Category Archives: Economic development

The Simple, Lovable Sidewalk

sidewalk By Peter Galuszka

Forever humble, the simple sidewalk is becoming an issue in land planning and transportation.

In densely-populated populated urban areas, sidewalks have been a staple of living since the time of the Ancient Greeks. They were classics in the familiar grid plans that marked most American towns in the 19th and early 20th centuries.

It all changed after World War II when thousands of veterans came home with access to cars and cheap mortgages and builders started constructing car-centric neighborhoods. The cookie-cutter plan included big subdivisions with only one or two access points, lots of cul de sacs and long streets and wound around until they emptied into the few access roads.

You couldn’t walk anywhere. The feeling was, with the complicity of such car-centric bodies as the Virginia Department of Transportation, that you didn’t need sidewalks because the kids could play in the cul de sacs and anyone could drive.

This started to change a decade or so ago as pe0ple wanted to walk more to the library, the store or to visit a neighbor. Suburban planners are taking this into consideration and are “encouraging” developers to put in sidewalks.

A couple problems here:

First, although the Tim Kaine administration changed VDOT policy to advocate more intersecting streets in new developments along with sidewalks, the policy has been watered down under pressure from the development industry.

The other problem is that while it is a simple matter to put sidewalks in new projects, retrofitting them in older ones is tough. It is expensive, there are rights of way issues and sometimes the terrain doesn’t lend itself to them. And, when sidewalks are put in, they merely connect with gigantic feeder roads where one might have to walk a half a mile to a stoplight just cross safely, as is the case in one instance in Chesterfield County.

For more, read my recent pieces in the Chesterfield Monthly and Henrico Monthly.

Building Connectivity in Suburbia

LinkedIn office building in Sunnyvale, Calif. --insulated from the street by a parking lot and a landscaping berm.

A LinkedIn office building in Sunnyvale, Calif. — insulated from the street by a parking lot and landscaping berm — hews to traditional “sprawl” design. The rest of the campus does better but still misses an opportunity to connect with the surrounding community.

Sunnyvale, Calif., wants to reinvent a 60’s-era industrial office park as an innovation district. It’s making progress but suburban sprawl is not an easy habit to break.

by James A. Bacon

LinkedIn Corp. has built a wildly successful business model around connecting business people through cyberspace. Ironically, the fast-growing Silicon Valley corporation gives short shrift to connecting people in the physical world. Its new corporate campus in Sunnyvale, Calif., located in an emerging “innovation district,” misses an opportunity to foster creativity by encouraging employees to interact with others outside the organization.

In some ways, the LinkedIn campus represents an improvement on the traditional sprawling settlement pattern of Silicon Valley. The facility is higher density than neighboring office and industrial buildings in Peery Park, one of the valley’s oldest office parks. The company conserves acreage by replacing open parking lots with a five-level deck. The buildings have interesting architectural features and the landscaping is attractive.

Erik_Calloway

Erik Calloway

But the LinkedIn complex falls short of what it could have been, Erik Calloway told me when I visited the San Francisco Bay area this spring. An urban designer with Freedman Tung & Sasaki, the firm engaged to help the City of Sunnyvale develop Peery Park as an innovation district, Calloway had ridden his motorcycle from San Francisco to show me how urban design can stimulate — or dampen — economic innovation. If only LinkedIn had tweaked the layout, he says, it could have opened the campus to the outside world, contributing to the vitality of the district and perhaps to its own enterprise. Says Calloway: “They weren’t focused on connections to the district.”

For much of American history, major corporations located major facilities in downtown business districts in order to avail themselves of the wealth of professional services, particularly bankers and lawyers, located nearby. Then in the post-World War II era, many corporations fled decaying cities to the suburbs, setting up self-contained campuses or office parks that were seen as serene, tranquil, far from the madding crowd. Now the movement is reversing, as corporations seek to gain competitive advantage by building innovation ecosystems in which they engage in intense interaction with collaborators outside the organization.

