REDRAWING THE MAP OF AMERICAN PROSPERITY / PROJECT SYNDICATE

Redrawing the Map of American Prosperity

In a country as large and diverse as the United States, expanding economic opportunity cannot and should not depend on volatile federal policies. A framework of directed improvisation that aligns federal and state priorities with local capacities offers a promising way to promote broad-based development.

Joseph Parilla  and Rohan Sandhu

CAMBRIDGE – With two-thirds of Americans – many in communities left behind by decades of uneven growth – no longer believing that working hard will enable them to get ahead, tariffs, subsidies, and direct public investment have returned to the federal policy toolkit. 

But leaning too heavily on these tools risks overestimating what national policy can accomplish on its own, and underestimating the disruptive effects of abrupt policy shifts on the very communities they are meant to help.

In a country as large and diverse as the United States, expanding economic opportunity, creating quality jobs, and attracting investment in critical sectors depend on actions taken across hundreds of localities, each with its own institutions and constraints. 

The most effective economic strategies will therefore pair national economic priorities with local flexibility and capacity, enabling communities to experiment, learn, and adapt.

To navigate future technological transitions and ensure that the benefits of economic growth are more equally shared, the US needs its own version of what political scientist Yuen Yuen Ang calls “directed improvisation.” 

At its core, this approach aims to align federal and state priorities with how local governments and institutions devise and implement development plans.

China illustrates how such a model can operate at scale. 

Challenging the conventional narrative that frames China’s economic development as a product of top-down decision-making, Ang argues that the country’s rapid growth has been driven by local innovation and leadership, guided by clear national economic and technological objectives.

To be sure, America’s problem is not a lack of improvisation. 

Across the country, coalitions of local governments, philanthropies, and civil-society organizations are already grappling with complex economic challenges. 

They often do so with little guidance because the federal government has been an unreliable partner for much of the past half-century, shifting priorities and tools from one administration to the next while showing only episodic interest in economic development. 

The decentralization of economic development has been less a deliberate strategy than a consequence of the federal government’s gradual withdrawal from sustained public investment beginning in the 1970s, following decades of robust postwar engagement. 

Local actors have been responsible for implementation but have rarely been equipped with the resources or institutional capacity needed to succeed.

States provide another essential, though underused, platform for economic development. 

Although they lack the scale of the federal tax base, their control over three key levers – strategy, coordination, and legislation – enables them to ensure that local efforts reinforce one another rather than operate in isolation.

State-level economic development agencies, for example, can bring local intermediaries and municipalities together around shared priorities, from energy production to attracting and supporting data centers. 

Convening intermediaries who are closer to local firms and workers, when complemented by executive action – like reforming community college funding structures or establishing new research and development institutions – can help states remove productivity bottlenecks.

Yet states also struggle with a lack of strategic direction. 

Too often, they default to using scarce taxpayer dollars to lure firms rather than investing in the innovation, talent, and infrastructure that underpin sustainable growth. 

While ribbon-cutting ceremonies and high-profile corporate relocations generate short-term political returns for incumbent governors, they rarely deliver lasting economic gains.

The fundamental challenge is staying the course. 

Because economic development unfolds over decades, far longer than any electoral cycle, meaningful progress depends on local civic ecosystems capable of insulating long-term economic priorities from political short-termism.

Encouragingly, a new generation of civic organizations has begun to do just that. 

Taking a long-term view, they support economic development through coordinated investments in R&D, job training, and real estate. 

Together, these efforts reflect a broader shift in economic development away from marketing places to outside investors toward building market-shaping strategies grounded in local strengths and tailored to emerging industries. 

Tech hubs such as the Tulsa Innovation Labs and Chicago’s P33 initiative, alongside labor-market intermediaries like Shaping Our Appalachian Region in Eastern Kentucky and Coalfield Development in West Virginia, are examples of this shift.

Because these organizations operate in vastly different contexts, their capacities vary widely. 

And without a coherent federal framework, their innovations are difficult to identify, replicate, or scale. 

This is where federal and state governments can play a vital role – not by dictating outcomes but by supporting local initiatives in the service of national economic priorities.

The CHIPS and Science Act offers a valuable blueprint. 

Through a portfolio of 13 programs, the federal government committed to investing more than $40 billion in place-based industrial strategies that tethered local experimentation to national economic and security objectives. 

While many of these investments survived President Donald Trump’s budget cuts, their long-term future remains uncertain, especially with the dismantling of complementary R&D, workforce-training, and economic-development programs.

This underscores the fragility of federal economic strategies. 

Governors have a rare opportunity to build on the federal government’s initial investments in place-based economic policy by forging stronger partnerships with regional actors. 

At the same time, given the volatility of both federal and state policy, it is crucial to invest in non-government institutions, including research organizations and regional development collectives, that can provide connection, continuity, and sustain progress over time.

Despite recent policy volatility, there is a remarkable amount of experimentation at all levels of America’s federal system. 

The challenge ahead is to connect these efforts, facilitate the transfer of ideas, and build a shared understanding of local capacities and opportunities. 

In a democratic system that resists command-and-control approaches, flexibility is a feature, not a bug.

Flexibility, however, need not come at the expense of direction or coordination. 

In the absence of consistent federal leadership, a connected improvisation framework offers a promising way to amplify the impact of local development initiatives, thereby expanding productivity gains and economic opportunity to larger parts of the country.

Joseph Parilla is Senior Fellow and Director of Applied Research at the Brookings Institution.

Rohan Sandhu is Director and Co-Founder of the Reimagining the Economy initiative at the Harvard Kennedy School.