Now, as many governments around the world take steps to protect industries they consider vital, and international institutions such as the IMF and World Trade Organization are sidelined, Rodrik believes that once Trump is gone, the new rules of global trade will be largely determined by the US and China, as the world's two dominant economic powers. He is particularly encouraged by China's two-decade effort to promote renewable energy, which he says could serve as a model for use in other countries and other economic sectors. Thanks in large part to technological advances in China, solar power is now so cheap that even a red state like Texas is rapidly expanding its solar capacity. And thanks to the growth of the electric vehicle industry in China, now the world's largest auto market, cheap Chinese electric vehicles are being exported to many other countries. “We're much further along on this” (the green transition) “than anyone thought possible, and it happened through a mechanism that no one predicted,” Rodrik said.
In his book, he argues that the key to the success of China's green energy initiative was the breadth of tools used and the flexibility with which they were applied. The Chinese government has provided EV startups with venture capital, subsidies, customized infrastructure, specialized training, and preferential access to raw materials. But rather than imposing a production plan from the top down, many details were left to the discretion of the enterprises. “The hallmark of Chinese developmentism is its experimental approach,” Rodrik writes. “The national government sets broad goals. Different industrial policies are then rolled out across industries and regions, followed by careful monitoring, iteration and revision when necessary.”
Rodrik also found much to like in the Biden administration's industrial policies, which were aimed at accelerating the transition to a green economy by providing subsidies, tax breaks and public support for industrial research. Trump is busy dismantling many of these policies. Rodrik would support their restoration in the future. He also advocates allowing countries, including the US, to use targeted tariffs to protect specific industries they deem essential, but he insists it would be a mistake to focus solely on manufacturing, which employs less than ten percent of the US workforce. The real problem, he argues, is raising wages in the vast service sector that employs more than eighty percent of American workers. “Whether we like it or not, services will remain the main driver of the economy,” he writes. Some service jobs, such as management, are well paid, but many, especially in areas such as retail and care, are low paid. “The inescapable conclusion is that good job economics depend critically on our ability to improve the productivity and quality of jobs in such services.”
Rodrik admits there is no proven formula for achieving this goal. The approach he advocates mimics the Chinese model, involving government agencies at the national and local levels, as well as educational institutions, private businesses and workers. He supports efforts to unionize service workers and discusses the possibility, proposed by Arin Dube, an economist at the University of Massachusetts Amherst, of creating wage boards to set minimum wages that vary by industry, occupation and location. Rodrik, citing the contrast between nurse practitioners, who earn an average annual salary of one hundred twenty-six thousand dollars, and low-wage medical professionals, also argues that training, technology, and regulatory reform can play a big role, as can directed scientific research.
He calls for the creation of a working equivalent DARPAPentagon agency that helped fund the development of the Internet, GPS and mRNA technologies used to create COVID-19-19 vaccines. While DARPA focuses on research that could potentially have military implications, Rodrik suggested:ARPA-W will focus on developing “labor-friendly technologies,” including those that use artificial intelligence. ARPA-W, he writes, “The main goal would be to enable workers to do what they cannot currently do, rather than displacing them by taking over tasks they already perform.”
