Can US progressives deliver economic growth?

When New York City Mayor Zohran Mamdani appointed Anthony Shorris and Lina Khan to lead the city’s Economic Development Corporation (EDC) as president and board chair, respectively, he signaled his understanding of the crucial challenge faced by progressives: balancing economic redistribution with economic growth. Mayor Mamdani’s election campaign emphasized redistribution, such as affordable housing, rent freezes, free public transportation, and universal childcare.

Since taking office, he has made progress on these issues, improved daily governance, reduced bureaucracy, and encouraged housing construction. However, New York City’s challenges—such as state government limitations, a skeptical bond market, and the influence of politically independent suburbs—complicate his efforts.

This challenge is not unique to the U.S. Leaders worldwide who promise economic justice often struggle to convince the public of their ability to promote dynamism. In Germany, the Social Democrats have seen their popularity plummet due to their focus on redistribution, while France’s left-wing alliance has largely emphasized tax increases, price controls, and a wealth tax.

In 2024, more voters in France trusted Marine Le Pen’s far-right party on economic matters than the left-wing alliance or President Emmanuel Macron’s centrist alliance. Similarly, Spain’s leftist governing alliance has achieved growth but faces criticism for inadequate progress on housing affordability.

Political difficulties like these in democracies highlight a fundamental issue: redistribution is necessary, but taxing and regulating alone cannot achieve affordability. A growth-enhancing agenda that creates good jobs and productive capacity is also essential. Harvard scholar Dani Rodrik’s “productivism” framework offers a solution.

It focuses on building capacity to create good jobs in services like healthcare, logistics, hospitality, and care for children and the elderly. This approach is consistent with progressive values, as it “puts less faith in markets” and “is suspicious of large corporations,” while emphasizing “production and investment over finance, and revitalizing local communities over globalization.”

Mayor Mamdani’s EDC agenda in New York includes using city-owned land, financing, and investment to create jobs and support small businesses. Lina Khan, with her background in challenging corporate concentration and defending workers, is well-suited for this role. Shorris, with his experience in New York City government and respect from the business community, can help navigate the relationship with large firms that anchor the city’s economy and fund its budget.

However, protecting workers and supporting small businesses alone will not create good jobs at scale.

Mayor Mamdani must also find ways to work with large firms in key industries to fund the city’s budget. The experience of Britain’s new Labour Prime Minister, Andy Burnham, illustrates the delicate balance required. Burnham’s success in making Greater Manchester the fastest-growing region in Britain was due in part to investments in education, public transport, and housing.

As prime minister, Burnham has called for more fiscal flexibility to finance large-scale projects like council house-building and increased defense spending. However, the bond market has reacted negatively to his plans, fearing a sharp increase in borrowing. Higher interest rates could constrain his programs and the U.K.’s overall growth potential.

Burnham has also advocated for further devolution of spending and decision-making powers to regional authorities. If Mayor Mamdani cannot demonstrate progress in creating good jobs soon, he risks providing ammunition to critics of the progressive agenda ahead of the November midterm elections. The U.S. case shows just how challenging it will be for progressive leaders to balance economic justice and growth.