A New Political Order Emerges

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A political order is "a way of rethinking political time."
It arises when "a political party wins not just one election but several, and develops an enduring appeal in American politics."
A political order is "undergirded by a program of political economy that can plausibly claim to promote prosperity and opportunity and connect that program to a vision of the good life that appeals to voters."
A mark of success is when the opposition accepts the dominant party’s political economy and vision as its own.

Time span: "from the 1930s to the early 1970s."
Context: emerged when "capitalism was substantially unregulated by the state" and "levels of unemployment, bankruptcies, poverty, and insecurity" prompted demand for state action.
Core elements:
- "a strong interventionist state" to regulate capitalism.
- Stabilize markets and redistribute wealth via "progressive taxation, support for strong unions, an expanded welfare state, and greater educational opportunity."
Political effect: Republicans "didn’t roll back the major New Deal programs" after taking the presidency in 1952, indicating the triumph of a political order.

Emergence: "New political orders tend to emerge in periods of economic crisis."
Time span of ascent: "The 1970s and 1980s marked the moment of this new political order’s ascent. It triumphed in the 1990s under the Democrat Bill Clinton."
Mechanism:
- Neoliberalism injected "dynamism into a capitalist economy by freeing markets from state constraints."
- The 1970s economic crisis (spiking "unemployment and inflation") discredited Keynesian tools central to the New Deal order and opened space for neoliberal ideas.
Political consolidation: Bill Clinton in 1993 "didn’t roll back the Reagan revolution of deregulation," interpreted as a sign of neoliberal triumph.

Neoliberal promise: societies adopting free market practices would unlock growth, create peace via trade, and expand opportunities.
Outcomes:
- Capitalism became global in ways not seen since before World War I, and "some of the wealth that had been concentrated in the West...has been redistributed."
- Shortcoming: neoliberalism "overlooked the way in which this unleashing of economic power advantages elites," thereby "deepening inequality."
- The justification of rising tides—"that economic growth will be so substantial that the difference between rich and poor won’t matter much"—failed to address inequality.
Crisis point: After the global financial crisis "it was no longer possible to believe that all boats were rising."

Effect: The crisis "fractured the neoliberal order, costing it the power and legitimacy that neoliberalism possessed in the 1990s and first decade of the 21st century."
Policy response missed: "Quantitative easing during the financial crisis opened all kinds of possibilities in the US. That was the moment to engage in a massive infrastructural improvement project. President Obama wasn’t able to do that."
Counterfactual: Had a "big infrastructure investment in 2009–10 to reboot the economy" occurred, recovery "would have flowed more quickly and directly to ordinary people" and might have reduced subsequent political volatility over "the last 10 years."

Emerging orientation: The Biden administration "has a plan for a new political order grounded in a political economy that looks more like the New Deal order than the neoliberal order."
Core shifts:
- Recognition that "states must intervene in markets to address questions of economic security, opportunity, and welfare."
- Rejection of the idea that "markets could be insulated completely from politics."
- State involvement is now seen as necessary for the economic realm to prosper.
Policy implication: a "new political economy" is taking shape that privileges state action to correct neoliberal-era errors.

Supply chain and security shocks:
- Pandemic revealed that producing "output...in the cheapest way" is vulnerable when "goods couldn’t move, or they moved much more slowly and unpredictably."
- Russia’s attack on Ukraine and "the threats that China is making toward Taiwan" ended assumptions that war would not obstruct international trade.
Strategic questions governments now ask: "What goods and services are essential for national security? What resources must every nation have for ensuring that the core needs of its people are met?"
Consequence: A recalibration "privileging national security over market freedom," affecting where semiconductors, pandemic protective gear, rare minerals, batteries, and energy supplies are produced.

Shift from laissez-faire globalization toward "strategic globalization" characterized by:
- Managing the flow of "capital, commodities, energy, goods, and supply chains under adverse circumstances."
- Moving away from a model focused on "free trade and financial flows" toward "managed trade and finance for the sake of some national or public interest."
Continued global engagement: "It doesn’t mean we stop thinking about globalization" or "countries become islands"; rather, globalization becomes purposive and security-aware.

Interview: Sunil Sharma with Gary Gerstle; edited for length and clarity; February 14, 2023.