Now that many governments around the world are moving to protect industries they consider vital, and international institutions like the I.M.F. and the World Trade Organization are being sidelined, Rodrik believes it will be largely up to the U.S. and China, as the world’s two dominant economic powers, to define new rules of global commerce after Trump has departed. He is particularly enthused by China’s two-decades-long effort to promote renewable energy, which he says could serve as a model to apply in other countries, and in other sectors of the economy. Largely as a result of technological progress in China, solar energy is now so cheap that even a red state like Texas is rapidly expanding its solar capacity. And thanks to the growth of the electric-vehicle industry in China, which is now the world’s largest car market, cheap Chinese E.V.s are being exported to many other countries. “We’re much further ahead on this”—the green transition—“than anyone thought feasible, and it happened through a mechanism that nobody predicted,” Rodrik said.
In his book, he argues that the key to the success of China’s green-energy initiative was the breadth of tools it employed, and the flexibility with which they were applied. The Chinese government supplied E.V. startups with venture capital, subsidies, customized infrastructure, specialized training, and preferential access to raw material. But instead of imposing a top-down production plan, it left a lot of the details up to the businesses. “The hallmark of Chinese developmentalism is an experimental approach,” Rodrik writes. “The national government sets broad objectives. Then a variety of industrial policies are deployed in different industries and locations, followed by close monitoring, iteration, and revision when called for.”
Rodrik also saw much to like in the Biden Administration’s industrial policies, which aimed to hasten the green transition by offering subsidies, tax credits, and public support for industrial research. Trump is busy dismantling many of these policies. Rodrik would support restoring them in the future. He also advocates for allowing countries, including the U.S., to use targeted tariffs to protect specific industries that they consider vital, but he insists it’s a mistake to focus solely on manufacturing, which employs less than ten per cent of the U.S. workforce. The real challenge, he argues, is boosting wages in the vast services sector, which employs more than eighty per cent of American workers. “Whether we like it or not, services will remain the main job engine of the economy,” he writes. Some service jobs, such as managerial ones, are well paid, but many of them, particularly in areas like retail and care, are low-wage positions. “An inescapable conclusion follows: a good jobs economy hinges critically on our ability to increase the productivity and quality of jobs in such services.”
Rodrik concedes that there is no tried and tested formula to achieve this. The approach that he advocates mimics the Chinese model in encompassing government agencies at the national and local level, as well as educational institutions, private businesses, and workers. He supports efforts to organize service workers in labor unions, and he discusses the possibility, raised by Arin Dube, an economist at the University of Massachusetts, Amherst, of establishing wage boards to set minimum wages that vary across industries, occupations, and locations. Rodrik, citing the contrast between nurse practitioners, who earn a median yearly salary of a hundred and twenty-six thousand dollars, and low-wage care workers, also argues that training, technology, and regulatory reform can a play a big role—as can directed scientific research.
He calls for the establishment of a workers’ equivalent of DARPA, the Pentagon agency that has helped finance the development of the internet, G.P.S., and the mRNA technologies used to make COVID-19 vaccines. Whereas DARPA focusses on research that potentially has military implications, Rodrik’s proposed “ARPA-W” would focus on developing “labor-friendly technologies,” including some that employ artificial intelligence. As some observers predict that A.I. could eliminate huge numbers of jobs, many of them well paid, Rodrik, echoing the M.I.T. economists David Autor, Daron Acemoglu, and Simon Johnson, argues that technological progress needs to be refocussed. Referring to his proposal for an ARPA-W, he writes, “The overarching objective would be to allow workers to do what they cannot presently do, instead of displacing them by taking over the tasks that they already do.”