America is about to revive an idea that was left for dead decades ago. It’s called industrial policy, and it’s at the heart of Joe Biden’s plans to restructure the U.S. economy.

When industrial policy was last debated in the 1980s, critics recoiled from government “picking winners.” But times have changed. Devastating climate change, a deadly pandemic, and the rise of China as a technological powerhouse require an active government pushing the private sector to achieve public purposes.

The dirty little secret is that America already has an industrial policy, but one that’s focused on pumping up profits with industry-specific subsidies, tax loopholes and credits, bailouts, and tariffs. The practical choice isn’t whether to have an industrial policy but whether it meets society’s needs or those of politically powerful industries.

Consider energy. The fossil fuel industry has accumulated “billions of dollars in subsidies, loopholes, and special foreign tax credits,” in Biden’s words. He intends to eliminate these and shift to non-carbon energy by strengthening the nation’s electrical grid, creating a new “clean electricity standard” that will force utilities to end carbon emissions by 2035 and providing research support and tax credits for clean energy.

It’s a sensible 180-degree shift of industrial policy.

The old industrial policy for the automobile industry consisted largely of bailouts – of Chrysler in 1979 and General Motors and Chrysler in 2008.

Biden intends to shift away from gas-powered cars entirely and invest $174 billion in companies making electric vehicles. He’ll also create 500,000 new charging stations.

This also makes sense. Notwithstanding the success of Tesla, which received $2.44 billion in government subsidies before becoming profitable, the switch to electric vehicles still needs pump priming.

Internet service providers have been subsidized by the states and the federal government, and federal regulators have allowed them to consolidate into a few telecom giants. But they’ve dragged their feet on upgrading copper networks with fiber, some 30 million Americans still lack access to high-speed broadband, and America has among the world’s highest prices for internet service.

Biden intends to invest $100 billion to extend high-speed broadband coverage. He also threatens to “hold providers accountable,” for their sky-high prices – suggesting either price controls or antitrust enforcement.

I hope he follows through. A proper industrial policy requires that industries receiving public benefits act in the public interest.  

The pharmaceutical industry exemplifies the old industrial policy at its worst. Big Pharma’s basic research has been subsidized through the National Institutes of Health. Medicare, Medicaid, and the Affordable Care Act bankroll much of its production costs. The industry has barred Americans from buying drugs from abroad. Yet Americans pay among the highest drug prices in the world.

Biden intends to invest an additional $30 billion to reduce the risk of future pandemics – replenishing the national stockpile of vaccines and therapeutics, accelerating the timeline for drug development, and boosting domestic production of pharmaceutical ingredients currently made overseas.

That’s a good start but he must insist on a more basic and long-overdue quid pro quo from big pharma: allow government to use its bargaining power to restrain drug prices.    

A case in point: The U.S. government paid in advance for hundreds of millions of doses of multiple COVID-19 vaccines. The appropriate quid pro quo here is to temporarily waive patents so vaccine manufacturers around the world can quickly ramp up. Americans can’t be safe until most of the rest of the world is inoculated.

Some of Biden’s emerging industrial policy is coming in response to China. Last week’s annual intelligence report from the Office of the Director of National Intelligence warns that Beijing threatens American leadership in an array of emerging technologies.

Expect more subsidies for supercomputers, advanced semiconductors, artificial intelligence, and other technologies linked to national security. These are likely to be embedded in Biden’s whopping $715 billion defense budget – larger even than Trump’s last defense budget.

Here again, it’s old industrial policy versus new. The new should focus on cutting-edge breakthroughs and not be frittered away on pointless projects like the F35 fighter jet. And it should meet human needs rather than add to an overstuffed defense arsenal.

Biden’s restructuring of the American economy is necessary. America’s old industrial policy was stifling innovation and gauging taxpayers and consumers. The challenges ahead demand a very different economy.

But Biden’s new industrial policy must avoid capture by the industries that dominated the old. He needs to be clear about its aims and the expected response from the private sector, and to reframe the debate so it’s not about whether government should “pick winners” but what kind industrial policy will help America and much of the world win.

Both Bernie Sanders and Donald Trump are blaming free-trade deals for the decline of working-class jobs and incomes. Are they right?

