NEW HAVEN – The widely acclaimed globalization of the post-Cold War era is now running in reverse. A protracted slowdown in global trade has been reinforced by persistent pandemic-related supply-chain disruptions, ongoing pressures of the US-China trade war, and efforts to align cross-border economic ties with geostrategic alliances (“friend-shoring”). These developments tighten the noose on China, arguably the country that has been the greatest beneficiary of modern globalization.

Of the many metrics of globalization, including financial, information, and labor flows, the cross-border exchange of goods and services is most closely tied to economic growth. Largely for that reason, the slowdown in global trade, which commenced in the aftermath of the 2008-09 global financial crisis and intensified in the COVID-19 era, points to a sea change in globalization. While global exports went from 19% of world GDP in 1990 to a peak of 31% in 2008, in the thirteen years that followed (2009-21), global exports have averaged just 28.7% of world GDP. Had world exports expanded on a 6.4% trajectory – halfway between the blistering 9.4% pace of 1990-2008 and the subdued post-2008 rate of 3.3% – the export share of global GDP would have soared to 46% by 2021, far above the actual share of 29%.

China’s gains from the globalization of trade have been extraordinary. In the decade prior to China’s 2001 accession to the World Trade Organization, Chinese exports averaged just 2% of total world exports. By 2008, that share had risen nearly fourfold, to 7.5%. China had timed its WTO membership bid perfectly, just when the global trade cycle was on a major upswing. While the financial crisis took a brief toll on Chinese export momentum, the interruption was short-lived. By 2021, Chinese exports had surged to 12.7% of world exports, well above the pre-2008 peak.

China is unlikely to maintain this performance. Overall growth of global trade is slowing, and China’s slice of the trade pie is under mounting pressure.

The ongoing trade war with the United States is especially problematic. During the first phase of China’s export-led growth surge in the aftermath of WTO accession, the US was consistently China’s largest source of external demand. Largely due to former US President Donald Trump’s tariffs, that is no longer the case. By 2020, US imports of Chinese goods and services had fallen 19% below the peak levels of 2018. Despite rebounding sharply on the heels of the US economy’s post-pandemic snapback, in 2021, US imports from China remained 5% below the 2018 peak. Partial tariff rollbacks for selected consumer products, which President Joe Biden’s administration is apparently considering as an anti-inflation gambit, are unlikely to jump-start bilateral trade.

At the same time, enduring pandemic-related supply-chain disruptions are likely to take a sharp toll on China and the rest of the world. Over the six months ending in April, a “global supply chain pressures index” constructed by researchers at the Federal Reserve Bank of New York averaged 3.6, well above the 2.3 reading in the first 21 months following the February 2020 onset of pandemic-related lockdowns, and sharply higher than the “zero” reading associated with the absence of supply-chain disruptions.

This is a big deal for a world connected by supply chains. Global value chains accounted for more than 70% of the cumulative growth in overall global trade from 1993 to 2013, and China has enjoyed an outsize share of this GVC-enabled expansion. As supply-chain disruptions persist, exacerbated by China’s zero-COVID policies, pressures on Chinese and global economic activity are likely to remain intense.

Mounting geostrategic tensions are the wild card in deglobalization, especially their implications for China. “Friend-shoring” in effect turns Ricardo’s efficiency calculus of cross-border trade into an assessment of the security benefits that come from strategic alliances with like-minded countries. China’s new unlimited partnership with Russia looms especially relevant in this regard. With China edging closer to crossing the line by providing support to Russian military efforts in Ukraine, the US has recently moved to impose sanctions on five more Chinese companies through its so-called Entity List.

Moreover, Chinese purchases of Russian energy products provide a major source of support to the Russian economy, thereby countering the impact of unprecedented Western sanctions. That raises the risk of China being judged guilty by association. Meanwhile, signs of financial deglobalization are also evident, with China steadily reducing its holdings of US treasuries to levels not seen since 2010 – hardly a comforting development for a saving-short, deficit-prone US economy.

The US is hardly an innocent bystander in this outbreak of geostrategic tensions. On-again, off-again rumors of an upcoming trip to Taiwan by House Speaker Nancy Pelosi clearly flirt with China’s tripwires regarding what it has defined as one of its core interests. The same can be said of bipartisan support for anti-China legislation slowly making its way through the US Congress.

