Reshaping Economic Strategy, Globalization, and the Welfare State in the Post-COVID Era

Dani Rodrik argues that COVID-19 is not creating entirely new trends but rather accelerating and reinforcing pre-existing shifts in economic thought and policy. He identifies three major trends: a move away from neoliberal market fundamentalism towards greater government intervention, a retreat from hyperglobalization back to the nation-state with renewed focus on domestic supply chains, and a reorientation of growth models for developing countries away from export-led industrialization towards domestic demand and structural change. Rodrik posits that the common root of these trends is a "deepening economic dualism" within nations, characterized by a stark divide between technologically advanced, globally integrated sectors and lagging firms, regions, and populations, leading to growing inequality and economic insecurity.\n\nRodrik proposes a new policy framework, which he terms a "productivist" or "good jobs welfare state" model, that fundamentally departs from traditional welfare state approaches. While conventional welfare states focus on pre-production (education, training) and post-production (redistribution, social insurance), his model advocates for direct intervention in the "production stage." This involves actively working with employers, investors, and innovators to change their incentives and decisions, thereby directly expanding the supply of "good jobs" – stable, middle-class employment with core labor protections. He challenges the notion of technology as an exogenous force, emphasizing that the direction of technological change is endogenous and can be steered towards employment-friendly outcomes through policy, norms, and empowering workers.\n\nPractically, this strategy calls for "modern industrial policies" that are not confined to manufacturing but aim to increase the productive employment capacity of existing firms and develop local workforce capabilities. This approach is characterized by ongoing collaboration, learning, and iteration between the public and private sectors, moving away from an "arm's length" regulation or the difficult task of "picking winners." Instead, the criterion for success becomes the ability to "let losers go" through adaptive policy revision. Examples like DARPA, ARPA-E, US Manufacturing Institutes, and Project Quest are cited as existing models of this collaborative, problem-solving approach.\n\nThe broader implications of this framework are significant, as it intrinsically links the social and economic agendas. Rodrik argues that achieving greater inclusion, less inequality, and enhanced economic security is only possible through the creation of better jobs. Conversely, aggregate economic growth and productivity depend on innovative sectors absorbing larger segments of the labor force. The pervasive "good jobs externalities" – encompassing social costs like increased crime and drug abuse, political consequences like polarization and populism, and economic impacts on productivity growth – underscore the critical importance of employment decisions for the overall health and stability of society. This perspective necessitates a fundamental re-evaluation of how societies manage technology and globalization to ensure broad-based prosperity and mitigate the corrosive effects of economic dualism.

"COVID-19 is largely reinforcing a pre-existing trends rather than pointing us in a completely different and unexpected direction."

"There is a movement away from what I've called hyperglobalisation to back to the nation-state which you know of course we have the renewed attention to establishing domestic supply chains and ensuring domestic security but again this is a trend that predates the pandemic."

"The reason that this is the central diagnosis is that it's it's essentially what I think explains all the trends or the three major transit system is the driving force behind these three trends that are that have outlined the outset."

"The crux of the matter therefore is that the problem is what one might call good jobs good jobs are becoming scarce."

"Neither technology nor globalization or exogenous processes that are outside our control and that we can that is there in fact processes that we can manage."

"The employment and innovation decisions that shape labor demand that firms investors innovators engaging are the source of significant externalities which I'm going to call good jobs externalities."

"Basically thinking about our problem from this perspective of good jobs and good shows the externalities to a large extent joins the social and economic agendas and makes them one one issue one problem."

"We need a different strategy that tackles good job creation directly and as the says which I think what I'm suggesting which is to essentially focus much more directly in the middle column and in particular the the the cell at the center of the table one called as a productivist model a good jobs model good jobs welfare state model."

"The direction of Technology response to thanks you know Donna Jamal Lu and Pascal Restrepo and others have done some very good work on this just are doing that we need to take both that the direction of technological changes endogenous response to incentives that we should take advantage of it to create more better jobs."

"The more contemporary modern or types of policy is it is much more of a of an ongoing collaboration presumes much less exacting knowledge on the part of the regulator's or the government or the development agencies about where the problems are what type of activities to promote and what type of instruments are going to be the most appropriate for doing so."