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An Industrial Policy for Good Jobs

So-called productive dualism is driving many contemporary ills in developed and developing countries alike: rising inequality and exclusion, loss of trust in governing elites, and growing electoral support for authoritarian populists. But much of the policy discussion today focuses on solutions that miss the true source of the problem.

CAMBRIDGE – In developed and developing countries alike, a combination of technological and economic forces has created a segment of advanced production, concentrated in metropolitan areas, that now co-exists with a mass of relatively less productive activities and communities. This productive dualism lies behind many contemporary ills: rising inequality and exclusion, loss of trust in governing elites, and growing electoral support for authoritarian populists. But much of the policy discussion today focuses on solutions that miss the true source of the problem.

For example, redistribution through taxes and fiscal transfers accepts the productive structure as given, and merely ameliorates the results through handouts. Likewise, investments in education, universal basic income, and social wealth funds seek to strengthen the workforce’s endowments, without ensuring that better endowments will be put to productive use. Meanwhile, job guarantees and Keynesian demand management offer little in the way of improving the mix of jobs.

To be sure, we need many of these policies. But they will work best – and in the long run perhaps only – with a new set of “productivist” measures that intervene directly in the real economy, targeting the expansion of productive employment.

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