Just as Russian President Vladimir Putin has attempted to justify his unconscionable aggression in Ukraine as a defense against NATO enlargement, China’s longstanding fears of American containment play to similar anxieties within Chinese leadership circles. Henry Kissinger, the architect of the modern-day US-China policy, recently warned of America’s penchant for “endless confrontation” with China and appealed for “Nixonian flexibility” to resolve an increasingly dangerous conflict. But, as I argue in my upcoming book, Accidental Conflict, it will take far more than that to bring Sino-American conflict escalation to an end.

Globalization was always a catchy term in search of a theory. Yes, trade was the glue that fostered integration of the world economy. But it was hardly the rising tide that lifted all boats. With the world beset by climate change, pandemics, and a shocking new war in Europe – to say nothing of mounting inequality and related social and political tensions – the defense of globalization is in tatters. And China may well have the most to lose.

WASHINGTON, DC –Semiconductors, one of the most important innovations of the last century, are now crucial inputs in mobile phones, personal computers, educational technologies, vehicles, heavy machinery, medical instruments, military equipment, and much more.

From the outset, they have undergone rapid improvement, shrinking in size while increasing in performance. In 1965, Gordon E. Moore, one of the founders of Intel, famously observed that the number of transistors on a computer chip tended to double every year, even as their costs continued to fall. What became known as Moore’s Law remains roughly true today, because research and development continue to advance this critical technology at a rapid rate.

Advances by American companies have enabled more uses and greater cost reductions, positioning the United States as the world leader in chip innovation and development. While some companies focus on research and design, others specialize in semiconductor manufacturing, and still others do both.

During the early months of the COVID-19 pandemic, disruptions to global supply chains created semiconductor shortages, forcing auto assembly plants and other factories to slow or halt production. Policymakers in many advanced economies responded by drafting measures to increase domestic productive capacity. In the US, this work culminated in the CHIPS and Science Act that President Joe Biden signed into law on August 9.

The new legislation authorizes the federal government to spend $52 billion to finance the construction of new semiconductor factories in the US. The funds will be allocated according to criteria set by the Department of Commerce, but the law already makes clear that recipients of federal funds will be barred from increasing their production of advanced chips in China for the next ten years.

According to Will Hunt of Georgetown University’s Center for Security and Emerging Technology, the US is now expected to “coordinate with other major chip-making countries to avoid subsidy competition.” But it remains to be seen how this would work. The European Union, South Korea, Japan, Singapore, and China are also already allocating resources to support domestic semiconductor manufacturing. Moreover, Intel has broken ground on one of two new factories in Ohio, promising to increase its $20 billion sharply if it receives a subsidy large enough to help it compete with lower-cost suppliers elsewhere.

How will the government forecast industry trends and allocate resources effectively? The facilities to produce state-of-the-art semiconductors are extraordinarily expensive, so the industry historically has been rather cautious about expanding production – which is why there tend to be wide swings between shortages and gluts. More to the point, it takes 4-5 years to build a “fab,” which is about the same amount of time it takes to develop the next generation of computer chips.

Worse, there is mounting evidence that demand for chips is falling, with the consultancy Gartner anticipating that global PC shipments will decline by 9.5% this year. This suggests that as more countries take steps to increase capacity, they will be setting the stage for an intensified glut in the coming years. Yet because they have put self-sufficiency first, costs will be higher, and R&D expenditures will be lower, than they would have been had markets been allowed to operate without subsidies and distortions.

Taiwan Semiconductor Manufacturing Company (TSMC) – the Taiwanese firm that leads the world in producing the most advanced chips – and Samsung are planning to open production facilities in the US, but it remains to be seen if the Department of Commerce will consider them eligible for funds under the CHIPS Act. Whatever happens, those not receiving investment subsidies in the US and other countries will be at a disadvantage when competing with subsidized companies. This will discourage new entrants.

The CHIPS Act flies in the face of past US policy supporting the open multilateral trading system. It represents exactly the sort of policy that the US has accused China of pursuing. There cannot be a competitive free market in semiconductors once some companies’ plants are heavily subsidized. And it is worth remembering that competition is what made the US economy so productive in the first place, driving R&D in many fields, including semiconductors.

