Kamala Harris at National Forum on Wages and Working People | Gage Skidmore / CC By-SA 2.0
Breaking with the strategic ambiguity of her presidential campaign’s early months, Vice President Kamala Harris served up a clearer distillation of her economic agenda in a speech to the Economic Club of Pittsburgh on September 25. The speech was fêted as Harris’s “pragmatic,” “moderate-friendly” pitch. Harris also, however, pointed to something more ambitious: the broadening and deepening of public investment in economic development. Beneath a surface of emollient rhetoric, in other words, lay the tantalizing suggestion that a hypothetical Harris presidency would embrace something that American voters have seemed to ignore for years: the reorientation—incipient yet unmistakable —of US political economy.
During his 2016 presidential campaign, Donald Trump challenged globalization’s domestic impact, railing against deindustrialization and free trade deals such as NAFTA. In office, however, Trump blended old GOP economic voodoo with gimcrack economic nationalism, serving up a farrago of tax cuts and US China tariff wars. Yet the Biden administration forewent a mere restoration of the pre-2016 status quo. Instead, it sought to reshape the US political economy around a new “industrial policy.”
Designed to manage and shape the national industrial portfolio, industrial policy typically joins measures such as grants, subsidies, and tax credits for business with public investment in infrastructure. Where development takes place is a critical issue; a “strong geographic orientation,” according to the Brookings Institution, suffused President Biden’s “place-based” industrial strategy. Another defining feature of industrial policy is sectoral specificity, which shapes the expansion of economic sectors judged as important for competitiveness and, often, national security. Biden’s foray into industrial policy focused on high technology and green energy, stirring into the economic mix a heightening of tensions with China. (US National Security Advisor Jake Sullivan made clear the link betweengeopolitical and economic goals when advocating “foreign policy for the middle class.”) Erected with breathtaking success given wafer-thin Congressional majorities, the legislative foundations for Biden’s agenda were the 2021 Infrastructure Investment and Jobs Act, the 2022 CHIPS and Science Act, and the 2022 Inflation Reduction Act (IRA). Sullivan also recently suggested Biden’s team is examining the idea of a sovereign wealth fund.
Among the commentariat and Beltway elite, this agenda attracted considerable interest: evidence of a sea-change towards “post-neoliberalism.” Describing economic conditions originating in the 1970s, the “neoliberal order” broadly encompassed financialization, globalization, and the offshoring of manufacturing employment, and rising inequality within wealthy countries. President Biden himself explicitly claimed to break with this order.
Yet the president’s attempt to alchemize his policy agenda into political gold failed. The U.S. economy, by almost any metric, is in remarkably robust health. But few Americans feel it. And those who do feel it don’t credit the Democratic Party.
Consequently, Harris’s campaign has been caught betwixt and between: proposing to expand certain Biden Administration policies (most notably the pandemic-era child tax credit) without toppling into politically toxic “Bidenomics.” In her Pittsburgh speech, Harris went further, loosely sketching an agenda of increased federal investment in sectors such as bio-manufacturing and aerospace alongside increased subsidies for green energy.
But Harris’s balancing act points to a profound uncertainty, even contest, over the future of Democrats’ economic agenda. A fierce summertime debate about whether Harris should embrace so-called “post-neoliberalism” or reset to Obama-era policies has been followed by tech-aligned Democratic donors’ continuing efforts to oust antitruster Lina Khan (chair of the Federal Trade Commission) and Gary Gensler (chair of the Securities and Exchange Commission). Many observers believe Democrats will abandon the Biden administration’s economic experimentation whatever the outcome of the 2024 election.
A critical assumption of such debate is that President Biden turned his back on the Democratic Party’s post-1970s history. The historical record is more complicated.
Biden began his career in the 1970s, at a time of crisis for Democrats. Seeing their party battered by economic slowdown, a public loss of confidence in government, and the disaster of the Vietnam War, and facing the rise of a free-market conservative movement within the GOP, a diffuse group of Democratic political actors set out to help American liberalism survive in an “era of limits.” These political actors cycled through a variety of identities. Some had come of age in late-1960s “New Politics” and were elected to office in 1974 as “Watergate Babies” focused on institutional reform of Congress. Ensorcelled by the economic possibilities of high technology in the early 1980s, many were dubbed “Atari Democrats.” A legendarily fawning Esquire profile labeled them the “neoliberal club.” Later, associated with the centrist Democratic Leadership Council, the most popular moniker was “New Democrats.” The term I use, encompassing a range of figures and overlapping networks, is “New Liberals.”
