Author: John Austin

Residents of regions in long-term economic decline are understandably angry and upset about diminished prospects for themselves and their families and the degraded condition of their communities. In order to turn residents’ outlook from frustration, resentment and distrust of leaders and institutions to hope, optimism and confidence in democracy leaders must listen, understand and appreciate residents’ real worries and frustrations then take small steps to deliver better living conditions and rebuild trust.

Behind these attitudes are growing economic inequities, both between different places (e.g. industrial heartlands versus thriving global cities) and within society as a whole. At the broadest level, what is needed is a new round of global reinvestment in people and places that are not finding economic opportunity in a changed, globalised economy and world: an investment in the communities that have fallen from a past prosperity to a current condition where residents feel anxiety over their future prospects. These regions constitute a “geography of discontent”, and they are fertile ground for anti-democratic and anti-system demagogues and movements (Rodríguez-Pose, Dijkstra & Poelman 2023).

Healing our politics

This discontent can be turned into optimism and hope. As I recently wrote for Brookings, when done well, place-focused investments can serve to bring new economic promise and identity to regions – like my own industrial Midwest of the US (Austin & Muro 2024). The work to rebuild local economies is taken up by leaders who want to provide a constructive, rather than a mere rhetorical, response to heartland residents’ legitimate frustrations and anxieties.

Despite the challenges, however, there is much at the nation-state, regional and local levels that can and is being done well to restore optimism, opportunity and hope to residents of still-struggling regions, thereby rebuilding faith in democracy and the leaders and institutions that undergird it. To succeed in this work, leaders need to engage differently with local residents: listening closely, taking small steps that show they understand and empathise with residents’ concerns and showing they are serious about finding solutions to their problems.

Lessons for leaders

Leaders who meet people where they are can win back some alienated voters’ support, and with it, elections. Leaders who show up in heartland communities, campaign there (and not just during election season) and most importantly listen well in rural and small-town regions, while not winning over every voter, can “lose less badly” than many peers who are viewed as being out of touch, condescending elites. Through transatlantic research, we have learned that local, regional and national leaders who truly listen to – and do not reject – the frustrations and grievances of heartland voters, who embrace and also seek to meet their concerns can restore faith in leadership (Austin, Kreuzer & Lungu 2024).

Leaders can succeed when they not only know their communities, but also know what makes them tick. Successful leaders understand the importance of local institutions that are community-defining points of pride, whether they be schools, sports teams, the pub, theatre, library or a busy and clean main street. Leaders who do more than maintain these institutions, but help them to thrive, can find electoral success. Leaders who bring competence and follow-through to their campaign promises, who do the small things such as making sure there is a functional bus and transportation system – these leaders build trust and get permission to do bigger things that can create renewed community vitality in the longer run.

Successful community engagement starts with an openness to constituents, to listen to their concerns, to even “walk a mile” in their jobs and shoes. One example is given by a US Congresswoman who spends days working alongside constituents in various occupations to know what they face in their life and work. Another US elected official – who keeps winning elections as a Democrat in a region that otherwise votes primarily for Trump and anti-system populists – campaigns by parking his truck on the side of the road with a hand-painted sign with the words: “Stop and talk with your State Senator” (Johnson 2022). Successful community engagement and trust-building is about meeting residents with respect and openness.

Leaders like Andy Burnham, the Mayor of Manchester in the UK, focus on people and pay attention to their tangible and immediate needs. As the Mayor told us in one of our transatlantic discussions: “Start with the little things, fix up and get the graffiti off the high street, get the buses running on time and where they need to be.” (Austin et al 2021).

If done well, these small steps build trust between communities and leaders – trust that will nurture support for additional policies and programmes that can move communities forward in more substantive ways, such as with larger-scale investments in people, infrastructure and innovation.

One of the biggest challenges for leaders in communities wracked by job loss is to deal with the feeling of nostalgia – the demand of residents to bring back the past. In part, this nostalgia is very understandable. Industrial heartland communities whose identity and economy were shaped by industry are home to residents proud of their contributions to their countries’ economy and success. People want to be seen and acknowledged for their hard work, not looked down upon or pitied.

And wounded pride is one of the principal drivers of the anger and resentment felt by many residents of ignored and declining communities, which compounds as people feel patronised. Successfully rebuilding this pride can be one of the most powerful boosters of industrial heartland regeneration. Effective local leaders find ways to build on the community and its historic roots to reinvigorate residents’ pride in themselves and their community.

