Now that many governments around the world are scrambling to protect industries they consider vital and international institutions like the IMF and the World Trade Organization are being sidelined, Rodrik believes it will largely be up to the United States and China, as the world’s two dominant economic powers, to set new rules for global trade after Trump leaves office. He is particularly enthusiastic about China’s efforts over the past two decades to promote renewable energy, which he says could serve as a model to be applied in other countries and other sectors of the economy. Largely thanks to technological advances in China, solar power is now so cheap that even a red state like Texas is rapidly expanding its solar capacity. And thanks to the growth of China’s electric vehicle industry, which is now the world’s largest auto market, cheap Chinese electric vehicles are being exported to many other countries. “We are much further along in this area” – the green transition – “than anyone thought possible, and it happened through a mechanism that no one predicted,” Rodrik said.
In his book, he argues that the key to the success of China’s green energy initiative lies in the breadth of tools used and the flexibility with which they have been applied. The Chinese government has provided electric vehicle startups with venture capital, grants, customized infrastructure, specialized training and preferential access to raw materials. But instead of imposing a top-down production plan, he left many of the details up to companies. “The hallmark of Chinese developmentalism is an experimental approach,” writes Rodrik. “The national government sets broad goals. Then, various industrial policies are rolled out across different sectors and locations, followed by close monitoring, iterations and revisions when necessary.”
Rodrik also saw a lot of appreciation in the Biden administration’s industrial policies, which aimed to accelerate the green transition by providing subsidies, tax credits and public support for industrial research. Trump is dismantling many of these policies. Rodrik would support their restoration in the future. He also advocates allowing countries, including the United States, to use targeted tariffs to protect specific sectors they consider vital, but he insists it is a mistake to focus solely on manufacturing, which employs less than ten percent of the U.S. workforce. The real challenge, he says, is raising wages in the vast service sector, which employs more than eighty percent of American workers. “Whether we like it or not, services will remain the economy’s primary employment engine,” he writes. Some service jobs, like management, pay well, but many of them, especially in fields like retail and caregiving, are low-wage positions. “An inescapable conclusion follows: a good employment economy essentially depends on our ability to increase productivity and the quality of jobs in these services. »
Rodrik concedes that there is no proven formula for achieving this. The approach he advocates mimics the Chinese model by encompassing government agencies at the national and local levels, as well as educational institutions, private businesses and workers. He supports efforts to organize service workers into unions and discusses the possibility, raised by Arin Dube, an economist at the University of Massachusetts at Amherst, of creating wage boards to set minimum wages that vary by industry, occupation and location. Rodrik, citing the contrast between nurse practitioners, who earn a median annual salary of one hundred and twenty-six thousand dollars, and low-wage care workers, also argues that training, technology and regulatory reform can play an important role, as can directed scientific research.
He calls for the establishment of a worker equivalent of DARPAthe Pentagon agency that helped fund the development of the Internet, GPS, and mRNA technologies used to make COVID-19 vaccines. While DARPA focuses on research that potentially has military implications, Rodrik’s project “ARPA-W” would focus on developing “work-friendly technologies,” including some that employ artificial intelligence. While some observers predict that AI could eliminate large numbers of jobs, many of them well-paid, Rodrik, echoing MIT economists David Autor, Daron Acemoglu and Simon Johnson, argues that technological progress needs to be refocused. ARPA-W, he writes, “the overriding goal would be to enable workers to do what they currently cannot do, instead of displacing them by taking over tasks they already do.” »
