Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

From California capitalism to Bidenomics

Laura Tyson and Lenny Mendonca 3rd June 2021

The Biden administration’s ambitious spending and investment programmes have already proven highly successful in the country’s most dynamic state.

Bidenomics,American Jobs Plan,American Families Plan,California,Silicon Valley
Laura Tyson

The United States president, Joe Biden’s, first months in office have been impressive. The number of Covid-19 vaccines that have been administered is more than twice what he promised and the spread of the coronavirus has slowed sharply. In the first quarter of this year, the US economy grew by 6.4 per cent (the fastest quarterly rate since 1984), owing to monetary and fiscal stimulus and the broader reopening of the economy.

Economists at Goldman Sachs expect the 2021 US growth rate to be the fastest in three decades and recent research by the McKinsey Global Institute finds significant acceleration in productivity growth to follow. Under Biden, consumer confidence has rebounded: 55 per cent of voters feel good about the state of the economy, up from 43 per cent when he took office and 34 per cent in May 2020.

Bidenomics,American Jobs Plan,American Families Plan,California,Silicon Valley
Lenny Mendonca

Many commentators have compared the Biden administration’s economic agenda to Franklin D Roosevelt’s New Deal or to Dwight D Eisenhower’s post-Sputnik expansion of federal science and infrastructure spending. But the best analogy for Bidenomics is California, which has pioneered a strategy of innovation-based sustainable and inclusive growth.

Supporting innovation

A fundamental component of both Bidenomics and California’s economic strategy is robust world-class research to support innovation in global growth sectors. It is these sectors that will drive productivity growth, create good jobs and fuel US exports and wealth creation now and in the future.


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

California has led the US (and the world) in innovation since World War II. It is home to a first-rate public college and university system, private universities such as Stanford, CalTech and the University of Southern California and six federal research labs (along with hundreds of private ones). While sceptics have once again been proclaiming the impending demise of the California economy, the state has in fact extended its lead in the innovation economy during the pandemic.

A few indicators demonstrate the point. In 2020, more than 440,000 Californians started a new business, up 22 per cent from 2019 and far exceeding all other states (not adjusted for population).

Moreover, in 2020, 50 per cent of the country’s venture-capital funding went to California—double the combined share of the next three states (New York, Massachusetts and Texas). Of approximately 750 venture funding rounds or initial public offerings with valuations exceeding $1 billion, roughly 494 have been in California (San Francisco alone has had more than Texas, Florida and North Carolina combined). And 17 of the 22 US startups ever to have been valued at $10 billion or more in a funding round are based in the San Francisco area.

Whereas the 236 publicly listed companies in Silicon Valley, Salinas Valley and Monterey Bay had a combined market cap of $4.75 trillion a year ago, that figure has now surpassed $8.5 trillion, implying 80 per cent growth in one year (and during a recession, no less).

Although the rest of the US cannot become another Silicon Valley, new mechanisms to spread investment and venture capital more broadly around the country certainly would help the national economy, not least by helping firms everywhere take advantage of remote work and other pandemic-driven trends. Likewise, a more open immigration system would allow the US to tap into a global pool of talent. It is worth remembering that around half of all Fortune 500 companies in the US were founded by immigrants or their children.

Highly progressive

California has benefited greatly from its leadership in the innovation economy. With a highly progressive tax system that taxes capital gains as income, approximately 90 per cent of the state’s income-tax revenues come from the top 10 per cent of taxpayers. And because innovation drives so much growth in the state’s capital and property markets, it generates a large (but volatile) revenue base with which to invest in education, infrastructure and safety-net programmes. Even during the Covid-19 recession, California maintained a budget surplus, now projected to reach a record $75.7 billion for 2021-22.

That surplus is important for another reason as well. Like much of the rest of the world, California is already experiencing the direct effects of climate change. Wildfires and droughts have become annual events, as have hurricanes and floods in other parts of the country. A combination of drought conditions and record-breaking temperatures caused extensive fires throughout the state in 2020 and the dangers are even greater this year, which is why the governor, Gavin Newsom, has proposed significant increases in fire-prevention and forest-resilience measures in the 2021 budget.

