Bidenomics under scrutiny: Will economic populism win US votes?

The interventionist, anti-trade, and anti-finance policies of the US administration haven't helped the vice-president's campaign

The United States (US) has run an unprecedented political economy experiment, the results of which will shortly be known to us. In that country’s presidential election, Vice-President Kamala Harris, now the nominee of the Democratic Party, is neck and neck, according to the polls, with former President Donald Trump, who has refashioned the Republican Party into his vehicle. It is, many would argue, just another test to see if moderate centrist politics, as represented by the Democratic Party of Ms Harris and her boss President Joe Biden, can hold off the insurgent threat of populist movements such as the one identified with Mr Trump.
 

But there is another way of looking at this election. Mr Biden and Ms Harris have run an administration that, over the past three and a half years, has in fact embraced populism — of a redistributive economic and isolationist foreign-policy sort that would have been unimaginable in 2016, at the end of the Barack Obama era.
 

Mr Biden’s transformation into an economic populist might appear unlikely. He was, after all, a career politician who spent a largely undistinguished career in the US Senate, becoming the last exponent of Cold War-era American exceptionalism in foreign policy while also fighting to defend his home state Delaware’s various attempts to become a tax and regulatory haven within the US. The administration in which he served as vice-president was memorable only for its moderation and constant attempts at bipartisanship.
 

Yet, in office, his isolationist record compares only with Mr Trump in post-War American history. His actions speak for themselves: Abandoning Afghanistan to the Taliban with minimal preparation and against all advice, retaining tariffs from the era of Mr Trump, and refusing to step forward to repair the damage that his predecessor did to the World Trade Organization. While he has not left Ukraine high and dry in the face of Russian aggression, every single request that the Ukrainians have made — from precision munitions to advanced jet fighters — that might have helped them fight back or take the war to the Russians met with a stony reception from the White House. Mr Biden granted Kyiv such requests only once they were too late to make a difference. Photo-ops, such as the one planned this week with Ukrainian President Volodymyr Zelenskyy and those with various European leaders, cannot cover up the fact that Mr Biden has been a slow partner for Ukraine and a confrontational one when it comes to trade with Europe.
 

Mr Biden has closed the US to any trade deals as firmly as Mr Trump has; American diplomats routinely defend this as necessary for Mr Biden’s agenda for a “middle-class foreign policy”. His national security advisor has described a “new Washington consensus” built around breaking down global connections and distrust of financial markets. 
 

This is the bedrock of what officials in this administration like to call “Bidenomics”: Unprecedented levels of spending, targeted industrial policy, tariffs and restrictions, heavier regulation, and an obsessive fear of monopolies.
 

This path was chosen by a Democratic Party shell-shocked by Mr Trump’s narrow victory in 2016. Former “blue wall” Democratic strongholds in the ex-industrial belt of the Midwest, and some in the party saw no path to victory without the swing states of Wisconsin and Michigan. They concluded that the only way to win them back was by vast amounts of subsidies to the industries and communities of the region. US attempts to “bring back manufacturing” should be seen through this cold mirror of political necessity: Mr Trump won 2016 by 100,000 votes in three states, and trillions of dollars in this past administration have been spent to win over this fortunate 100,000.
 

However, this choice has been enabled and given ideological and programmatic depth by another transformation. The neo-classically trained technocrats of previous Democratic administrations found no place in the Biden team. Instead the superannuated Mr Biden surrounded himself with young and deeply ideological activists, many of whom were lawyers or diplomats and not economists. The notion, for example, that the US’ competition regulator should break up companies just because they were large — without evidence that their size was leading to worse outcomes for consumers — is hardly necessary to win back the Midwest. Instead, it is part of a larger set of beliefs that policy informed by economic theory had “got us here” — ie caused the unpopularity of the mainstream parties and enabled Mr Trump. Thus companies could be broken up or their behaviour sanctioned without reference to any possible effect on consumer prices. Money would be spent on infrastructure, on the assumption this would create manufacturing or construction jobs, with no regard for the debt or the deficit.
Unionised companies would receive preferment in matters like procurement and subsidies, regardless, again, of whether this would raise prices overall. What mattered was winning back “real Americans” in the heartland, and restoring “real American jobs” that had been “sent overseas”.
 

Thus the various spending and subsidy measures of the past four years, alongside the intensification of scrutiny of the US corporate sector, represent a huge and expensive natural experiment in the political effectiveness of economic populism.

The question is: Will it pay off? Frankly, I would argue that it has already been demonstrated that economic populism on this scale is not, in fact, a vote-winner. People need the appearance of populism, but are unhappy with the reality of it — especially as such spending packages eventually cause inflation. And inflation is far more damaging to a politician’s chances of re-election than anything else.
 

Mr Biden may have been knocked out of the race thanks to a disastrous debate showing. But he had already lost considerable popularity before that. Inflation has been a particular worry. In strictly material terms, economic populism — which argues that there are political benefits to valuing subsidies and interventionism over macro price stability — has lost the political argument. Mr Trump’s vice-presidential nominee may complain about inflation. But Mr Trump himself simply speaks his accustomed language of racial and gender grievance. That’s kept his campaign alive. Economic populism might not work — social populism, or majoritarianism, is the real reason that moderates tend to be beaten.

The writer is director, Centre for the Economy and Growth, Observer Research Foundation, New Delhi