At a June 2023 assembly of business and community leaders in Chicago, President Biden outlined what has become a central theme of his reelection campaign. “Bidenomics,” the President declared, embracing the moniker for his economic policy agenda, represents a “fundamental break from the economic theory that has failed” for decades. The Reaganite commitment to unfettered market capitalism and an anemic public sector never delivered on the promise of equitable prosperity. “It failed the middle class,” he continued. “It failed America. It blew up the deficit. It increased inequity. And it weakened our infrastructure. It stripped the dignity, pride, and hope out of communities one after another.”
Senior Biden administration leaders have self-consciously styled Biden’s approach as a move away from the neoliberal presumptions of the Washington Consensus. This approach signals a major shift from decades of economic policy, with massive new public investment in infrastructure and green energy, a commitment to worker empowerment, and policies to promote competition and limit unhealthy concentrations of power in the market. It also revives the tradition of “industrial policy,” the basic premise that governments can and ought to restructure markets to better advance public goals and values.
This shift is not just about philosophy, but about very real commitments of federal resources and attention. The Biden administration’s 2022 Inflation Reduction Act (IRA) is the most expansive climate bill in history. Between the IRA, the Bipartisan Infrastructure Law (BIL), the CHIPS and Science Act, and the continued impact of the American Rescue Plan, the 2021–23 Congress authorized trillions of dollars of new investment in the safety net, direct supports to households, and physical infrastructure, the latter of which have generated new industries and manufacturing in clean energy and semiconductors.
The early data is promising. These funds seem to have unlocked dramatic new private investments in clean energy industries. Yet politically, Bidenomics remains deeply underwater. The deep voter dissatisfaction with the economy is a broader high-stakes puzzle going into an election year. But even in the context of these spending bills, the political upside has yet to materialize. In some cases, where new jobs were created and investments have been made, local political leaders have resisted giving the President or the new policies credit. The bigger challenge, though, may be that for all the vast sums of money authorized by Congress, many of these programs have yet to be designed and the dollars yet to be spent. Many communities will not see immediate benefits. And many of the economic pain points that households face—from housing to care to food prices—remain underaddressed.
The debate about how to implement a new industrial policy and political economy also points to a deeper problem. Simply put, our administrative machinery is old, outdated, and not designed to build quickly and equitably. And after decades of systemic vilification of public institutions, the task of standing up new governance regimes overnight is a tall order for government and civil society alike.
Disagreements about implementation reflect not only different ideas about what will work, but ideological differences about priorities—from the energy transition to the United States’ place in global economic competition, to job creation, labor standards and equity. Even with better governance regimes, these kinds of differences won’t disappear. But precisely because this moment offers the potential for significant public action for the first time in decades, the stakes are high. Ultimately we need a state that can build fast, at scale, and do so equitably and inclusively. But can we develop the kinds of administrative governance regimes required for this ambition before the window for change closes?
There are three distinct lenses on the question of governance and state capacity emerging in the current debate about industrial policy. Each account responds to a very real history of governance failures. And each highlights an important set of normative values and institutional design criteria.
In a series of essays, New York Times columnist Ezra Klein has made the case for forging a “liberalism that builds.” He calls for converting new funding streams as quickly as possible into new infrastructure: transmission lines, clean energy industries, housing, transit, and the like. For Klein the primary obstacle to this goal is the persistence of administrative requirements that slow down or even stall projects for years. Requirements for community approval, for example, create veto points that can be weaponized by parochial interests—like local elites aiming to block urgently needed affordable housing construction.
Some of these procedures originate in our penchant for checks and balances and skepticism of centralized state control. This impulse drives our constitutional system of multiple veto points, separation of powers, and federalism—and the multiplication of these constraints at the state and local level. Another source of these hurdles, though, are the decades of conservative attacks on the New Deal and civil rights state apparatus, which fueled a host of procedural and analytic limits designed to rein in government. Leaner budgets and persistent attacks on “big government” help sustain a very real sense of scarcity and risk among government officials at all levels, making it difficult to innovate and execute bold new programs at scale. But liberalism shares some responsibility for these strictures as well. Through what legal scholar Nicholas Bagley calls the “procedure fetish,” liberal reforms privilege procedural structures rather than substantive goals. Indeed, many of the “good governance” reforms advocated by liberal activists in the 1970s were animated by a neoliberal skepticism of state action and worry about the corporate capture of state institutions; they hoped transparency requirements and other procedures would restrict bad actors.
