This is the third of three posts about place-based economic development. The first highlighted strategies communities use in their place-based programs. The second featured Boulder, Colorado and its implementation of place-based strategies. This post reviews insights from Brookings about a “sustainability challenge” emerging in today’s changing political environment and their recommendations to communities for sustaining their place-based initiatives.
The Brookings Institution has championed place-based economic development ever since the American Rescue Plan Act, the Bipartisan Infrastructure Bill, the Inflation Reduction Act, and the CHIPS and Science Act, were passed by Congress in 2021 and 2022 to help jump start the nation’s recovery from the Covid pandemic.
These bills collectively represent hundreds of billions of dollars in potential federal investment targeting regions and states to help them fundamentally transform their economies. Brookings emphasizes that this investment is also intended to open “pathways to federal funding for entities that have traditionally been intimidated by or capacity-constrained in seeking such large sums of money.”
Brookings celebrated the bills as a historic “national pivot” to what the Biden administration called a “modern American industrial strategy.” The goal of the new strategy? To “raise the productive capacity of the U.S. economy and at the same time promote greater inclusion, a higher standard of living, and reduced carbon emissions.”
A Sustainability Problem
Even before the November 2024 election, Brookings identified a “sustainability problem” for the nation, its regions and industries, and for federal funding. They highlighted a two-fold problem:
1. The legislation authorized billions of dollars for place-based economic development, but congressional “appropriations will likely not be sufficient for the regions looking to transform their economies.”
2. As a result of decreased funding and growing uncertainty about future funding, most regions are challenged to sustain their place-based programs beyond the initial federal grants they received.
After the election, Brookings asserts that the “sustainability problem” is more acute. “Billions of dollars of pending economic development awards—as well as the support of friendly federal administrators—have been thrown into uncertainty. At a minimum, the likelihood of further large federal investments in place-based industrial development appears reduced.”
Addressing the Sustainability Challenge
In a recent research report entitled Sustaining America’s New Industrial Policy: Pathways to Extend Place-based Economic Development, Brookings describes key features of the current sustainability challenge and approaches to address it. The report is presented to “describe the challenge in its current form; review the funding options that can resolve it; survey how several U.S. regions are considering the issue; and offer counsel for leaders seeking to sustain their initiatives.”
Four key takeaways from the report are examined in depth:
1. Federal place-based industrial policy awards have already succeeded in spurring and seeding growth in new places, while also supporting and accelerating progress for existing regional development efforts.
2. While large federal awards have been catalytic, they cannot by themselves serve as fully formed and sustainable drivers for regional cluster development.
3. Advancing sustainable regional cluster growth strategies, regardless of past or future awards, will continue to require tough work for both emerging and existing regional system hub organizations.
4. Successful sustainability strategies will need to draw from a mix of public and private regional sources in the capital stack, including states, local and national philanthropy, universities and community colleges, and private businesses—with some funders likely (or required) to come to the table earlier than others.
Brookings’ Conclusions
Despite the challenges highlighted by Brookings, their research shows that federal place-based investment has spurred unprecedented regional economic development and renewal across the U.S. As described in their report, “…the development of sustained, “bottom-up” execution across a range of regions and localities, the new place-based challenge grants (and federal hub designations, even in the absence of funding) are catalyzing new approaches to inclusive economic growth.”
Brookings goes even further, saying that “…no matter what happens at the federal level in the near term, these kinds of asset-based, inclusive regional growth strategies—and the institutional coalitions that must drive them—are gaining traction, and they’re here to stay.”
Their primary conclusion is that with reduced certainty about future federal investment, “…regional system leaders will need to turn to the funding sources closer to home that make up each region’s “capital stack” of public, business, university, and philanthropic stakeholders and investors.”
Brookings acknowledges that it isn’t easy to align and deploy regional sources of capital for future economic development. “But with the right kinds of strategic definition, effective leadership, and appropriately engaged stakeholders, the regional opportunities that have been unlocked through federal industrial policy competitions can and will proceed toward truly shared regional prosperity.”
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