A Vision For Making The U.S. Economy More Equitable

It’s time for a new era of using public investment to shape markets so that they help all Americans, argues Felicia Wong.

Hoi Chan for Noema Magazine
Felicia Wong is the president and CEO of the Roosevelt Institute. She is a political scientist by training and has authored “The Emerging Worldview: How New Progressivism Is Moving Beyond Neoliberalism” and “A New Paradigm for Justice and Democracy: Beyond the Twin Failures of Neoliberalism and Racial Liberalism.” Her work has appeared in a range of outlets, including the New York Times, Washington Post and Boston Review. She recently spoke with Noema Magazine Senior Editor Braden Goyette and Yakov Feygin, associate director of the Berggruen Institute’s Future of Capitalism program and associate editor of Noema Magazine.

After the U.S. government fended off a pandemic-induced recession with historic stimulus spending, many asked whether this was the end of American neoliberalism as we knew it. Roosevelt Institute President Felicia Wong argues there has indeed been a sea change in the dominant economic thinking in the U.S. She spoke with Noema Magazine about what that means and how increased public investment can shape a more egalitarian future for all Americans.

Braden Goyette: To start off, since “neoliberalism” is a term that’s been deployed in a lot of different ways, would you tell us what that word means to you?

Felicia Wong: Neoliberalism is often seen as primarily economic, Milton Friedman and Friedrich Hayek. But historically, it has never been just about economics. Neoliberalism is an entire paradigm, a set of cultural beliefs that celebrate and reify norms like individualism, property ownership and wealth accumulation. This has become profoundly anti-democratic and anti-political.

That is because neoliberalism says we should make decisions according to prices alone, where supply and demand curves cross. Neoliberalism discredits collective action, collective voice. The political theorist Wendy Brown has long argued that neoliberalism has undone the demos and remade human life into human capital. So neoliberalism has market fundamentalist economics as a backbone. But the flesh and blood of neoliberalism is much more a set of beliefs that animate political alliances and institutions that are, in many ways, anti-democratic.

And here’s why this matters: not only because of political theory (as much as I love political theory!) but because our beliefs about what is right or wrong economically and societally constrain, or enable, what we think is possible in our politics. Our paradigms shape our presidential elections, our legislative outcomes. The fate of Build Back Better, our ability to decarbonize our economy fast enough, to build a child care and elder care infrastructure that works for families and for workers — all depend in part on whether and how we move past neoliberalism.

Goyette: How will we know we’re moving past neoliberalism? What are the indicators of that for you?

Wong: To know whether neoliberalism is on the outs or whether it continues in some kind of zombie form, you have to look not just at economic policy, but at politics. At alliance building, institution building and organizing.

There are a lot of signs that we’re moving past the old political elite consensus on neoliberalism. Just look at some of the ideas that we’ve seen embraced by the Biden administration, especially early on in Biden’s presidency. His team has pushed new ideas: public investment in clean energy, for example, or a new approach to thinking about structuring the care economy. Many of those ideas are about public provision and public investment.

There’s been a real embrace of smarter regulation and more taxation on corporations and on the wealthy. The American Rescue Plan put billions of dollars directly into the bank accounts of low-income families through the child tax credit and sent money directly to workers, cities and states. That was very different than the policy response to the Great Recession.

There are a lot of new ideas that are being put into motion. They build on a decade-plus of work done by policy experts and economists in academia and think tanks, outside of politics. But obviously we see that many of those ideas are politically contested, both within the Democratic Party and, of course, across the aisle.

Goyette: You’ve written about “zombie neoliberalism” — how increased spending during the pandemic suggested neoliberal ideas were losing purchase, but with the Build Back Better Act being chipped away, neoliberalism is creeping back in. Why do you think neoliberalism has been so tenacious in the U.S.?

Wong: Let’s start with economics. Even though there’s been an enormous pivot in the economic profession, that pivot is not yet complete. In recent months, a few prominent economists have pushed back against the amount of federal spending in both the CARES Act and the Rescue Plan.

Now, this pushback has been really overplayed by many journalists. Because overall there is significant agreement that the level of spending in the American Rescue Plan ended up benefitting workers, in part by ensuring that there was not only relief money, but also the support of stronger labor markets. Two years ago, we expected mass unemployment — that was the prediction in March and April of 2020 — and instead, we’ve seen the opposite. We’ve seen record low unemployment, which is remarkable, when you think about it.