Many cities are evolving “innovation districts,” a concept popularized earlier this year by Bruce Katz and Julie Wagner with the Brookings Institution. Innovation districts, they write in “The Rise of Innovation Districts: A New Geography of Innovation in America,” are where “leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators.” Typically, these areas are physically compact, walkable, bikeable and transit-accessible, and sport a rich variety of amenities from restaurants to apartments.

Innovation districts are found mainly in cities built in the pre-automobile era because those districts possess the attributes — research universities, walkable streets, higher densities, mixed uses and an inventory of affordable older buildings — required to stimulate enterprise formation. Sunnyvale is notable for its effort to carve an innovation district out of mid-20th century, autocentric suburbia. If the Sunnyvale experiment is successful, it could provide a new economic-development template for suburbia.

As someone who combines the academic viewpoint of Katz and Wagner with a hands-on practice of an urban planner actually working to create and implement an innovation district, Calloway provides a valuable perspective.

Cities are changing from the scattered, low-density pattern derisively known as “suburban sprawl” to more compact forms, he says. Unlike some critics he doesn’t castigate sprawl as a disaster. Citing research he has done for an upcoming book on the subject, he asserts that sprawl arose after World War II in response to social and economic forces such as mass production, the spread of automobile ownership and construction of freeways. Developing cheap land by applying assembly-line principles to urban planning provided affordable middle-class housing to millions of Americans. “It worked well at the time. It provided a lot of wealth and prosperity.”

Silicon Valley was developed along that model: low-density suburbs served by streets designed with automobility foremost in mind. But sprawl created problems, Calloway says. In Silicon Valley traffic congestion and pricey housing were accentuated by sharp growth limits and surging demand created by the extraordinary success of the region’s high-tech industry. Unlike nearby San Francisco, which evolved to greater densities over the decades, the Valley has not. With some of the highest real estate prices in the world, it has largely displaced the poor and working class.

On a more global level, the nature of work has changed as the economy has evolved from a hierarchical, assembly-line model to a digital economy. Selling more stuff cheaper is no longer the primary path to prosperity, Calloway argues. Access to raw materials, transportation and abundant labor are secondary considerations. Now the mantra is innovation. Take shoes, for example, a product that humans have been fabricating for centuries. The challenge for a company like Nike isn’t to keep costs down so it can sell shoes cheaper than anyone else — although cost is a consideration — it’s applying technology to create shoes that have features that shoes never had before, such as, perhaps, the ability of buyers to customize their shoes online.

The question, then, is how to organize companies and their employees to maximize creativity and innovation. Continue reading

The Emerging Exurban Dead Zone

Hope Plantation, Bertie County, N.C., circa 1800. The McMansion of its day.

Hope Plantation, Bertie County, N.C., circa 1800. The McMansion of its day.

by James A. Bacon

The Northern Virginia exurbs, like exurbs across the country, are cruising for a bruising. EM Risse would never express himself so inelegantly or imprecisely but that’s the thrust, in colloquial terms, of a new essay, “The Great Submergence,” he has posted on his website.

The United States economy, argues Risse, a former Bacon’s Rebellion contributor, is in the midst of a profound shift — what he calls the U Turn — away from the scattered, low-density pattern of growth widely referred to as “suburban sprawl” (a label he avoids as a “core confusing word”) toward infill and re-development of the nation’s urban cores. This trend, which is taking place for reasons amply documented on this blog, has profound implications for homeowners and political jurisdictions on the metropolitan edge where landowners, developers and speculators valued land with the expectation that it would be developed some day into shopping centers, office parks and residential subdivisions.

Given the cost of providing transportation, utilities and municipal services, the logical limit for development in the Washington metropolitan region is about 20 to 35 miles from the metropolitan center in Washington, D.C., Risse writes. Land beyond that limit, he contends, is experiencing collapsing demand as people seek to live closer to the metropolitan core, closer to jobs and amenities in walkable communities with more transportation options. That collapse he calls “the Great Submergence.”

Some clusters of development may adapt and survive but others will be economically unsustainable and wilt away. Another phrase for “wilt away” would be “dry up and blow away,” just like western mining towns when the claims ran dry, just like Great Plains farming towns during the Dust Bowl and Depression. Risse’s home town of Warrenton, he warns, is the “bulls eye of the danger zone.”