This diagnosis of governance failures animates what we might call a “productivist” vision of government: a focus on unlocking the state’s affirmative capacities for building infrastructure, investing in communities, and delivering critical services and safety net programs to those most in need. Klein and others acknowledge the value of procedural requirements in addressing systemic inequities; they do not suggest those goals be abandoned. But, they argue, administrative procedures can derail projects like the building of a clean energy infrastructure, more robust housing supply, or other urgent, time-sensitive public investments.
A second view of the obstacles to industrial policy focuses on a different set of fundamental (and familiar) concerns: the dangers of corporate power. The vast sums of money flowing through new programs, whether through federal contracts, grants, or tax credits, create a very real risk that the lion’s share of benefits will go to investors and corporations.
If these contracts nevertheless result in the clean energy infrastructure and industries the planet needs, one might tolerate graft as the necessary price. But corporate capture poses its own risks. For one, the corruption and extraction made possible by such corporate capture undercuts the productive uses of those funds: Republicans in Georgia have already used their discretion to award contracts to favored donors. And the very urgency of the need to build a more sustainable and inclusive economy demands that we not let any of these rare investment dollars go to waste.
Additionally, a focus on building alone without adequate attention to the distribution of gains from public investment undermines the long-term political viability of Biden’s agenda. A forward-looking plan must show tangible gains to communities in ways that generate the political power to sustain these efforts against apathy, the inevitable pressures of demobilization, and counterattack from political opponents. As David Dayen has argued, building grassroots power by limiting corporate capture and spreading gains broadly is essential to the clean energy transition. We have already seen that without the kind of localized organizing and power building undertaken by labor unions and community organizations, the apparent benefits of the new industrial policy does not bolster public opinion on the president, the Democratic Party, or progressive ideas more generally, particularly in purple or red areas.
Indeed, a central legacy of forty years of neoliberal political economy is not simply the defunding of public goods, but the systematic empowering of corporate—and increasingly, financial—interests as the often-hidden private sovereigns who allocate capital, investment, and distribution of returns. The well-documented result has been the widening inequality in, and increasing financialization of, the economy. A post-neoliberal political economy, by contrast, would have a greater focus on the legal and macro structure of markets to drive firms towards more socially productive, non-extractive, and ultimately democratically accountable behavior. Early reporting on the new industrial policy’s affirmative requirements for domestic workers, high wages, protections for union labor, and restrictions on stock buybacks suggests that this strategy is working. Without these requirements, firms tend to default to low-wage and low-road production models.
A third essential lens on economic governance puts racial and gender equity at the heart of its critique. Previous economic regimes have traded on and exacerbated deeply racialized and gendered forms of exclusion, extraction, and subordination, and they have historically privileged white, male workers. Repeating these patterns is a very real danger. Policies and practices of racial segregation are baked into our built environment and patterns of physical infrastructure investment, from roads to transit to housing. These practices have also concentrated the harms of air and water pollution on low-income communities of color in particular. It is all too easy to imagine an approach to industrial policy and public investment that, despite lip service to the value of equity, nevertheless leaves Black and brown communities worse off.
This critique highlights the importance of building governance regimes that include women, people of color, and historically underserved communities. One strategy might be to earmark a specific and significant allocation of investment funds for these communities, as in the recent Administration Justice40 program, an initiative that itself was modeled on an earlier provision in New York State’s 2019 climate justice bill. Similarly, provisions that directly empower these communities to participate in shaping and implementing industrial policy help advance equity and inclusion goals. This lens on governance also advocates reforming the procedures around permitting or impact analysis, to fast-track projects while securing sufficient guardrails that protect or even expand the seat at the table for communities of color.
