The Left Shouldn’t Get Too Excited About Joe Biden’s “Supply-Side Liberalism”

Pundits have lauded the Biden administration for replacing the free-market consensus with supply-side liberalism. But it is geopolitical tensions with China and labor’s weakness that have made elites feel comfortable with a milquetoast industrial policy.

President Joe Biden displays a semiconductor during a White House press conference, February 24, 2021. (Doug Mills / Pool / Getty Images)

Even prior to his inauguration, there was talk that Joe Biden’s administration would mark a break with the neoliberal orthodoxy that has dominated both parties since the Ronald Reagan era. During the height of the pandemic, the president claimed that the “blinders have been taken off,” and his administration would have to address challenges that “may not dwarf but eclipse what FDR faced.”

The unexpectedly generous, albeit frustratingly temporary, COVID-19 relief package that Biden signed into law in March 2021 and, later, his passage of the Bipartisan Infrastructure Bill (BIB), the CHIPS Act, and the Inflation Reduction Act (IRA) seemed to confirm these initial estimates of his ambitions. The president has been, if not the second coming of Franklin D. Roosevelt, at least a Democrat in a different mold from that of either Bill Clinton or Barack Obama.

Perhaps the most distinctive feature of “Bidenism” is its embrace of what pundits have called “supply-side liberalism” or “supply-side progressivism”: giving the state a prominent role in directing investment in the form of tax incentives, direct subsidies, and tariffs to encourage domestic production of goods deemed strategically necessary. The IRA, for instance, offers subsidies for building renewable energy and green manufacturing; the CHIPS Act uses tariffs and subsidies to encourage domestic manufacturing of computer chips.

In April, Jake Sullivan, Biden’s national security advisor, outlined this new approach in remarks he delivered to the Brookings Institute think tank. The current administration, Sullivan claimed, was rejecting faith in “tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself” and instead “restor[ing] an economic mentality that champions building.”

What should socialists make of this turn away from neoliberal orthodoxy and the emergence of industrial policy? Biden’s ambitions do mark a step in the direction of rebuilding infrastructure and encouraging economic activity through government intervention. But this move away from the economic orthodoxy of the past forty years has not occurred as a result of the strength of the Left or any other progressive bloc. Despite the recent uptick in worker militancy, it is the weakness of organized labor and working-class political organizations that characterize the current moment.

The exceptional circumstances of the COVID-19 pandemic, combined with the rise of a new cold war with China — mentioned fifteen times in Sullivan’s remarks — opened the door to greater government intervention in the economy. But as that crisis fades from view, the current administration has justified much-needed public investment almost entirely in geopolitical terms, with industrial policy necessary to enable American hawkishness toward the world’s second-largest economy. As long as industrial policy remains tied to the geopolitical ambitions of the Democratic Party, the Left should be very sober about the limits and even dangers of Biden’s supply-side liberalism. Ultimately, it is the marginal status of the domestic left and labor and the consequent lack of space for an internationalist approach to foreign policy and economic planning that have led to this right-wing form of industrial policy.

Still, this does not mean that socialists should reject the turn away from neoliberalism initiated in some ways by Donald Trump and carried through by Biden. We must instead point to the limits of such a policy and argue that the investments required to fix America’s failing infrastructure and decarbonize the global economy can and must be achieved without the dangerous anti-China stance. Unless workers and the Left organize to assert their own power, the government’s newfound largesse will do little to address glaring economic inequality, further a just green transition, or de-escalate rising geopolitical tensions.

All Carrot, No Stick

Famously, Bill Clinton declared that “the era of Big Government is over,” and Barack Obama, despite his claims to offer an alternative to this consensus, championed free trade. Biden’s recent moves, despite breaking with the legacy of his predecessors, does not signal a return to the ambitious liberalism of the New Deal, let alone an experiment in European-style social democracy or “socialism,” as right-wing hysterics would have it.

Supply-side liberalism is rather a policy approach that acknowledges markets do not always produce the desired outcome — not only in providing for people’s consumption needs but in ensuring the production of certain necessary goods like clean energy or adequate infrastructure. Supply-side liberals, unlike their neoliberal counterparts, acknowledge certain shortcomings of the free market and recognize the need for more direct government intervention in the economy.

We should be skeptical, however, that Biden’s break with the old “Washington Consensus” can achieve its lofty goals. The tools with which supply-side liberals have sought to address America’s problems are meager at best. First, the amount of money committed to the IRA pales in comparison to what will be required to carry out a green transition. The International Energy Agency predicts that the transition away from fossil fuels requires investments of $4 trillion annually through 2030, or $28 trillion over the next seven years. In comparison, the IRA only allocates $400 billion over the course of an entire decade.