As demand evaporates for single-family dwellings on large lots in remote locations, land and housing prices will fall. Every new single-family dwelling built in Greater Warrenton-Fauquier (and other communities situated more 25 to 30 miles from the metropolitan center) will serve to drive down the value of existing properties. Writes Risse:

The downward trend will be exacerbated by the fact that there are dwellings selling BELOW their replacement cost. Further, there will be many scattered Units that have not been maintained, which will further deflate the market via assessment / appraisal “comparables.”

Declining land and improvement values, he says, will have a devastating impact on municipal tax bases in this exurban dead zone as well as household net worth, much of which is composed of housing equity.

Bacon’s bottom line: I’m in 95% agreement with Risse. The reason I hesitate to say 100% is that there are powerful forces at work to sustain “sprawl,” the most important of which is the slow pace, due to zoning restrictions, at which urbanized jurisdictions close to the Washington metropolitan core can free more land for more compact, higher-density development. If demand for housing exceeds supply in Washington’s urban core, growth will default to exurban communities (beyond the 25-mile radius) planned and approved in the 2000s simply because there is nowhere else to build.

With that caveat aside, I share Risse’s larger concern. A dozen or more exurban counties on the metropolitan fringe of Washington, Richmond and Hampton Roads are likely to experience deflating land values, shrinking real estate property revenues and chronic fiscal stress. Their scattered, low-density settlement patterns have high embedded costs and local governments will be hard-pressed to maintain the supporting services and infrastructure. Once the newness wears off and depreciation sets in, these places will become worn, shabby and dilapidated.

Driving back from vacation on the North Carolina coast a couple of weeks ago, I passed through a dozen hamlets and crossroads in farming communities. I was shocked to see so many boarded up and tumble-down buildings that property owners had simply abandoned. The knowledge economy has passed these inland communities by. Sure, the real estate is cheap but no one wants to live there anymore. The houses don’t even have for-sale signs on them. The price of better houses is so low that it’s not even worth patching up the decaying ones. Virginia’s exurbs have not reached that stage yet. But give them time. Let the shiny newness wear off. In 20 years, we could see the same thing.

Those who miss Risse’s writing on Bacon’s Rebellion should check out the “Current Perspectives” on his website.

Update: Ed Risse has responded to Larry Gross’ comments on this post in the form of an essay, “Blogging, Geographical Illiteracy and the Great Submergence.”

Hope for Small Cities

small_cities

by James A. Bacon

Many economists contend that the economic deck is stacked against America’s small cities. Labor markets in the knowledge economy favor large cities; corporations are drawn to large labor markets where they have a bigger pool of prospective employees to recruit from; employees are drawn to larger labor markets where they have more employers to choose from. By this line of logic, smaller metros suffer an enduring competitive disadvantage. Geographically speaking, the rich get richer and the poor get poorer.

But Joel Kotkin, perhaps America’s most vocal urbanism critic, says decline is not inevitable. While the smallest metropolitan/micropolitan regions (under 100,000 residents) have lost population, a group he classifies as “small cities” (regions between 100,000 and 250,000 residents) actually has seen 13.5% population growth since 2000 — 10% percent faster than the national growth rate, and twice that of New York, Los Angeles or Chicago.

Small cities, Kotkin suggests, are large enough to support the basic infrastructure — hospitals, schools, airports, broadband — critical to economic growth. Not all have prospered, but many have. He categorizes the successful small cities into four categories: (1) Boomer Boomtowns, which are attracting retiring Boomers; (2) Energy Towns, which are benefiting from the fracking revolution, (3) College Towns and (4) Government towns, which benefit from federal and state government spending, typically military spending and state capitals.

Recent performance suggests that small cities have better economic prospects than commonly acknowledged, Kotkin argues, although he quickly adds that declining government spending could hurt the Government Towns and that all small cities face a challenge of attracting young families.

Virginia’s small cities have been fair-to-middling performers in comparison to the 167 cities ranked according to a composite of four metrics: population growth, job growth, real per capita personal income growth, and growth of regional GDP per job, all between 2000 and 2012. Three of Virginia’s “small cities” fall into Kotkin’s category of College Towns. The economies of Charlottesville, Blacksburg and Harrisonburg are dominated by local state universities. (See the list above.)

