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It’s not just the economy, stupid

Remember the sentence, “It’s the economy, stupid?” It was coined by James Carville, strategist of US President Bill Clinton’s successful 1992 campaign against George HW Bush.

This quote is intended to bring voters back to the fact that the campaign was being held in the midst of a recession, which Clinton’s team successfully used to overthrow the elder Bush, despite the fact that 90% of the country approved this work. which the incumbent did just a year before the election. Since then, this phrase has come true as much as you can in politics.

However, it doesn’t seem to work for Joe Biden, even though many of the top economic indicators, from unemployment to post-pandemic economic recovery, are in his favor. Of course, rising inflation has spooked the American public, though it has also supported their wages. As a result, the old road is no longer as correct as it was in the past. I suspect if Carville were on Biden’s team today, he might come up with another phrase for the next election cycle: “It’s geopolitics, it’s stupid.”

It’s been clear that for a few years now, the world is changing – and the change won’t stop when the pandemic is finally over. That’s because Covid-19 is an elevated scenario of the new realities of the post-liberal world, one of politics, not just “efficient” markets.

It turns out that the world Not flat, after all, and the general public feels uncomfortable, even as many domestic indicators are telling them that everything is fine.

Surveys show that Americans are attention about what’s going on with political tensions in Ukraine – more than they will about past foreign affairs. That’s partly because the crisis was accompanied by an inflation problem – in this case, energy inflation in particular – but it is also a reminder that we are now in a post-American world. , where the US no longer calls all the capes are the new regional powers including the rising China.drive the global economy and markets in new ways.

It’s important to start grappling with all of this honestly. Take, for example, supply chain disruptions. Many experts predict they will decline later this year, and that may be true in the short term. But in reality, supply chains are only at the beginning of a fundamental, lasting change.

This change is for all sorts of reasons. One is political – seeing China become a more inward-focused “dual circulation” economy as well as the increasing use of supply chains as political leverage in places like Lithuania and Germany. Another cause is the result of changes in wages and energy differentials – only no point in shipping low-margin products such as furniture or textiles worldwide. The third is by promoting higher environmental, social and governance standards. They all come to the conclusion that regionalization, not globalization, is the future.

That means there will be a profound change in the way businesses operate, even though the biggest and most powerful multinationals are doing their best to counter this trend and pretend they can be apolitical. Electric vehicle giant Tesla is continuing to push into China despite concerns about human rights abuses in Xinjiang. Tech giant Apple has invaded privacy under pressure from Beijing.

Many economists are also trying to pretend that nothing has changed in the past 20 years, and that falling prices should still be the ultimate goal of society. “The goal is to buy as cheaply as possible,” said former Treasury Secretary Lawrence Summers, related to shopping for the Biden administration’s $1.2 billion infrastructure program.

I have a different opinion. We have left the age of neoliberalism. We now know that markets are imperfect and that consumers and large multinationals are not the only economic stakeholders. In this new world, there will be innovative trade-offs to be made among a larger and more diverse group of people, from businesses of all sizes, to workers and the environment. Most people seem to understand that goods are getting cheaper have raised wages in some parts of Asia and generated staggering profits for large companies, but they have not yet led to a healthier and more sustainable form of market capitalism. Liberal democracy is also not well developed.

The new world is, admittedly, messier and it will come with some upsides in the short term. Inflation for example. Let’s face it, products made by robots, big companies, and autocratic countries that hold back wages are cheaper. We need to be honest about the impact of inflation as we move from a highly globalized economy to one in which production and consumption are more geographically connected and in which stakeholders Officials, not just shareholders, have a say.

But that doesn’t mean we should go back to the old, unsustainable model that led to environmental degradation, labor abuses, rising inequality and toxic politics. It means we should begin to tackle the burning questions: what is the right balance between foreign and domestic concerns when thinking about commercial policies? How can better education and competition policy mitigate the downsides of our new era? What comes? after neoliberalism? This is a political economy after all, stupid.

rana.foroohar@ft.com

Subscribe to Rana Foroohar’s US political newsletter, Swamp Notes, ft.com/newsletters

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