Early in Joe Biden’s presidency, Felicia Wong, president of the liberal Roosevelt Institute, told me that Biden is seriously misunderstood. He’s been in politics for decades, which is why people look at him “and automatically have an old-fashioned view of what Democrats stand for — this idea that they’re progressives who advocate more taxation and more public spending.”
Wong felt Biden wanted to do more: “What he’s trying to promote has a lot more to do with really reshaping our economy so that it does different things and produces different results, on a regular basis.”
I think Wong was right about what Biden wanted, or at least what his administration wanted. But the execution did not keep up with the vision. And the reason is uncomfortable for Democrats. You cannot transform the economy without first transforming the government.
In April, Brian Deese, director of the National Economic Council, gave a speech on the need for “a modern American industrial strategy.” It was a powerful contribution to a debate that most Americans would likely be stunned if they knew the Democrats were having.
Industrial strategy is the idea that a country must map a path to productive capacity that transcends what the market alone would support. That there needs to be some political vision in economic policy, some vision of what we are trying to create, beyond what the financial markets reward.
Trying to build clean energy infrastructure is a form of industrial strategy. Invest in domestic supply chains for vaccines, masks and microchips, too. The idea has been frowned upon for decades, even among Democrats. We don’t want the government to “pick winners and losers,” the saying goes.
The argument is basically this: when governments bet on technologies or companies, they usually bet wrong. Markets are more efficient, more adaptable, less corrupt. So governments should, when possible, get out of the way. Appropriate role comes after the market has done its work, transferring money from those who have it to those who need it. In simple terms: markets create, governments tax and politicians spend.
The assumptions behind what Washington sees as common sense are surprising. Consider the phrase “winners and losers”. Winners in what? Losers how? Markets manage these issues through profit and loss, valuations and bankruptcies. But societies have more complex goals. Criticizing markets for not realizing society’s goals is like scolding a toaster because it never produces an oil painting.
So I won’t say that the markets have failed. We failed. Growth slowed, inequality grew, the climate crisis continued to worsen, deindustrialization destroyed communities, the pandemic highlighted the fragility of US supply chains, China became more authoritarian and Vladimir Putin’s war exposed the folly of depending on countries we cannot rely on to provide us with absolutely necessary goods.
Nobody sees this as success. Deese declared the debate over: “The question must move from ‘why should we design an industrial strategy?’ to ‘how do we successfully plot one?'”.
I am openly sympathetic to this vision. I have been arguing that we need a liberalism that builds. Take a closer look at the failures of modern democratic governance, especially in blue states [democratas]and you’ll often find that the market didn’t deliver what we needed and that the government either didn’t intervene or made the problem worse through negligence or over-regulation.
We need to build more houses, trains, clean energy, research centers, health surveillance. And we need to do it in less time and at a lower cost. At the national level, much of the blame can be placed on republican obstructionism. But that’s not always the case in New York, California or Oregon. It is excessively time-consuming and expensive to build even in states where Republicans are weak.
And here the liberal view often turns a blind eye. Criticisms of public action made a generation ago apply even more today. Do we have a government capable of building? The answer, all too often, is no. What we have is a government that is extremely good at making construction difficult.
The first step is acknowledging that you have a problem, and Deese did that. He said, “A modern American industrial strategy needs to demonstrate that the US is capable of building — fast, as we have done in the past, and fairly, as we have sometimes failed to do.”
One answer (the typical Republican answer) is that the government can’t do this job and shouldn’t try. But the data do not justify this position. The Public Transport Cost Project tracks the costs of rail projects in different countries — it’s difficult to draw an apples to apples comparison here, because different plans are just that, different, and it makes a difference whether or not they include a tunnel. , for example.
Even so, the US is notable for high spending and meager results. It costs US$ 538 million (R$ 2.5 billion) to build 1 kilometer of railroad in the country. Germany does the same for US$ 287 million (R$ 1.3 billion). Canada, for US$ 254 million (R$ 1.2 billion), and Japan, for US$ 170 million (R$ 806 million). Among the countries in the database, Spain spends the least: US$ 80 million (R$ 379 million).
They all tunnel more than the US, possibly because they retain the confidence to try regularly. The more skilled you are at building infrastructure, the more ambitious you can be when imagining the infrastructure to be built.
The problem is not the government. It’s our government. And it’s not troublesome unions, another favorite bogeyman of the right. Union density is higher in all these countries than it is in the US. So what went wrong?
One answer worth evaluating was proposed by Brink Lindsey, director of the Open Society Project at the Niskanen Center, in a 2021 article titled “State Capacity: What It Is, How We Lost It, and How to Get It Back.” The definition Lindsey proposes is admirably concise: “The capacity of the state is the ability to design and execute public policy effectively.”
When a government fails to collect the taxes owed to it or create the portal to enroll in its new health insurance plan or build the high-speed railroad it has already spent billions of dollars on, that is a failure of state capacity. .
But weak government is often an end, not an accident. Lindsey’s argument is that in order to fix state capacity in the US, we need to understand that the hands-on state we have is a choice and that there are reasons why we chose it. Government is not inherently inefficient. He was reduced to inefficiency. And not just from the right.
What is most needed is a change of mind: namely, the reversal of the intellectual trends of the last 50 years or so that have brought us to where we are today.
On the right, this means giving up automatic anti-statism, embracing the legitimacy of a large and complex social and regulatory welfare state, and recognizing the vital role played by the national civil service (not just police and military). On the left, review the decentralized and legalist governance model that since the 1960s has guided the expansion of the progressive state, reducing the veto power exercised by activist groups in the courts and shifting the focus of public policies so that, in rather than primarily ensuring that power is subject to progressive restrictions, ensuring that power can actually be exercised effectively.
The Biden administration can’t do much about right-wing hostility to the government. But it can confront the mistakes and divisions of the left.
The starting point is indicated in another Niskanen Center article, this one by Nicholas Bagley, a professor of law at the University of Michigan. In “The Fetish of Process,” he argues that liberal governance has developed a hard-to-understand preference for legitimizing government actions through processes, not outcomes. Provocatively, he suggests that this is because American politics in general and the Democratic Party in particular are dominated by lawyers.
Joe Biden and Kamala Harris are law graduates, as are Barack Obama, John Kerry and Hillary Clinton. And all this influences the various levels of the party, from top to bottom. “It is lawyers, not administrators, who have assumed primary responsibility for formulating administrative law in the US,” writes Bagley. “And if you only have one lawyer, it all becomes a procedural problem.”
This is one way the US differs from peer countries. Robert Kagan, a professor of law at the University of California at Berkeley, described this phenomenon as “adversarial legalism” and demonstrated that it is a uniquely American way of curbing state power.
The justification given for these policies is that they make state action more legitimate by ensuring that dissenting voices are heard. But over time they also make government inefficient, and that cost is rarely taken into account. And that brings us to Bagley’s last, and in my view the wisest, argument.
“Legitimacy is not unique or even primarily the result of the processes followed by the agencies”, he says. “It stems more generally from the perception that government is skillful, informed, responsive, responsive and fair.” That’s what we’ve lost—concretely, not just in perception.
I spent most of my adult life studying think tank reports to better understand how to solve problems. When I look for ideas from the left on how to build state capacity, I don’t find much. There is nothing that comes close to the depth of research, thought and energy invested in thinking about public health, climate and education policies. But crucially, these plans depend on the State being able to design and execute public policies effectively.
So this is what I’m sure of today: Democrats spend far too much time and energy imagining the public policies a capable government should carry out; and insufficient time thinking about how to make the government capable of executing them. It wasn’t just the markets that failed.