While there are legitimate national-security concerns about future semiconductor supplies, government planners don’t know which factories to build now in order to produce the types of high-end chips that will be needed a few years out. For currently produced chips, it would be cheaper simply to maintain a stockpile (especially now that a short-term supply glut looms). But even for yet-to-be-developed advanced chips, supplies could be assured by maintaining funding for the US military so that it can consistently order chips in advance.

China’s recent experience shows why R&D related to individual products is best left to competitive market forces. The Chinese government has poured an estimated $100 billion or more into subsidies and support for the semiconductor industry. Yet, as the Wall Street Journal’s Editorial Board notes, Chinese President Xi Jinping’s “plan to throw money at the semiconductor industry has resulted in many unproductive companies chasing government subsidies, with an estimated 15,700 new semiconductor companies started in the first five months of 2021.”

We know that competitive market economies perform much better than centrally directed command economies. That is especially true of a relatively new industry whose future technological development is uncertain. It is ironic that the Biden administration (along with a bipartisan majority in Congress) has chosen to react to China’s inefficient industrial policy by adopting one of its own. One of the US economy’s most successful industries is being set up for chronic under-performance.

MUNICH – Will Germany’s economic model survive Russian President Vladimir Putin’s war on Ukraine? As I noted in a recent talk at Harvard University, answering that question requires revisiting recent economic history.

Germany’s economy was transformed after the fall of communism in 1989. Liberalization of trade with the country’s eastern neighbors had three profound effects at home. First, it led to decentralized wage bargaining. Second, it had a flattening effect on hierarchical management in German firms. And third, it extended German production networks into Central and Eastern Europe.

On the first count, the opening of ex-communist Europe – where labor costs were lower – changed the power equilibrium between Germany’s trade unions and employers’ federation. With the loss of union bargaining power, wage negotiations shifted from the national level to the firm level.

Owing to this new structural wage restraint (the so-called Lohnzurückhaltung), unit labor costs in Germany declined by 30% between 1995 and 2012. Germany was the only country in Europe to experience such declines. While the 2002-05 Hartz labor-market reforms are often blamed for reducing German wages, the data indicate that they played no role in this development.

The opening of the ex-communist countries also introduced decentralized management. As trade became more internationalized and competitive, innovation and the generation of new ideas became more important. To encourage more creativity among workers, German firms delegated decision-making power to lower levels of management.

This approach proved highly effective. Germany’s business culture increasingly championed quality, and empowering lower levels of management led firms to introduce more products that customers appreciated. The typical (median) German firm that embraced decentralized management increased its export-market share by a factor of three, while firms that stuck with centralized management generally recorded no such gains.

Finally, the opening of ex-communist Europe led to expanded production networks, which reduced costs and helped Germany deal with a severe skills shortage. Germany’s eastern neighbors offered a large pool of skilled workers, particularly engineers. In 1998, 16% of the these countries’ populations had university degrees, compared to 15% of Germans.

Moreover, the growth of Germany’s human-capital stock (based on measures across five categories of educational attainment) had slowed to an annual rate of 0.18% in the 1990s, compared to 0.75% in the 1980s. Thus, when German firms invested in Central and Eastern Europe, they employed three times as many people with academic degrees and 11% more research personnel in their subsidiaries than in their parent firms.

By the late 2000s, the resulting supply chains had reduced costs and increased productivity in German multinational firms by over 20%. Germany went from being the sick man of Europe in the 1990s to the economic powerhouse that it is today.

Will these economic arrangements survive Russia’s invasion of Ukraine? To answer that, it helps to revisit the period following the 2008 global financial crisis. While transnational supply chains were a major engine of globalization after the fall of communism, and especially after China’s entry into the World Trade Organization in 2001, they stopped expanding after 2008. Increased global uncertainty led to an accelerating trend of reshoring to high-income countries, including Germany. The risk of non-delivery for key inputs made firms in high-income countries reassess their production networks.