New Liberals are closely identified with America’s rising “professional class”: a highly-educated,affluent, metropolitan constituency. This constituency became increasingly significant to Democrats’ electoral coalition from the 1970s, and is especially prominent among party elites and personnel. New Liberals in the 1970s through the 1990s included Colorado senator Gary Hart, Massachusetts governor Michael Dukakis, and Bill Clinton.
Typically, histories of the New Liberals read as a liberal betrayal narrative. Given how vocally they fretted that New Deal liberalism had lost its electoral luster, New Liberals are easily depicted as architects of a Democratic turn away from the state. Certainly, New Liberals put rhetorical distance between themselves and liberalism’s legacy of “big government.” “He is a leader of post–New Deal Democrats,” one aide to Hart noted in a memo planning the senator’s 1984 presidential campaign. (The aide added parenthetically: “Whatever that means.”)
But the New Liberals coalesced in the 1980s specifically around advocacy for industrial policy. American liberalism since the New Deal was defined as much by economic developmentalism as by welfare policies and redistribution. Developmental liberalism meant the shaping and management of markets through the alliance of an indulgent federal fiscal apparatus with regional, state-level, and local development regimes. This alliance was often structured around public-private partnerships.
In the 1980s, New Liberals believed that policymakers’ greatest challenge was U.S. industrial decline. Inspired by Japan’s “economic miracle” and Ministry of International Trade and Industry (MITI), which nurtured high-tech industries and helped modernize “traditional” industries like automaking, New Liberals in Congress crafted a blueprint for an Economic Cooperation Council that could strategically plan America’s “reindustrialization.” These New Liberals, advised by policy entrepreneurs Robert Reich and Lester Thurow, argued for some modernization of “sunset” industries (steel and automaking) while targeting most industrial-policy attention to high-tech “sunrise” manufacturing. The New York Times dubbed their proposed Economic Cooperation Council “MITI-Minus.” New Liberal allies, such as Wall Street financier Felix Rohatyn, pressed for yet more muscular economic intervention, proposing that the Depression-era Reconstruction Finance Corporation be revivified. New Liberals attempted to cultivate business buy-in for their plans. Former California governor Jerry Brown launched industrial-policy advocacy groups with financial support from high-techmanufacturing companies like Intel. Senator Paul Tsongas devised an ambitious “High Tech Morrill Act” for regional business and university research and development hubs in collaboration with the Massachusetts High Technology Council.
Many New Liberals recognized that such ideas built on America’s postwar history of “hidden” industrial policies, from the buildup of Silicon Valley to the tentacular military-industrial complex. As new scholarship by historians such as Daniel Rowe and Rohan Shah suggests, none other than Ronald Reagan himself acquiesced to “hidden” industrial policy via managed trade with Japan. There were older antecedents as well, such as the Gilded Age Republican Party’s developmental mélange of tariffs and railroad subsidies. Yet such examples constituted industrial policy as bricolage. New Liberals, rather than retreating from activist government, advocated for concentrating the state’s market-shaping capacity into a national, strategic planning agency: an institutional consolidation of developmental liberalism.
American liberalism’s paramount goal, in reformers’ view, was the managing of markets to shape growth, not meliorative social policies. Tsongas described this as worrying more about “the health of the goose” than its “golden eggs.” True, this meant Democrats ceded some social-policy terrain to the radicalized GOP. (Although, contrary tothe Right’s best efforts, the federal government has grown more redistributive over time.) But none of this meant post-1970s New Liberals were turning away from the state. In fact, the New Liberals were forged around an effort to revive activist government.
New Liberals’ formative focus on industrial policy also reveals a critical popular misconception about Reagan-style, “free market” neoliberalism. It is common to identify this neoliberalism with a “growth at any costs” mentality. In fact, this neoliberalism is better understood as a propensity for unmanaged growth. Since the 1970s, this has led to uneven, ill-distributed growth and a decline in productive economic sectors. New Liberals instead believed durable growth required incubation in the laboratory of activist government.
