The Build Back Better Regional Challenge marks a new era of place-based industrial strategy
After a year-long competition, today the U.S. Department of Commerce’s Economic Development Administration (EDA) made price to 21 regions as part of its $1 billion Building Back Better Regional Challenge (BBBRC).
As the flagship recovery program of the EDA’s American Rescue Plan Act, the BBBRC offers five-year grants ranging from $25 million to $65 million to urban, rural, and tribal areas. These investments support the local development of critical industries and technologies nationwide in ways that provide economic opportunities to traditionally disadvantaged individuals and communities.
Although only a small portion of the $3.4 trillion in recent federal investments to support the economy, the BBBRC represents a critical test for key assumptions in the broader economic framework of the Biden administration: that a major public investment can catalyze new markets and technologies; that growth and equity can be mutually reinforcing as drivers of shared prosperity; and that federal agencies can unleash state and local innovation while demanding effective, on-the-ground implementation at the same time.
Along the way, the program announces the federal government’s adoption of large-scale, place-based challenge grants to stimulate and support local responses. He recognizes that the American economy is truly a aggregation distinct regional economies, each with their own stories and opportunities. And it recognizes that the regional networks that receive BBBRC grants—universities, community organizations, local and state governments, and business intermediaries—play a vital role in the country’s economic development.
For these reasons, more than its price, the BBBRC is a political experiment that deserves attention. That’s why, over the next 18 months, Brookings Metro will be undertaking an applied research project focused on how the program is implemented and what it means for the the future of federal aid for local economic growth and resilience.
The inclusive industrial strategy finds its place
The BBBRC was designed to achieve two critical post-pandemic economic goals.
First, at a time of disrupted supply chains, growing global insecurity and an urgent need to decarbonize the economy, the BBBRC seeks to build the country’s technological and industrial capabilities in areas such as advanced manufacturing , green technologies, agriculture and health. In April 2022, the Biden administration argued for a new national industrial strategy that invests in infrastructure, research, technology and energy as platforms for the next generation of economic growth. Congress passed two major pieces of legislation – the Infrastructure Investment and Jobs Act and the Inflation Reduction Act – that make this vision a reality. The BBBRC’s distinct contribution is its recognition that the country’s industrial capacity stems from what Gary P. Pisano and Willy C. Shih call the “industrial commons”— the local concentrations of research institutions, skilled workers and suppliers that anchor America’s most productive clusters. Building on this recognition, the program invests locally to strengthen the competitive backbone of the country.
Second, at a time of heightened geographic and racial inequality, the BBBRC is also investing in people and places historically left behind to fuel the country’s industrial transition. Federal investment could easily be channeled directly to the largest and most productive knowledge hubs or bypass those traditionally disconnected from the innovation economy altogether. Instead, the BBBRC responds to the work of Brookings Metro and others demonstrating the enormous social and geographical divisions separating the country. In view of this, the EDA has made “equity” the priority result for the beneficiaries. This recognizes that structural racism has undermined the pipeline of various Talent and entrepreneurs on which the “industrial commons” depend, while regional inequalities have concentrated investment in too few places in recent decades.
Local laboratories for a national industrial strategy
The EDA translated these high-level goals into a detailed rubric to select 21 winners. If states are the laboratories of democracy, then the beneficiaries of the BBBRC are, in many ways, the laboratories of this new national industrial strategy, and the implementation of their industrial cluster strategies will test several key premises. of policy design.
The first premise is that a territorial policy can not only help regions recover from the pandemic, but also build more productive and long-term inclusive economies. In effect, cluster strategies take years, even decades, to materialize. Each winner explained why their cluster strategy could achieve these goals in a highly disruptive momentwhether it’s building battery manufacturing capacity in upstate New Yorkevolve the timber industry to meet climate and equity imperatives Oregonor the creation of a clean energy center in West Virginia.
The second premise is threefold: market failures inhibit the development of key industries and technologies; regional actors can effectively identify these market failures; and public investment can correct those failures to trigger economic development that would not otherwise have occurred. The EDA asked each winner to explain why government resources were critical to triggering economic growth based on their specific economic and civic context. This has allowed the agency to fund clusters at various stages of maturity and in regions of varying scale, ranging from well-established advanced manufacturing clusters to Detroit to more emerging opportunities such as the Biotech Corridor Virginia.
The final premise to be tested is that cluster strategies can catalyze inclusive growth. Meeting the equity imperative of DEA will require intentional strategies delivered by new types of coalitions. As such, the diversity of institutions – from research universities to community-based nonprofit organizations to midstream companies and task forces – represented in the 21 awardees is broader than the typical pool of grantees. EDA. But only time will tell if these coalitions can actually implement their strategies.
Examining how and where these premises hold up can provide tangible insights into building an American economy that works for everyone.
The beginning of a new era in place-based politics
The BBBRC is the Biden administration’s first major territorial economic policy, but it is not the only one. These other national “bets” on particular industries in particular locations can learn from and inform the EDA program:
- The National Science Foundation Regional drivers of innovation will make up to $160 million available for regional innovation strategies.
- Under the Infrastructure Investment and Jobs Act, the Department of Energy launched an $8 billion program to catalyze at least four regional clean hydrogen hubs.
- The recent passage of CHIPS and scientific law saw Congress commit $11 billion to place-based policy through the $10 billion Regional Technology Centers program and the $1 billion RECOPETE pilot program.
By our estimates, the BBBRC will provide critical lessons for the design and execution of more than $20 billion in such programs – and likely more, given the recent passage of the Cut Inflation Act. .
Together, these programs represent the greatest commitment to territorial economic policy in recent memory. But in his plea for a new American industrial strategy, Brian Deese, director of the National Economic Council, Speak clearly how such an approach requires stronger US federalism: “Most construction will be done by state and local partners. The federal government will need to build its capacity; demand progress rather than inertia; and learn from local innovation.
With that in mind, over the next 18 months, Brookings Metro will partner with the EDA to produce research on the BBBRC program, document the new solutions emerging from it, and analyze what it all means for future public and private action. aimed at shutting down our country. social and spatial divisions.
This blog was prepared by Brookings Metro with federal funding under Economic Development Administration, US Department of Commerce Award ED22HDQ3070081. The statements, findings, conclusions, and recommendations are those of the authors and do not necessarily reflect the views of the Economic Development Administration or the United States Department of Commerce.