiconductors).
Fifth, it's not clear what he means by "localism": "there are signs of a major reorientation toward an economic-policy framework that is rooted in production, work, and localism instead of finance, consumerism, and globalism." With respect to the U.S., does that mean each state (or even city) will have its own industrial policy? And if not, isn't "nationalism" a better term?
And sixth, how do his ideas apply outside the U.S.? For example, is every country around the world supposed to use industrial policy to develop its own semiconductor industry? Or is the U.S. supposed to be the only producer and then supply everyone else?
I understand why people try to come up with a take on current events in which their preferred policies are suddenly about to sweep into power. We all want to believe that our views are catching on, and there may be a feeling that we can talk that outcome into existence. But if you look at the history of U.S. trade policy (Doug Irwin is always a good place to start!), it is clear that protectionism and industrial policy have always been there, and that recent calls for more protectionism and industrial policy are not that out of the ordinary. Back during the heart of "neoliberalism" in the 1980s and 1990s (as I accept the critics' paradigm for the sake of argument), people were writing things like "Trading Places: How We Are Giving Our Future To Japan & How To Reclaim It"; Pat Buchanan got a lot of mileage out of his version of America First; Ira Magaziner was pushing industrial policy in the Clinton administration; Ross Perot did surprisingly well as a third party presidential candidate talking about the "giant sucking sound" of jobs going to Mexico; and what was the TRIPS Agreement if not industrial policy?
So is there a big new era of economic policy coming, either in a new marketing package or just the old one? I'm skeptical, and I think the mostly likely future involves basically the same mix of markets and government intervention we have had for a while, with a few tweaks around the edges.
