HASwhen, for months, the World Bank and the International Monetary Fund have continued to warn of the risks posed to the world economy by the measures taken in many countries, particularly on both sides of the Atlantic , to preserve their economic security and assert their industrial, agricultural and technological “sovereignty”, public decision-makers do not seem to attach much importance to it.
Have they all lost their minds? Or did they realize that the Washington consensus model, promoted by international organizations for four decades, had not kept its promises and that, with all due respect to Margaret Thatcher, who affirmed that there was no “no alternative” to the liberalization of market forces, do alternatives really exist?
In a world where shocks – health crisis, supply disruptions, war in Ukraine – have all highlighted the vulnerabilities that interdependencies cause, where geopolitical tensions are at their highest and where the threat of war between China and Taiwan becomes palpable, should we be surprised that decision-makers now wish to take a different path from the one on which they had previously embarked?
Especially since it is through subsidies and massive public investments, far from the approach advocated by the Washington consensus, and by taking advantage of technology transfers and foreign direct investments, that China has acquired a dominant position in many industries of the future, the very ones that advanced economies have neglected, preferring to rely on their comparative advantages. Therefore, should we blame them for being more concerned about the deleterious effects of Chinese competition on employment and social inequalities and the disappearance on their soil of the industries which will ensure tomorrow’s growth?
The devil is in the details
Certainly, supporters of free trade respond that the unequal effects of trade should not lead to protectionist measures, and that it is enough to compensate the losers through support policies. But in reality, this hasn’t really worked, because it’s much easier to let market forces play out than to put in place what could correct them.
They also maintain that States, unlike markets, would not have the capacity to identify the sectors to be favored to modify the structure of the economy, and that the risk of capture by private interests is too high. However, as economists Réka Juhasz, Nathan Lane and Dani Rodrik point out, state interventions are, in certain situations, justified by economic theory, for example to reduce dependence on foreign supplies in order to ensure security. common economic system, because this advantage is not taken into account in companies’ decisions (“ The New Economics of Industrial Policy », Harvard, 2023).
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