In a new Foreign Affairs piece where he makes the case for the Biden administration's approach to foreign policy, National Security Advisor Jake Sullivan talks up what he sees as the good things that were happening in U.S. economic policy in the 1950s through the 1970s, and laments how we later moved away from these policies:
The United States has reached the third phase of the global role it assumed following World War II. In the first phase, the Truman administration laid the foundation of American power to accomplish two objectives: strengthening democracies and democratic cooperation and containing the Soviet Union. This strategy, carried on by subsequent presidents, included a comprehensive effort to invest in American industry, especially in new technologies, from the 1950s to the 1970s. This commitment to national strength through industrial investment began to erode in the 1980s, and there was little perceived need for it after the Cold War.
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In the decades following World War II, the [United States] had pursued a policy of bold public investment, including in R & D and in strategic sectors. That strategy underpinned its economic success, but over time, the United States moved away from it. The U.S. government designed trade policies and a tax code that placed insufficient focus on both American workers and the planet. In the exuberance at “the end of history,” many observers asserted that geopolitical rivalries would give way to economic integration, and most believed that new countries brought into the international economic system would adjust their policies to play by the rules. As a result, the U.S. economy developed worrying vulnerabilities.
What I think would be useful here is a comparison of (1) what Sullivan had in mind in terms of 195os-1970s economic policy related to investing in new technologies with (2) what the Biden administration is doing today. But Sullivan didn't provide any citations that explain what he had in mind, so doing the comparison is difficult. I'm on a White House email list that sent around the Sullivan article, but when I asked them to clarify what he was thinking of from the 1950s-1970s, they didn't have any details. When I reached out to other trade experts, I got answers such as: "My guess is that it's the Civil-mil stuff" and "Fairly heavy govt share of fundamental RD?" Along these lines, the following articles may be the kind of thing that people in the Biden administration are thinking of here: America, Jump-started: World War II R&D and the Takeoff of the U.S. Innovation System and Moonshot: Public R&D and Growth. Assuming they are, then I have questions about whether these examples provide support for current economic policies such as the CHIPS Act and the IRA. The 1950s policies seem much less directed at specific companies or products, and instead are more about R & D related to broader objectives (find a way to get to the moon!). And, of course, there's also the issue of what other uses that money might have been put to rather than the actual uses. Presumably the money would not have been hidden in mattresses, but it's hard to know what the counterfactual is for the technologies that might have been developed if the government hadn't focused investment on these particular ones.
There are some other considerations here as well. For people who think fondly of the U.S. economy in the 1950s-1970s, there are a couple important things to keep in mind. First, the economy and society generally were wildly unequal due to discrimination based on race and gender. There are people today who try to portray things as more equal back then, and that may have been true in some sense for a few people within specific categories (I think it's clear what categories I mean here, but I can elaborate in the comments if needed). But if you are only looking at those categories, you are missing a lot about society back then. When people look back on this time as one of "national strength," I think they are not being realistic about what the economy and life were like during this period.
Second, the U.S. economy benefitted significantly from the impact of WWII on its main economic competitors in Europe and Japan. The 1950s were an anomalous situation that couldn't last, and there's no going back to those unique circumstances. Looking ahead, the U.S. will always have serious economic competition across all sectors of the economy, and policymakers are going to have to accept the reality that they can't bring back the era of weak foreign competition that we saw in the 1950s.
With regard to 1950s trade policy, there are some points that critics of pre-Trump U.S. trade policy may want to keep in mind about the 1950s. First, this was the beginning of multilateralism in international trade relations. The GATT was created in 1948, and the U.S. agreed to Japan's accession to the GATT in 1955. Also of importance here was that Congress did not agree to the International Trade Organization, which would have added provisions on labor and restrictive business practices to international economic rules, showing that there were limits to the broader international economic regulation that some were pushing for. Instead of this broader approach, the 1950s saw the rise of an international economic policy with a focus on multilateral trade liberalization. Now, I'm fine with that focus, but for those on the American left that want to go back to the 1950s, I wonder what exactly they have in mind in terms of international trade rules, because the actual trade rules of that time are not necessarily consistent with what some are pushing today.
Also on trade policy, the 1950s-1970s period was a more flexible and accommodating one in the area of anti-dumping/countervailing duties. It was the Trade Agreements Act of 1979 that led to the legalized, stricter AD/CVD regime. Again, I'm fine with the pre-1980 version of trade policy here, but for those who are nostalgic for the earlier period, they should be aware of how actual U.S. trade policy worked backed then.
Overall, Sullivan's piece fits nicely into my narrative that nostalgia is generally misguided, and people who promote it tend to gloss over a lot of the realities of the earlier era they say they want to go back to.