Unlike many other parts of the country, California has taken the lead in adopting policies to reduce carbon-dioxide emissions and build a more resilient infrastructure. Through strict emissions and air-quality standards, carbon pricing and public support for electric vehicles (the state’s largest export product in 2020), high-speed rail and clean energy, the state is increasingly decoupling its growth from a carbon-based economy.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

Substantial investments

The Biden administration wants to pursue similar actions nationally. America has rejoined the Paris climate agreement and Biden is seeking congressional approval for billions of dollars in investments in clean power, electrification of transport and buildings, low-carbon manufacturing, public transport and other key features of a green economy.

Moreover, Biden’s $2.3 trillion American Jobs Plan and $1.8 trillion American Families Plan include substantial investments in the country’s social infrastructure. These investments promise to scale up efforts, already under way in California, to strengthen the social safety-net, open a path to a $15 minimum hourly wage, expand the earned-income and child tax credits, support paid family leave and broaden health coverage.

The early public response to Bidenomics is extremely positive. With the exception of some Republican voters, many of whom still believe the 2020 election was stolen from Donald Trump, supermajorities of citizens (including Republicans) support key elements of the American Jobs Plan and the American Families Plan. Around 68 per cent of Americans support the Biden administration’s infrastructure proposal, and 64 per cent support its plan to expand health care, childcare and other family programmes.

Members of Congress should listen to their constituents and take a page from California’s playbook. A new era of sustainable, inclusive growth awaits.

Republication forbidden—copyright Project Syndicate 2021, ‘From California capitalism to Bidenomics‘

Laura Tyson
Laura Tyson

Laura Tyson, former chair of the US president's Council of Economic Advisers, is professor of the graduate school at the Haas School of Business and chair of the Blum Center board of trustees at the University of California, Berkeley.

Lenny Mendonca
Lenny Mendonca

Lenny Mendonca, senior partner emeritus at McKinsey, is a former chief economic and business adviser to Governor Gavin Newsom of California and chair of the California High-Speed Rail Authority.

You are here: Home / Economy / From California capitalism to Bidenomics

Most Popular Posts

Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic
Orbán,Hungary,Russia,Putin,sanctions,European Union,EU,European Parliament,commission,funds,funding Time to confront Europe’s rogue state—HungaryStephen Pogány

Most Recent Posts

reality check,EU foreign policy,Russia Russia’s invasion of Ukraine—a reality check for the EUHeidi Mauer, Richard Whitman and Nicholas Wright
permanent EU investment fund,Recovery and Resilience Facility,public investment,RRF Towards a permanent EU investment fundPhilipp Heimberger and Andreas Lichtenberger
sustainability,SDGs,Finland Embedding sustainability in a government programmeJohanna Juselius
social dialogue,social partners Social dialogue must be at the heart of Europe’s futureClaes-Mikael Ståhl
Jacinda Ardern,women,leadership,New Zealand What it means when Jacinda Ardern calls timePeter Davis

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

Foundation for European Progressive Studies Advertisement

The winter issue of the Progressive Post magazine from FEPS is out!

The sequence of recent catastrophes has thrust new words into our vocabulary—'polycrisis', for example, even 'permacrisis'. These challenges have multiple origins, reinforce each other and cannot be tackled individually. But could they also be opportunities for the EU?

This issue offers compelling analyses on the European health union, multilateralism and international co-operation, the state of the union, political alternatives to the narrative imposed by the right and much more!


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

The EU recovery strategy: a blueprint for a more Social Europe or a house of cards?

This new ETUI paper explores the European Union recovery strategy, with a focus on its potentially transformative aspects vis-à-vis European integration and its implications for the social dimension of the EU’s socio-economic governance. In particular, it reflects on whether the agreed measures provide sufficient safeguards against the spectre of austerity and whether these constitute steps away from treating social and labour policies as mere ‘variables’ of economic growth.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube