Industrial Policy Synergies: Industrial Policy + Inclusion Policy

As the Biden administration begins its third year, it is entering a critical new phase: implementation of the set of major infrastructure and industrial investments passed into law in the last Congress. Collectively, the funds from the American Rescue Plan (ARP), the Bipartisan Infrastructure Law (BIL), the CHIPS and Science Act, and the Inflation Reduction Act (IRA) represent a potentially transformative set of investments in our economy. Together, they have the potential to not only create thousands of new jobs by jump-starting new clean energy industries and manufacturing capabilities but to lay the foundation for an inclusive economy by investing in underlying physical infrastructure—from roads and bridges to utilities and transit.

In addition to spurring economic transformation, these investments represent an important new policy paradigm: a reclaiming of government’s proper role in constructing a dynamic and inclusive economy.

But for this new experiment in industrial policy to be successful, it will be critical that policymakers, advocates, communities, and partners alike work together to channel these investments in ways that are both equitable and inclusive of the communities affected. At the same time, these commitments to equitable outcomes and inclusive processes must reckon with the imperative to move investments into action quickly and efficiently. Indeed, commentators have already raised concerns¹ about the ways in which overly burdensome permitting and review processes might slow down and undermine their efficacy. Others have raised concerns that, absent robust accountability, these investments could easily end up funneled into the pockets of the most well-off without generating as much bottom-up prosperity or collective social value as they should. Successful implementation of these programs will require developing systems that not only move quickly and efficiently but also move in ways that help advance equitable outcomes and engage community groups and key stakeholders.

Historically, moments of significant public investment in infrastructure and industrial policy have also been key moments of institutionalizing inequities in our built environment and in the structure of jobs and economic opportunities. Many racial, geographic, gender, and other critical inequities have been exacerbated, and in a sense produced, by past disparities in patterns of investment. The Biden administration’s commitment to equity,² to reducing barriers for disadvantaged communities, and to building an economy that works for everyone are therefore on display³ and will be put to the test in the implementation of these new funding streams.

What would an equitable and inclusive approach to industrial policy look like? Three particular themes stand out: first, identifying and managing toward equitable outcomes; second, developing inclusive processes for engaging community stakeholders; and third, building capacity in both governmental and civil society organizations.

Targeting Equitable Outcomes

First, in implementing these new investment programs, policymakers need to continue to emphasize equity as a key aspect of success, including setting up benchmarks, data collection, and reporting systems. In 2020, then-candidate Joe Biden included among his ambitious campaign commitments a promise to channel a significant portion of climate funding streams into historically disadvantaged and distressed communities. This commitment has been operationalized in the Justice40 initiative, and agencies have started to put some initial practices in place to help identify communities suffering from critical inequities and to reshape grant-making processes to take those inequities into account. The general Justice40 guidelines were initially released in 2021, and the administration has consistently called on Justice40 to be a component of investments arising out of the IRA and BIL. In practice, agencies like the Department of Transportation have identified a range of systemic disadvantages to be addressed—for example, identifying not only communities facing high poverty or sustained economic distress but also those facing more subtle inequities, such as disproportionately long and burdensome transportation challenges or high vulnerability to climate shocks or pollution. Similarly, the Environmental Protection Agency’s implementation of the Justice40 commitments have informed a wide array of its programming, from Superfund site remediation to lead risk reduction.

These early efforts represent a good start. As the president’s executive orders on advancing equity make explicit, agencies are tasked with developing data collection methods and long-term policy strategies that are attentive to the ways in which different communities face barriers to opportunity and cumulative disadvantages. As IRA and BIL implementation continues, policymakers should be attentive to what kinds of outcome benchmarks might be ambitious and feasible, not just in terms of outputs like transmission lines and new bridges, but in terms of the ripple effects on regions and communities, where such investments can help spark more inclusive, dynamic, and equitable economies. At the same time, agencies will need to help develop metrics and data collection practices to track impacts on particular geographies and communities.

The challenge for these efforts is especially critical. Despite some passing references, the legislation as passed largely shied away from more explicit directives along these lines, leaving it up to the agencies to design programs either more or less equitably. As the first wave of infrastructure projects starts to come online, it will be important to see how equity commitments manifest. The Department of Transportation’s “Reconnecting Communities” program, for example, could be a transformative effort to redress the ways in which infrastructure of the past has physically and geographically segregated communities and imposed literal barriers to economic opportunity and inclusion. Similarly, as energy investments get off the ground, there will be huge opportunity to make real commitments to environmental justice.

