Ro Khanna’s ‘New Middle’ Agenda: Rebalancing Capitalism Through State-Led Industrial Policy and Labor-Centric Tech Regulation

Indigenous economic traditions emphasize communal ownership, reciprocity, and stewardship of resources, contrasting sharply with Khanna’s state-centric approach, which prioritizes private property and industrial growth. However, Indigenous critiques of extractivism and financialization align with his calls to regulate tech capitalism, suggesting a potential synthesis in policies like worker cooperatives or land trusts. The omission of Indigenous land reclamation movements—such as the Standing Rock protests against pipeline projects—highlights how state-led industrial policy often conflicts with Indigenous sovereignty.

Khanna’s agenda echoes mid-20th century industrial policy in the U.S., where the New Deal and post-WWII Keynesianism combined state investment with labor protections to create a broad middle class. However, this model was later dismantled under neoliberal reforms in the 1970s–80s, which prioritized deregulation, financialization, and globalization—trends that Khanna now seeks to reverse. The historical parallel to East Asian developmental states, where state-directed credit and industrial policy drove rapid industrialization, is also underappreciated in mainstream coverage.

In Europe, the ‘social market economy’ of Germany and the Nordic model blend market competition with strong labor rights and social safety nets, offering a template for Khanna’s ‘new middle’ that avoids the pitfalls of American exceptionalism. In India, the ‘License Raj’ era demonstrated the risks of excessive state control, but also showed how strategic industrial policy could foster domestic manufacturing—lessons Khanna implicitly draws upon. African and Latin American models, such as Rwanda’s state-led development or Brazil’s Bolsa Família, further illustrate how targeted welfare and industrial policy can coexist without the ideological constraints of ‘America First’ nationalism.

Empirical evidence from labor economics shows that state-led industrial policy and strong labor unions correlate with reduced inequality and higher productivity, as seen in the post-war U.S. and contemporary Germany. Research on financialization demonstrates that the shift from productive investment to shareholder primacy has hollowed out manufacturing and suppressed wages, a trend Khanna’s proposals aim to address. However, the scientific literature also warns that state intervention risks inefficiency, rent-seeking, and bureaucratic capture—risks that Khanna’s framework does not adequately address.

Artistic movements like the WPA murals of the 1930s or the Detroit techno scene of the 1980s-90s reflect a cultural synthesis of labor pride and industrial identity, themes that resonate with Khanna’s agenda. Spiritual traditions, such as Catholic social teaching’s emphasis on the ‘common good’ or Buddhist economics’ focus on sufficiency, offer ethical frameworks for rebalancing capitalism that mainstream economics often ignores. However, the spiritual dimensions of labor—such as the Protestant work ethic or Marxist critiques of alienation—are rarely engaged in policy discussions, leaving a gap in Khanna’s narrative.

Scenario modeling suggests that Khanna’s ‘new middle’ could stabilize regional economies by redirecting capital from financial speculation to productive investment, but risks include bureaucratic inefficiency and political capture by corporate interests. A more radical pathway involves democratizing capital ownership through worker cooperatives and community land trusts, as seen in the Mondragon Corporation in Spain. Alternatively, a ‘green industrial policy’ could align Khanna’s agenda with climate goals, though this would require overcoming resistance from fossil fuel and tech lobbies.

Khanna’s agenda centers working-class Americans, particularly in Rust Belt and Sun Belt regions, but marginalizes the voices of undocumented workers, gig economy laborers, and Indigenous communities who are disproportionately affected by deindustrialization and financialization. The framing also overlooks the role of racial capitalism in shaping economic policy, such as the Federal Housing Administration’s redlining practices that excluded Black Americans from post-war prosperity. Global South perspectives—such as the impact of U.S. outsourcing on Mexican maquiladoras or Bangladeshi garment workers—are similarly absent, despite their relevance to Khanna’s calls for moderating tech capitalism.