For two generations, the neoliberal model of capitalism has rewarded Wall Street while liquidating the foundations of worker power and shared prosperity. While neoliberalism is often identified with the presidency of Ronald Reagan, Democratic leaders, too, implemented policies that led to financialization, ravaged manufacturing, and widened inequality. But over the past three years, the Biden administration has critiqued neoliberalism in words—recall National Security Adviser Jake Sullivan’s blistering jeremiad against the “Washington Consensus”—and in deeds. From unleashing antitrust czar Lina Khan to encouraging collective bargaining as no Democratic administration has done for decades, Democrats are finally attempting to rebuild an economy that serves the majority.
The centerpiece of the post-neoliberal turn among Democrats is industrial policy, as exemplified by the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, and the CHIPS and Science Act. Taken together, these measures represent a significant step toward restoring domestic manufacturing, while combating regional inequalities and boosting worker power via higher pre-tax wages (as opposed to means-tested post-tax assistance to lower-income Americans).
As the Roosevelt Institute, Employ America, and other left-leaning think tanks have underscored, the right kinds of industrial policies can help kickstart the green transition, while extending an olive branch to conservative-leaning industrial workers who have “dealigned” from the left and disaffiliated from the Democrats, and whom many progressives still view as critical to rebuilding a labor-oriented politics. More fundamentally, industrial policy can reintroduce central questions about what the American economy should be producing more of—and conversely, what it could use less of. In other words, it can help re-politicize the economy: the fundamental task set by the left for itself in the wake of the Great Recession.
These developments should encourage economic progressives. The emerging post-neoliberal era invites the left to think dialectically about the forces of development that have followed periods of stagnation and depression and that are again starting to change how and what we produce in the United States. By actively guiding new allocations of capital and labor, the American state has acknowledged populist grievances about the lack of good jobs across much of the country. In this way, the state is at the very least sanctioning the push-and-pull of democratic capitalism—and, most centrally, the “space” for labor to exert pressure on the wage bargain—to an extent not seen since the 1970s.
Yet a significant obstacle to serious engagement with the possibilities at hand has emerged within the left itself. A wide and influential segment of the left opposes industrial policy, denouncing Team Biden’s strategy as “imperialist Keynesianism,” “backward-facing,” and an accelerator of zero-sum global competition amid chronic “global overcapacity.” As opposition to neoliberal globalization comes to form the conventional wisdom in the center and even parts of the right, these progressives are resisting the transition to a new order.
Those who think about the process of building a socialist economy are themselves implicitly divided between alleviators and developmentalists. While there is considerable overlap between the two in terms of goals and rhetoric—both, in particular, want to expand programs that decommodify labor—their differences strike at the heart of contemporary leftism’s fraught orientation toward the future.
The alleviators emphasize social justice, posing in one way or another the question of how to undo capitalism’s “systemic harms.” Developmentalists, by contrast, scrutinize Whiggish notions of progress and conclude that, while much of what we have produced in the last 200 years is a remarkable feat of ingenuity and the division of labor, far more could have been achieved for human development were it not for capitalism’s irrationality, rentierism, and predations. From this perspective, even “pro-market” industrial policies are quasi-statist experiments that attest to the reality of market failure. What is needed, developmentalists hold, is more public debate about the desirability of “free enterprise” versus the potential of economic planning to solve problems.
“Industrial policy is at odds with the shibboleths of market fundamentalism.”
Industrial policy is at odds with the shibboleths of market fundamentalism, puncturing Econ 101 certainties that haven’t determined actually existing capitalism since the Industrial Revolution, if they ever did. It follows that the developmentalist left—a coalition of infrastructure-focused social democrats, advocates of clean-energy abundance, supporters of a “just transition” for industrial workers, and promethean socialists—views industrial policy more optimistically. Provided the state erects sufficient guardrails, they believe, development itself can be a mechanism of egalitarian distribution. Developmentalists, to be clear, usually prefer outright socialist control of the economy. Yet in contrast to the hard left and single-minded welfarists, developmentalists intuit that modern capitalism has a latent “socialist investment component” (to borrow a concept from the late historian Martin J. Sklar) that can be activated through public policy within the framework of market society.
The explanation may seem counterintuitive. Industrial policy looks like a “gift” to capital in the form of various subsidies. Yet large-scale industrial policy in a democracy quite deliberately counteracts capital’s liquidity preference, creating conditions in which more is at stake for capital, the state, and the communities targeted for reindustrialization. We are dealing with major new fixed investments worth billions of dollars intended to produce goods that need to be purchased for the express purpose of rehabilitating our industrial base and facilitating the clean-energy transition. Failure isn’t an option. Demand, accordingly, must rise sufficiently to keep output going. As a result, more businesses, workers, and government agencies at all levels are likely to be drawn into the energy transition, raising prospects for socially beneficial economic activity in once-stagnant areas.
