Over the past 40 years, the United States and other Western liberal democracies have pursued policies that prioritized markets over government intervention. But, as China and even the US have shown, governments are not limited to a binary choice between laissez-faire and top-down planning.
WASHINGTON, DC –To intervene or not to intervene. That has been a central debate about the state’s role in the economy at least since the eighteenth century. Over the past 40 years, the United States and other Western liberal democracies have championed free markets, free trade, and a limited role for government – a stance known as neoliberalism or “market fundamentalism.” To some commentators, the recent passage of the CHIPS and Science Act and the Inflation Reduction Act, US President Joe Biden’s two signature industrial policies, marks the end of neoliberalism and the re-emergence of interventionism as the dominant paradigm.
But this is a false dichotomy. Governments are not limited to a binary choice between laissez-faire and top-down planning. A third option, long-neglected by policymakers and economists, is for governments to direct bottom-up processes of improvisation and creativity, akin to the role of an orchestra conductor. One can find plenty of examples of this in China and the US.
Neoliberalism emerged as the dominant policymaking paradigm in the West in the 1980s. Under President Ronald Reagan, the US pursued deregulation, cut taxes, and slashed welfare programs. Government intervention, the thinking went, inevitably leads to policy distortions, dependence on state handouts, and corruption. As Reagan famously put it in his first inaugural address, “government is not the solution to our problem; government is the problem.”
WASHINGTON, DC –To intervene or not to intervene. That has been a central debate about the state’s role in the economy at least since the eighteenth century. Over the past 40 years, the United States and other Western liberal democracies have championed free markets, free trade, and a limited role for government – a stance known as neoliberalism or “market fundamentalism.” To some commentators, the recent passage of the CHIPS and Science Act and the Inflation Reduction Act, US President Joe Biden’s two signature industrial policies, marks the end of neoliberalism and the re-emergence of interventionism as the dominant paradigm.
But this is a false dichotomy. Governments are not limited to a binary choice between laissez-faire and top-down planning. A third option, long-neglected by policymakers and economists, is for governments to direct bottom-up processes of improvisation and creativity, akin to the role of an orchestra conductor. One can find plenty of examples of this in China and the US.
Neoliberalism emerged as the dominant policymaking paradigm in the West in the 1980s. Under President Ronald Reagan, the US pursued deregulation, cut taxes, and slashed welfare programs. Government intervention, the thinking went, inevitably leads to policy distortions, dependence on state handouts, and corruption. As Reagan famously put it in his first inaugural address, “government is not the solution to our problem; government is the problem.”