While the global financial crisis ended hyper-globalization, the COVID-19 pandemic seems to have triggered deglobalization. The coronavirus introduced an unprecedented degree of global uncertainty, compounding the legacy effects of the 2008 shock. Kemal Kilic of LMU Munich and I estimate that COVID-19 has reduced global supply chains by 35%, measured by imported inputs from developing countries as a share of total inputs.

Now, Putin’s war is accelerating the deglobalization that COVID-19 started. The war has sent shockwaves throughout the world economy and further increased global uncertainty. Worse, Russia’s aggression seems to be just one violent manifestation of a broader authoritarian trend.

A world of increasingly assertive autocracies is hardly conducive to trade, global supply chains, and foreign direct investment. Recent moves by China are particularly worrying. China has sanctioned imports from Lithuania in retaliation for that country hosting a Taiwanese Representative Office, and it has imposed tariffs on imports from Australia after Australian officials criticized Chinese stonewalling in the investigation of the pandemic’s origins.

Unfortunately, the weaponization of trade has become all too common and, along with the shock from Putin’s war and the continuing uncertainty from the pandemic, will prolong the disruption of supply chains. The longer these disruptions last, the more likely it is that firms will reorganize their supply chains altogether. US Secretary of the Treasury Janet Yellen has already suggested that “friend-shoring” should be added to the list of strategic options, alongside reshoring and onshoring. In Germany, friend-shoring is already underway. According to a survey by the Ifo Institute, 50% of German companies with supply chains in China are now rethinking their operations.

The German economic model is not dead yet. But its high dependence on international trade implies that today’s changing economic and geopolitical environment will confront Germany with greater challenges compared to most other developed countries. The best way for Germany to sustain its post-Cold War economic model is to diversify its trading relationships so that it is no longer overly exposed to instability in a particular country or region.

SEOUL – Global value chains have had some tough years. First, the COVID-19 pandemic created barriers and bottlenecks, especially in manufacturing. Then, Russia’s war in Ukraine further disrupted GVCs, particularly those involving agriculture and energy. With the fragility of globally dispersed supply networks now fully exposed, countries around the world are seeking to strengthen domestic or regional networks instead.

For developing economies, especially middle-income countries, the advent of deglobalization poses a new challenge. After all, some of the most successful development strategies have relied on GVCs. How can economies continue to develop – and even to reach high-income status – if that strategy is no longer viable?

High-income status is notoriously difficult to achieve. The so-called middle-income trap – the growth slowdown that often sets in first – ensnares most emerging economies, with per capita income remaining at 20-40% of the level in the United States in PPP terms for several decades.

Of course, the middle-income trap does not catch everyone. Japan avoided it. So did the so-called Asian tigers: Hong Kong, Singapore, South Korea, and Taiwan. And now, Malaysia and Chile are joining their ranks, with important lessons for other developing countries navigating an increasingly deglobalized world.

In 1990, per capita income levels were lower in Malaysia and Chile than in Mexico. But, in the early 2000s, they surpassed Mexico, despite Mexico’s advantages as a member of the North American Free Trade Agreement. Since then, they have crossed the high-income threshold. Though Chile fell back below 40% of US levels during the pandemic, the World Bank still classifies Chile as a high-income economy. Malaysia remains above 40%, despite the pandemic.

This achievement might be surprising. Neither Malaysia nor Chile is renowned for its manufacturing prowess. In Malaysia, attempts to develop an automotive industry have failed, and the electronics industry has had only mixed success. Moreover, Chile was long a poster child for neoliberalism, exemplifying a policymaking orthodoxy that prevailed for decades but is now increasingly perceived as a failure.

In both countries, resource-based sectors – petroleum, rubber, and palm oil in Malaysia, and salmon, fruit, wine, and wood-based products in Chile – are the leading growth engines, catering to domestic consumers and even more to international markets. The trade surplus for Chile’s four leading export goods amounts to almost 80% of total trade in four sectors, in sharp contrast to machinery and transportation (-85%) and chemical products (-38%).

In Malaysia, the same ratio for palm oil was as high as 85%, and that of the combined resource sectors (including petroleum and rubber products) was 26%. This is significantly higher than the electronics sector (16%), machinery and transportation (-33%), and chemical products (-13%).