There’s also pushback from some centrist economists arguing that the amount of spending in the American Rescue Plan is the primary driver of price increases. I think there’s a lot of evidence that’s not true. Today’s inflation has many different causes. And the spending in the Rescue Plan clearly did a lot of good. What many economists agreed on two years ago — that it’s far more dangerous to spend too little in the face of a pandemic-induced recession than to spend too much — still holds.

“The flesh and blood of neoliberalism is a set of beliefs that are, in many ways, anti-democratic.”

The second reason that neoliberalism exists in zombie form is that its institutions are very strong, whereas post-neoliberal institutions that would be about pro-democracy and pro-public engagement for its own sake are quite weak. So I would make the argument that, on the progressive side, we have very strong outside advocacy organizations focused on particular issues — women’s reproductive health, gun violence, gun safety laws, etc.

But we don’t actually have strong membership institutions that would argue for a democratic post-neoliberal society. Labor unions, yes, but even with the uptick in labor action recently, unions are historically weak, especially compared to the mid-20th century. So that’s one of the reasons we see neoliberal ideas coming back in the fray. At this time of paradigmatic confusion, where we are past neoliberalism but the new world is still unclear, we don’t have post-neoliberal institutions to argue that a new democratic world is possible, smart and achievable.

Yakov Feygin: Given the Republican Party’s populist turn, do you see areas where progressives can work with the GOP on these issues? And if there are, what are the dangers of that?

Wong: I do think we’re past the high-water mark of neoliberalism on the Republican side, which was the “Reagan Revolution.” And we’re even past the high-water mark of neoliberalism on the Democratic side, which would be some of the ways the Clinton administration chose to solve policy problems. So, in that sense, we are beyond neoliberalism.

But we’re at a real fork in the road for post-neoliberalism, where you can either have a democratic — small “d,” this is not about parties — post-neoliberalism that is about public engagement and affirmative racial inclusion or you can have a white nationalist post-neoliberalism that has some elements of populist economics — a kind of welfare state for white people.

There’s plenty of people in the Republican party or on the conservative side who are anti-large corporations or monopolies. The problem is they are not pro-public in a racially inclusive sense. They are not arguing for changes that would benefit working mothers or make sure that women are included in the labor market. In fact, much of the Republican party now is driven by a MAGA faction that is motivated mostly by “animus” (a polite word) toward people who are not white or Christian. Yes, they might be populist, in that they don’t like big business either. But the dangers of racist, populist economics are very real.

Goyette: What could be done to counter those dangers?

Wong: We need to strengthen our institutions so that they’re more inclusive. The Biden team is actually starting to do this, but it will be a very long road. In a race equity executive order on his first day in office, Biden said we need to have a whole-of-government approach to race equity, to make sure that we are gathering all the data we need so that all Americans — Black, brown, indigenous, Asian, immigrant — are actually able to partake in public policy. So it’s about building governmental institutions that actually understand how to serve the public and are getting the information they need to do so.

And I think we have to look at the ways in which we shape markets using two mechanisms. It’s not just about distribution and redistribution to families and workers, although that’s obviously incredibly important. It’s also about using public investment to shape markets so that they really help the American people.

In an earlier version of Build Back Better — and I hope some of this will come back into legislation — there were hundreds of billions of dollars to incentivize corporations to decarbonize. That is an incredibly important use of public power and federal funds. On the flip side, you need to make sure that you’re using environmental regulation to shut down or curb producers that are actually polluters. There’s a way to use federal carrots and sticks to shape markets. Same thing with building a stronger care economy.

“The dangers of racist, populist economics are very real.”

Where it’s possible to directly provide goods or supports to the American public, we ought to do it. One pointed example is the way we have handled COVID testing over the last couple of years, especially over the last six months. The governments in many other wealthy nations, in Singapore and throughout Europe , for example, have done far more to use public power to meet their citizens’ needs. They have either purchased tests and sent them directly to their citizens’ homes or they have made sure to invest much more directly in the manufacturing of tests, so that tests are widely available and easily accessible.

