Learning the Right Lessons from US Economic Experimentation
In one policy area after another – from trade to taxation to labor markets – the decades-old consensus in the United States has been replaced with something very different. But policymakers elsewhere would be wise to consider their own countries’ circumstances carefully before following America’s lead.
CAMBRIDGE – The economic-policy conversation in the United States has been thoroughly transformed within the space of just a few years. Neoliberalism, the Washington Consensus, market fundamentalism – call it whatever you want – has been replaced with something very different.
In macroeconomic policy, debt and inflation fears have given way to a preference for over-stimulating the economy and downplaying the risks to price stability. As for taxation, the tacit acquiescence in a global race to the bottom is out, and establishing a global minimum rate for multinational corporations is in. Industrial policy, which could not even be mentioned in polite company until recently, is back with a vengeance.
The list goes on. Whereas the buzzwords in labor-market policy used to be deregulation and flexibility, now the talk is all about good jobs, redressing imbalances in bargaining power, and empowering workers and unions. Big Tech and platform companies used to be viewed as a source of innovation and consumer benefits; now they are monopolies that need to be regulated and possibly broken up. Trade policy was all about the global division of labor and seeking efficiency; now it is about resilience and safeguarding domestic supply chains.