Some have pointed to the potential in the uncapped tax credits included in the bill, which by some estimates could triple the IRA’s sticker price to $1.2 trillion and further mobilize private investment. But even this remains far too little, especially in the wake of decades of austerity that have hollowed out state capacity. Though these are substantial amounts of money relative to recent decades, we should not overstate what has been achieved thus far.

A second problem with Biden’s market-oriented turn to industrial policy is that it is all carrots and no sticks. With few stipulations, the federal government has committed to giving firms cash in hopes of guiding investment choices to government priorities like semiconductors and green energy. As Daniela Gabor has argued, the state is “derisking” investment in these sectors. What this means is that governments encourage private investment by taking responsibility for potential losses. Profits are privatized while losses are socialized.

Under this approach, there is no mechanism to discipline firms that either do not follow through with promises or simply decide not to participate in subsidy programs; there’s no way of forcing existing industries to restructure. This inability of the state to discipline capital was the Achilles’s heel of industrial policy efforts by “developmental states” like India in the twentieth century. Capitalists made use of subsidies and protection for domestic industry, but they refused to invest in the way state planners wanted them to. Here in the United States, the need to placate capital hamstrung previous attempts at supply-side policymaking.

The Biden administration’s close ties to private finance — Brian Deese, a former BlackRock executive, served until recently as his top economic advisor — all but ensures that the absence of disciplinary mechanisms in the IRA will turn it into a blank check. “Targeted public investment,” according to Sullivan, will “unlock the power and ingenuity of private markets, capitalism, and competition.” It would be naive to expect radicalism from Biden, but his unwillingness to discipline capital through control of the federal purse strings makes evident the distance between his rhetoric and reality.

This was illustrated just last week when the government announced that it would loan Ford nearly $10 billion for the construction of new electric vehicle factories. The catch? There is no catch. Not only did the government fail to impose any requirements on Ford to ensure these new factories would be union shops, they included no mandates on working conditions. Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC), on track to receive billions from the CHIPS Act, has done its best to resist union labor.

Finally, the third problem is that, in the absence of a powerful left-wing challenge to the political establishment, Biden’s industrial policy is certain not only to disproportionately enrich capital but to do so at the expense of workers and the broader public. Private capital is normally wary of empowering the state in any way that might encroach on its domain. But as the political economist Cedric Durand has observed, absent any possibility of higher taxes or at least partial nationalization, “state subsidies imply a transfer of resources from labor and the public sector to capital.”

None of this should come as a surprise. As exciting as the last few years have been for segments of the labor movement, it remains historically weak. Without a major change in the balance of class power, any reform program will primarily serve the interests of capital. All of the above shortcomings stem from this fundamental issue.

Great Power Rivalry

Although the president has personally focused on this concern less than his predecessor Donald Trump, whose America First agenda was in many ways a precursor to Bidenism, the United States’ intensifying great power rivalry with China is the primary motivation behind the turn to industrial policy. Already during Obama’s presidency, a major priority was what that administration termed the “Pivot to Asia”: the goal was to reduce involvement in the Middle East in order to free up attention and resources to reinforce US influence in China’s “backyard.” The failed Trans-Pacific Partnership (TPP) trade bill, championed by Obama in his second term, was an attempt to keep East Asia locked into a US-centered global economy using the traditional neoliberal toolkit.

Trump, less committed to economic orthodoxy, understood the unpopularity of free-trade deals that had forced many Americans to compete with cheaper overseas labor. He instead favored economic protectionism, a policy considered taboo since the advent of neoliberalism that elicited horror from mainstream policymakers.

It is on this front, among others, that the Biden administration has carried on his predecessor’s policies. For instance, last year, China, Turkey, Norway, and Switzerland won a case in the World Trade Organization (WTO) against the United States on the grounds that steel tariffs introduced by Trump were not legal under the body’s rules. The United States has long wielded the WTO as a weapon to pry open foreign markets. But now, with the shoe on the other foot, the Biden administration argued that steel tariffs fell under a national security exemption and that the WTO was on “thin ice.”

While Trump may speak in a cruder nationalist register, Biden’s policies are a continuation of the turn against neoliberalism initiated by his predecessor. Sullivan and Treasury Secretary Janet Yellen see the new industrial policy as a means of ensuring the economic, military, and ideological superiority of the United States over China. The CHIPS Act, for instance, was explicitly pitched as an attempt to onshore manufacturing of computer chips that are essential to the US military; right now, the vast majority of such chips are manufactured in Taiwan, the biggest flashpoint for rising US-China tensions.

