What can replace free markets? Groups pledge $41 million to find out.
By Steve Lohr
Wages have been stagnant for most Americans for decades. Inequality has increased sharply. Globalization and technology have enriched some, but also fueled job losses and impoverished communities.
Those problems, many economists argue, are partly byproducts of government policies and corporate practices shaped by a set of ideas that championed free markets, free trade and a hands-off role for government. Its most common label is neoliberalism.
A group of philanthropists and academics say it is time for a new set of ideas to guide the economy. The William and Flora Hewlett Foundation and Omidyar Network announced Wednesday that they were committing more than $41 million to economic and policy research focused on alternatives.
“Neoliberalism is dead, but we haven’t developed a replacement,” said Larry Kramer, president of the Hewlett Foundation.
The initial recipients of grants to set up research programs are Harvard University’s Kennedy School, Howard University, Johns Hopkins University, the Massachusetts Institute of Technology and the Santa Fe Institute.
The Ford Foundation and the Open Society Foundations have pledged to join the initiative and make grants later this year for research centers abroad, Kramer said.
The universities have agreed to provide a space for the research centers, gather scholars and students from many disciplines, communicate their findings and raise funds to keep the programs going.
The hope is that other funders and universities will follow. “Our role is to supply the fertilizer and water to grow something different,” Kramer said. “We think this is the next intellectual wave.”
The well-funded effort is based on the belief that ideas provide the framework for policies and the boundaries of public debate. The free-market worldview was most forcefully promoted in the 1960s and 1970s by a group of economists at the University of Chicago, led by Milton Friedman, and became known as the Chicago school.
In the 1980s, the Reagan administration and Margaret Thatcher’s government in Britain wholeheartedly embraced the neoliberal model. It was also the Clinton administration’s guiding mindset for policies like free-trade agreements and financial deregulation. That was generally true for the Obama administration as well in areas like trade, the bank bailout and antitrust enforcement.
That is less the case in the Biden administration. Jennifer Harris, who led the economy and society program at Hewlett, where work on the new initiative began, joined the staff of the administration’s National Economic Council last year.
In recent years, many prominent economists have questioned the wisdom of leaving so many human outcomes to the whims of markets. Economists are increasingly investigating inequality, and that is a focus of the universities receiving the grants.
“Reducing inequality has to be a goal of economic progress,” said Dani Rodrik, an economist at Harvard’s Kennedy School and a leader of its project on re-imagining the economy. “We have all this new technology, but it is not encompassing large enough parts of the workforce and not enough parts of the country.”
The grantees are qualified market enthusiasts. “Markets are terrific, but we have to overcome this notion that ‘markets are autonomous — so just leave it to the market,’” said David Autor, a labor economist at MIT. “That fatalism is a decision.”
Autor is a leader of the MIT program on shaping the future of work. “We’re calling it ‘shaping’ because it is interventionist,” he said.
The MIT project will research the challenges faced by workers without four-year college degrees — nearly two-thirds of the nation’s workforce — and steps that could improve their jobs or lift them into higher-paying occupations.
The MIT group will also explore policies and incentives to steer technological development in ways that enhance the productivity of workers instead of replace them.
Each of the centers will have a somewhat different tack. The Howard program will examine racial and economic inequities. The Johns Hopkins center will explore the rise and spread of neoliberalism and lessons learned. And the Santa Fe Institute will develop new economic models — updated with insights and data from behavioral economics, innovation studies and competition in digital markets.
Hewlett is contributing $35 million for grants to the four universities, and Omidyar Network is making a $6.5 million grant to the Santa Fe Institute.
The Hewlett Foundation, created in 1966 by a Hewlett-Packard Co. co-founder and his wife, is one of the larger grant-making philanthropies in America. Omidyar Network, established in 2004 by Pierre Omidyar, founder of eBay, and his wife, Pam, includes a foundation and an investment arm that backs for-profit social impact ventures.
Both foundations are identified as left leaning because they support work in fields like climate change, gender equity and economic fairness. But Mike Kubzansky, CEO of Omidyar Network, said today’s economic challenges spanned partisan divisions.
“I think there’s pretty broad agreement that the traditional set of economic ideas has passed its sell-by date,” he said.