US mounts dramatic pivot to ‘place-based industrial policy’

“We believe every single American, no matter where you live, ought to have an opportunity to have a high-paying, family-supporting job in that community.” That was how Joe Biden described the aims of the federal government’s $1 billion (£870 million) Build Back Better Regional Challenge (BBBRC) as he announced the 21 winners of funding at the White House this month.

Funded by the president’s American Rescue Plan for post-pandemic recovery, the project provides each winning partnership with “funding to rebuild regional economies, promote inclusive and equitable recovery, and create thousands of good-paying jobs in industries of the future such as clean energy, next-generation manufacturing, and biotechnology”, the White House said.

Universities and colleges, often from beyond the coastal elite of US higher education, are front and centre of many of the winning BBBRC bids.

For example, the third biggest winner of the 21 is the New Energy New York project, led by SUNY Binghamton University, to establish a hub for battery technology innovation in upstate New York. Binghamton’s project won $63.7 million of federal funding plus another $50 million from the state government, after making use of the clout brought by its Nobel-winning professor Stan Whittingham, an inventor of the lithium-ion battery.

With other, even bigger initiatives to boost the economies of struggling regions expected soon from federal agencies, this adds up to a pretty remarkable trend, some believe. The US federal government is getting into place-based industrial strategy – using public funding to drive the creation of new technologies and markets – in a way that has often been unthinkable in the land of the free market.

For universities, this could all help drive a shift to transformative new roles in their regional economies.

“I think you’re looking at a belated embrace by the United States of a quite explicit region-based, bottom-up-oriented industrial policy, where geographical inclusion is part of the agenda of industrial policy,” said Mark Muro, senior fellow and policy director at the Brookings Institution’s metropolitan policy programme and co-author of a 2019 report that helped drive such thinking in the US by calling for federal funding for up to 10 “growth centres” in “heartland” cities.

And in a US often regarded as the land of the legislative logjam, this shift to place-based industrial policy is moving fast, offering lessons for nations such as the UK, where Conservative government rhetoric on “levelling up” in the regions has borne precious little fruit in policy.

“I would say this stuff channels a lot of great thinking in the UK [on boosting regional productivity]…but I think may outstrip the UK in terms of building. There’s a significant fusillade of quite serious new programmes,” Mr Muro said.

One is the National Science Foundation’s Regional Innovation Engines scheme, expected to award funding early next year. These grants will be the foundation’s biggest ever awards, with $160 million going to each of five successful metropolitan areas over 10 years. The project is billed as a “unique way to drive economic growth in regions that have not fully participated in the technology boom of the past few decades”, with funding going to “coalitions comprising a diverse set of sectors and organisational types – such as small businesses, two-year colleges and minority-serving institutions”.

Plus, Congress has approved $10 billion of funding for 20 regional tech hubs under the CHIPS and Science Act, the legislation aimed at boosting America’s semiconductor manufacturing. There’s doubt whether a divided Congress will make the final appropriations here but also some cause for optimism: the slant towards largely red heartland states and the messaging around onshoring technology manufacturing to meet the challenge of China will appeal to plenty of Republican lawmakers.

These new place-based industrial policy funding streams are good news for universities, said Mr Muro. “Universities, first, are place based” as “core anchor institutions” at the centre of ecosystems of firms and suppliers or running incubators for new businesses; they are “core developers of new and applied technology, often with partnerships to regional advanced industry companies”; and they have regional convening power to bring key players together.

Universities “clearly are central to emerging place-based industrial policy in the United States”, he added.

In the BBBRC awards, there is $65 million for the Georgia AI Manufacturing coalition “to accelerate the adoption of artificial intelligence across the state’s legacy industrial sectors”, including the establishment of an AI manufacturing pilot facility at the Georgia Institute of Technology.

And there is $51.4 million for the Wichita State University-led South Kansas Coalition “to strengthen the United States’ competitive advantage and global market share in aerospace production”.