These are not low-value-added sectors. Malaysia exports processed palm oil, in contrast to Indonesia’s exports of unprocessed palm oil. Likewise, Chile’s salmon production requires technologies such as cold-storage systems and vaccines, and its wood-based exports include value-added products such as pulp, paper, paperboard, cork, and furniture.

These sectors are led by locally owned firms, which emerged and grew as a result of policy intervention. For example, salmon is not a native Chilean species; its cultivation in the country began in 1969, with Fundación Chile (FCH) – a nonprofit corporation dedicated to fostering business and industry growth – helping to accelerate progress since the 1980s.

Imported Norwegian technology and experiments with farming various species under different conditions were essential to making the salmon industry commercially viable. After Salmones Antartica, the company created by FCH, proved the potential, more entrepreneurs got into the salmon business. The number of salmon producers increased from around four in 1980 to more than 200 in the 2000s.

In long-colonized Malaysia, palm-oil (and rubber) plantations used to be foreign-owned. Uninterested in moving their processing facilities to the country, these owners exported unprocessed product. But, in 1981, Malaysia seized control of three British palm-oil and rubber conglomerates listed on the London Stock Exchange – a milestone in the process of decolonizing its economy – and interest in local processing grew.

But upgrading the palm-oil industry was an uphill battle. The European Union imposed massive tariffs of more than 200% in the 1990s – more than double the already-high tariffs that had been introduced in the 1970s by the European Economic Community – in order to keep refining capacity in Europe.

At the same time, however, Malaysia’s palm-oil sector benefited from the rise of barter arrangements whereby the government negotiated deals to export processed palm oil in exchange for goods and services. This fueled the rapid growth of palm-oil refining within Malaysia.

As with Chile’s salmon industry, research and development was vital, and much of it has been carried out by the Palm Oil Research Institute of Malaysia, which was established in 1979, and funded by the government. These efforts enabled firms to add more value not only to palm-oil exports, but also to produce new products like biodiesel and specialty fats.

Even in the heyday of GVCs, developing and emerging economies largely had little hope of gaining enough of a foothold in high-end manufacturing sectors to propel them beyond middle-income levels. But Malaysia and Chile have shown that there is another way: Invest in developing high-value-added sectors that make the most of local resources.

LONDON – “The left and the right united shall never be defeated,” claimed the Chilean poet Nicanor Parra, and the current debate over deglobalization illustrates the point. So-called progressives never liked fast growth in world trade and now greet any reversal with cries of “I told you so!” Globalization-supporting conservatives, on the other hand, react to the smallest setback with Chicken Little-like cries that “the sky is falling!”

Both camps have an interest in exaggerating the extent of deglobalization. The result is a widely accepted narrative of decline: After repeated financial crises, a nativist reaction, the COVID-19 pandemic, and now Russia’s war on Ukraine, globalization’s days are numbered.

It’s an eye-catching claim. But is it true?

According to the World Bank, trade in goods and services as a share of global GDP fell from a peak of 61% in 2008, just before the global financial crisis, to 52% in 2020. But this figure is still very high by historical standards – the trade-to-GDP ratio averaged just 42% in the 1990s, when critics were already complaining about hyper-globalization. Once final data are available, they will show that trade recovered in 2021 and 2022 as the pandemic receded.

More interestingly, the all-out tariff war predicted by trade skeptics never erupted. Starting in 2018, then-US President Donald Trump increased tariffs on some Chinese goods, China retaliated, and the dispute spilled over into a handful of other markets. President Joe Biden initially found it expedient to keep some of Trump’s tariffs, but now plans to roll them back in an attempt to reduce US inflation.

A worldwide escalation in tariffs and quotas will not happen, for the simple reason that voters do not want it to happen. In rich and poor countries alike, a parent can buy a pair of Chinese-made children’s sneakers for $10 or less. A generation ago, the only option in most places was a locally-made pair costing several times that.

Protectionism is supposed to be popular with voters, but the reality is subtler. As any pollster will tell you, the statement “government should do what it can to protect local businesses and local jobs” typically elicits overwhelming support. The statement “government should protect local industry even if that means much higher prices for consumers” meets with widespread derision.

Three big changes are afoot in world trade, but none of them need imply widespread deglobalization.

