The US is adopting an interventionist industrial strategy to enhance the fortune of left-behind places. But policies must go beyond national growth imperatives and adopt more explicitly redistributive approaches where social inclusion—through bottom-up, place-based development—is a central aim, writes Grete Gansauer.
The US is turning toward an interventionist industrial strategy with place-based policies at the centre. Yet as emerging policies aim to reinvest in regions which have been “left behind for far too long,” questions remain regarding the extent to which the national competitiveness goals of ‘Bidenomics’ square with improving the fortunes of the US’s disadvantaged regions.
As in the UK, regional inequalities in the US are increasingly difficult to ignore, as each country grapples with rising anti-establishment populist politics, and stark socioeconomic divides between ‘superstar cities’ and disadvantaged areas. In the US, distressed regions are more likely to be rural and majority Black, Indigenous, and people of colour (BIPOC). Through a renewed place-based industrial strategy, the Biden Administration aims to revive the places which have been left out of national prosperity gains, and leverage latent productive potential in such regions toward national competitiveness goals.
Much US place-based investment focuses on innovation clusters using financial incentives, technical and planning assistance, and direct subsidies in geopolitically important and globally competitive industries. With programmes to support Tech Hubs, Hydrogren Hubs, Direct Air Capture Hubs, Regional Innovation Engines and more, assuredly there will be new clusters cropping up – and fuelling national productivity – all across the heartland.
This strategy could pay off for a handful of presently disadvantaged regions, particularly those which already have the networks, anchor institutions, firms, and labour required to provide a basis for agglomerative, innovation-led development. Yet ‘left behind’ places are, by definition, those which lack such advantages. Thus the US’s emphasis on investing in places with promising ingredients to spin up into the proverbial ‘next Silicon Valley’ might provide payoffs for the national economy and a handful of places, but the strategy potentially leaves out much of the ‘left behind’.
This is for a few reasons. First, Bidenomics gives relatively little attention to supporting the early-stage regional development capacities which ‘left behind’ places need. Disadvantaged regions often lack the anchor institutions, infrastructures, and regional human capital assets needed to be competitive; thus, there is a need for place-based programmes which facilitate building foundations of a healthy economy. While some Bidenomics programmes demonstrate such aims, they have less funding than those with clear national competitiveness and security motivations such as the $39 billion Chips for America program. It will be worth tracking asset-building interventions such as the Economic Development Administration’s Distressed Area Recompete Pilot Program, the Coronavirus Capital Projects Improvement Fund, and expanded funding for Federally Authorized Regional Commissions and Authorities to assess to what extent these programmes support foundational capacities in distressed communities.
Success isn’t guaranteed for distressed regions which receive Bidenomics investments, as siting key innovation sectors in ‘left behind’ places carries significant risks. In the green technologies sector, for example, the US is leveraging place-based industrial strategies to accelerate R&D and commercialisation through the Regional Clean Hydrogen Hubs and the Regional Direct Air Capture Hubs programmes. Potential tensions become clear when distressed regions, with weak institutions and histories of marginalisation, are targeted for siting the facilities. This means the regions themselves, their workforce, their property markets, and their local governments will bear risks associated with such ‘high-risk, high-reward’ innovation schemes.
US place-based industrial policies also lack explicit solutions for rural regions—which harbour a disproportionate share of distressed communities. Rural places struggle with physical disconnection, diseconomies of scale in infrastructure and service provision, weak institutions, and (for Tribal governments especially) legal barriers to sovereignty and fiscal health. While US industrial policies include some provisions and set-asides for rural and Tribal governments, current policy directions do little to address such issues at a systemic level. Cluster-based, advanced secondary- and tertiary-sector development strategies promoted in recent policies are not only an ineffective and unrealistic development model for disconnected, primary- and legacy secondary production rural areas, but are also unresponsive to the development needs of rural communities. ‘Levelling up’ national geographies of economic opportunity will require place-based strategies fit for peripheral regions with histories of single industry dependence.
Despite a growing consensus about the importance of social infrastructure for local wellbeing and quality of life, such investments are notably overlooked in the Bidenomics place-based industrial policy agenda. In the US and the UK, decades of public disinvestment and fiscal austerity have degraded social infrastructures in ‘left behind’ places, and there is a widely recognised imperative to construct tangible and intangible spaces which facilitate belonging and social connection. The dearth of social infrastructure (re)investment –including federal support for local entities to develop social infrastructures and hard infrastructures with high value to the local community – raises questions about the extent to which Bidenomics’ place-based policies are truly responsive to place-based needs in disadvantaged areas. One notable exception which will be worth tracking is the ReConnecting Communities Pilot Program, which funds community-led projects which repurpose public space for local needs within redlined, urban communities of colour.
Finally, many new US place-based programmes (including, for example, Economic Development Administration Economic Adjustment Assistance programmes and National Science Foundation’s Regional Innovation Engines) are delivered through competitive, multi-stage award processes. In theory such programme designs reward places with the highest potential for success, but they may not be as effective in redistributing capital toward less-competitive geographies. Low educational attainment, limited (sometimes volunteer) local government and planning and constrained local public revenue streams produce relatively weak institutional capacity in disadvantaged regions, which impede disadvantaged and rural geographies from reliably winning US federal funds through competitive award processes. Furthermore, programmes with large local matching fund requirements exclude communities with relatively low financial capital, including places which have been historically dispossessed of wealth, rural local governments with narrow tax bases, and those which lack access to capital and credit due to discriminatory lending practices. Place-based policies with redistributive aims will need to match the mechanisms of their delivery to their intents.
In sum, the potential for US place-based industrial policies to enhance the fortunes of disadvantaged regions remains limited, and there is reason for caution about the lessons to be drawn. If anything, a key takeaway might be that delivering regional development through national-growth focused industrial policies is rife with tensions. By achieving national competitiveness goals with regions and agglomerative development, US place-based industrial policies potentially miss the mark in delivering solutions fit for systemic challenges in disadvantaged regions.
To repair geographic divides in economic opportunity and quality of life, both the US and UK central governments must go beyond the national growth imperatives implicit in industrial strategy and adopt more explicitly redistributive approaches where social inclusion—through bottom-up, place-based development—is a central aim.
Image: President Joe Biden is joined onstage by workers after his remarks on job growth and clean energy investments under the Inflation Reduction Act, Wednesday, November 29, 2023, at CS Wind America, Inc. in Pueblo, Colorado. (Official White House Photo by Adam Schultz)
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
