BiGS Actionable Intelligence:
Harvard Business School’s Institute for Business in Global Society (BiGS) invited Aaron “Ronnie” Chatterji, a professor at Duke University and former White House advisor, to participate in our Washington DC Global Leadership Roundtable. Chatterji held senior economic policy positions in the Biden Administration, as the White House coordinator for the National Economic Council and Chief Economist at the United States Department of Commerce. Barbara DeLollis, BiGS’ head of communications, caught up with Chatterji during the event to discuss U.S. industrial policy and how companies can respond. BiGS contributor Esther Schrader edited the transcript for length and style.
What is the importance of the CHIPS Act and what policy priorities does it reflect?
The CHIPS Act is part of a broader set of policies that people often refer to as “industrial policy.” We haven't talked about it for a long time in the United States, but it is an important set of ideas that goes way back in economic history. In short, industrial policy is when the government provides support—often subsidies, grants, loans, and tax credits—to key industries to encourage their growth. A lot of countries in Asia and Europe have been doing this for a long time, but since the 1990s these policies haven't been in fashion in the United States. What's interesting about the CHIPS and Science Act and the Inflation Reduction Act and the bipartisan infrastructure law and other things is that they constitute a return to industrial policy.
What is the promise of industrial policy?
This sort of policymaking offers great potential for business—and also great risks. Business leaders need to be thinking about how these three sets of policies are going to impact their bottom lines and their employees. What we’re seeing now, frankly, is industry leaders are making bets on America again, because the Biden administration has said, ‘look, we're going to build chips in the United States again.’ Back in 1990, 37% of chips produced worldwide were made in the United States. Now that number is only 12%. The Biden administration wants to increase that number. That's obviously sent a signal to companies big and small that the United States is open for business again.
How can business leaders take advantage of these policies?
First, they have to understand the rules of the game. These pieces of legislation are very complicated. They allocate lots of money, but they're going to impact some sectors more than others. The rules are being written by the Department of Energy, the Department of Commerce, and the Environmental Protection Agency. Making sure your government affairs team and your C-suite are paying attention to how these rules affect your firm is incredibly important.
Second, they have to keep communication channels open. We need to hear from business leaders about the friction points they encounter to making more investment in technological innovation. We need to go from the billions of dollars in the Inflation Reduction Act, for example, to trillions of dollars in private-sector investment. That's only going to happen if we unlock private-sector capital.
What role is higher education taking in training workers for this new economy?
It's been exciting to see dozens of community colleges around the country either starting new programs to train semiconductor technicians or expanding the ones they already have. The question is, can community colleges come up with a value proposition to get students who are interested in this to where they need to go in a reasonable amount of time? Very few people have time to take off multiple years to get a new job. Can we train people quickly and effectively? That's going to take collaboration between our institutions of higher learning and companies. I'm seeing that happen on the ground.
The CHIPS Act has been criticized by some for linking chipmaker funding to assurances that they provide childcare for employees. How do you respond to those who say trying to solve the childcare crunch through employer mandates is a bad idea?
I'd say, look at what chip makers do in other parts of the world. When you think about childcare and childcare facilities, or even just having a plan for childcare, this is just an accepted workforce strategy they use. It's natural to ask companies to do it in the United States. I don't think it's been a major hindrance. I think it's much harder to deal with the workforce issues, the permitting, and other things that come with building big things in the United States, rather than issues around making sure that your workforce is compensated fairly and that they have childcare on site.
What will the success of this legislation look like to you?
If we're successful, I think what you'll see is leading-edge capacity on the chip side in the United States for the first time in a long time. Over the next decade you'll see the plants that are now being built in East Asia being built in the United States. You'll also see a larger share of the infrastructure for our energy transition being made in the United States, and hopefully you'll see that the workforce and communities have benefited.
What would a change in administrations mean for the future of this legislation and of industrial policy?
Regardless of how the election turns out or even future administrations, there's a good bulwark of support across both parties for the investments in the CHIPS Act. The Inflation Reduction Act was a little bit different. It was a party line vote supported by Democrats and not Republicans. But its investments are going all across the country. As you see the economic benefits from some of those investments starting to pay off, it might change the discussion, even in future administrations where the party might be different. So, I'm optimistic.
What are the biggest local concerns to the construction of chips manufacturing facilities, and how is the federal government addressing them?
I'm hearing from community stakeholders about two key issues: Are these jobs going to be available and attainable to people in the community who need to get trained? And what about the environment and sustainability issues around water and energy usage? Those are things that can be negotiated at the state and local levels, but also with an assist from the federal government.