The U.S. has a competitive economic edge: Equity and entrepreneurship are keys to unlock a more muscular economy

Alejandra Y. Castillo is well versed in the nuts and bolts of economics.

In August 2021, she was sworn in as the Assistant Secretary of Commerce for Economic Development in the U.S. Department of Commerce, becoming the first woman of color to assume that role.

But decades before she was a presidential appointee, Castillo built her business know-how as the child of entrepreneurs. Her father ran a Bodega in the Bronx – Castillo often awoke at 4 a.m. to help out at the store – and her mom owned an Avon franchise. Later, her family built an import-export company in the Dominican Republic, their native country, and she witnessed the business’s innerworkings firsthand.

Castillo has held leadership positions in the Department of Commerce with three presidential administrations, working with Presidents Biden, Obama, and Clinton. In her current role, she runs the U.S. Economic Development Administration (EDA), which is tasked with fueling economic development across the country.

We spoke with Castillo about America’s shrinking middle class, how to make the economy more equitable, and policy solutions that could spur equitable economic transformation.

You are the eldest child of immigrants and entrepreneurs. How did your childhood influence your economic perspective?

My passion for economic development came at an early age. When we first came to America, I had to take on a lot of responsibilities to help my parents pursue their entrepreneurial endeavors. I was the only one in my family who spoke English, and, because of this, I often served as a bridge between two communities. While my peers pursued extracurricular activities, I was helping my parents survive in the business world.

I understood how difficult it can be for a new business to succeed. Lack of capital or funding is the primary reason – according to the Bureau of Labor Statistics, it’s why approximately 20% of small businesses fail within the first year. While we had discovered the American Dream, too many immigrants were never given that chance because of their economic or social status. I respected those who had succeeded and strived to help new businesses find their success as well.

That passion is something that serves me well in my role. When I returned to the Department of Commerce to serve with the Biden-Harris Administration, we redefined our investment priorities, emphasizing equity above all else. Equity provides the framework for all our investments, as we work to ensure that historically underserved communities receive the support they need to achieve economic resilience.

What do we get wrong when talking about economic development, especially when it comes to entrepreneurship? What economic innovations or trends that support entrepreneurship make you most hopeful?

In conversations about economic development and policy, entrepreneurship is often left out. Rather, there’s a focus on big businesses and big labor. It is important to remember that every big business in America started small.

Entrepreneurship and innovation are the fuel for economic development. Innovators and entrepreneurs build businesses that create jobs, strengthen market competition, and increase productivity. Job creation, job flexibility, wealth creation, and new technologies can lead to a better quality of life for many people.

While tax cuts and incentives typically receive the most news coverage, the economic developments I find most exciting relate to the “care economy.” Expanding access to structural supports, such as education, child and elder care, and student loan debt forgiveness, opens door for entrepreneurs who are traditionally underserved. Through such supports, we can offer the entrepreneurial dream to a wider swath of Americans, creating a more inclusive economy and opening new avenues for economic growth.

Entrepreneurs come from all walks of life, with different ideas and backgrounds. It’s important for us meet their respective needs and to provide essential support on their journey to success. This support can be simple, such as offering everyday business advice, or much more hands-on, including large-scale capital investment.

As you know, America’s middle class is shrinking. Meanwhile, the upper-income and lower-income tiers are growing. Black and Hispanic adults, as well as women, are more likely to be lower income. You’ve studied economics, political science, and law. From your vantage point, what are the most significant barriers to economic prosperity?

Our economy is at its strongest when all Americans fully participate. At EDA, we are working to address the most common barriers to economic prosperity, including lack of access to capital.

At the executive level, the Biden-Harris Administration is addressing barriers many new entrepreneurs face, including insufficient infrastructure, limited access to reliable, high-speed internet service, lack of affordable housing, and crime.

President Biden has signed several pieces of legislation into law designed to ensure that our communities of color have access to new avenues of economic prosperity. Included among these is one that I am proud to have overseen at EDA, the American Rescue Plan. The plan awarded EDA $3 billion in supplemental funding, which we disbursed to help Americans respond to and recover from the economic impacts of the coronavirus pandemic.

By September of this year, EDA had officially awarded all the funding. A total of 780 awards were made in 433 unique American counties. The projects awarded will support workforce development, new infrastructure, entrepreneurship, and the creation of regional economic clusters. In human terms, 70% of these awards are expected to directly benefit historically underserved communities and populations.

EDA continues to support these communities through our traditional funding programs as well. We recently announced the Equity Impact Investments Program, designed to provide capacity, knowledge, and technical assistance to organizations that serve underrepresented populations.

In a recent panel discussion, you described equity as a verb. Can you explain what you mean by that? You also said that for the first time in a long time, the U.S. is investing in itself. What makes this moment in history ripe for transformative economic change in America?

America’s diversity is a competitive advantage for our economy, but only if we give everyone an opportunity to fulfill their potential and fully participate.

EDA has always supported our nation’s underserved communities, but we are doubling down to ensure that communities of color, rural communities, and others receive the support they need to build back better.

Some communities need help developing a vision and plan for their economic future. Others need critical infrastructure to support business expansion. And still others need help building ecosystems to translate innovation into jobs. We ask communities to tell EDA their needs, and we then offer flexible programs to support their efforts.  

In addition, there are three new pieces of federal legislation that are primed to boost equitable economic development:

The Bipartisan Infrastructure Law was designed to rebuild America’s roads, bridges, and rails and provide every American with access to high-speed internet – which could have a huge impact on underserved rural and urban entrepreneurs, among others.
The bipartisan CHIPS and Science Act allocates billions toward American semiconductor research, development and manufacturing, with incentives available to companies that can demonstrate they’re providing opportunities for small businesses and underserved communities. The act also includes investments to diversify the STEM field by supporting academic institutions that work with communities underrepresented in STEM.
The Inflation Reduction Act will expand opportunities for entrepreneurs by doubling the research and development tax credit for small businesses. Starting next year, small businesses can use the credit to decrease payroll taxes and other business expenses. The act will also expand a program that offers loans and grants to rural small businesses that want to make energy-efficient upgrades.

As the former CEO of YWCA, you spent years advocating for women’s empowerment. The pandemic drove millions of women out of the workforce. Many have returned, but a May article from Pew shows that women’s employment is still below pre-pandemic levels, lagging most in the Midwest. Further, Kauffman research shows about 4 in 10 new entrepreneurs are women – a statistic that has stayed at a persistent plateau for decades. What can be done to bring more women back to the workforce? And what is lost when women’s workforce participation drops?

Inspiring and empowering women has long been a passion of mine. When I served as CEO of YWCA USA, I oversaw a nationwide network of more than 200 associations, which served more than 2 million women and girls. Now, at EDA, part of my role is to help ensure that women continue to be active voices and stakeholders in economic development and that women-owned businesses take full advantage of EDA opportunities.

Throughout the pandemic, we saw more and more women drop out of the American workforce. A lack of affordable childcare topped the list of reasons why. If we are going to ensure that women have an equal shot at economic success, then we must continue to invest in programs and policies that support women in the workforce. Affordable childcare and workforce training efforts play a big role in this process.

Last year, the U.S. Census Bureau reported that businesses owned and operated by women are on the rise in America, including many in sectors traditionally run by men, such as construction, real estate, and arts and entertainment. I’m excited to see this trend, which I try to foster every day in my position at EDA. We are creating an ecosystem that will allow these businesses to not only survive, but to thrive in the post-pandemic economy.