"In a speech shortly after he took power as General Secretary of the Communist Party of the Soviet Union, Mikhail Gorbachev declared “It’s obvious, comrades, that we all need to change. All of us.” The line foreshadowed perestroika—Gorbachev’s
effort to reform the USSR’s deteriorating political and economic system.
...
With this in mind, it is worth noting the significance of U.S. national security advisor Jake Sullivan’s recent speech on “Renewing American Economic Leadership” at the Brookings Institution. His remarks mark a profound shift in American strategic
and economic thinking; a confession that much of what the United States has been doing and saying for decades has been wrong, and a recognition that painful and urgent reform is necessary.

As Gorbachev learned, recognizing the need for change and successfully enacting such change are two wildly different things. Is the Biden administration on the path to learning the same painful lesson?

The Failure of the “Old” Washington Consensus

Sullivan’s speech does not just reflect his individual views—the whole event was billed in the days leading up to it as an “outline” of “the Biden administration’s international economic doctrine.” It also builds upon views that Sullivan
and others in the administration have been developing for quite a while.

In brief, the speech was a strong repudiation of the United States’ strong free-market economic policies for the past forty-odd years. Sullivan challenged the idea that markets always allocate capital effectively and in socially optimal ways, that “
in the name of oversimplified market efficiency, entire supply chains of strategic goods—along with the industries and jobs that made them—moved overseas. And the postulate that deep trade liberalization would help America export goods, not jobs and
capacity, was a promise made but not kept.” He also acknowledged the mistake of favoring the financial sector over the “real economy” (involving material goods): “our industrial capacity—which is crucial to any country’s ability to continue
to innovate—took a real hit.”
...
Overall, Sullivan’s speech highlights a growing recognition that a new approach to economics is needed, especially in light of changing domestic and international economic conditions and realities.

The Coming Failure of the “New” Washington Consensus

Sullivan’s remarks are certainly welcome, but admitting that there is a problem is merely the first step to addressing it. The Biden administration faces three major obstacles that will frustrate, if not completely demolish, its efforts at reform.

First, the popular name for this new economic policy—the “New Washington Consensus,” a clear reference to the old, free-market-oriented Washington Consensus—suggests a failure to fully let go of the current paradigm.
...
Second, the speech is dishonest about what the Biden administration—and U.S. policymakers more broadly—says its intentions are for its relationship vis-à-vis China. ...

This rings hollow. ...

Washington, it seems, wants to have it both ways: it recognizes it must engage in the painful (but necessary!) reform, which would realistically require a limited drawdown of the American-led unipolar world order, while also somehow maintaining that
order, refusing to give an inch to the prospect of multipolarity. The feasibility of this is an open question.

Third, and most importantly, while Sullivan’s speech recognizes the urgent need to address America’s multiple economic problems and challenges, it is yet unclear whether such change can be realistically achieved at this point in the country’s
current political and socio-economic context.
...

Has Time Run Out?

At this point in time, implementing a U.S. industrial strategy will not be easy, if at all feasible. While still wealthy and powerful, the United States faces internal political division, multiple external challengers, and, perhaps most worryingly,
strongly entrenched internal interests that would take a firm line against any sort of radical but needed change in the country’s national and international economic doctrine. Without a clear plan of attack, the Biden administration’s agenda—to say
nothing of any potential successor administration's efforts after the 2024 election—could well founder.

Policymakers and experts must address this reality and come to grips with its implications. Otherwise, the country risks waking up one day, like the French monarchy, to tiles being thrown from the roofs by enraged citizens—an eerie prelude of what
could follow.

Carlos Roa is the Executive Editor of The National Interest."

https://nationalinterest.org/feature/america-about-have-its-perestroika-moment-206439

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