Clearly, America has lost a significant number of factory jobs over the last three decades. In 1980, 1 in 5 Americans worked in manufacturing. Now it’s 1 in 12.

Today Ohio has a third fewer manufacturing jobs than it had in 2000. Michigan is down 32 percent.

Trade isn’t the only culprit. Technological change has also played a part.

When I visit one of America’s remaining factories, I rarely see assembly-line workers. I don’t see many workers at all. Instead, I find a handful of technicians sitting behind computer screens. They’re linked to fleets of robots and computerized machine tools who do the physical work.

There’s a lively debate among researchers as to whether trade or technology is more responsible for the decline in factory jobs. In reality the two can’t be separated.

Were it not for technological breakthroughs we wouldn’t have the huge cargo containers, massive container ports and cranes, and satellite and Internet communications systems that have created highly-efficiently worldwide manufacturing systems.

These systems have relocated factory jobs from the United States to Asia, especially to China. Researchers find the biggest losses in American manufacturing started in 2001 when China joined the World Trade Organization, requiring the U.S. to lower tariffs on Chinese goods.

MIT economist David Autor and two co-authors estimate that between 2000 and 2007 the United States lost close to a million manufacturing jobs to China – about a quarter of the total decline in those years. Robert Scott of the Economic Policy Institute puts the loss since then at about 3 million.

This doesn’t mean free trade has been entirely bad for Americans. It’s given us access to cheaper goods, saving the typical American thousands of dollars a year.

A recent study by economists at UCLA and Columbia University found that trade has increased the real incomes of the U.S. middle class by 29 percent, and even more for those with lower incomes.

But trade has widened inequality and imposed a particular burden on America’s blue-collar workers.

If you’re well educated, free trade has given you better access worldwide markets for your skills and insights – resulting directly or indirectly in higher pay.

On the other hand, if you’re not well educated, the trade deals of the last quarter century have very likely taken away the factory job you (or your parents or grandparents) once relied on for steady work with good pay and generous benefits.

These jobs were the backbone of the old American middle class. Now they’re almost all gone, replaced by lower-paying service jobs in places like retail stores, restaurants, hotels, and hospitals.

The change has been a dramatic. A half century ago America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly income (including health and pension benefits) of around $50, in today’s dollars.

Today America’s largest employer is Walmart, whose typical employee earns just over $9 an hour. A third of Walmart’s employees work less than 28 hours per week and don’t even qualify for benefits.

The core problem isn’t really free trade, or even the loss of factory jobs per se. It’s the demise of an entire economic system in which people with only high-school degrees, or less, could count on good and secure jobs.

That old system included strong unions, CEOs with responsibilities to their employees and communities and not just to shareholders, and a financial sector that didn’t demand the highest possible returns every quarter.

Trade has contributed to the loss of this old system, but that doesn’t necessarily mean we should give up on free trade. We should create a new system, in which a greater share of Americans can be winners.

But will we? The underlying political question is whether the winners from America’s current economic system – people with college degrees, the right connections, and good jobs that put them on the winning side of the divide – will support new rules that widen the circle of prosperity to include those who have been on the losing side.

Those new rules might include, for example, a much larger Earned Income Tax Credit (effectively, a wage subsidy for lower-income workers), stronger unions in the service sector, world-class education for all (including free public higher education), a single-payer healthcare plan, more generous Social Security, and higher taxes on the wealthy to pay for all this.

If the winners refuse to budge, America could turn its back on free trade – and much else. Indeed, there’s no telling where the anger we’ve seen this primary might lead. 

It’s now possible to sell a new product to hundreds of millions of people without needing many, if any, workers to produce or distribute it.

At its prime in 1988, Kodak, the iconic American photography company, had 145,000 employees. In 2012, Kodak filed for bankruptcy.

The same year Kodak went under, Instagram, the world’s newest photo company, had 13 employees serving 30 million customers.

The ratio of producers to customers continues to plummet. When Facebook purchased “WhatsApp” (the messaging app) for $19 billion last year, WhatsApp had 55 employees serving 450 million customers.

A friend, operating from his home in Tucson, recently invented a machine that can find particles of certain elements in the air.

He’s already sold hundreds of these machines over the Internet to customers all over the world. He’s manufacturing them in his garage with a 3D printer.

So far, his entire business depends on just one person – himself.