For example, at another transatlantic event, Mayor Francois Decoster of Saint-Omer in the Haut-de-France, the country’s industrial North, described a community renewal process that began with a celebration of their industrial history with a UNESCO world heritage designation. He noted: “We did not do this from the top-down, it was a participatory process. The community asked for and was engaged in the process” (Austin 2022).

Successful community redevelopment efforts build resident ownership. Ownership matters for giving people pride in their local communities through bottom-up leadership initiatives and inclusive participation.

There are other things to do that can rebuild connection and faith in leaders and democratic institutions – but the fundamental connection has to be between people. Leaders who listen to and share a worldview with their constituents; constituents who see themselves in those that represent them. This is the glue that binds democratic societies together.

References

• Austin, John (2022): Transatlantic learning exchange. Economic renewal and democracy. The Chicago Council on Global Affairs, https://globalaffairs.org/research/workingpaper/transatlantic-learning-exchangeeconomic-renewal-and-democracy (date of retrieval: 22.10.2024).
• Austin, John; Anderson, Jeffrey; Dougherty, Colleen; Hanson Brian; Hein Jürgen; Hitch, Alexander & Westwood, Andy (2021): Transforming industrial regions of North America and Europe. Opportunity and imperative. The Chicago Council on Global Affairs, https://globalaffairs.org/commentaryand-analysis/interactives/transforming-industrial-regions-north-america-and-europe (date of retrieval: 22.10.2024).
• Austin, John C.; Kreuzer, Lucas & Lungu, Kamil (2024): Poland shows that democracy can triumph. Here’s how, Washington Monthly, https://washingtonmonthly.com/2024/04/24/poland-shows-that-democracy-can-triumphheres-how/ (date of retrieval: 22.10.2024).
• Austin, John C. & Muro, Mark (2024): CHIPS and Science Act programs are writing a new story about the Rust Belt, Brookings, https://www.brookings.edu/articles/chips-andscience-act-programs-are-writing-a-newstory-about-the-rust-belt/ (date of retrieval: 22.10.2024).
• Johnson, Robin A. (2022): How democrats can win in white working-class districts. Let them control their own messages – and give them the resources they need, Washington Monthly, 17 January 2022, https://washingtonmonthly.com/2022/01/17/how-democrats-canwin-in-white-working-class-districts/ (date of retrieval: 22.10.2024).
• Rodríguez-Pose, Andrés; Dijkstra, Lewis & Poelman, Hugo (2023): The geography of EU discontent and the regional development trap. European Commission, https://ec.europa.eu/regional_policy/sources/reports/Geography_of_Discontent_and_development_trap_forlay-out.pdf (date of retrieval: 22.10.2024).

© 21.11.2024 | Originally Published in BKHS Magazine „For a Just Democracy!“

About John Austin

Authors: Matthew Delmastro, Elisabeth Winter

A modern industrial policy can promote a just democracy. Under the mantle of “Bidenomics”, the US administration has launched a new industrial policy aimed not only at boosting economic growth and competing with China, but also at strengthening American democracy.

For a country that for decades has been the epicentre and enforcer of the main tenets of what some call “neoliberalism” or the “Washington Consensus” – e.g. free trade, privatisation, deregulation and state budget cuts – this is indeed a startling reversal, but one which is welcome amidst the multiple and overlapping crises of our time. From a European perspective, much of the debate around US industrial policy has centred on the Inflation Reduction Act (IRA) and how its clean energy and subsidies for electric vehicles (EV) may threaten European firms’ competitiveness and lure them to invest in the US rather than in Europe. But these debates can come across as short-sighted, as they ignore the broader, more positive fact of the US being “back at the table” in the fight against climate change. It also betrays a lack of understanding of the broader project and goals of Bidenomics. One particularly overlooked aspect is its explicit focus on improving the socioeconomic conditions conducive to the stability of democracy. We illustrate how Bidenomics seeks to strengthen American democracy, showcasing that a modern industrial policy can promote democracy by reducing inequalities, delivering good jobs and higher wages and, ultimately, increasing trust in government.