This isn’t to exaggerate how auspicious current circumstances are, nor the reach of the Biden administration’s labor-friendly Federal Trade Commission and National Labor Relations Board. Industrial policy alone can only engender limited social transformation. The majority of investments spurred by President Biden’s industrial policies have so far gone to nonunion states, an uneasy compromise to boost conservative support for green industries that cuts against the administration’s efforts to strengthen collective bargaining in the private sector.
Still, pragmatic leftists would concur that stimulative developments that raise labor’s share of the social income, especially in poorer regions, are an improvement over an economy polarized between a shrinking pool of coveted professional jobs and low-wage, precarious jobs in food and retail services. While valuable and courageous, organizing drives at the likes of Amazon and Starbucks continue to struggle, and attempts to unionize similar businesses are barely fledgling. As the sociologist Vivek Chibber has shown, such sectors are structurally harder to unionize: The nature of the work, the geographic distribution of workers, and the political conditions they generate—all tend to militate against collective action. This leaves the emerging hybrid of the “old” and green economies and the corresponding changes in the overall service sector that industrial policy may trigger. Assuming that it is accompanied by an expansive fiscal policy and political pressure to maintain full employment, industrial policy is a gateway to rebuilding labor’s power, catalyzing many decades’ worth of deferred investment, and altering the sectoral composition of the economy to better meet collective human needs.
In other words, an overt industrial strategy creates new avenues for growth, as well as new terrains of contestation and bargaining between capital and labor. This isn’t just a theory. Consider the successful United Auto Workers strike: Facing extraordinarily high stakes, the union recently won concessions from the Big Three automakers. Going forward, all electric-vehicle battery production at GM will be placed under the firm’s national master agreement with UAW—no small feat, given GM’s plans to go all-electric by 2035. Although the UAW could have just as easily failed to achieve this breakthrough, the decision to fight now might not have been taken without the broader macroeconomic push to ramp up green manufacturing. A tantalizing new agreement in the solar industry that could advance sectoral bargaining also illustrates this dynamic. None of this is to suggest industrial policy guarantees positive outcomes for labor. But major historical case studies, such as federally funded plant openings during World War II, make it clear that these types of supply-based interventions can have profound effects on regional economic development and wage growth.
Skeptics counter that all these arguments rest on faulty, wishful reasoning. But it is clear there are dueling realisms at play in the debate. Following the Great Recession, the field of heterodox economics renewed left-wing interest in developmental states, including America’s own forgotten traditions of developmentalism. Charting a new path—electoral and economic—required more than espousing anti-capitalism against unaccountable transnational forces. If many in both the Global North and Global South had failed to become more secure through the neoliberal growth model, and if “free trade” in particular had largely suppressed labor and environmental standards in the developing world while hollowing out the working class in higher-income countries, then it was necessary to pursue a mélange of state-interventionist ideas, including industrial policy, that could successfully challenge the status quo.
“Leftists … have suddenly rediscovered an all-encompassing critique of state power.”
A certain dogmatism, by contrast, has shaded even the more well-founded critiques of our industrial-policy moment. Among those fixated on the flaws of Biden’s green industrial strategy, there is significant ideological pressure to affirm one’s “anti-capitalist” bona fides. The critiques span from the refrain that the IRA and related measures are a paltry substitute for a Green New Deal to remonstrances that industrial policy has instigated a Cold War with China, increasing the likelihood of yet more global conflict. (For avowed revolutionaries, we may surmise, even qualified support for industrial policy is beyond the pale, despite the fact that China’s phenomenal advance has been contingent on the Middle Kingdom’s own particular forms of developmentalism.) Long critical of the state’s withdrawal from the real economy and the tepid management of demand through debt-fueled consumption, leftists who cut their teeth denouncing austerity and disinvestment have suddenly rediscovered an all-encompassing critique of state power.
To be sure, many leftists chary of endorsing any aspect of Bidenomics rightly underscore that the IRA was stripped of the social spending contained in the Biden administration’s original Build Back Better plan. Principled criticism has nevertheless given way, at times, to a blinkered understanding of economic development and the fiscal multipliers that a national industrial strategy generates.