New technologies aren’t just labor-replacing. They’re also knowledge-replacing.

The combination of advanced sensors, voice recognition, artificial intelligence, big data, text-mining, and pattern-recognition algorithms, is generating smart robots capable of quickly learning human actions, and even learning from one another.

If you think being a “professional” makes your job safe, think again.

The two sectors of the economy harboring the most professionals – health care and education – are under increasing pressure to cut costs. And expert machines are poised to take over.

We’re on the verge of a wave of mobile health apps for measuring everything from your cholesterol to your blood pressure, along with diagnostic software that tells you what it means and what to do about it.

In coming years, software apps will be doing many of the things physicians, nurses, and technicians now do (think ultrasound, CT scans, and electrocardiograms).

Meanwhile, the jobs of many teachers and university professors will disappear, replaced by online courses and interactive online textbooks.

Where will this end?

Imagine a small box – let’s call it an “iEverything” – capable of producing everything you could possibly desire, a modern day Aladdin’s lamp.

You simply tell it what you want, and – presto – the object of your desire arrives at your feet. 

The iEverything also does whatever you want. It gives you a massage, fetches you your slippers, does your laundry and folds and irons it.

The iEverything will be the best machine ever invented. 

The only problem is no one will be able to buy it. That’s because no one will have any means of earning money, since the iEverything will do it all.

This is obviously fanciful, but when more and more can be done by fewer and fewer people, the profits go to an ever-smaller circle of executives and owner-investors.

One of the young founders of WhatsApp, CEO Jan Koum, had a 45 percent equity stake in the company when Facebook purchased it, which yielded him $6.8 billion.

Cofounder Brian Acton got $3 billion for his 20 percent stake. 

Each of the early employees reportedly had a 1 percent stake, which presumably netted them $160 million each.

Meanwhile, the rest of us will be left providing the only things technology can’t provide  – person-to-person attention, human touch, and care. But these sorts of person-to-person jobs pay very little. 

That means most of us will have less and less money to buy the dazzling array of products and services spawned by blockbuster technologies – because those same technologies will be supplanting our jobs and driving down our pay.

We need a new economic model. 

The economic model that dominated most of the twentieth century was mass production by the many, for mass consumption by the many.

Workers were consumers; consumers were workers. As paychecks rose, people had more money to buy all the things they and others produced – like Kodak cameras. That resulted in more jobs and even higher pay.

That virtuous cycle is now falling apart. A future of almost unlimited production by a handful, for consumption by whoever can afford it, is a recipe for economic and social collapse. 

Our underlying problem won’t be the number of jobs. It will be – it already is – the allocation of income and wealth.

What to do? 

“Redistribution” has become a bad word.

But the economy toward which we’re hurtling – in which more and more is generated by fewer and fewer people who reap almost all the rewards, leaving the rest of us without enough purchasing power – can’t function. 

It may be that a redistribution of income and wealth from the rich owners of breakthrough technologies to the rest of us becomes the only means of making the future economy work.

Jobs are coming back, but pay isn’t. The median wage is still below where it was before the Great Recession. Last month, average pay actually fell. 

What’s going on? It used to be that as unemployment dropped, employers had to pay more to attract or keep the workers they needed. That’s what happened when I was labor secretary in the late 1990s.

It still could happen – but the unemployment rate would have to sink far lower than it is today, probably below 4 percent.

Yet there’s reason to believe the link between falling unemployment and rising wages has been severed.

For one thing, it’s easier than ever for American employers to get the workers they need at low cost by outsourcing jobs abroad rather than hiking wages at home. Outsourcing can now be done at the click of a computer keyboard.

Besides, many workers in developing nations now have access to both the education and the advanced technologies to be as productive as American workers. So CEOs ask, why pay more?

Meanwhile here at home, a whole new generation of smart technologies is taking over jobs that used to be done only by people.  Rather than pay higher wages, it’s cheaper for employers to install more robots.

Not even professional work is safe. The combination of advanced sensors, voice recognition, artificial intelligence, big data, text-mining, and pattern-recognition algorithms is even generating smart robots capable of quickly learning human actions.

In addition, millions of Americans who dropped out of the labor market in the Great Recession are still jobless. They’re not even counted as unemployment because they’ve stopped looking for work.

