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How the free-market approach lost its grip on economic policy

January 24, 2022, 11:45 AM UTC

Good morning.

Glenn Hubbard, former dean of Columbia Business School and former economic adviser to George W. Bush, has a new book out tomorrow entitled The Wall and the Bridge: Fear and Opportunity in Disruption’s Wake, published by Yale University Press. Hubbard is an advocate of the global free-market approach to economic policy that ruled during most of the last half century but now has been abandoned by populists and nationalists of the right and the left. 

I spoke to Hubbard Friday, and asked him: What went wrong? How did the mainstream economic orthodoxy that united Democratic and Republican economic policy makers in the U.S. for four decades, and was widely adopted around the world, lose its grip? His response:

“The reason I did the book is to remind people that growth and disruption is a coin with two sides. If you want growth, dynamism, innovation, you are going to have disruption…

“What we have to do is help people more who suffer that disruption… That’s what we really didn’t do well enough. This book talks about conceptually how to do that. Massive transformation requires massive help.”

Hubbard said A.I. and climate change will cause even more disruption than that resulting from globalization. And he favors government programs that cushion the effects of disruption without trying to stop it—“bridges,” not “walls.” It’s a sound approach but requires compromise between ideologues on one side rejecting government aid and those on the other embracing an outsized grab bag of programs that lack focus. The book could be a useful guide to those in Congress as they work to negotiate a more balanced bill. Here’s a clear goal they should keep in mind: help workers gain the skills and training they will need to survive the coming technology-and-climate-fed disruption.

By the way, I was amused by a headline in the New York Times this weekend on the “debate” over whether the U.S. government’s past spending policies are feeding inflation. Is this really a debate? Jason Furman, who held the same position as Hubbard in President Obama’s cabinet, writes in Project Syndicate:

“The extraordinary $2.5 trillion in fiscal support for the U.S. economy in 2021, amounting to 11% of GDP, was far larger than any previous fiscal package since World War II. A simple fiscal multiplier would have predicted that average output in the last three quarters of 2021 would be 2-5% above pre-pandemic estimates of potential. To think that a stimulus of this magnitude would not cause inflation…(was) implausible.”

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

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This edition of CEO Daily was edited by David Meyer.

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