A recent Jacobin article, for example, contends that “Biden’s industrial policy is certain not only to disproportionately enrich capital, but to do so at the expense of workers and the broader public.” The authors are correct that current industrial policies lack direct mechanisms to discipline capital. Even so, notable shifts in trade policy and other conditionalities, such as project-labor agreements and “Made in America” requirements, are both coaxing and setting parameters for investment. More important, their argument unavoidably ignores the holistic benefits of a pump-priming energy transition. If achieved through a tight labor market, it will, in all likelihood, improve developmental indices for a working class that has suffered higher rates of disease, deaths of despair, drug addiction, excess pollution, and even declining literacy. The concern, then, isn’t so much the “expense” shouldered by the public—runaway defense contracts, rampant wage theft, and the yawning gap between CEO compensation and workers’ wages are among the more egregious problems the public ends up paying for—but the extent to which the societal benefits of green developmentalism will be maximized and perceived in the form of better jobs, stable communities, and improved health outcomes.
More generally, leftists tend to presuppose that efforts to stoke fixed investments that address various “supply-side” deficits—new factories, orders for machine tools and equipment, domestically sourced materials for infrastructure, innovation that surpasses personal tech, grid repair, housing construction, and so on—divert political energy away from urgently needed redistribution. If reformism is to be engaged at all, they reason, then the emphasis should be on expanding those social programs that stalwart liberals in Congress have defended since the 1980s and using progressive taxation to grow public employment and the care sectors. Targeted tax credits, tariffs, rules of origin, consumer rebates, and other stimuli and stipulations for enterprise: Surely this isn’t the stuff of economic planning, the thinking goes, let alone building American social democracy.
It is true that, from a socialist perspective, few of the conditions designed to foster industrial renewal are especially ideal. But this only underscores how much state capacity and industrial know-how were enervated by neoliberal governance. Whatever the deficiencies of “Bidenomics,” it has established national economic objectives beyond the order of anything seen since the end of the New Deal order. With few levers of political influence outside of culture and academia, the left should concentrate on the difficult but feasible task of organizing the workers who will be pulled into the energy transition and raising overall union density in the private sector—now at a dismal 6 percent of the workforce.
Yes, current industrial policies are bound to mint new millionaires—something no one on the developmentalist left is cheering on. In the real world, however, there are only so many options to build the green economy, repair our infrastructure, and overcome the inertia that accompanies regional polarization. A host of new capital expenditures—in goods that improve our quality of life while creating new pathways to organizing workers—beats another era of “gigification” for the many and asset inflation for the few.
Critics have suggested industrial policy lures leftists into becoming capitalists, rather than initiating changes in capitalism that wax the economy’s embedded, socialistic features. Developmentalists, the critics also charge, harbor goals that happen to overlap with national-security objectives (an inevitability, in fact, given that the Pentagon itself recognizes climate change as a threat to national security). The insinuation is that industrial policy is nothing more than the siren song of rank economic nationalism. Whether ostensibly for green purposes or not, industrial policy’s opponents warn, left-wing developmentalists are giving cover to great-power competition. From there, it is only a short distance to a total corruption of progressive values and intelligence.
Yet there is something else afoot that accounts for industrial policy’s chilly reception. Keen to persuade others that industrial policy is either mere smoke and mirrors or dangerous and reactionary, some leftists have ended up concurring with the likes of Lawrence Summers, who has similarly expressed alarm over Biden’s “nationalist” manufacturing agenda. The Marxist historian Robert Brenner’s theories of global overcapacity and a zero-growth horizon, readily taken for granted in certain quarters, have also dampened constructive engagement with anything that might concretely raise labor’s share of income and yield innovation long urged by practical climate activists. The Brennerite believe that excess capacity has become an inexorable feature of modern capitalism owing to the rise of too many advanced and emerging markets. It follows, they contend, that any industrial strategy recalling older forms of developmentalism will eventually crater under the weight of too much competition, too little demand, and too little profit for the very goods that are meant to hasten the energy transition. Put another way, these leftists ask: If China is now the factory of the world, why enact policies that heighten global competition, catalyze redundant R&D and output, and artificially sphere off critical supply chains from certain economic rivals, when they are only bound to bring about another massive crisis of the business cycle?
This line of thinking tends to dramatically limit the range of policies that might be put to social-democratic ends. Particularly when it comes to the actual people and terrain through which industrial policies are implemented—the municipalities, regional economies, and former reserve armies of nonmetro labor—material conditions as they are and how they might change disappear from view. Instead, conventional economistic reasoning, dressed up in obligatory rhetoric about the rapacity and ills of the imperial core, prevails. Meanwhile, anti-developmentalists ignore that one of the main obstacles to more global growth—besides a hawkish turn from the Federal Reserve—is China’s continued suppression of domestic demand.
“The most militant leftist critiques of industrial policy echo the libertarian right.”
