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From Site Selection magazine, January 2023

The Law of Unintended Consequences


ecent analysis from Brookings makes the case that the federal government is finally putting its money where its mouth is with respect to investing in domestic industrial development and local and regional prosperity. The 117th Congress passed nearly $4 trillion in spending in just four laws — the American Rescue Plan Act, the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act.

The first three contain more than $77 billion in what Brookings calls place-based industrial policy. The D.C. think tank breaks that spending down by program, Act and implementing agency, with the CHIPS for America Fund the largest program by far at $39 billion — more than half the total.

“Today, place-based industrial policy is resurfacing after 40 years in which the federal government has been reluctant to engage with it outside of the defense sector,” note the authors. “Part of this renewal owes to the need for extraordinary measures to rethink shaky supply chains, counter China’s rising economic power and address the existential danger of climate change.”

The adjective “place-based” means that specific locations will be the recipients of Washington’s largesse. Similarly, “industrial” means funding will benefit sectors, such as semiconductor manufacturing in the case of the CHIPS Act. Which places, and which other sectors?

And who will be in the driver’s seat as these programs are appropriated in the coming years — the public or private sector? To what extent will companies in industries being funded want bureaucrats in federal agencies managing or micro-managing their operations? It will happen. Brookings: “Now that these programs have been authorized, what is needed is for Congress to provide full appropriations for each of them, and for agencies to effectively implement and then rigorously evaluate them to assess how well they work.” The huge potential for governmental overreach into private industry is clear.

As for place, I foresee a lot of cooks in the kitchen when it comes to securing program funds. Brookings again: “To the extent communities or regions want to compete for these pots of federal funding, they will be well served by identifying where their existing clusters align with these opportunities, as well as by ensuring various regional actors are working cooperatively toward winning funding. Moreover, state governments may want to serve as central points on coordination to ensure their regions are proposing complementary — rather than contradictory — projects.”

The bottom line is some communities and regions will see funding for their industry clusters or hubs. Others will not, which will be awkward. It’s the law of unintended consequences.

Till next time,

Mark Arend, Editor in Chief

Mark Arend
Editor Emeritus of Site Selection magazine

Mark Arend

Mark Arend is editor emeritus of Site Selection, and previously served as editor in chief from 2001 to 2023. Prior to joining the editorial staff in 1997, he worked for 10 years in New York City at Wall Street Computer Review, ABA Banking Journal and Global Investment Technology. Mark graduated from the University of Hartford (Conn.) in 1985 and lives near Atlanta, Georgia.


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