I have long argued that the challenge of most of Virginia outside the urban crescent is to decline gracefully. In the long run, it is hopeless to prop up every small mill town through economic development subsidies. The best bet for Southside Virginia, Southwest Virginia and the Shenandoah Valley is not to intensify industrial recruitment — it’s to concentrate growth in cities that are large enough to potentially become self-sustaining in the knowledge economy.

I know that’s a hard pill for many to swallow, but if rural Virginians want to create a future for their children anywhere near home, it will most likely be in a city large enough to recruit and retain 21st-century jobs. As a practical matter, that means focusing resources on the five cities listed above, plus Roanoke, Lynchburg, Bristol-Abingdon and Danville.

These regions also can help themselves by embracing the smart-growth and smart-cities strategies advocated on this blog. By keeping the cost of government low, they will have more leeway to provide an attractive trade-off between taxes and urban amenities that creative-class workers are looking for.

It’s Oh, So Richmond!

By Peter Galuszka

cantorWhen I looked at my Richmond Times Dispatch, I was stunned. I couldn’t find a story that their wunderkind Congressman, Eric Cantor, the kind of Republican they love, had gotten a big deal job with Moelis & Co., a New York boutique investment bank.

There was the story in the Wall Street Journal and the Washington Post. Finally, the RTD straggled  on with brief piece at 6:22 a.m. on its Website.

Maybe it’s embarrassment. Cantor, the former House Majority Leader, could do no wrong with his Main Street Republican friends or the editors of the local newspaper. His wife, Diana, was on the board when the newspaper was owned by Media General. Then came his stunning defeat in a June primary to unknown David Brat, who ran a mash-up of a Tea Party and Libertarian insurgency.

Moelis says it is hiring Cantor “for his judgment and experience” and ability to open doors, says the Journal. He’ll live in Virginia and have offices in Washington and New York.

Well, that was quick! Or maybe not. Cantor has raised $1.4 million from the financial services sector, as well as lots from managed care. His sense of entitlement is astounding. First, he thought he didn’t have to bother with the home folks in the Seventh District any more, costing him the election. They he arranged (with Gov. Terry McAuliffe’s help) a special election.

Doing so would get his replacement in office faster and thus Virginia can keep its seats on some important committees. But it also frees Cantor to take his plum job.

You didn’t read it in the RTD first! Somethings will never change.

A Surprising Source of Resilience in SW, Southside Virginia

start-upsBack on the subject of entrepreneurship and business start-ups in Virginia… The Virginia Performs website provides a useful overview of data that describes the climate for business growth in the state. With the caveat that the data is subject to reporting lags, hence a little of out date, the picture is a modestly favorable one. The Old Dominion excels in the percentage of technology firms and the percentage of fast-growth firms, and fares in line with national averages for patents per capita, venture capital, business start-ups and university spin-offs.

Perhaps the most surprising finding emerges from the regional breakdown of business start-ups per 10,000 population broken down by region, as seen in the chart above. After years of lagging statewide averages, Southside Virginia has come on strong in recent years, surpassing even Northern Virginia in 2012. Southwest Virginia has out-performed the state average in several recent years, although it dipped in 2012.

With the perception of “Virginiagal2,” who has been touting the entrepreneurial potential for areas outside Virginia’s urban crescent in the comments section of this blog, not many observers would have predicted this trend. Of course, one must be careful with the data. We don’t know, for instance, what proportion of these new businesses are comprised of home-based businesses and micro-businesses with limited growth prospects, and what number might have fast-growth potential. Regardless, the rate of business formation suggests a hidden resilience in the Southside and Southwest Virginia economies that may keep those regions economically afloat in the face of labor-market economies that favor the major metros.

– JAB

Bob McDonnell’s Big Decision

 smith_mountain_lake2By Peter Galuszka

It was a gubernatorial quandary only Virginia could have .

In the summer of 2011, former Gov. Robert F. McDonnell was ready to take a few days off. He and his family had been going to Smith Mountain Lake, a popular destination near Roanoke with lots of golf courses and seven-figure lakeside homes.