More ironic still is how much the most militant leftist critiques of industrial policy echo the libertarian right’s complaint that it is but another iteration of “crony capitalism.” As their fiercest skeptics would have it, left-wing developmentalists are making peace with state capitalism for less than crumbs. In this formula, there is no appreciation for the state’s historical ability to incentivize and set boundaries for capital, nor any recognition that fully socialist industrial policies would be, in a very real sense, highly protectionist. At their most acidic, such arguments suggest that any attempted exit from “the End of History” is an interminable halfway house, just one more permutation of neoliberalism. And if not, many wager with gallows humor, then the new political economy will be worse than the old order—both domestically and for the world.
In truth, such judgments reflect a peculiar dissociation from the ideas and strategies than animated Bernie Sanders and European left populists such as Jeremy Corbyn and his then-Shadow Chancellor John McDonnell, Jean-Luc Mélenchon, Beppe Grillo and the Five-Star Movement, and Sahra Wagenknecht in the 2010s. While they attacked jet-setting plutocrats, financial institutions, and arrogant technocrats for the austerity that desiccated the aspirations of so many young people after the Great Recession, their proposals drew from the tool kit of democratic capitalism as constructed in the 20th century by social and Christian democrats, New Deal liberals, populists, and patrician reformers. Different points of emphasis aside, the goal of left populists was essentially twofold: to revitalize the welfare state in order to ameliorate depressed conditions; but also reignite economic opportunity—and thus worker agency—within a more solidaristic regulation of the private economy. Purchasing power had to be raised, but it had to be done within a new social infrastructure that, importantly, averted free trade’s further erosion of the industrial base.
More than three decades after the fall of the Berlin Wall, the state’s latent power to mold the economy—to compel both the private and public sectors to meet more “predistributive” ends—had to be reclaimed in order to tame a globalization gone awry. Any program that advocated expansionary, wage-led growth strongly implied, if not outlined, a revision to globalization that would rebuild or shield some manufacturing capacity while launching new domestic industries. Even if the economic agenda was tilted toward public ownership, public services, and care-led growth, facilities, infrastructure, and housing would still have to be built, and the materials to do so would have to be purchased.
Given the suffering and dysfunction wrought by deindustrialization, left populists reckoned that ambitious social investments had to be tied to more domestic production. The benefits, free from the exacting yet uncomplex rubric of mainstream economists, would outweigh the initial costs incurred by a departure from global economic integration. Indeed, if left populists were to sustain a convincing case against the liberal globalists, free-market conservatives, and C-suite types who had profited most from globalization, their plans had to involve more than simply improving benefits to make neoliberalism more bearable.
Left populism thus had a productivist streak that was either overlooked or misinterpreted as merely supplementing welfarist demands. As such, it was innately hostile to the gig economy and low-wage services not just because of rampant exploitation, but due to the lack of social utility generated by gig platforms, zero-hour contracts, and on-call employment. While proposals to democratize the economy included improving labor laws, supporting trade unions, and instituting worker representation in business decisions alongside “ownership funds,” there was a clear sense that further growth in gig, retail, and entry-level food service employment had to be contained as best as possible.
“Influential leftists … now seem reluctant to see the old order fall.”
A plausible counterweight to these symptoms of hyper-financialization had to envisage the use of mechanisms that diluted capital’s liquidity preference and nudged it into more productive forms of sunk costs. Bringing about political and market conditions that launched green manufacturing and massive infrastructure projects would facilitate this shift. The means of reindustrialization—whether via nationalization, higher taxes on the financial sector, or neo-dirigiste pressures upon capital—had to factor in disruptions to world trade. Regardless of how they were framed, this usually meant exploring quasi-protectionist ideas in lieu of explicit and more politically explosive calls for capital controls. Admittedly, left populists were usually reluctant to endorse things like subsidies and tariffs, given their political constituency and the need to be uniformly tough on business. Between the lines, however, there was a good deal of sympathy for economic patriotism, anchored by stronger social corporatist arrangements.
However scattered, the impact of these ideas on the Biden administration and mainstream economics should now be clear. For better or worse, a new synthesis of economic prescriptions—Keynesian and Hamiltonian, “statist” and “pro-market”—has emerged within the American establishment. But while forces from the labor left, “new center,” and protectionist right vie to shape the post-neoliberal transition, influential leftists, overwhelmingly concentrated in major global cities, now seem reluctant to see the old order fall. Instead, many who cheered left populists now accuse others who glimpse a new horizon of mistaken nostalgia for Fordism—of being, at heart, “nation-statists,” yearning for an order and security not befitting a left that is supposed to be resolutely cosmopolitan. But perhaps the conservatism they ascribe to the new developmentalists is a matter of projection. At a moment when history is finally moving forward, they may well end up neoliberalism’s last defenders.