They did that rather than relying on market mechanisms alone. The Biden administration could have produced rapid tests very early on, or it could have purchased them at low cost from manufacturers. It could have made sure that they were distributed to every household. Recently, the administration has started doing that, which is a very good move. But it could have made this shift much earlier. It’s smart public health policy, and it’s popular! Seventy-five percent of Americans are in favor of this, and about as many have heard about this — no small feat in today’s fractured media and political environment.

Because instead, at least right now, you have tests in the U.S. that are privately produced, that are governed by a single provider with an oversized market share. So tests are expensive, they’re hard to find, and, at least until very recently, the administration had been relying on private insurance reimbursement. And that is just not good enough. This is an economic problem, this is a public provision problem, and it’s also a public health problem.

I’d contend that the reason we didn’t do more public provision earlier is that the administration’s thinking was held back by neoliberalism, which says that the private system will provide.

Goyette: What lessons do you take from how the Build Back Better Act negotiations have stalled?

Wong: That is a really good question. The framing around the entire package should not be “BBB will combat high prices,” which is what you sometimes hear, but instead, “We can afford to invest in a better future.” Even some recalcitrant economists — the ones who worry about inflation — say that of course we can and should be making Build Back Better’s investments.

We can afford to do big things, because there is so much money available at the top of the economy. That’s why it’s extremely important to focus on corporate and wealth taxation. And to look at all of the new research and data that suggests that higher taxation of ultra-wealthy people would have a positive effect on the economy.

Originally, the idea was close to a $4 trillion package over 10 years, a $400 billion package every year. That was eminently affordable, given Joe Biden’s original tax proposals from the 2020 election — $4 trillion over 10 years. These are investments we can absolutely afford — investments in child care, elder care, decarbonization, in our education system, in roads and bridges via the infrastructure plan.

We have to make sure that argument is shored up as we move forward on legislative investment and spending proposals. Too often, at least in the media, these arguments get disaggregated rather than put together. It’s very hard to make a clear argument for public investment if you haven’t made a clear argument for the virtues of higher taxation.

“We can afford to do big things, because there is so much money available at the top of the economy.”

One thing to remember in all of this is that there is a real nuts-and-bolts business case for making these kinds of investments — and for taking on debt, because it’s really debt in the service of long-term investment. There is also a nuts-and-bolts political case for doing so in a way that makes sure that the American people — and not huge corporations that dominate our politics and lobby for tax breaks just for them — see the benefit of federal spending.

Making the business case for investment in American kids, American workers, a greener economic future — whether it’s battery production, electric vehicle charging stations, wind, solar — that’s the way to bring in not just a lot of progressives, but also a lot of centrists who see the opportunity in growth and inclusion.

Goyette: How do you respond to the narrative that government spending is causing inflation, and what tools beyond rate hikes do you think we should deploy to address the problem?

Wong: Well, first, I think we should start the conversation with a much bigger sense of what a healthy economy is: full employment, a shrinking — or nonexistent — wage- and wealth gap between white people and people of color, public and private investment in the sectors that will drive a greener future.

But, as for inflation itself, we need to do a little more explaining, to get past the model in people’s heads that inflation is driven by too much money in the system, especially by too much money going to workers. Because that neoliberal thinking leads to austerity, which is a bad answer today.

“What you want to be doing in certain sectors is to spend more money, not less.”

When you look at the drivers of price increases, whether it’s ports running at full capacity or a shortage of semiconductors — that requires not rate hikes and a throttling down of the whole economy, but more investment, both public and private. What you want to be doing in certain sectors is to spend more money, not less.

The same is true in housing. One of the biggest drivers of price increases that hurt everyday people is the price of housing. In the short term, you can talk about rent control and rent relief. In the long term, you can talk about investing in more social housing.

There is also significant evidence that part of what’s behind price increases is markets that are overly monopolized and not competitive. The White House recently focused on the meat packing industry. Meat in the United States is dominated by three or four very large producers, who can then essentially act as a conglomerate to hold prices up. Instead, you need to use anti-trust mechanisms to fight that kind of market sclerosis.

One of the most interesting things the Biden team did recently was to take about a billion dollars to shore up smaller producers, and I think that is a novel way to think about prosecuting competition policy. It’s not just antitrust from a legal and regulatory perspective — it’s also small amounts of public investment to try to make sure the market actually operates as it should.