Across these successful bids is a common emphasis on the key role for universities in boosting America’s domestic manufacturing capacity – a driving priority for the White House after the pandemic interrupted global supply chains and highlighted the need to onshore manufacturing and supply chains, particularly amid growing geopolitical tension with China.

Binghamton’s project, a plan to “accelerate innovation in battery technology and to transform New York’s Southern Tier into a global hub of energy storage manufacturing” will include the building of a lithium-based battery development manufacturing facility, the Battery-NY Center. Focused on manufacturing, not research and development, it will be housed in Endicott, in the former plant where IBM started – the company largely pulled out of the town in the 1980s, leaving a huge hole in the regional economy – and where New York’s first lithium-ion gigafactory recently launched.

This facility will allow companies to “build prototyping lines” of batteries, producing up to 1,000 a week, said Professor Whittingham, distinguished professor of chemistry at Binghamton and winner of the Nobel Prize in Chemistry in 2019. “So a company can make the batteries in North America and not ship their ideas off to Asia to make the prototypes.”

Professor Whittingham and his lab, the NorthEast Center for Chemical Energy Storage, were a “cornerstone” in Binghamton’s successful case to be seen as a centre for battery innovation, said Per Stromhaug, the university’s associate vice-president for innovation and economic development. Another factor was the “growing ecosystem” of battery innovation locally, including the new gigafactory and start-ups. Also key was the wider New York state ecosystem as a leading location for energy storage, a product of the state’s position as a national leader on climate goals.

Binghamton’s New Energy New York project will also include a big workforce development programme, involving two community colleges. There’s a need to “make sure you train not just the PhD level but every level needed in a battery manufacturing facility”, said Dr Stromhaug. It’s key for the US Economic Development Administration, which ran the BBBRC, that the innovation projects funded are carried out “in an equitable way and it benefits the whole community, and not just select demographics within the community”, he added.

The university’s close engagement with large numbers of local companies, demonstrated in the opening of its Koffman Southern Tier Incubator in central Binghamton in 2017, helped build a successful bid, said Olga Petrova, assistant director of Binghamton University’s office of Entrepreneurship and Innovation Partnerships. “What we’re designing is not simply: ‘Hey, we will build it, they will come.’ But it actually addresses both industry and regional community needs.”

Another element of the project will be recruiting supply chain companies to make components for battery manufacture locally – an aim made easier by Biden tax incentives for US-based supply chains.

Given that gigafactories are largely automated, it is “all the small partners, the supply chain folks, who will bring in a few thousand jobs”, said Professor Whittingham. And the area’s history of innovation means there is a fertile base here, of “small companies with all the widgets who can employ the graduates in the schools here and bring in more employees from outside the region”.

This is all badly needed in an area still struggling with the legacy of IBM’s exit along with large numbers of high-paying jobs, and the demise of another former key employer, the huge Endicott-Johnson shoe factory. “If you talk to local people here about that transformation and what happened, they get tears in their eyes – because it was dramatic. It wasn’t just a small change; it was really destroying part of these communities,” said Dr Stromhaug.

The level of federal and state funding for Binghamton’s project is “huge for us” and “can be transformative for this region”, he continued.

In the past, a lot of US funding for innovation has been “focused on the Bostons and the MITs and the Silicon Valleys”, said Dr Stromhaug. “Now there’s a realisation that you can’t focus everything on those locations – which are also by the way super expensive. You need to get other regions involved…You have to give those communities the chance if they have the right pieces to put it together.”

And what might this all mean for the future direction of US universities, particularly in the heartlands?

There’s a trend for universities to be “shouldering more of a responsibility for economic revitalisation and social and economic inclusion”, said Mr Muro. The emerging US place-based industrial policy “all amplifies that, leans into it and says: ‘By the way, if you want one of these major grants, you have to demonstrate your orientation to these interests.’”

He added: “These fundings are going to push universities towards this broader economic development direction, with a strong social concern about inclusive growth.”

And if the home of free market capitalism can so rapidly shift to place-based industrial strategy, leveraging the power of universities in struggling regions, perhaps other nations should sit up and take notice.

john.morgan@timeshighereducation.com