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The View
OpinionComment
Dani Rodrik
Dani Rodrik

Why Biden is right to depart from decades-old Western economic orthodoxy

  • The ideas dominant since the 1980s produced highly financialised, unequal and unstable economies
  • The Biden administration has launched an overdue economic transformation. The point is not to create the next ossified orthodoxy, but to learn to adapt policies

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US President Joe Biden speaks in Pittsburgh, Pennsylvania, on March 31. Biden’s American Rescue Plan, American Jobs Plan and American Families Plan add up to trillions in government spending. Photo: AFP
Dani Rodrik

Neoliberalism is dead. Or perhaps it remains very much alive. Pundits have been calling it both ways these days. But either way, it is hard to deny that something new is afoot in the world of economic policy.

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US President Joe Biden has called for a vast expansion of government spending on social programmes, infrastructure, and the transition to a green economy. He wants to use government procurement to rebuild domestic supply chains and bring manufacturing jobs back to the United States.
His Treasury Secretary, Janet Yellen, is pushing for a globally coordinated increase in corporate taxes. Jerome Powell, chair of the Federal Reserve, traditionally the most hawkish arm of government on price stability, is playing down inflation fears and lending his support to fiscal expansion.

All of these policy changes represent a sharp departure from the conventional wisdom in Washington. Do they also augur a new economic policy paradigm?

Economic policies in the US, and the West more broadly, have long been in need of overhaul. The ideas dominant since the 1980s – variously called the Washington Consensus, market fundamentalism or neoliberalism – originally gained traction because of the perceived failures of Keynesianism and excessive government regulation.

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But they took on a life of their own and produced highly financialised, unequal and unstable economies that were unequipped to cope with today’s most significant challenges: climate change, social inclusion and disruptive new technologies.
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