The first change is the reconfiguring of global supply chains. As the media have reported in gory detail, first the US-China tensions, then the pandemic, and now the Russia-Ukraine conflict caught many global firms – in sectors ranging from cars to baby formula – without a Plan B to source the inputs they need. So, they are now switching from “just-in-time” to “just-in-case” supplies. “Resilience,” “near-shoring,” and “friend-shoring” are the buzzwords du jour.

The expansion of world trade over the past two decades resembled the Gold Rush or the dot-com bubble of the early 2000s. Firms that found the lowest-cost supplier internationally, with little regard for the risks involved, could make big money. Other companies followed suit because their competitors were doing it. Eventually, something had to give.

While the dot-com crash took away Pets.com, it gave us Facebook, Amazon, and Netflix. This time around, crises are causing firms to diversify suppliers and draw up plans B, C, and D. Costs will increase, but so will safety and reliability. Crucially, most supplies will still come from abroad. Apple recently decided to move some of its assembly operations from China to Vietnam, not to Arkansas or Alabama. As I wrote in a previous commentary, Guangdong’s loss could well be Guadalajara’s gain.

The second big change is a gradual but unmistakable shift from trade in goods to trade in services. Manufacturing’s share of total output is falling almost everywhere, and the drop has been particularly sharp in China. Unsurprisingly, trade in manufactures is declining as a share of global GDP. Services will likely make up the slack, but trade in services is hampered by all kinds of political, regulatory, and cultural barriers. There is no need for customers to speak the same language as the people who make their smartphones. But they are right to expect their doctor, architect, asset manager, or airline pilot to be able to communicate with them in a more-or-less comprehensible version of a shared language. And that takes time.

Yet, by forcing people to hold business meetings across a computer screen, the COVID-19 pandemic has given services trade an unexpected shot in the arm. Why not use similar technology to sell services around the world? Radiologists in Bangalore were already reviewing X-rays produced in Boston or Birmingham before the pandemic. Now architects in Buenos Aires design housing projects for Beijing, and programmers in Bangkok write code for firms in Brussels.

The economist Richard Baldwin has described globalization as a sequence of “great unbundlings.” The first occurred in the late nineteenth century when steam power cut the expense of moving goods internationally. The second came in the late twentieth century when information technology radically lowered the cost of moving ideas across borders. A third great unbundling beckons, predicts Baldwin, as digital technology makes it cheap and easy to move people across borders – without making them leave their bedroom or kitchen.

The final change is political. Until now, globalization has largely shaped governments’ policy options. Today’s policymakers rightly want to shape the paths that globalization follows. International flows of hot money can be destabilizing and need to be regulated (as even the International Monetary Fund now recognizes). Similarly, the direction of technological change is not preordained; as Harvard’s Dani Rodrik and Stefanie Stantcheva have argued, it can be shifted to create jobs rather than destroy them. A growing number of essential global public goods – from climate control to pandemic relief – also call for more activist policies.

If governments get it right, a more subdued, but also more sustainable and longer-lasting kind of globalization will emerge. Peddlers of deglobalization theories may then need to change jobs and re-skill. Fortunately for them, that is easier to do in an open and growing world economy.

CAMBRIDGE – A new economic paradigm becomes truly established when even its purported opponents start to see the world through its lens. At its height, the Keynesian welfare state received as much support from conservative politicians as it did from those on the left. In the United States, Republican presidents Dwight Eisenhower and Richard Nixon bought fully into the paradigm’s essential tenets – regulated markets, redistribution, social insurance, and counter-cyclical macroeconomic policies – and worked to expand social-welfare programs and strengthen workplace and environmental regulation.

It was similar with neoliberalism. The impetus for it came from economists and politicians – such as Milton Friedman, Ronald Reagan, and Margaret Thatcher – who were market enthusiasts. But the paradigm’s eventual dominance was due in no small part to center-left leaders like Bill Clinton and Tony Blair, who had internalized much of its pro-market agenda. These leaders pushed for deregulation, financialization, and hyper-globalization, while paying lip service to ameliorating the consequent rise in inequality and economic insecurity.

Today we are in the midst of a transition away from neoliberalism, but what will replace it is highly uncertain. The absence of a solidified new paradigm is not necessarily bad. We do not need yet another orthodoxy offering cookie-cutter solutions and ready-made blueprints for countries and regions with different circumstances and needs.

