We are in a Chronic Shortage of Good Jobs

In 1997, Harvard economist Dani Rodrik published a slim volume called Has Globalisation Gone Too Far? and went a long way in answering the question in the affirmative. That made him one of only a few top establishment economists challenging the prevailing wisdom on trade and financial liberalisation.

As he later recounted, even colleagues who privately agreed with him in an intellectual sense berated him for “giving ammunition to the barbarians” — providing arguments for protectionism and other limits on the unrestrained globalisation that was pursued in the 1990s.

The FT’s European economics commentator, Martin Sandbu, decided to catch up with Rodrik partly because the world of economics — both in research and policymaking — has been catching up with him. Many of the dogmas which Rodrik questioned, such as the rejection of capital controls or industrial policy, are being left by the wayside. Policymakers are navigating a global economy that does not behave in line with traditional models and politicians are contending with a fierce backlash against globalisation and rising inequality.

In the interview below, the economist says that the consensus has moved so much that he now feels uncomfortably part of the conventional wisdom.

Rodrik also shares his analysis of the right-wing populism that has grown strong in so many countries. He thinks it should be seen as having economic roots, despite the fact that it often aligns with a conflict over identity and values. In fact, he says, many places could now do with a dose of left-wing populism instead.

He sets out a four-pronged plan for governments, especially centre-left ones, about where he thinks they should go from here: align labour market, industrial, and technology policy to the goal of supplying “good jobs” and subordinate international economic policy to that domestic priority.

Rodrik also gives a stark warning to governments that fail to achieve this. The looming disruptions from technology, he says, will dwarf those from globalisation. With an inadequate policy response, the social and political fallout could be dire.

Martin Sandbu: Joe Biden has been in office for a few weeks now. I wanted to start by asking you for your reflections about the change of power in the US.

Dani Rodrik: I don’t think we’re necessarily done with the problems which Trump has leveraged politically.

I see him very much as being the result of significant economic dislocations and economic polarisation taking place, not just in the United States but among the advanced countries more generally, which the right-wing populists have used to catalyse and mobilise along nativist, ethno-nationalist lines.

I think the left has been very much, until recently, missing in action.

What we’re seeing with Biden is that the economic programme of the Democratic party has very much moved to the left.  in a direction which the centre-left should have moved [towards] much more urgently and much sooner in the aftermath of the global financial crisis, for example.

MS: These dislocations are 30 years in the making and maybe even longer. Why did the Democrats and similar forces elsewhere not respond more adequately to these changes earlier on?

DR: I think that the Clinton Democrats, New Labour in [the UK], the Social Democrats in Germany, and the French Socialists as of the 90s had become enthralled to essentially adopting the neoliberal model and simply sweetening it, maybe with a little bit more help for the poor.

They did not have the kind of ideas and policy vision to fundamentally change the system and I think we saw that very clearly in the aftermath of the financial crisis.

In fact, they did as much if not more than the traditional conservative parties to push for globalisation, for the single market in Europe and for the liberalisation of financial and capital flows. That was very much pushed by the French Socialists in Europe.

MS: There is a debate around whether economics or culture are driving these shifts? People who resist economic explanations say it’s not the poorest or those who suffer the most who support populist right-wing movements.

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