Prioritizing Upstream Community and Stakeholder Engagement

Second, in designing these funding programs, agencies should pilot new approaches to civic engagement and help facilitate ongoing engagement between communities, government, and firms. The executive orders on equity include a particular charge for agencies to invest in proactive, early engagement with communities to help inform policymaking. This is particularly true and essential when it comes to industrial policy. Early and inclusive engagement with affected communities will be crucial, whether in the context of physical infrastructure investments in roads, bridges, or water systems, or in the context of investment in new manufacturing capabilities.

However since many of these funding programs take place outside of notice-and-comment rulemaking, much of the process and protocol for such consultation is underdeveloped. This presents the administration with an invaluable opportunity to pilot new approaches to civic engagement. From participatory budgeting to civic juries, there are a host of participatory and inclusive planning processes that have been extensively piloted in states and localities in the US and across the world, including on seemingly complex and high-stakes issues like land use and infrastructure planning, or attempts to engage workers and community members around new investments in neighborhoods or firms in the region. These experiments provide useful lessons that could inform how federal agencies might engage with stakeholders in a structured, meaningful process that can shape the design of these investment programs without unduly slowing down the process of awarding grants.

In engaging stakeholders, agencies should keep several critical design choices in mind when it comes to the design of the engagement process itself.

First, it is important to engage at the right scale. It can be easy to think of the range of affected stakeholders as only those in the immediate vicinity of a physical investment in a neighborhood or those most directly connected to the investment in a particular firm or manufacturing site. But wider engagement will be important, particularly given the aspirations for these investments to have broader regional and sectoral impacts. Concretely, this might mean seeking out platforms and building processes that gather input at the regional or sectoral level, as Jones suggests earlier.

Second, it is important that such engagement also come with real hooks and levers for communities to buy in and stay involved in the implementation of these projects in ways that provide meaningful opportunities to help shape the outcomes for the better. This means, for example, finding ways to engage communities on a sustained basis, translating some of the inputs into explicit benchmarks and tracking progress to outcomes transparently, and engaging stakeholders early enough in the process to help inform design choices.

At a moment when our broader system of electoral and legislative democracy faces severe threats and tests, a key piece of building a new and more inclusive democratic process is embedding democracy and participation in the process of implementing large-scale and high-impact initiatives. In part, this is essential because the administrative and bureaucratic implementation of such large efforts ought to engage impacted communities and stakeholders in a meaningful and productive way. But it is also an essential part of the administration’s own commitment to shoring up democratic institutions and norms by showing concretely and tangibly that democracy can and should deliver for communities on the ground.

Building Capacity and Deepening a Community of Practice

Third, to operationalize all of this, both government and civil society actors will need to continue to invest in new capacity building and in developing personnel, practices, and know-how over time to make this approach to industrial policy a lasting one. This will require not just building capacity within agencies and organizations but also creating a larger, robust community of practice in which civil society organizations, advocates, workers, firms, and policymakers can work collaboratively and effectively.

Agencies will need to develop new practices for incorporating conditions or suggestions in notices of funding opportunities—and developing the data capacities to track progress to outcomes, in ways that also track impacts on underserved communities. Similarly, agencies will need to invest in the personnel and skill sets needed to both do this kind of program design and analysis and also to do meaningful and effective stakeholder engagement—which is itself a high-skill, highly complex task. Similarly, the Executive Office of the President, which has set up critical hub offices to coordinate the implementation of ARP, IRA, CHIPS, and BIL, will need to continue investing in new practices of coordination within the executive branch and with external stakeholders. At the same time, civil society actors will need to boost their capacity: Grassroots community groups need to be able to organize their communities effectively to engage with policymakers, and researchers at universities and think tanks and in state and local communities need to be able to collect data and help monitor outcomes.

This is also a charge for philanthropy: As funders seek to mobilize resources to help implement these policies and make the possibilities for transformative impact real, it will be essential that they invest in the broader infrastructure of civil society. Implementation of industrial policy and infrastructure investments is not only about creating new transmission lines, energy production, roads, or water systems—though these are of course key outcomes. It is also, more broadly, about creating the kind of governing capacity—in government, in civil society, and in the productive and sustained engagement between the two—that is needed to transform our political economy, and to do so inclusively and equitably.