But economic policy must be guided by an animating vision. History suggests that the vacuum left as neoliberalism wanes will soon be filled by a new paradigm that eventually will need support across the political spectrum. Such an outcome may seem impossible given current political polarization. In fact, there already are signs of convergence.

In particular, a new bipartisan consensus may be emerging around “productivism,” which emphasizes the dissemination of productive economic opportunities throughout all regions and all segments of the labor force. Unlike neoliberalism, productivism gives governments and civil society a significant role in achieving that goal. It puts less faith in markets, is suspicious of large corporations, and emphasizes production and investment over finance, and revitalizing local communities over globalization.

Productivism also departs from the Keynesian welfare state by focusing less on redistribution, social transfers, and macroeconomic management and more on supply-side measures to create good jobs for everyone. And productivism diverges from both of its antecedents by reflecting greater skepticism toward technocrats and expressing less knee-jerk hostility to economic populism.

The rhetoric of US President Joe Biden’s administration – and some of its policies – feature many of these elements. Examples include the embrace of industrial policies to facilitate the green transition, rebuild domestic supply chains, and stimulate good jobs; blaming large corporate profits as a culprit behind inflation, and refusing (so far) to revoke former President Donald Trump’s tariffs against China. When the administration’s most senior economist, Secretary of the Treasury Janet Yellen, extols the virtues of “friend-shoring” – sourcing supplies from US allies – over the World Trade Organization, we know the times are changing.

But many strands of this thinking exist on the political right as well. Alarmed by China’s rise, Republicans have made common cause with Democrats in pushing for investment and innovation policies to bolster US manufacturing. US Senator Marco Rubio, a past and likely future Republican presidential candidate, has made impassioned pleas for industrial policy – promoting financial, marketing, and technological assistance to small businesses and to manufacturing and high-tech sectors. “In those instances in which the market’s most efficient outcome is one that’s bad for our people,” said Rubio, “what we need is targeted industrial policy to further the common good.”

Many on the left agree. The architect of Trump’s China trade policy, Robert Lighthizer, has won many progressive fans for his hardball tactics vis-à-vis the WTO. Robert Kuttner, a leading voice on the left, has argued that Lighthizer’s views on trade, industrial policy, and economic nationalism “were more those of a progressive Democrat.”

The Niskanen Center, named after the libertarian economist William Niskanen (a principal adviser to Reagan), has made “state capacity” one of its main planks, emphasizing that governments’ ability to provide public goods is important for a healthy economy. Oren Cass, an adviser to the Republican Mitt Romney during his 2008 and 2012 presidential campaigns and a former senior fellow at the pro-market Manhattan Institute, is a critic of financialized capitalism and supports reshoring supply chains and investing in local communities.

Likewise, Patrick Deneen, one of the leading intellectuals of the US “populist right,” advocates “pro-worker policies” and “the encouragement, through government policy, of domestic production.” During a recent interview in which Deneen discussed these and other economic policies, the New York Times writer Ezra Klein remarked: “What’s funny about that to me is that they seem to me to resemble what the current Democratic Party is.”

As James and Deborah Fallows found when they traveled across America in their single-engine plane to study local economic development, pragmatism can override political partisanship when it comes to fostering businesses, job creation, and public-private partnerships. Local politicians confronted by the challenges of economic decline and joblessness engaged with community groups, entrepreneurs, and other stakeholders in extensive policy experimentation. And in many cases their political affiliation made little difference to what they did.

Whether this kind of cross-party collaboration and fertilization of ideas will amount to a new paradigm remains to be seen. There are deep divides between Republicans and Democrats on social and cultural issues such as abortion rights, race, and gender. Many Republicans, including prominent figures such as Rubio, have yet to renounce their allegiance to Trump, who remains a threat to US democracy. And there is always the danger that the “new” industrial policies favored by both conservatives and progressives will fizzle out or turn into the old measures of the past.

Nonetheless, there are signs of a major reorientation toward an economic-policy framework that is rooted in production, work, and localism instead of finance, consumerism, and globalism. Productivism might just develop into a new policy model that captures imaginations of even the most polarized of political opponents.