Understanding industrial policy

Despite there being no consensus on the definition of industrial policy, we follow Dani Rodrik and his colleagues in defining it generally as “those government policies that explicitly target the transformation of the structure of economic activity in pursuit of some public goal” (Juhász et al. 2023). In other words, industrial policy entails government favouring certain industries and sectors over others to achieve some larger objective, whether it be economic growth, competitiveness, reducing inequalities or bolstering national security. Historically, industrial policy mainly targeted economic and productivity growth in the manufacturing sector, but new approaches have widened both the range of objectives as well as the sectors to which it is applied. States are now using industrial policy to promote decarbonisation, digitalisation, the development of lagging regions and the creation of new, well-paid forms of employment. In developed countries in particular, new industrial policy calls for extending interventions into the vast services sectors, as in countries like the US, only around 10 per cent of the workforce is still employed in manufacturing (Rodrik 2022). The primary mechanism of industrial policy consists in offering incentives to the private sector to produce particular goods or offer particular services. Usually, these incentives come in the form of subsidies; however, many other tools are possible. New industrial policy explicitly calls for novel forms of support, such as the provision of customised business services, job training, improved infrastructure and various forms of private-public collaboration. Common to all these forms of intervention is that they, one, seek to remove the production constraints facing certain sectors and firms and, two, involve some form of conditionality to qualify for government support. Industrial policy sometimes gets a bad rap for its connotations of inward-looking protectionism, but this need not be the case. In fact, it is often used to help make firms more competitive internationally and to facilitate exports.

But for all the recent excitement around industrial policy, it is far from a new phenomenon. On a very basic level, states are always engaged in industrial policy to the extent that they incentivise certain sectors of the economy over others. In the US, for example, this is blatantly obvious when looking at the defence sector and the wider to finance subsidies and protect American industry to Dwight Eisenhower’s preservation of the New Deal architecture and further investments in social security, the US has a long and storied history of robust government intervention in pursuit of pragmatic policy goals. In a sense, then, the recent free market era concerned above all with keeping the state out of the economy can just as well be viewed as an historical exception rather than the rule.

Bidenomics and the new US industrial policy

To best get a sense of what Bidenomics and the new US industrial policy is all about, it is easiest to list the challenges to which they are meant to respond. In April 2023, US National Security Advisor Jake Sullivan gave what is perhaps the clearest explanation of the Biden administration’s new international economic policy in a speech at the Brookings Institution (Sullivan 2023). In it, he implies that the administration is proposing a “new Washington Consensus” to leave behind the era of “trickle-down economic policies”. This rethink, he explains, was prompted by four fundamental challenges facing the US.

The first challenge Sullivan named has been the hollowing out of American industry as a result of the old market-liberal paradigm of trade liberalisation and privatisation. Certain sectors like the financial industry won out while manufacturing experienced massive, geographically-concentrated job losses embodied in the “China Shock” of the 1990s and 2000s (Autor et al. 2016). The second challenge consists in the failure of what is known in Germany as Wandel durch Handel: the idea of a more economically interconnected world leading to more peaceful and collaborative relations between states and the gradual transformation of autocracies into democracies. The third challenge, according to Sullivan, is the accelerating climate crisis and the accompanying need for rapid and massive action to ensure a “just and efficient energy transition” that rejects the false choice between economic growth and climate action. The fourth and final challenge laid out by Sullivan is the state of inequality in America and how it has undermined social cohesion and the socioeconomic conditions necessary for a stable democracy. Sullivan lays the blame for rising inequality at the foot of trickle-down economics and a free trade paradigm that promised broadly distributed gains, but which, in reality, massively benefitted the wealthy while squeezing the middle class.

The speech is striking for its explicit condemnation of the previous market-liberal paradigm, one that had gone unquestioned for decades amongst both Republicans and Democrats, but also for its recognition that inequality has had a corrosive and destabilising effect on American democracy. As is made clear, the Biden team has fully bought into the new thinking about industrial policy by seeking to meet a handful of diverse objectives with its economic policies. Under the mantle of Bidenomics, it is seeking to, among other things: revive the American manufacturing sector, accelerate the energy transition, drive innovation, reduce inequalities, increase the power of labour over capital, reduce strategic dependencies and outcompete China.

In concrete terms, the administration is pursuing these goals via four pieces of legislation passed in 2021 and 2022: the American Rescue Plan (ARP), the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act and the Inflation Reduction Act (IRA). Even excluding the ARP stimulus bill passed in the wake of the pandemic, the remaining three laws contain over $1.5 trillion in new spending and investment. A useful metaphor for this set of laws describes the CHIPS act as the “brains”, the IIJA as the “backbone” and the IRA as the “engine” (Carey & Shepard 2022). The CHIPS Act is the brains because it concentrates its roughly $280 billion of spending on semiconductor R&D and manufacturing ($53 billion) as well as on America’s overall research and science ecosystem. The IIJA makes up the backbone for its massive investments to rebuild America’s roads and bridges, to modernise the grid for the renewable energy build-out and to finish expanding broadband infrastructure. The IRA represents the engine for its powerful package of loans, grants and tax credits ($370 billion) to incentivise the green energy transition and to boost domestic manufacturing.

