America Needs a New Economic Model

The Importance of Sustainable Development Goals (SDGs) in Economic Policy

For decades, economic policy in most liberal democracies has been premised on two core beliefs: that free markets would maximize economic growth, and that we could address inequality through redistribution.

The Revival of Industrial Policy

The recent revival of industrial policy, championed by President Biden, is a clear repudiation of the first of these beliefs. It reflects a growing recognition among economists that state intervention to shape markets and steer investment is crucial for fostering innovation, protecting strategically important sectors like semi-conductors, and tackling the climate emergency.

Rethinking Economic Institutions

But we must also reassess the second belief—that taxes and transfers alone can address the vast inequalities that have brought American democracy to such a perilous juncture. Doing so will lead us towards a more fundamental rethink of our economic institutions, and the values that guide them.

The Role of Redistribution

This is partly a pragmatic response to economic reality. The massive increase in inequality since the 1980s in America was mostly driven not by a reduction in redistribution, but by the growing gap in earnings between low skill workers, whose wages have suffered an unprecedented period of stagnation, and college-educated professionals whose salaries have continued to soar. And while inequality has increased in most advanced economies, that it is so much higher in the U.S. compared to Europe is mostly the result of bigger gaps in earnings than lower levels of redistribution. In other words, even if America were to increase the generosity of the welfare state to European levels it would still be much more unequal.

Beyond Money: The Importance of Work

But the need to look beyond redistribution is about more than economics, it is about resisting the narrow focus on money that dominates most debates about inequality, and the tendency to reduce our interests as citizens to those of consumers. While government transfers are essential for making sure that everyone can meet their basic needs, simply topping up people’s incomes fails to recognize the importance of work as a source of independence, identity, and community, and does nothing to address the insecurity faced by gig-economy workers, or the constant surveillance of employees in Amazon warehouses.

The Political Impact of Redistribution

This is not purely a moral issue. According to a recent paper by economists at Columbia and Princeton, the Democratic Party’s shift towards a “compensate the losers” strategy in the 1970s and 1980s—taxing high earners to fund welfare payments to the poor—played a key role in driving away less educated voters, who disproportionately support “pre-redistributive” policies like higher minimum wages and stronger unions.

The Shift Towards “Good Jobs”

Things are moving in the right direction. President Biden has put “good jobs” at the center of his economic agenda, claiming that “a job is about [a] lot more than a pay cheque. It’s about your dignity. It’s about respect.” Leading economists such as Dani Rodrik at Harvard and Daron Acemoglu at the Massachusetts Institute of Technology’s have started to challenge the prevailing orthodoxy that such jobs are an inevitable by-product of a well-functioning market economy. This shift of focus towards the production or supply side of the economy has been variously termed “productivism”, “modern supply-side economics” and “supply-side progressivism.”

John Rawls and the Vision of a Just Society

And yet, to grasp the full potential of these ideas we must look beyond economics to philosophy. Contemporary thinkers such as Michael Sandel and Elizabeth Anderson have done much to put questions about work back on the agenda. But for a systematic vision of a just society that recognizes the fundamental importance of work we should revisit the ideas of arguably the 20th-century’s greatest political philosopher, John Rawls—an early advocate for what we would now call “pre

SDGs, Targets, and Indicators

1. SDG 8: Decent Work and Economic Growth

   • Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
   • Indicator 8.5.1: Average hourly earnings of female and male employees, by occupation, age, and persons with disabilities.
   • Indicator 8.5.2: Unemployment rate, by sex, age, and persons with disabilities.

2. SDG 10: Reduced Inequalities

   • Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average.
   • Indicator 10.1.1: Growth rates of household expenditure or income per capita among the bottom 40 percent of the population and the total population.
   • Indicator 10.1.2: Proportion of the population living below the national poverty line, by sex and age.

3. SDG 4: Quality Education

   • Target 4.5: By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples, and children in vulnerable situations.
   • Indicator 4.5.1: Parity indices (female/male, rural/urban, bottom/top wealth quintile, and others such as disability status, indigenous peoples, and conflict-affected, as data become available) for all education indicators on access, participation, and completion.

4. SDG 10: Reduced Inequalities

   • Target 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion, or economic or other status.
   • Indicator 10.2.1: Proportion of people living below 50 percent of median income, by sex, age, and persons with disabilities.
   • Indicator 10.2.2: Proportion of people who believe they have been discriminated against or harassed in the previous 12 months on the basis of a ground of discrimination prohibited under international human rights law.

Table: SDGs, Targets, and Indicators

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Fuente: time.com

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