But they haven’t disappeared entirely. Employers know they can fill whatever job openings emerge with this “reserve army” of the hidden unemployed – again, without raising wages.

Add to this that today’s workers are less economically secure than workers have been since World War II. Nearly one out of every five is in a part-time job.

Insecure workers don’t demand higher wages when unemployment drops. They’re grateful simply to have a job.

To make things worse, a majority of Americans have no savings to draw upon if they lose their job. Two-thirds of all workers are living paycheck to paycheck. They won’t risk losing a job by asking for higher pay.

Insecurity is now baked into every aspect of the employment relationship. Workers can be fired for any reason, or no reason. And benefits are disappearing. The portion of workers with any pension connected to their job has fallen from over half in 1979 to under 35 percent in today.

Workers used to be represented by trade unions that utilized tight labor markets to bargain for higher pay. In the 1950s, more than a third of all private-sector workers belonged to a union. Today, though, fewer than 7 percent of private-sector workers are unionized.

None of these changes has been accidental. The growing use of outsourcing abroad and of labor-replacing technologies, the large reserve of hidden unemployed, the mounting economic insecurities, and the demise of labor unions have been actively pursued by corporations and encouraged by Wall Street. Payrolls are the single biggest cost of business. Lower payrolls mean higher profits.

The results have been touted as “efficient” because, at least in theory, they’ve allowed workers to be shifted to “higher and better uses.” But most haven’t been shifted. Instead, they’ve been shafted.

The human costs of this “efficiency” have been substantial. Ordinary workers have lost jobs and wages, and many communities have been abandoned.

Nor have the efficiency benefits been widely shared. As corporations have steadily weakened their workers’ bargaining power, the link between productivity and workers’ income has been severed.

Since 1979, the nation’s productivity has risen 65 percent, but workers’ median compensation has increased by just 8 percent. Almost all the gains from growth have gone to the top.

This is not a winning corporate strategy over the long term because higher returns ultimately depend on more sales, which requires a large and growing middle class with enough purchasing power to buy what can be produced.

But from the limited viewpoint of the CEO of a single large firm, or of an investment banker or fund manager on Wall Street, it’s worked out just fine – so far.

Low unemployment won’t lead to higher pay for most Americans because the key strategy of the nation’s large corporations and financial sector has been to prevent wages from rising.

And, if you hadn’t noticed, the big corporations and Wall Street are calling the shots. 

We are witnessing a reversion to tribalism around the world, away from nation states. The the same pattern can be seen even in America – especially in American politics.

Before the rise of the nation-state, between the eighteenth and twentieth centuries, the world was mostly tribal. Tribes were united by language, religion, blood, and belief. They feared other tribes and often warred against them. Kings and emperors imposed temporary truces, at most.

But in the past three hundred years the idea of nationhood took root in most of the world. Members of tribes started to become citizens, viewing themselves as a single people with patriotic sentiments and duties toward their homeland. Although nationalism never fully supplanted tribalism in some former colonial territories, the transition from tribe to nation was mostly completed by the mid twentieth century.

Over the last several decades, though, technology has whittled away the underpinnings of the nation state. National economies have become so intertwined that economic security depends less on national armies than on financial transactions around the world. Global corporations play nations off against each other to get the best deals on taxes and regulations.

News and images move so easily across borders that attitudes and aspirations are no longer especially national. Cyber-weapons, no longer the exclusive province of national governments, can originate in a hacker’s garage.

Nations are becoming less relevant in a world where everyone and everything is interconnected. The connections that matter most are again becoming more personal. Religious beliefs and affiliations, the nuances of one’s own language and culture, the daily realities of class, and the extensions of one’s family and its values – all are providing people with ever greater senses of identity.

The nation state, meanwhile, is coming apart. A single Europe – which seemed within reach a few years ago – is now succumbing to the centrifugal forces of its different languages and cultures. The Soviet Union is gone, replaced by nations split along tribal lines. Vladimir Putin can’t easily annex the whole of Ukraine, only the Russian-speaking part. The Balkans have been Balkanized.

Separatist movements have broken out all over – Czechs separating from Slovaks; Kurds wanting to separate from Iraq, Syria, and Turkey; even the Scots seeking separation from England.

