October 19, 2021
  • October 19, 2021

Reviews | Regional pacts for American states

By on July 14, 2021 0

Last summer, when medical equipment was scarce, a bipartisan group of governors from Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio and Wisconsin agreed to work closely coordination to share their resources in the fight against Covid-19 and define standards for an economic reopening in the region. The idea was that if Michigan hospitals ran out of ventilators or personal protective equipment, they could borrow them from Illinois.

Were they good neighbors? May be. But they also recognized the power of collaboration – a model for a new kind of institution at the regional level.

After years of partisan stalemate, Washington has returned to exploring ambitious federal agendas. But big programs don’t help anyone if they aren’t designed and delivered effectively. Unfortunately, the United States too often lacks the capacity to do just that.

Regional hubs of collaboration focused on economic development could link Washington to local needs and capacities across the country.

Other challenges, such as the loss of strategic supply chains for medical equipment and regional inequalities, could be addressed through such collaborations. Experimentation should be encouraged: these can be permanent or temporary and range from state pacts or city clusters cooperating on infrastructure to federally funded regional development banks and innovation hubs. The key is that they have clearly defined missions and serve as necessary intermediaries between federal and local actors.

In the short term, our emerging national industrial policy – government programs designed to favor specific industries like semiconductor production – offers the greatest potential for regional collaboration. Industrial policy has moved from a marginal position to a dominant one, supported by Republicans and Democrats. (The Senate recently passed a $ 250 billion industrial policy program, the U.S. Innovation and Competition Act, which would encourage semiconductor manufacturers and emerging technologies to compete with China, as well as develop scientific research and development.)

Large-scale industrial policies must be financed at the national level, but they must be implemented locally. Unfortunately, states have been largely excluded from these conversations. More often than not, with economic development, states are faced with zero-sum competition – in a race to the bottom to attract, for example, an Amazon site – rather than being offered a role in larger national efforts. .

The United States has experience in regional governance. The Tennessee Valley Authority, created during the New Deal era, involved seven southeastern states and helped plan and develop the construction of dams for flood control, navigation, and electrification in the valley.

There is also an important current example that America can learn from. One of the keys to China’s success has been its superior coordination between central and provincial authorities. Beijing sets strategic goals like the Made in China 2025 plan, but much of the execution is handled at the provincial level. Take uninterruptible power technology: officials in Guangdong province were tasked with ensuring that local suppliers were in place to manufacture up to 90% of the technology’s components. They have also facilitated the purchase of advanced capital equipment for businesses and provided training and workforce recruitment to meet business needs. China has also launched new agencies (known as “city clusters”) in mega-urban areas to help bridge urban-rural divides.

America today faces development challenges that state and federal governments alone have been unable to resolve; regional collaboration could be essential to solve this problem. The deindustrialization of the Midwestern states is an obvious target. They haven’t taken advantage of much of the recent manufacturing relocation for semiconductors (which has largely gone to the Sun Belt states).

But the Midwestern states, with their automation companies, still have a lot of capabilities that could make them attractive destinations for other industries. Imagine a regional collaboration – a Midwestern industrial pact – between states like Michigan, Ohio, Indiana, Illinois and Wisconsin that identifies a sector that could be relocated. Those responsible for this collaboration could scour states for suppliers of key components and engineering skills, move investments to businesses in the region, coordinate local government agencies, and connect to federal “buy American” procurement efforts. “.

The Biden administration has prioritized the transition to a greener economy, which would require major development projects – and could benefit from better coordination.

For example, there have been discussions about mining lithium (for use in batteries) in some Southeastern states. With help from Washington, a regional agreement between states like Arkansas and North Carolina could support this project by funding geological surveys and workforce retraining, as well as supporting local development. treatment facilities in those states. A mine site in North Carolina could be backed by an Arkansas trucking company.

Another problem is the concentration of capital and economic activity in the most populous states – and even within those states, generally leaving rural areas behind. One idea is to divide larger states. But what if instead we connect the zones to their neighbors? A regional intermediary, for example in the Upper Midwest, could focus on companies focused on new technologies for biobrewing active pharmaceutical ingredients, which could enable the migration of key elements of the pharmaceutical supply chain from the United States. China and India to rural America. Businesses in Detroit and Chicago could connect businesses in those regions with larger markets and sources of funding. The regional intermediary could also coordinate infrastructure improvements across the region.

More experimentation with financing regional development would also help across the country. The US law on innovation and competition would fund regional technology hubs. But the biggest problem facing the United States is funding scale-ups – existing businesses that want to grow – not start-ups or research. America could learn a lesson from Europe and form regional development banks, with a mandate to provide capital to certain sectors of a region. One proposal suggests using the Federal Reserve’s regional banks for this purpose.

In any country, a common criticism of any ambitious government policy is that it is too top-down. Regional intermediaries can help ensure this is not the case.

States and local governments are often called America’s laboratories of democracy. With strengthened regional coordination – and better integration into ambitious national development initiatives – they can also be engines of growth and innovation.

Julius Kerin is the editor-in-chief of American Affairs.

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