Sunday, September 10, 2023

Good jobs and Bidenomics

Recent talk about “Bidenomics” suggests that there are new developments in economic ideas, even beyond the fate of US politics. These new ideas are the result of the re-evaluation of the role of governments, markets and firms after the global financial crisis, Covid-19 and the war in Ukraine.

The new ideas (sometimes a new insistence on old but useful ones) include pro-labor and not anti-labor use of technology, participation of workers in governance, decentralized organizations, new antitrust policy, public investment and subsidies in climate friendly technologies that complement private investment, and others.

Some have talked of a return of old-fashioned industrial policy, but economist Dani Rodrik recent paper “On productivism” shows that ideas about the promotion of “good jobs” go clearly beyond that. 

Rodrik analyzes how the replacement of the neoliberal paradigm in economic thought with a new one, which he calls "productivism," should occur. These "paradigms" have the advantage that they allow ideas and actions to be oriented, but they have the disadvantage that they can cause excess rigidity and lack of adaptation of the recipes to local circumstances. 

In any case, the author considers that the void left after the decline of neoliberalism (which in turn replaced Keynesianism) will be filled by new paradigms, both whether you want or not, and that is why it is necessary to participate in the debate about what strong ideas should be tried to be introduced. To do this, he proposes the concept of "productivism." as a flexible paradigm that must be adapted to local circumstances. This proposal differs from neoliberalism in that it gives an important role to the state (and civil society) in achieving economic opportunities for all territories and all segments of the workforce, acting directly on the supply side to combat some of the scourges of today's world, such as inequality or climate change.

Productivism would consist of prioritizing interventions in the production phase in the companies, in close cooperation with them, aimed at creating "good jobs". If until now public intervention to improve the well-being of the population had prioritized redistributive policies (taxes and the welfare state), accepting the jobs created by the market, now it would be a matter of intervening directly so that quality jobs are created. Companies should "internalize" the impact of their decisions on the well-being of the entire population, without assuming that increases in productivity will be automatically distributed throughout the economic system as a whole.

Rodrik understands good jobs as those that provide reasonably high salaries as a safe path to the middle class and a good standard of living (to avoid “economic dualism”), job stability and promotion possibilities, generating positive externalities with local communities. Promotion policies of good jobs would be developed through coordination between business and the public sector to generate economic opportunities throughout the territory.

These quality jobs should not be restricted to large companies, but should be a priority especially for small and medium-sized ones. Productivism would focus on actions with a medium impact on productivity, to avoid the «emptying» of the intermediate parts of the labor force, which would be complementary to other existing interventions, such as investments in education and training or tax incentives to the companies.

The author points out that the policies he proposes are in line with the proposals by MIT economist Daron Acemoglu (recently collected in the book published with political scientist Simon Johnson, Power and Progress), in the sense of promoting technologies that "increase" rather than "decrease" work. There is a risk that new technologies, such as artificial intelligence, greatly increase the creation of wealth, but that this is compatible with the impoverishment of workers, as has happened with other technological changes in history when they have not gone accompanied by institutional changes that promote the general interest and redistribution.

This paradigm shift should be accompanied by an improvement and adaptation of the capacities of the public sector, to guide labor, regional and industrial policies (which should be more based on the services of small and medium-sized companies than in the manufactures of the great «national champions») in the direction of much greater coordination with the productive structures. The internalization of externalities by companies would be part of the system of governance, and not simply a form of corporate social responsibility, and the boundary between growth policies and social policies would be diluted. 

It is clearly too soon to evaluate the real impact of these ideas, but we must pay attention, because they are being very influential in the largest economy.

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