We now have a Biden Doctrine. The Biden administration has set it out in a striking recent address by national security adviser Jake Sullivan. Sullivan outlines the administration’s international economic policy, but it is really the overarching framework for President Biden’s approach to the world, defining in lucid terms the ideas behind the slogan “a foreign policy for the middle class.”
Opinion We now have a Biden Doctrine. It makes me nervous.
Sullivan is a fiercely intelligent thinker and skilled policymaker who has come to dominate policy in the administration. His speech showcases these talents, and many of the specific initiatives are smart and worth pursuing. But the overall approach left me worried, along three broad dimensions.
First, it is a fundamentally pessimistic view of America’s recent history. Sullivan recalls the glory days of American economic power after 1945, but then notes that in “the last few decades” that strength has waned. He talks about the hollowing-out of the country’s industrial base, the export of American jobs and the atrophying of industries. We “stopped really focusing on building,” Sullivan said, as he summarized the subsidies, tariffs, bans and investments that are at the heart of Biden’s new approach.
Ironically, only a couple of weeks before Sullivan made his speech, the Economist had a cover story on “America’s astonishing economic record.” It begins with 1990 — often used as the start of the rot in the narrative of decline — and points out that despite the rise of huge new economies such as China and India, the United States’ share of global gross domestic product has stayed roughly the same since then: around 25 percent. During that same period, America’s share of the Group of Seven’s economic output increased substantially, from 40 percent to 58 percent. Today, eight of the world’s 10 biggest companies are American. In 1989, only four were American (and six were Japanese). As for building, during these decades, the United States created and built the information economy, surely one of the greatest transformations and advances in human history.
In 1990, the great fear in the United States was of being overtaken by Japan, then seen as the predatory economic power that was eating our lunch. But, as the Economist notes in the same edition, in 1990, the income per person in the United States was just 17 percent higher than in Japan; today it is a staggering 54 percent higher. Look at demographics or energy or leading technology companies, and everywhere you see the United States in a dominant position. Perhaps we got something right.
The second worry I have is of the efficacy of large-scale government intervention in the economy. Sullivan outlines the need for federal subsidies in certain areas, either to maintain the technological lead or for national security reasons. Brilliant people such as Sullivan might think they are well-positioned to identify the key strategic industries that need support. But historically, these kinds of interventions have not gone so well. Companies focus on lobbying the government rather than responding to the market, subsidies once in place become eternal, and innovation slows down. In the 1980s and 1990s, Japan’s much-admired technocrats picked industries and companies to push the country into the lead. Their strategic investments in artificial intelligence, maglev trains, micromachines and HDTV all proved to be “multimillion dollar debacles” in the words of a Harvard Business Review essay.
Finally, Sullivan insisted that these polices were not designed to be “America First” or “America Alone.” But the facts are clear. Almost every element of Biden’s economic policy has a “Buy America” component to it. Its green subsidies are causing some European companies to build new plants in the United States. This sounds great to Americans but not to Europeans, who must now offer industries their own bribes to invest at home instead. It conjures up an autarchic vision of the world that is quite far removed from reality. (The iPhone, for example, is made with products from dozens of countries across six continents — though the vast majority of the profits accrue in the United States.) And as the United States preaches the need for a rules-based international order, it is worth noting that this new Biden Doctrine is violating the core of that order; every one of these policies is in violation of the letter or spirit of the World Trade Organization and its framework of open trade. This hypocrisy is rarely discussed in the United States but frequently and angrily pointed out abroad.
The greatest challenge for Americans over the past few decades has been that middle-class wages have not kept up with rising costs of living. That problem will surely get exacerbated by raising costs of goods throughout the economy through tariffs and industrial policy. As former treasury secretary and Post contributing columnist Lawrence H. Summers points out, protecting the 60,000 workers in the American steel industry sounds smart, but when you do it by raising the price of steel, the 6 million workers who use steel as an input in their goods all suffer. A foreign policy that produces persistent, systemic inflation will fail to deliver for the middle class, who are, as Joe Biden often says, its intended beneficiaries.