The debate over how to implement industrial policy is not simply technocratic. What makes this otherwise wonky debate so fraught is the understanding that failure to make the most of this burst of public spending could be catastrophic. In a divided country where vast swaths of undermobilized and apathetic voters could make the difference in the survival of American democracy itself, these questions of political strategy—how to activate public support by delivering tangible benefits broadly—loom large. Indeed, as we head into the 2024 presidential primaries, where Trump and Trumpism has further taken hold in the conservative ecosystem, the dangers of an electoral loss for progressives are increasingly existential—for these new industrial policy initiatives, for the survival of the administrative agencies charged with executing them, and for democracy itself. And a failure to fully leverage these dollars for green, and more equitable, development could mean missing a rapidly closing window to tackle the worsening climate crisis and chronic economic inequities.
The concerns voiced by all three camps—the need to build fast and at scale, reining in corporate capture, and delivering real benefits to voters of color—are all essential parts of the political project. But can they all be achieved at the same time? Tradeoffs seem inevitable in pursuing Biden’s economic agenda. Productivists like Klein, for example, blame excessive protocols around permitting for slowing down building. In fact they are right: we do not have the kind of administrative apparatus needed to deliver on all of the desired outcomes simultaneously—building on the ground, restraining corporate power, and advancing equity.
But before negotiating morally and politically dubious tradeoffs, we need to consider that our task goes beyond making difficult choices in implementing new policy. In order to achieve the goals of all three camps in the debate, we need to design and build different governance mechanisms.
What this requires is a state that is active: effective at building fast and at scale in ways that drive benefits toward the most vulnerable and most historically overlooked while protecting against active efforts to siphon off the gains for firms, investors, and economic elites. Such a state must deliver visible, tangible gains to communities in the short term while building the long-term ecological and economic transformations we need for a sustainable and equitable future. These are tall objectives. Achieving this requires a level of creative institutional innovation and state-building vision that is as much a break from the recent past as the new economic agenda itself. Some of these innovations are already underway.
No doubt, some compromise will still be inevitable. Balancing speed and equity may mean we change how we engage grassroots communities in informing regional and urban planning. It also may mean that some investments are made with an eye not just to how many buildings are stood up but who is brought into the new economic upturn. But the bottom line is that new, well-designed governance mechanisms can serve multiple goals and help better balance the competing demands of speed, scale, and equity.
Equitable and inclusive investment
As the long history of economic development in the United States and elsewhere shows, economic investment and growth do not alone translate into broad-based prosperity. New resources tend to accrue to those already well-positioned to use them, concentrating gains in wealthy areas and among dominant firms, investors, and other elites.
So we should embrace the new policy-created linkages and guardrails that serve to channel the gains of infrastructure and new industrial development more equitably—and we should deepen the capacity of government to design, monitor, and implement these requirements effectively. The Biden administration has moved in this direction—for example through regulations requiring prevailing wage standards in building projects, equity commitments like Justice40, attentiveness to geographic exclusion and disinvestments in tribal and rural communities, limitations on firms using federal dollars for stock buybacks, and newly invigorated competition law enforcement. Where these requirements have been enforced, we’ve seen increases in wage standards and union organizing, decreases in stock buybacks, and more productive investments in underserved communities. Where these commitments have been left to the wayside, we’ve seen the reverse.
Importantly, such regulations can operate alongside efforts to streamline grants and permitting requirements. The Biden administration has just proposed a major revision to the grants process that would significantly streamline the experience for states, localities, companies, and nonprofits applying for some of these new funds, while conditioning funds, for example, on high labor standards. Similarly, a host of legislative and administrative proposals around environmental justice and permitting provide efficiency and speed gains without sacrificing the goal of equitable investment and broadly shared benefits.
Upstream planning and coordination
A second key tension in the governance of industrial policy stems from the balance between localized participation and permitting procedures and the kind of regional or sectoral level at which meaningful economic transformations might take root. Where many permitting procedures are designed around project- and site-specific initiatives, a more holistic regional or sectoral level coordination and oversight of investments could provide a better balance of scale, speed, and participation. This is not a new proposal, but it is an underleveraged idea that, while not formally incorporated into the new legislation, could be adapted in this context. Many states and localities already have state-chartered regional planning authorities that could be reanimated and expanded to have a bigger role and be comprised of a wider range of stakeholder and community representatives.