This effort to boost domestic chip manufacturing has gone hand in hand with aggressive new export rules designed to cripple China’s own ability to make such chips. The rules “essentially seek to eradicate, root and branch, China’s entire ecosystem of advanced technology,” New York Times Magazine reported. The magazine quotes a semiconductor analyst who says, “If you’d told me about these rules five years ago, I would’ve told you that’s an act of war — we’d have to be at war.”

What Do Socialists Want?

“Bidenomics” is a far cry from the type of expanded role for the state in the green transition that socialists have advocated in the form of a Bernie Sanders or Alexandria Ocasio-Cortez–style Green New Deal. Its limitations, however, ultimately stem from the political climate out of which it has emerged. The alternative vision, put forward by Sanders, AOC, and the few other left-wing elected officials in Congress, was to rapidly decarbonize the economy via a massive expansion of public ownership of industry and infrastructure, aimed at achieving full employment and increasing unionization. A Green New Deal of that sort would empower workers, reduce economic inequality, and make major steps toward democratizing the economy.

If you squint, Bidenism appears to offer something that bears resemblance to the more radical aims of the US left. The role of socialists must be to point out the difference between the militaristic corporate handout that is the IRA, CHIPS Act, and associated policies, and the vision of redistribution and economic planning we need to confront climate change and inequality.

The ultimate aims of socialists are for an end to great power conflict, the reconstruction of the global order in the interests of the international working class, and the democratization of the economy so that decisions around investment and workers’ conditions are made by the public. Biden’s agenda clearly does not seek to address these issues. Democrats are unwilling to base their proposals on anything that might smell like socialist principles or suggest insufficient reverence for the sanctity of private enterprise, so they are forced to justify exceptions to free-market dogma by the presence of the supposed threat of China.

The point is not that socialists should advocate for “free trade” or oppose attempts to increase semiconductor production in the United States, but we must be careful not to get sucked into supporting Democrats’ increasingly militaristic posturing. This will be easier said than done. Absent a stronger social base and independent political voice, it will be difficult for socialists to explain how our support for investments in domestic industry differs from that of the anti-China hawks.

This is not to say that there’s nothing for socialists to like in the Inflation Reduction Act and other Biden administration policies. At least in part due to the various subsidies provided, we are in the middle of a factory construction boom, with investment at a thirty-year high. In a relatively tight labor market like the one we have now, this could make it easier for workers to unionize, even in the traditionally nonunion South — like the 1,400 workers at a bus manufacturer in Fort Valley, Georgia, who just voted to unionize. And in New York, the Democratic Socialists of America (DSA) and allies recently pushed through a bill that makes use of federal IRA funds to direct the state to build public renewable energy, with strong labor protections for new green jobs.

Yet these victories did not happen automatically, and neither will the many more larger wins we’ll need for a just transition. Even as legislation has included some modest labor provisions, it’s no accident that so much funding is flowing to right-to-work states. Prevailing wage requirements are restricted to a narrow set of jobs, and real employer neutrality or union labor mandates were left out of recent bills. It was not even a year ago that Biden and Congress denied railworkers the right to strike; we saw there how paper thin pro-union sentiment can be when profits are on the line. Socialists should be clear-eyed about the fact that government policy toward unions will remain ambivalent at best.

When it comes to legislation, the Left cannot be content with being “junior partners” to a militaristic and corporate-friendly Democratic establishment. Socialists can’t be afraid to openly criticize Biden and the Democrats; we must build our own public identity and political organization, as groups like DSA are continuing to do, and agitate for ambitious pro-worker demands like a green jobs guarantee and public ownership of the energy system.

If any such campaign is to find success, we also need to see a reverse in decades of declining union density. Ossified unions, particularly in the manufacturing and energy sectors, must be transformed so that they actually devote their considerable resources to organizing and fighting the boss. If history is any guide, that will likely require socialists to be active on the shop floor, both as militant reformers in existing unions and as “salts” in nonunion workplaces. This kind of confrontational, class-based program is our best bet at ramping up the pressure on establishment politicians like Biden and ultimately building support for real solutions to the climate crisis.

Crucially, the Left must not respond to the failings of Biden’s program by calling for a wholesale abandonment of industrial policy. This moment has shown publicly, for the first time in decades, the massive influence the state can have in managing the economy. It’s our responsibility to provide an alternative vision of that power both domestically and internationally. Conversely, those on the Left who are most optimistic about this neo-industrial turn have a responsibility to be similarly vocal about the dangers of yoking industrial policy to the drumbeat of war with China.

“Supply-side liberalism” is no panacea to the United States’ social problems, nor even a radical break from the approach taken by political elites in recent years. But it does represent a shift in the terrain on which we’re fighting — a shift that workers, and the Left, must quickly adapt to take advantage of.