Industrial policy and democracy

Industrial policy is implemented in the realm of the economy, but its motivations and effects are also to be found in the realm of politics. We would therefore like to shift the attention to those aspects of the laws that are connected to questions of democracy and justice in order to illustrate how industrial policy can strengthen democracy. Three aspects are worth highlighting in particular.

First, industrial policy can reduce geographical and socioeconomic inequalities in the form of place-based policy, or “government efforts to enhance the economic performance of an area within its jurisdiction” (Neumark & Simpson 2014). It typically targets lagging regions with the goal of creating more job opportunities and higher wages. The Biden administration has been implementing place-based policy through its Justice40 Initiative, which pledges that 40 per cent of the overall benefits of federal investments in climate, clean energy and sustainable housing go to disadvantaged communities plagued by underinvestment and pollution (Daly & Gunn-Wright 2022, The White House 2024). And the data shows that this effort has already been paying off: the massive increase in construction spending occurring across the US has been concentrated in the struggling Rust Belt (as wellas the rising Sun Belt) and, at a local level, in rural and often more conservative regions of the country (Politano 2024). In its recent IRA report, the Biden administration boasted that “99 per cent of high-poverty counties have received funding from the infrastructure law, CHIPS Act, or Inflation Reduction Act, and non-metro communities have received nearly double the per capita funding of their urban counterparts” (The White House 2024). Place-based industrial policy can thus play an essential role in rectifying geographic inequalities that undermine social solidarity and sow resentments among people living in “left-behind regions”.

Second, industrial policy can help to rebalance the power between labour and cap ital by promoting new job growth, higher wages and union density. This is especially important in places, such as the US, where the power of labour has been continuously and systematically weakened since the 1980s. Besides generating new job growth through its investment spending, the Biden administration is pursuing these objectives by offering incentives for firms to pay prevailing wages and to use collective bargaining agreements, such as in the IRA’s clean energy tax credit (The White House 2024). More far-reaching provisions in support of unions fell victim to the legislative bargaining process, such as the proposal to give extra tax credits for EVs produced in union shops. Such ideas were viciously opposed by foreign automakers and even raised protest from European ambassadors trying to protect their firms operating in non-union states (Gabor et al. 2023). A more general component of the push to support labour is the Biden administration’s policy of running the economy hot, or keeping demand high and unemployment low to put upward pressure on wages and give workers more bargaining power. Taken together, these are all pro-worker measures that can help to reduce the staggering levels of economic inequality that sow distrust in institutions and enforce peoples’ beliefs that the system is rigged in favour of those at the top.

Third, and more generally, a coherent and successfully implemented industrial policy can demonstrate to citizens that government can actually solve problems and offer real, tangible benefits to their lives. The Biden administration’s promise is to raise wa ges, create good sustainable jobs, ensure a cleaner and healthier environment, rebuild local infrastructure and to protect the coun try’s economic and strategic interests amidst competition with China. Insofar as these in vestments pan out and people start to feel the positive impact of their government’s actions, it can go some way in restoring the dismal levels of trust in government institutions and politicians. Despite the increases in investment and construction spending, as well the growth of new clean energy jobs (Climate Power 2024), the real impacts of the legislation will take years to pan out. The onus is now on the government to move from the allocation of funds to, in collabo ration with the private sector, seeing projects through to implementation.

Industrial policy, while not a panacea, of fers several tools for strengthening democracy by addressing various forms of inequality and delivering tangible benefits to citizens. It also, after decades of the supremacy of free market thinking, represents a much-needed evitalisation of the idea that the state, act ing in the public interest, has an essential role to play in tackling today’s biggest chal lenges and safeguarding democracy. 

