Bidenomics – The Challenges

Chris Waller - March 2021
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Anatole Kaletsky, writing in The Times (13/12/96), commented thus:-

“America is far from perfect. I would certainly not want to bring up my children there. It lacks decent public services. It is marred by violence, extremism and grinding poverty. Altogether, there are many things wrong with America. It just happens that economic policy is not one of them.”

One has to question what Kaletsky understands as the purpose of economic policy. If the application of putatively successful economic policy delivers all of those social ills, then one would surely reasonably conclude that it has failed, would one not? President Biden is proposing to spend $1.9 trillion to revitalise the US economy, but he has a mountain to climb. Indeed, he has the Sierra Nevada and the Rockies to climb, plus possibly the Himalayas, depending on his foreign policy.

Ronald Reagan, president from 1981 to 1989, a conservative by disposition, initiated changes to the US economy and, thereby, American society, almost by accident. In response to what he, and his advisors, perceived as the decline of America, he caused the implementation of what were called ‘supply-side’ economics, which was a euphemism for neo-liberal economic policy as espoused in ‘the Washington Consensus’ – that is: democracy plus free markets. However, one has to accept that the terms ‘democracy’ and ‘free markets’ were nominal and could be stretched as the need required. In the 18 years from 1973 to 1995, the earnings of the 80% of American workers, blue-collar and lower white-collar, had fallen by 18% in real terms. In the period from 1978 to 1989, the earnings of American Chief Executive Officers increased by 19%, on top of which they enjoyed enormous tax reductions. During the Reagan presidency, the wealth of the top 1% of Americans increased from 31% to 36% of total US wealth. It is not surprising, therefore, that as average wages continued to fall in real terms, particularly after the 2007/08 financial crash, the siren-song of Donald Trump seduced the blue- collar vote.

During the Reagan presidency, the US prison population doubled from around 600,000 to 1.2 million. Juvenile detention followed the same curve. This rate of incarceration continued for the next 20 years, the current US prison population now standing at over 1.2 million (2020 figure). The rates of incarceration are typically higher in the southern states. It is difficult to ascertain whether the increased rates of incarceration are an unforeseen consequence of neo-liberal economics or an instrument of policy.

Biden inherits a legacy of foreign policy débacles which will hamper his attempts to revitalise the US economy, all of which flowed from a failure to comprehend the cultures of the countries in which they became involved. America likes to see itself as the embodiment of the Enlightenment view that the world must be modernised by assimilating the Western political forms of state and economy, the structures and the mechanisms. In Vietnam, the US Army contracted out much of its supply and logistics to people whom it thought were Vietnamese but were in fact Hoa – ethnic Chinese people, about 300,000 in number, who controlled most of Vietnamese trade and commerce and were largely hated by the indigenous Vietnamese. In favouring the Hoa, the US merely inflamed existing resentments.

More recently under George W Bush, assisted by our own Prime Minister Blair, the U.S. thundered into Iraq and Afghanistan, blissfully unaware that the forms of Western democracy cannot simply be veneered on to cultures which are already deeply divided along tribal and sectarian fault-lines. The same is true of Libya. Had Bush and Blair taken the trouble to read T E Lawrence’s ‘The Seven Pillars of Wisdom’, they might have had second thoughts. Once again, existing internal rivalries were exacerbated and have turned into festering political ulcer from which the U.S. cannot extricate itself and which will continue to be a drain on the US economy.

The political collapse of the Eastern Bloc – which occurred, almost as if scripted, at the end of the Reagan presidency – ushered in a period of economic collapse which once again saw the imposition of the Washington Consensus, via the World Bank and the International Monetary Fund, creating the conditions from which eventually Vladimir Putin would emerge to seize control of Russia. Finally, the Trump administration started a trade war with China, justifiably so in the eyes of many Americans, and that has yet to be resolved, as does the stand-off with North Korea. Add to this China’s increasingly aggressive claims on the seas and islands in its neighbourhood, including its historical claim on Taiwan, and Biden will have his hands full.

On the domestic front, U.S. infrastructure is desperately in need of spending. American civil engineers estimate that, by 2025, infrastructure spending will be $2 trillion short of where it needs to be. How this will be paid for is another headache for the Biden administration.

A presidential term of 4 years is manifestly insufficient to even begin the task of restoring the damage caused over the last four decades. The best that Biden can hope for is to convince the American people who voted for Trump that he can turn the US economy to their benefit and to restore their faith in the political institutions of the US. Meanwhile, Trump is currently manoeuvring to reshape the Republican party in his own image with a view to re-entering the White House in 2025. The next four years should be interesting.

Gray, John. ‘False Dawn’, publ. Granta, 1997 (1998 paperback).
Jenkins, David. ‘Market Whys and Human Wherefores’, publ. Cassell, 2000.
The Sentencing Project:

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