The turmoil now consuming much of the Middle East stems less from democratic movements trying to topple dictatorships than from ancient tribal conflicts between the two major denominations of Isam – Sunni and Shia.

And what about America? The world’s “melting pot” is changing color. Between the 2000 and 2010 census the share of the U.S. population calling itself white dropped from 69 to 64 percent, and more than half of the nation’s population growth came from Hispanics.

It’s also becoming more divided by economic class. Increasingly, the rich seem to inhabit a different country than the rest.

But America’s new tribalism can be seen most distinctly in its politics. Nowadays the members of one tribe (calling themselves liberals, progressives, and Democrats) hold sharply different views and values than the members of the other (conservatives, Tea Partiers, and Republicans).

Each tribe has contrasting ideas about rights and freedoms (for liberals, reproductive rights and equal marriage rights; for conservatives, the right to own a gun and do what you want with your property).

Each has its own totems (social insurance versus smaller government) and taboos (cutting entitlements or raising taxes). Each, its own demons (the Tea Party and Ted Cruz; the Affordable Care Act and Barack Obama); its own version of truth (one believes in climate change and evolution; the other doesn’t); and its own media that confirm its beliefs.

The tribes even look different. One is becoming blacker, browner, and more feminine. The other, whiter and more male. (Only 2 percent of Mitt Romney’s voters were African-American, for example.)

Each tribe is headed by rival warlords whose fighting has almost brought the national government in Washington to a halt. Increasingly, the two tribes live separately in their own regions – blue or red state, coastal or mid-section, urban or rural – with state or local governments reflecting their contrasting values.

I’m not making a claim of moral equivalence. Personally, I think the Republican right has gone off the deep end, and if polls are to be believed a majority of Americans agree with me.

But the fact is, the two tribes are pulling America apart, often putting tribal goals over the national interest – which is not that different from what’s happening in the rest of the world.

If you ever wonder what’s fueling America’s staggering inequality, ponder Facebook’s acquisition of the mobile messaging company WhatsApp .

According to news reports today, Facebook has agreed to buy WhatsApp for $19 billion.

That’s the highest price paid for a startup in history. It’s $3 billion more than Facebook raised when it was first listed, and more than twice what Microsoft paid for Skype.

(To be precise, $12 billion of the $19 billion will be in the form of shares in Facebook, $4 billion will be in cash, and $3 billion in restricted stock to WhatsApp staff, which will vest in four years.)

Given that gargantuan amount, you might think Whatsapp is a big company. You’d be wrong. It has 55 employees, including its two young founders, Jan Koum and Brian Acton.

Whatsapp’s value doesn’t come from making anything. It doesn’t need a large organization to distribute its services or implement its strategy.

It value comes instead from two other things that require only a handful of people. First is its technology – a simple but powerful app that allows users to send and receive text, image, audio and video messages through the Internet.

The second is its network effect: The more people use it, the more other people want and need to use it in order to be connected. To that extent, it’s like Facebook – driven by connectivity.  

Whatsapp’s worldwide usage has more than doubled in the past nine months, to 450 million people – and it’s growing by around a million users every day. On December 31, 2013, it handled 54 billion messages (making its service more popular than Twitter, now valued at about $30 billion.)

How does it make money? The first year of usage is free. After that, customers pay a small fee. At the scale it’s already achieved, even a small fee generates big bucks. And if it gets into advertising it could reach more eyeballs than any other medium in history. It already has a database that could be mined in ways that reveal huge amounts of information about a significant percentage of the world’s population.

The winners here are truly big winners. WhatsApp’s fifty-five employees are now enormously rich. Its two founders are now billionaires. And the partners of the venture capital firm that financed it have also reaped a fortune.

And the rest of us? We’re winners in the sense that we have an even more efficient way to connect with each other.

But we’re not getting more jobs.

In the emerging economy, there’s no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp’s 55 employees are all its 450 million customers need).

Meanwhile, the ranks of postal workers, call-center operators, telephone installers, the people who lay and service miles of cable, and the millions of other communication workers, are dwindling – just as retail workers are succumbing to Amazon, office clerks and secretaries to Microsoft, and librarians and encyclopedia editors to Google.   

Productivity keeps growing, as do corporate profits. But jobs and wages are not growing. Unless we figure out how to bring all of them back into line – or spread the gains more widely – our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together.