The new Biden trade doctrine is a death knell for neoliberalism

Earlier this month, New York Magazine published an article titled, “The Biden Administration Just Declared the Death of Neoliberalism” This article was in response to National Security Advisor Jake Sullivan’s address at the Brookings Institution a week prior. In the process of summarizing the Biden administration’s economic strategy, Sullivan sounded the death knell for neoliberal policymaking in Washington D.C.   

Sullivan did not sugarcoat or hold back. He was blunt and plain-spoken in his criticism of the market-oriented economic orthodoxy that had come to shape the economic and trade policies of the last three decades. 

In his words, “In the name of oversimplified market efficiency, entire supply chains of strategic goods — along with the industries and jobs that made them — moved overseas.” He added, “Various reforms combined and came together to privilege some sectors of the economy, like finance, while other essential sectors, like semiconductors and infrastructure, atrophied. Our industrial capacity — which is crucial to any country’s ability to continue to innovate — took a real hit.”  

Unlike economists who dismissed these concerns as a mere product of increasing market efficiencies in China, Sullivan’s polemical address was interpreted by advocates as unabashed criticism of oversimplified rationalizing by neoliberal economists. Akin to most national security experts since the Trump era, Sullivan directed blame toward Chinese economic, and particularly industrial policies.

“The People’s Republic of China continued to subsidize at a massive scale both traditional industrial sectors, like steel, as well as key industries of the future, like clean energy, digital infrastructure and advanced biotechnologies. America didn’t just lose manufacturing — we eroded our competitiveness in critical technologies that would define the future.” 

Two decades ago, Sullivan’s address would have been unfathomable. Even seven years ago, (pre-Trump), this would have been an unimaginable development. But here we are.  

Over the last three decades, the U.S. pursued a security, trade and economic strategy that benefitted few and concentrated power in certain geographies by hollowing out the manufacturing sector in middle America and drawing America into conflicts with no end.    

Since the Trump years, there has been widespread bipartisan approval for letting go of the neoconservative policies that drew America into cycles of conflict. Interestingly, the opposition to neoliberalism was not as profound as the criticism of neoconservatism. This blind spot is possibly the result of media and policy ecosystems in power centers of the world trying to desperately hold onto the gains of the last two decades in the form of cheaper goods and higher shareholder value. As several advocates and even critics have pointed out, the Biden administration’s economic policies are not an extension of the Obama era policies but more of the Trump administration’s “America First” policies of bans, tariffs and restrictions.  

Expectedly, Biden’s economic strategy has caused considerable unease amongst the ones that benefitted the most from decades of neoliberalism. Editors at British newspapers and journals such as The Economist and The Financial Times have consistently derided “Bidenomics.”

On his “Global Public Square” show, CNN’s Fareed Zakaria called it autarchy, characterizing Sullivan’s address as the “New Biden Doctrine.” While the nomenclature may vary from the “New Washington Consensus” to the “New Biden Doctrine” to “Bidenomics,” the underlying and recurring criticism is of the securitization of economics and trade policy. 

Pointing to the stability of America’s share of GDP from the 90s to now, and the rise in America’s share of GDP in the G7 economic output, Zakaria attempts to paint a rosy picture. Interestingly, he also points to the growth of American companies by market capitalization to demonstrate America’s winning trajectory. He is not wrong about the leading role of American companies across sectors, particularly technology. However, that transition from manufacturing to service and information economy hollowed out towns in the process and created dependencies on autocratic regimes of the world. For Apple, Walmart and Tesla to become leaders in their fields, jobs were shipped overseas.  

These critiques of the administration support the premise that its policies are tailored and catered to address the concerns of the middle class. Interestingly, the Financial Times reported that the administration’s industrial policies have already led to over $200 billion in investment commitments by various corporations. The Inflation Reduction Act, CHIPS and Science Act and Infrastructure, Investment and Jobs Act not only revive manufacturing in America but also address the transition to clean energy while reducing dependencies on autocracies such as China.  

The Biden administration’s foreign and trade policy for the middle class is alive and well. The prioritization of American workers, society and the environment is certainly anathema to Wall Street and K Street, which prioritize market efficiencies and the interests of big businesses. However, the prioritization of workers and society (less so, the environment) is no longer a partisan issue. Plus, China’s belligerence and Russia’s aggressions have resulted in bipartisan resolve on securitization of trade and economic policymaking.     

Even advocacy groups in certain industries are beginning to wake up and smell the coffee. The COVID-19 pandemic, Russia’s invasion of Ukraine and the possibility of conflict in the Taiwan Strait have provided corporations a reason to diversify and move supply chains. 

Businesses are faced with the hard choices of supply chain resiliency versus economic efficiency and productivity. The Biden administration’s legislations and the subsidies they offer incentivize a rethink of business decisions based solely on efficiency parameters.

Akhil Ramesh is a senior fellow with the Pacific Forum. He has worked with governments, risk consulting firms and think tanks in the United States and India. Follow him on Twitter: Akhil_oldsoul.