The current administration’s agenda, incomplete though it is, recalls the formative project of late-twentieth-century New Liberals. New Liberals’ avenue for industrial policy was obstructed in the early- to mid-1990s through a combination of domestic political pressures, globalization, and the end of the Cold War. Disruptions brought about by the Trump presidency and the COVID-19 pandemic created space for industrial policy’s revival. Crediting Biden’s industrial-policymaking should not mean overstating cleavages with the Obama era. President Obama laid foundations for IRA investments in clean energy and was more successful than his former vice president has proved in enhancing U.S. social policy’s redistributive justice. Nonetheless, Biden clearly lifted developmental liberalism out of the defensive crouch that it was in during Clinton’s and Obama’s presidencies.
Unfortunately, the political failure of Biden’s policy success is redolent of earlier New Liberals’ failure to realize their vision of “reindustrialization.” In the 1980s, New Liberals did not translate the elite debate over industrial policy into a popular political project. Even when faced with an opportunity to turn it into an election issue, they hesitated. Catastrophically, they chose to make the 1984 election a referendum on President Reagan’s fiscal profligacy, not on industrial decay and regional de-development. Congeries of industrial-policy supporters were scattered across unions and business. But New Liberals failed to unify them. This allowed fractures to widen—between labor and business, and between different business sectors, from Rust Belt automakers to southwestern technologists.
Strikingly reminiscent of this history: a secure constituency for Biden’s industrial policy has utterly failed to emerge. “Bidenomics” is politically toxic. Selling long-term public investment to American voters used to years of easy credit and low inflation required a robust communications strategy. No such strategy was executed. Moreover, the administration overlooked a crucial feature of the earlier industrial policy debate: the proposal of a new strategic-planning agency. Financial Times columnist Rana Foroohar, a prominent heretic inside the crumbling globalist cathedral, has argued that America’s new industrial policy requires improved, more strategic coordination. This is precisely what New Liberals in the 1980s unsuccessfully proposed with the Economic Cooperation Council. Biden might have more efficaciously harnessed his industrial policy’s disparate elements —and combined this with making it easier to build fabs and solar farms—had his team dusted off forebears’ plans for “MITI-Minus.”
Because of these political shortcomings, it remains unclear how the incipient industrial-policy revival might fare in a potential Harris administration. Of course, a Harris victory is far from guaranteed; she arguably remains less likely than Trump to win the election. Left-leaning commentary at first limned Harris as facing a choice between “neoliberalism” and “populism.” At best, this analytic line was simplistic. At worst, given that historical Democrats commonly maligned as “neoliberals” actually emerged by advocating industrial policy, the line was entirely misleading.
Rather, three dispensations competed for the Harris campaign’s attention. One, exemplified by Silicon Valley megadonor and philosopher manqué Reid Hoffman, is composed of knowledge-economy interests hostile to government intervention such as antitrust enforcement. The second could be termed the “care economy agenda,” defined by goals such as universal childcare and reflective of Harris’s deep ties to unions like SEIU and National Nurses United. The third dispensation is the developmental liberalism precariously reenthroned by Biden. Framing industrial policy in national security terms, Biden abandoned what had earlier been a connected social policy agenda.” (These dispensations contain some overlaps in political support.)
Harris is most prepared to embrace a “liberalism that builds” in the arena of housing, floating a $40 billion fund to help localities build “innovative” affordable homes. Harris’s new interest in industrial policy, though rhetorically veiled, is promising. But all three major economic-policy dispensations will continue to compete for attention should Democrats hold onto the White House. And the Democratic Party remains—for now—a coalition of metropolitan professionals and the multiracial working class.
Ultimately, Biden’s withdrawal means developmental liberalism’s restoration is no longer assured. During the past decade, American politics has undergone the first stage of a reorientation that could prove comparable to the rise of the New Deal order in the 1930s or to the crisis of the 1970s and ensuing “Reagan Revolution” in the 1980s. Equally, this reorientation could prove a transient political moment. Whatever it is, this political moment has not represented a straightforward repudiation of the Democratic Party’s post-1970s history. Rather, it has recovered the formative goal of New Liberals in the 1970s-1990s: renewing liberalism’s quest to shape and manage American capitalism.