References

• Autor, David H.; Dorn, David & Hanson, Gordon H. (2016): The China shock: learning from labor market adjustement to large changes in trade, in: NBER Working Paper No. 21906.
• Carey, Laclan & Shepard, Jun Ukita (2022): Congress’s climate triple whammy: innovation, investment, and industrial policy, RMI, rmi.org/climate-innovation-investment-and-industrial-policy (date of retrieval 22.10.2024).
• Climate Power (2024): Two years of the Biden-Harris clean energy boom, climatepower.us/wp-content/uploads/2024/08/Clean-Energy-Boom-Two-Year-Anniversary-Report-RES-2024_07_30-DR.pdf (date of retrieval 22.10.2024).
• Daly, Lew & Gunn-Wright, Rhiana (2022): A new administrative architecture for Justice40, Roosevelt Institute, rooseveltinstitute.org/2022/04/18/a-new-administrative-architecture-for-justice40/ (date of retrieval 22.10.2024).
• Delong, Brad (2022): A note on “Industrial Policy” …, Grasping Reality, braddelong.substack.com/p/a-note-on-industrial-policy-and (date of retrieval: 22.10.2024).
• Gabor, Daniela; Fertik, Ted & Sahay, Tim (2023): Bidenomics, the Dig, thedigradio.com/podcast/bidenomics-w-daniela-gabor-ted-fertik-tim-sahay/ (date of retrieval 22.10.2024).
• Juhász, Réka; Lane, Nathan & Dani, Rodrik (2023): The new economics of industrial policy, in: NBER Working Paper No. 31538.
• Neumark, David & Simpson, Helen (2014): Place-Based policies, in: NBER Working Paper No. 20049. Politano, Joseph (2024): The regional impacts of America’s investment boom, Apricitas Economis, www.apricitas.io/p/the-regional-impacts-of-americas (date of retrieval 22.10.2024).
• Rodrik, Dani (2022): Why sercices need an industrial policy, Project Syndicate, www.project-syndicate.org/commentary/services-industrial-policy-good-jobs-agenda-by-dani-rodrik-2022-10 (date of retrieval 22.10.2024).
• Tankersley, Jim (2024): Harris and Trump offer a clear contrast on the economy, The New York Times, www.nytimes.com/2024/08/16/business/economy/harris-trump-economy-inflation.html (date of retrieval: 22.10.2024).
• The White House (2024): Statement from Vice President Kamala Harris on the Inflation Reduction Act, www.whitehouse.gov/briefing-room/statements-releases/2024/08/16/statement-from-vice-president-kamala-harris-on-the-inflation-reduction-act-anniversary/ (date of retrieval: 22.10.2024).
• U.S. Department of Labor (2024): The Inflation Reduction Act and qualifying project labor agreements, www.dol.gov/general/inflation-reduction-act-tax-credit/project-labor-agreements (date of retrieval: 22.10.2024).

© 21.11.2024 | Originally Published in BKHS Magazine „For a Just Democracy!“

About the authors

At the Progressive Governance Summit organised by Das Progressive Zentrum on Friday 21 June, several of our project fellows participated in a panel discussion to debate strategies that empower the industrial heartland regions by creating positive narratives about their future. This roundtable discussion was organised as part of the Transatlantic Dialogue of the Industrial Heartlands project.

Four weeks prior to the US elections and together with the fellows of our Industrial Heartlands project, we toured crucial electoral battlegrounds in Pennsylvania, Ohio and Michigan. This synopsis highlights remarkable efforts to revitalise these once thriving centres of industrial manufacturing – and the remaining challenges that we saw.

Why should use the term “industrial heartlands” rather “rust belt” when we speak about former industrial regions in the US and Germany? In this paper, authors John Austin and Jürgen Hein discuss why the language we use matters and why without careful communication, anti-democratic and populist sentiments may be fuelled.

Why should use the term “industrial heartlands” rather “rust belt” when we speak about former industrial regions in the US and Germany? In this paper, authors John Austin and Jürgen Hein discuss why the language we use matters and why without careful communication, anti-democratic and populist sentiments may be fuelled.

Why should use the term “industrial heartlands” rather “rust belt” when we speak about former industrial regions in the US and Germany? In this paper, authors John Austin and Jürgen Hein discuss why the language we use matters and why without careful communication, anti-democratic and populist sentiments may be fuelled.

The industrial heartlands have become central to the political and policy future of advanced economies. There is a political battle over who can speak for the communities of the industrial heartlands; and who can offer a new prosperity for areas that have been marked by the social, economic and cultural effects of deindustrialisation. Russia’s war of aggression in Ukraine, rising prices for energy and housing and general inflation have triggered material uncertainties, alongside challenges over immigration, integration and trade with China, and the need for action on climate change.

How can we, economically and socially, revitalize former industrial heartland regions while promoting a green transition? In this report, John Austin reflects on the experiences of the tour, which took participants to several iconic mining and steel regions: Charleroi, in Belgium’s Wallonia region; the Saarland linking Germany and France; and Saxony in Germany’s former East.

In his new paper, John Austin delves into the global rise of nationalist and anti-democratic sentiments, particularly in economically declining industrial heartland communities in Europe and the United States. Based on the learnings from the Industrial Heartlands and Democracy Study Tour in November 2023, the paper outlines the reasons behind people’s dissatisfaction and anger. Factors such as economic decline, geographic inequality, social alienation, and political disillusionment emphasize the urgent need for leaders to understand the underlying emotions and experiences driving these anti-democratic sentiments.