Consider the physical infrastructure investments of the Bipartisan Infrastructure Law and the Inflation Reduction Act. Some localities may receive grants for new roads, bridges, or transit investments. Others may receive grants or have already-in-motion plans for new housing construction. But these investments could be coordinated at a regional level, replacing other local-level approval or permitting requirements—streamlining significantly the process of securing approvals. Regional level bodies are also better suited for community and stakeholder participation in economic development planning, as a space where such participation can be made both more impactful—by helping shape a wider range of planning decisions beyond a particular neighborhood—and more efficient. Regional-level oversight would also allow for a more thoughtful consideration of equity impacts and policy design: it could allow, for example, exploring how the placement of affordable housing close to mass transit might make economic opportunity more meaningful, or evaluating siting decisions for energy investments by both potential production and environmental risks to particular communities.
Administration officials have in some ways reverse engineered some degree of regional planning and consultation around the implementation of BIL and the IRA, but a long-term project of industrial policy and renewed infrastructure investment should consider the possibility of more formalized regional governance. Grants could be moved through regional planning bodies, conditioned on certain requirements for community participation and equitable outcomes.
A similar argument can be made for sectoral level oversight. Often, requirements for high-quality jobs and working conditions and equitable investments in underserved communities operate on a project-by-project basis. But we could create a form of sectoral coordination where workers and impacted communities have a seat at the table with firms or recipients of government funds or tax breaks to develop new plants or industries. Here too institutional mechanisms already exist. Many states already have wage boards that can be redesigned along these lines.
Building and reinventing public administration
A central challenge for implementing the new industrial policy is the creation of genuine public infrastructure and public governance. During the pandemic, the government played a massive role in incentivizing the development of vaccines, restructured markets to ensure the scaled production of rapid tests and masks, and built a public health infrastructure to deliver vaccines and protective equipment. Yet much of these successes remained built on a premise of private corporate ownership and profit, rather than building a durable, lasting public infrastructure. The broader lesson is clear: while investing public dollars into economic transformation is no doubt a major step forward, those dollars ought also to go into creating specifically public institutions of governance and implementation that themselves can help respond to future challenges that may arise.
This kind of effective, equitable public provision and public administration of economic policies requires a different kind of state capacity in the often-overlooked ‘back end’ of how federal or state agencies operate in the first place.
First, agencies need to in-source much more expertise and capacity for managing these programs and enforcing requirements. As one recent study of procurement around road resurfacing projects highlights, greater investment in administrative agency’s staff capacity meant more bidders for a contract, which led to significant cost savings. Broadly, the ability to insource, rather than outsource, more critical governance functions—from data collection to community consultation to complex modeling and analysis needs—seems to create efficiencies and is critical to enforcing and realizing commitments for equitable development.
Second, federal and state level agencies need much more robust sources of data and evidence to identify barriers to production and systemic inequities. The Biden administration’s work on equity puts a heavy focus on better data collection, information flow to agencies, and the development of disaggregated data that can highlight the particular challenges that underserved or vulnerable communities might face. This attention to data is also important to enforce new guardrails and linkages and to track changes that might undermine long-term goals. For example, agencies like the Consumer Financial Protection Bureau and Federal Trade Commission (FTC) have begun investing in new capacities to monitor corporations for potential harms to communities or competition.
Third, we need to invest in participatory and inclusive models of administrative policymaking in the first place. Typically, administrative procedure has only the appearance of public consultation, won through transparency or notice-and-comment requirements. These mechanisms achieve the worst of both worlds: they increase barriers to action and fail to deliver meaningful community empowerment or inclusion, let alone accountability. Yet there are models that can accommodate genuine voice and inclusion while operating at speed and scale. Some forms of stakeholder empowerment, especially at a regional or sectoral level, can provide marginalized communities and workers with a voice at the table without replicating problems like the localized veto points that bedevil the housing construction politics of many metro areas.
