Washington and the New Economic Order*

“If we were doing this in France, people would say we were communists,” a French government cabinet member said recently, in an interview with the Financial Times. The White House proposal for a new international economic order went largely unnoticed among us. Two months ago, President Joe Biden’s national security advisor, Jake Sullivan, gave an important speech at the Brookings Institute, in which he discussed how Washington regards the evolution of the economy and society in the United States.

The central tenet of his discussion rests on a largely negative view of America’s path in the last few decades. Globalization, shifts in industrial production to China and the disappearance of many high-skill jobs have weakened the middle class and American democracy. The United States, according to Sullivan, needs a new policy of innovation focused on technology in order to restore confidence in its democratic institutions, improve prospects for its middle class, compete with China and win the political support of its citizens for an energy transition.

Thirty years ago, Washington’s primary economic goals were the reduction of tariffs and the liberalization of trade. Today, its main interests are ensuring sustainable economic growth, quality jobs that support families, diversified logistical networks, improving workers’ rights and mobilizing private and public investment in the shift toward renewable power sources internally, as well as abroad. Legislative initiatives approved by Congress, such as the Inflation Reduction Act and the CHIPS and Science Act, are the result of this new economic vision to lure talent, technology and foreign capital investment.

This fact was quickly understood in European capitals, where there is a fear that the fiscal incentives and subsidies on offer from the federal government and a number of American state governments could influence decisions and choices made by European companies. Unlike Washington, the Europeans have a rosier view of America’s future, and are concerned that the new consensus among Democrats and Republicans regarding industrial policies will diminish the competitiveness of their companies and weaken the “Old Continent.”

Washington claims that its proposal for a new economic world order will not harm the interests of its allies and partners. The fact remains, however, that the Biden administration’s economic agenda has a very strong nationalistic “buy American” component. Sullivan’s speech indicates a powerful shift in the relationship between government and the marketplace, a risk assessment that accepts some initial inefficiency in order to keep what it considers industries vital to national security at home, and assumes that this significant intervention in the economy will bring good results.

The United States, then, will begin to have an explicit industrial policy designed to protect its permanent interests. Hence the surprise, and some envy, from Paris. The problem is that this American policy conflicts with the existing economic world order. We await reactions from partners, allies and rivals.

*Editor’s Note: The original Portuguese version of this article is accessible with a subscription.