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What Comes After Neoliberalism?

Project Syndicate

June 4, 2024

The steep tariff increases on Chinese goods that US President Joe Biden’s administration recently announced are just the latest in a long string of interventionist economic policies that fly in the face of decades of neoliberal orthodoxy. And the Biden administration is hardly alone: a growing number of governments, economists, and institutions are rethinking the free-market doctrine to which they long subscribed.

The neoliberal era is not ending in the US, because over the long term, political success rests on a foundation of policy success, and the “post-neoliberal” policies embraced by Presidents Donald Trump and Joe Biden are not succeeding.

Trump broke with the bipartisan free-trade consensus to which his recent predecessors subscribed when he launched a trade war with China. The result was higher prices for consumers and fewer jobs for manufacturing workers. Lose-lose.

Biden has maintained and extended the Trump tariffs, and has embraced industrial policy to jumpstart domestic clean-energy innovation and semiconductor manufacturing. But substituting the judgment of politicians for the judgment of markets is meeting with predictable results: the US lacks the workforce needed to use these funds effectively. Moreover, other countries are retaliating, blunting the impact of the subsidies. The White House is tripping over itself, pursuing contradictory goals.

Biden’s $2 trillion economic stimulus, signed in March 2021, cast aside even a rhetorical commitment to fiscal responsibility. The inflation to which it contributed is a major headwind in his quest for re-election. Finally, Biden’s regulatory agenda rejects the consumer-welfare standard in competition policy in favor of a “big is bad” standard. This approach is chilling deal-making and persistently losing in courts.

The US is set to continue on this unproductive path, regardless of who wins the November election. Trump and Biden are trying to out-do each other on how high they can raise tariff rates, and one of Trump’s potential vice presidential picks argues that Federal Trade Commission Chair Lina Khan, responsible for antitrust enforcement, is the “best person” in the Biden administration. Meanwhile, Trump’s immigration proposals would cause severe economic damage.

These policy failures will have political consequences – not in 2024 apparently, but certainly in the coming years. Ironically, they will end up solidifying the consensus around the importance of free people and free markets.