Other forms of participation could help agencies to audit projects and identify gaps in the delivery of benefits to workers, communities of color, or other underserved communities. But realizing more meaningful models of participation requires building trust in communities and designing better modes of engagement first. The federal government has made several impressive efforts along these lines, from its recent emphasis on engaging communities in the design and delivery of public benefits and government services, to renewed efforts at encouraging greater participation—particularly by vulnerable or marginalized communities—in shaping public policy.
The same tensions around implementation, efficacy, and institutional redesign that we see in the industrial policy debate manifests on other front lines as well. The Biden administration’s brief experiment with expansive public provision of benefits—from the child tax credit to expansions of food stamps and other safety net programs, along with radically streamlined enrollment requirements for them—allowed millions of Americans access to urgently needed supports during the pandemic. This represented a stark departure from the neoliberal vision of a minimal state, and from the racialized, gendered approaches to preventing “waste, fraud, and abuse” by imposing punitive and demeaning requirements for public benefits. It also implied a very different approach to governance in public provision, reimagining the federal service delivery machinery entirely. Yet the swift counterattack by opponents of an expansive welfare state has already started to undo these gains. With pandemic-era policies expiring, we’ve now started to move in the opposite direction, with child poverty and food insecurity skyrocketing again and millions losing access to Medicaid, often over unnecessary administrative burdens and paperwork errors.
These policy shifts created openings for a new paradigm and a new reality on the ground. But how we implement Biden’s signature pieces of legislation—and how we theorize and organize new systems of governance around them—will determine whether the U.S. economy sets a new course or if investments disappear along the way to increasing climate risk, worsening economic inequality, persisting racial and gender inequities, and threats to democracy itself. Shifting to a more progressive paradigm of economic policy and governance more broadly does not mean the resolution of every policy debate, but it does mean creating a different baseline. Instead of fighting for public provision of basic needs in each instance, we might establish the state capacity and intellectual alignment to make direct public provision a default starting point in conversations about public health, the safety net, or other economic basic needs like education or housing. Instead of sitting at the mercy of private investors or with some public financing tilting the equation in favor of productivity- and equity-enhancing investments, we might shift to a baseline of state resourcing and capacity, along with a public consensus that government can and should shape markets and invest in the physical and social infrastructures needed to undergird new economic production and basic levels of economic security for all.
The challenge is not just to reinvent government in order to combat economic inequality and the climate crisis. It is to do so at a time that governance is direct threatened by the far right. It is not a coincidence that the right’s mobilization against the boldest ideas proposed by the Biden administration and advocates has targeted precisely those policies most likely to tip the balance of economic power or alter existing racial and gender hierarchies. Think of the Supreme Court’s blocking student debt cancellation, narrowing climate regulation, and undercutting the possibilities for expansive civil rights protections, with very likely challenges on the horizon to the FTC’s attempts to ban noncompete clauses and tackle excessive corporate concentration in the economy. Conservatives are also setting their sights on new litigation to dismantle federal powers to tax and direct flows of congressionally authorized spending, grants, and procurement funds. They are increasingly united in the effort to dismantle protections for the federal civil service. While these attacks are often framed as a continuation of familiar fights between small government libertarians and big government progressives, they reflect antidemocratic and authoritarian efforts to dismantle the instruments through which we might implement a more inclusive and egalitarian political economy.
State capacity has always been central to progressive governance. The Progressive Era and New Deal creation of agencies like the FTC, National Labor Relations Board, Tennessee Valley Authority, or Social Security Administration made possible the rebalancing of corporate power, providing vital services to the public. The civil rights and environmental revolutions similarly required the creation of new agencies like the Environmental Protection Agency, and new tools like Title VI and Title IX enforcement measures to help realize the promise of a more inclusive society. Crucially, the success of these institution-building moments was not measured only in terms of construction projects or output. They were regarded too for their creation of a richer, fuller, more expansive sense of freedom: one that took seriously the power disparities between capital and labor, firms and communities, and attempted to deconstruct the systemic subordination of people of color, women, and marginalized or vulnerable groups. As we grapple today with our own challenges—among them a climate crisis and persistent social and economic disparities—we will need as much creativity and institution building as we did then.
