Biden-Sullivan economics is not a one-off; just ask the Australians
The global turn toward more radical pro-market economics announced itself loudly and unapologetically in the 1980s. The 2020s are witnessing a similarly sharp swing in a new direction, but you hear few fiery ideological proclamations and little talk of a “revolution.”
The new economics stresses active government intervention in the economy, green transformations and large-scale public investment, but its champions avoid philosophical lightning bolts. They prefer highlighting specific goals: better-paying jobs and less carbon, restored manufacturing strength and improved public amenities. The idea tries to sell itself in practice by underselling itself in theory.
But it is no less of a breakthrough. If the 1980s shift was visible across many democracies, Margaret Thatcher’s Britain and Ronald Reagan’s U.S. especially, the same can be said of the new state activism. It is at the heart of “Bidenomics” but also central to the politics of Britain’s opposition leader, Keir Starmer and Australia’s Labor prime minister, Anthony Albanese.
Advocates of the new interventionism sometimes take on the old orthodoxy directly. President Biden enthusiastically attacks “trickle down” economics and preaches a “middle-out” and “bottom-up” approach in its place.
But at least as often, they make times-havechanged arguments focused on new climate challenges, supply chain defects that emerged from the pandemic and the sharpening rivalry with China. They also stress that economic growth since the 1980s has stranded many regions once dependent on manufacturing.
This softer case is especially important in Australia, which profited mightily from 1980s-era freetrade policies.
Australian Treasurer
Jim Chalmers, who occupies what is effectively the No. 2 job in Albanese’s government, stressed in an interview that by the 1980s, Australia had become “this inward-looking, stagnant, underperforming economy” and that his predecessors “needed to open it up to make it more competitive and to subject it to the opportunities of the region and the world beyond.”
But that was then.
“You can’t just retrofit the same 1980s solutions onto the problems of the 2020s,” he told me during the annual meeting of the Australian American Leadership Dialogue in Canberra. Describing the turn toward more pointed government engagement in economic decision-making, he said, “It’s not populism. It’s not liberalism. It’s pragmatism.”
“What people are working out is: Where do our countries fit in this new environment? And how do we learn from not just the last two years of inflation, but the last two decades of vulnerability?”
In a declaration that could have been part of Biden’s speech last week celebrating investments spurred by the Inflation Reduction Act, Chalmers added: “If our economic policy doesn’t deliver a more inclusive, a more cohesive society, then we’re not doing it right . ... A lot of the pressures that we’ve seen build in our democracies — and not just our economies — have been a function of people feeling left out and left behind.”
What’s striking is that the conservative response to the policies laid out by Biden and Jake Sullivan, his national security adviser, is decidedly mixed. Economic nationalists can see echoes of their own priorities in his tough stance toward China and skepticism of a purely free-trade regime. The Economist noted recently that the “angriest critiques of global capitalism come increasingly from the populist right.”
But the new interventionism’s growing influence has also inspired forceful critique from free-market conservatives. Robert B. Zoellick, a veteran of four Republican, warns of the dangers of abandoning the 1980s and 1990s consensus in favor of Biden’s embrace of “subsidies and protection.”
It’s clearly not the Reagan-Thatcher era anymore, nor is it the period of center-left accommodation to those leaders’ market doctrines under President Bill Clinton and British Prime Minister Tony Blair. The policy vibe points to at least partial conservative acquiescence to aspects of the Biden-Sullivan model.
History now acknowledges the “Reagan revolution.” It might come to do the same with Biden’s.