When you have one or two producers dominating a market sector, they’re also able to hold workers’ wages down. Thus, ensuring competition helps both consumers and workers.

Goyette: How would you want to see the U.S. strengthen and innovate redistributive policy measures in the next 5-10 years or so?

Wong: I said this before, and I’ll say it again: First and foremost, it’s incredibly important not to leave money on the table with respect to taxation. Why would we do that? There’s plenty of evidence that higher taxation on the wealthy will not hurt economic growth. Now, we haven’t gone far enough for a lot of bad political reasons, including corporate lobbying — just look at the lobbying numbers against wealth taxation and different forms of corporate taxation. We have to see taxation in and of itself as a tool to fight inequality and to create markets that distribute better.

Second, the Federal Reserve should keep interest rates as low as possible, because that’s very good for workers. It’s going to be challenging in the next year, as the Fed seeks to figure out what kind of rate increases are going to be needed to bring inflation down to what people think will be the best-case scenario, perhaps 3 or 4% inflation (from 7% last year).

“We have to see taxation in and of itself as a tool to fight inequality and to create markets that distribute better.”

But keeping interest rates low creates a hotter economy. That means more workers are being hired, which means wages rise. And that’s what we’ve seen — record low unemployment and record wage increases, especially at the bottom of the income distribution over the last year. And that has been driven in part because we have seen a Federal Reserve willing for a very long time to keep rates lower in order to drive more employment. This is a big, maybe even radical change in the Federal Reserve’s thinking.

Feygin: Where do public ownership and public options come into it for you, and what is the government’s role in areas traditionally dominated by markets? 

Wong: I think we ought to be distributing goods, services and funds as directly as possible, which we saw in the child tax credit.

Just to take one example, we ought to be thinking much more fundamentally about public provision of child care. We have a public K-12 education system. Here in New York, there’s public pre-K, which is exciting. There’s no reason that you wouldn’t also look at public provision of child care, ages 0-3, which you see in many successful European economies.

Much of what’s in the Build Back Better Act is about consumer subsidy, making sure that most consumers don’t have to pay more than 7% of their income on child care. That’s very important.

But we’ve seen public child care in the United States before. It existed during World War II when it was important for women — you know, Rosie the Riveter — to be in the workforce while men were deployed in the military. We should be looking toward that again. Interestingly, in some of the early ideas around Build Back Better, you did see $25 billion — not a tremendous amount, but still something — deployed to building and renovating public child care facilities.

Why is it that water and electricity, for example, are public goods right now and not privately provided? Why do they have some very significant level of public oversight? This was a historical development that really came out of the progressive era in the 19th and early 20th centuries. But it was not a foregone conclusion that those things would be provided as public goods, and we might think about other kinds of goods that way.

“Even given the dismay in our world today, or perhaps because of that dismay, we must remember: A new world is possible.”

Obviously, we’re already thinking about broadband in that way. We should also consider public options for both media and social media, since the advertising model drives sensationalism and doesn’t provide a foundation of fact-based information for the American public writ large. 

When I say it’s important to have public investment in everything from semiconductors to green manufacturing to electric vehicle charging stations, I think you can use direct public dollars to incentivize private dollars so that the market will go as fast as the science requires. I also think that we can use the power of government procurement. Government is the largest single employer and one of the largest purchasers of things like cars. So the fact that Biden declared that the government was going to purchase electric vehicles very early on, for example — that in and of itself is a way to shape markets for good.

Goyette: What would the U.S. look like if the ideas you’ve been talking about become reality? Paint us a picture of your vision of the future.

Wong: We would have an incredibly robust economy that does not only rely on consumer goods — 70% of our economy right now is driven by consumption. We’d have an economy in which care workers, whether it’s teachers or home health workers or child care providers, would make at least middle-class salaries. American families would be very easily able to keep their homes and avail themselves of transportation that is clean and green, whether it’s solar or wind or geothermal. Electricity would be clean. And, most importantly, you would have labor markets and other kinds of public institutions and public systems, including public safety, that are truly racially equitable.

Painting a vision of the future is so important right now. Our politics can be either limited by, or driven by, our imaginations. Even given the dismay in our world today, or perhaps because of that dismay, we must remember: A new world is possible. Organize toward that vision.

This interview has been edited for clarity and length.