Ezra Klein and Derek Thompson’s Abundance has in recent months become a Rorschach test of sorts among policy analysts. At least one division has to do with how people interpret the book’s state capacity agenda—one group views the authors’ idea of de-constraining the state as a neoliberal project of deregulation and ceding power to private interests. The other recognizes that a range of pressures have enfeebled the state over time and, if unchecked, will continue perpetuating a doom loop of government inaction.
At its core, Klein and Thompson’s argument for going beyond incremental demand-side policy interventions towards more proactive market shaping to generate prosperity and abundance is a project of government effectiveness. This framing around effectiveness rather than efficiency is an important one—it marks a paradigmatic shift from focusing on the cost side of the equation, which inevitably results in a diminution of the size and scope of government. Effectiveness, instead, optimizes for outcomes.
One way of achieving this is to eradicate the impediments that government may have inflicted upon itself, through the accretion of rules, processes, and restrictions over time. On this, Abundance builds on Nicholas Bagley’s thesis on the procedure fetish, as well as Jennifer Pahlka and Marc Dunkelman’s respective work on the nitty-gritties of government action being overburdened by legalese and rigid accountability structures. This part of Klein and Thompson’s book has been the subject of much discussion (and much misinterpretation) over the past few months.
But there is another more expansive state capacity project embedded in Abundance, especially in the sections on the implementation gap between innovation and deployment. The United States’ history of technological development is instructive here. Much of the institutional apparatus for scientific and technological research was put in place in the shadow of World War II. At the core of this was a network of federally funded laboratories and research centers—housed in universities across the country—that were contracted by federal departments and agencies, such as the Department of Defense and the National Institutes of Health. But towards the late 1970s, while federal laboratories had been leading significant basic research, less than 5 percent of federally owned patents had been licensed by the private sector. Subsequently, a number of laws passed in the 1980s focused on commercialization, by facilitating the transfer of technology between federal laboratories and local stakeholders, including small businesses, nonprofit organizations, and local government.
Studies showed the increased connectedness between universities and their local industries boosted regional productivity, employment, and payroll, among both established and new firms. More broadly, it stimulated US innovation, particularly in life sciences, including the discovery of new drugs and vaccines. Studies of tech clusters find that top-tier research universities, government laboratories, and workforce development were key ingredients in enabling regions to take advantage of these reforms.
This range of local institutions that mediate the technological development and commercialization value chain are illustrative of market-shaping and productivity-enhancing interventions more broadly. In recent research I conducted with Harvard Kennedy School colleagues Gordon Hanson and Dani Rodrik, we found that such productive development policies rely on an infrastructure of local organizations spread across domains: certified development corporations (CDCs), community development entities (CDEs), and community development finance institutions (CDFIs) for business finance and community redevelopment; workforce development boards, community colleges, and public universities for workforce development; small business development centers (SBDCs) for small business capacity supports; and various hues of economic development agencies for business recruitment and regional strategies. These organizations have originated from various legislations and receive funding (generally application-based) from specific federal departments. The regional organization stack also includes non-government organizations running active labor market programs, as well as labor unions, which can play an important role in worker training and upskilling.
Regional economic prosperity then requires building the implementation capacity of this patchwork of local institutions, not only to implement specific projects but also to enable local discretion and problem-solving. It also requires significant local coordination capacity, to align these institutions towards a coherent regional strategy—or hubs that integrate these spokes. The experiences of successful tech clusters reinforce this. North Carolina’s Research Triangle Park and Maryland’s biotechnology cluster were undergirded by local orchestrators like North Carolina Biotech and regional strategies that encompassed business recruitment, start-up incubators, and small business supports.
Recent federal programs that provide funding for local consortia—like the Build to Scale Program and Tech Hubs—can bolster such local strategy and coordination. But the institutional capacity to apply for (let alone implement) these programs isn’t uniform across the country. In addition, local economic development is a much more involved, adaptive, and continuous process that requires more flexible funding and capacity support that isn’t always tied to specific projects and that insulates it from the vagaries of federal policy.
Evidently, the state capacity needed to generate this abundance won’t just be a top-down federal imperative. It’ll involve building out the capabilities of a range of local public and private institutions, the system hubs and their spokes—and in both advanced and distressed labor markets across the country. The role of the federal and state government will be to play facilitator and goal-setter, to link this local infrastructure to strategic growth and economic development priorities. Government, in tandem with philanthropy and regional commissions, must also ensure that the capacity to implement such strategies is widely distributed.
We need to resist the urge to attach too many goals and rules to a single program—what Klein has called the “everything bagel” approach—to prevent “premature loadbearing” on institutions that simply aren’t ready. But this doesn’t mean we limit our ambition. Instead, we need to take an Everything Everywhere All at Once approach to building the institutional capacity required for an abundance of economic prosperity.
Read more stories by Rohan Sandhu.