BY Bruce Katz
Jul. 19, 2024
I’ve been thinking a lot about place lately.
By all accounts, the U.S. economy is undergoing an industrial transformation of monumental proportions. This transformation is gradually shaping a new industrial geography in the country — across and within metropolitan areas and broader regions — which could have profound implications for sub-national growth and development for decades to come.
In the pre-Covid era, the nation became inured to the dominance of “superstar cities.” These cities — Los Angeles, San Francisco and Seattle on the West Coast, New York City and Boston/Cambridge on the East Coast, Austin in between — captured the lion’s share of venture capital for the formation and expansion of technology firms and institutional capital for the build-out of central business districts. Despite the acceleration of hybrid and remote work, the superstar cities are still with us. VC continues to be hyper-concentrated. And institutional capital has been slow to change.
But the superstar cities, with a few exceptions, are not leading the industrial transformation. They have been joined by a different set of cities, metros and metro-regions that have become the hubs of new production and the innovation that naturally goes along with it. While this geography is still nascent, it is already beginning to generate a few big winners and a growing list of places that are eager to get in the game.
As my colleagues and I have written before, the forces driving the U.S. industrial transformation are large, complex and structural in nature.
Three changes are of utmost significance. First, rising tensions with China and Russia have led political and business leaders to rethink global supply chains and bring production back onto American soil. While US manufacturing job announcements in 2011 barely topped 6,000, they neared 350,000 in 2022. Some of this new production is generating the next generation of America’s military arsenal (e.g., the next class of nuclear-powered submarines); some is focused on dual use technologies that serve both military and civilian purposes.
Second, climate change is driving the domestic manufacturing of a broad spectrum of clean economy goods: the production of electric vehicles and electric batteries, for sure, but also new sources of renewable energy (solar, hydrogen, wind, nuclear), as well as innovations in the electric grid, energy storage, consumer products and green building components.
Finally, these broader dynamics are being activated by an activist government. Federal funding measures include the $1.9 trillion American Rescue Plan, the $1.2 trillion Investments in Infrastructure and Jobs Act, the $280 billion CHIPS and Science Act, the $411 billion Inflation Reduction Act and the $850 billion+ annual Department of Defense Appropriations.
These macro forces have profound spatial effects. On one level, they operate across metropolitan areas, reshuffling the hierarchy of places in ways that are just beginning to take shape. On another level, they are shifting nodes of economic activity within metropolitan areas, compelling efforts to coordinate across jurisdictional boundaries on workforce, suppliers, research and development, energy and infrastructure. And, finally, they are forcing thinking and action beyond metropolitan areas, as the driving elements of the industrial economy rarely respect metropolitan borders.
Each of these geographic impacts needs a separate and special focus.
The new industrial geography is both leveraging metropolitan areas with long standing production footprints and enabling other metropolitan areas to join the new industrial economy.
In many cases, the past is prologue. Metropolitan areas that have a strong position in the defense industrial base (e.g., Dallas, Hampton Roads, Philadelphia and St. Louis) are reaping a large defense dividend. Ramping up production at existing defense industrial facilities is an efficient way to strengthen our national security. Likewise, key components of industrial decarbonization (e.g., the assembly of electric vehicles and the manufacturing of the batteries that fuel them) are happening in states and metropolitan areas where the auto ecosystem is long standing.
Yet, there are many new industrial entrants in the mix. Columbus (OH), Syracuse and Phoenix are successfully attracting large semiconductor companies and the domestic and global supply chain firms that serve these advanced industries.
Whether in old industrial metros or new industrial powerhouses, the economic impacts of this national surge in production are transformative. The new semiconductor hubs, for example, are attracting tens of billions of dollars in new investment and creating tens of thousands of near- and long-term jobs. Columbus, Ohio’s vision to be the most prosperous US metropolis by 2030 now seems to be prescient and attainable.
The intra metro effects of reshoring are also varied and complex.
Many defense production facilities, for example, harken back to World War II or before. They were built prior to the construction of the interstate highway system along rail lines and shipping lanes. These facilities (e.g., Newport News Shipbuilding) tend to be located in areas that are close to concentrated areas of population and institutions of higher education, making it easier to source an adequate labor supply, co-locate applied research and suppliers and organically create the next wave of manufacturing innovation districts.
Many new industrial facilities, however, are located outside the cores of metropolitan areas. For example, Micron’s new semiconductor plant (nominally in Syracuse) will be in Clay, NY; Intel’s new facility (nominally in Columbus) will be in New Albany, OH. These siting decisions shouldn’t be surprising; large scale factories require the accumulation of large masses of land. But manufacturing plants are only one element of an industrial ecosystem. To function, these facilities require aligned actions on workforce development, housing production, transportation access, energy use, infrastructure improvements, childcare provision and beyond. Decisions about how these critical components of the industrial economy will be designed, financed and delivered and which jurisdictions will share in tax revenues are still to be sorted.
The reshoring of advanced production is also forcing metropolitan areas, narrowly defined by commuting patterns and commuter sheds, to reach beyond their borders for talent, research & development, suppliers and reliable energy and forge new connections between urban, suburban and rural communities.
The Kansas City metropolis, to its credit, was able to land a major Panasonic EV Battery Plant. Realizing the full potential of that economic victory will draw upon critical institutions of higher education (e.g., UMKC, multiple community colleges) that are located within the metro. But many other institutions (e.g., University of Missouri, University of Kansas and Kansas State University) that are central to the success of this facility and further industrial wins are located outside the metropolis as are other federal facilities (e.g., Whiteman Air Force Base, National Bio & Agro-Defense Facility).
Furthermore, multi-metro corridors with real economic linkages and synergies are starting to emerge. In upstate New York, Buffalo, Rochester and Syracuse are now connected by a new raison d’etre, sharing a foundation for industrial- and innovation-led growth.
The deindustrialization of the US economy was decades in the making; by contrast, reindustrialization is occurring in real, rapid time.
The place effects of this profound economic shift are only partially influenced by explicitly labeled “place-based” funding coming from high profile programs like the Build Back Better Regional Challenge or the recently announced Regional Tech Hubs. Rather the new geography is primarily the result of much larger federal industrial investments from the Departments of Defense, Commerce and Energy and a brutally competitive industrial federalism.
The positive impacts of reindustrialization cannot be denied or diminished. But there will be effects, large and small, of an approach that, with a few exceptions, can only be described as “invest first and plan later.”
As with prior economic shifts, the US will no doubt adapt to this new industrial geography. Researchers will find new ways to size and measure the shifting industrial geography. Metro political, business and civic leaders will expand their focus from building the next sports stadium to winning the new industrial competition. Metro planning organizations, now mostly focused on transportation decisions, will increasingly take on energy and economic development. New industrial action teams will be formed to bring order out of chaos and, along with MPOs, provide unified, multijurisdictional approaches to workforce development, energy and infrastructure.
All of this will happen through organic, bottom-up, multi-sectoral and multi-jurisdictional actions that ultimately set a new norm for economy shaping and economic prosperity. This is New Localism in industrial action.
Reindustrialization is forging, ipso facto, a new economic geography in this country. Our conceptions of place — and the governance around it — must change accordingly.
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