Can the global economy be healed?

Now that many governments around the world have moved to protect industries they consider vital, and international institutions like the International Monetary Fund and the World Trade Organization have been sidelined, Rodrik believes it will largely be up to the United States and China, as the world’s two dominant economic powers, to define new rules for global trade after Trump is gone. He is particularly enthusiastic about China’s two-decade-long effort to promote renewable energy, which he says can serve as a model that can be applied in other countries, and in other sectors of the economy. Largely as a result of China’s technological advances, solar power is now so cheap that even a red state like Texas is rapidly expanding its solar capacity. Thanks to the growth of China’s electric car industry, which is now the world’s largest car market, cheap Chinese electric cars are exported to many other countries. “We have come much further in this direction” — the green transition — “than anyone thought was possible, and it has happened through a mechanism that no one expected,” Rodrik said.

In his book, he argues that the key to the success of China’s green energy initiative was the breadth of tools it used, and the flexibility with which they were applied. The Chinese government has provided EV startups with investment capital, subsidies, customized infrastructure, specialized training, and preferential access to raw materials. But instead of imposing a top-down production plan, it left many of the details to the companies. “The hallmark of Chinese development is the experimental approach,” writes Rodrik. “The national government sets broad targets. A variety of industrial policies are then rolled out across industries and locations, followed by close monitoring, iteration and review where needed.”

Rodrik also saw a lot to like in the Biden administration’s industrial policies, which aim to accelerate the green transition by offering subsidies, tax breaks and public support for industrial research. Trump is busy dismantling many of these policies. Roderick will support its restoration in the future. He also calls for countries, including the United States, to be allowed to use targeted tariffs to protect certain industries they consider vital, but insists it is wrong to focus solely on manufacturing, which employs less than ten percent of the US workforce. He claims that the real challenge lies in boosting wages in the huge services sector, which employs more than eighty percent of American workers. “Whether we like it or not, services will remain the main driver of jobs in the economy,” he says. Some service jobs, such as administrative jobs, are well paid, but many, especially in areas such as retail and care, are low-paid jobs. An inescapable conclusion follows: a good jobs economy depends critically on our ability to increase the productivity and quality of jobs in such services.

Roderick admits that there is no tried and tested formula for achieving this. The approach advocated by the Chinese model mimics the inclusion of government agencies at the national and local levels, as well as educational institutions, private companies, and workers. He supports efforts to organize service workers into labor unions, and discusses the possibility raised by Arin Dube, an economist at the University of Massachusetts, Amherst, to create wage boards to set minimum wages that vary across industries, occupations and locations. Citing the discrepancy between nurse practitioners, who earn a median annual salary of $126,000, and low-paid care workers, Roderick argues that training, technology and regulatory reform can play a big role — as can targeted scientific research.

It calls for the establishment of an equivalent for workers DARPAthe Pentagon agency that helped fund the development of the Internet, GPS, and the mRNA technologies used to make them Coronavirus disease-19 Vaccines. while DARPA “Focuses on research that potentially has military implications, as Roderick suggested.”ARPA“-W” will focus on developing “worker-friendly technologies,” including some that use artificial intelligence. Just as some observers predict that AI could eliminate huge numbers of jobs, many of them well-paid, Rodrik, echoing MIT economists David Autor, Daron Acemoglu, and Simon Johnson, argues that technological progress needs to be refocused. ARPA“The overarching goal is to allow workers to do what they cannot do at present, rather than displace them by taking over the tasks they already do,” he writes.