At his corruption trial this week, McDonnell testified that his summer getaway had been bankrolled by Delta Star, a company with a big factory in Lynchburg that makes portable industrial electrical gear. The firm had put him up at one of their lakefront houses for $2,474 in 2010, according the VPAP, which runs a data base about this kind of thing.

Summer 2011 had proved a big problem, however. His wife, Maureen, had become fast friends with Jonnie R. Williams a rich Goochland County businessman. Williams had given Ms. McDonnell a $50,000 check and also paid $15,000 for her daughter’s wedding luncheon that June. She had traveled with Williams helping promote Anatabloc, Williams dietary supplement that has since been pulled off the market by the U.S. Food and Drug Administration.

The problem was — whose million-dollar-plus house would the McDonnells use? Williams very much wanted the McDonnells to stay at his sprawling domicile on the tip of a peninsula. Delta Star wanted the McDonnells to stay at their place.

What to do? They split it. The McDonnells stayed at Williams’ house for a getaway valued at $2,268 value according to VPAP. He also laid on a Ferrari that the governor could enjoy driving on the way home.

Delta Star made sure the family was entertained and fed. They provided the family with their very own boat to cruise the lake and catered meals – a $1,892 value for a long weekend.

Delta Star’s feelings didn’t seem to be hurt since they laid on another entertainment gift worth $10,182 in 2012.

And while we’re talking lakeside homes, guess who else also stayed at Williams’ place? Former Atty. Gen. Kenneth Cuccinelli, that’s who – to the tune of $3,000 in 2011. We haven’t heard much recently from the former firebrand, hard right politician but he is on the witness list.

And so it goes. And, by the way, getting vacation favors is very common. Check out former Gov. Tim Kaine’s expensive sojourn on the turquoise blue waters of the Caribbean Sea.

It’s not the only way Virginia’s extremely lax ethics laws work.

If you use your PAC, you have an automatic teller machine. For instance, Tim Hugo of Fairfax, the third-ranking Republican in Virginia’s House of Delegates, expensed nearly $30,000 for travel and food and $9,400 for his cellphone over an 18-month period. As a spokeswoman for the State Board of Elections told The Washington Post’s Laura Vozzella in 2013, “If they wanted to use the money to send their kids to college, they could probably do that.”

Maureen McDonnell and Sexism

maureen_and_bob(1)By Peter Galuszka

Sitting for hours listening to former Gov. Robert F. McDonnell testify in his federal corruption trial makes one wonder exactly what his values are, especially as they relate to women.

His entire legal strategy is to “Throw Maureen Under the Bus” – namely his lawyers and those of his co-defendant wife Maureen are portraying Ms. McDonnell as a “basket case” who set up a lot of funny meetings with snake oil salesman Jonnie Ray Williams Sr., accepted expensive gifts from him with promptly telling her husband, and communicated with him 1,200 times in about a year and a half (one day it was 52 text messages.)

She is bad and deceptive. He is good and didn’t know much about her messy friendship with Williams. She is guilty. He is innocent (or so it goes).

Gov. Bob, helmet hair perfect as usual, took the jurors through a horrible litany of his long-decaying marriage to college sweetheart Maureen. While she was screaming and intimidating her staff, he was slogging through “the business of governing” for endless hours every day.

When she approached Ann Romney, wife of Republican presidential candidate on the campaign trail in 2012 and offered the woman who suffers from MS some “Anatabloc,” Williams’ miracle pills, Bob overhead it and was “embarrassed.”

There is something deeply disturbing, however, about McDonnell and his attitudes. He seems to have come from a bygone era when men worked long hours, held major responsibilities and answered to the most important thing in their lives – their overweening ambition.

The husband was ordained by God to do great things, be a Boy Scout, and write his name in history books. His wife was to stay barefoot and pregnant in the kitchen knitting socks or selling silly vials of creams.

McDonnell has since disowned this little passage he wrote at Regent University (Pat Robertson’s school) back in 1989 when he was a graduate student, but it seems strangely relevant. He tried to create some kind of conservative, faith-based government paradigm that would cut taxes, open charter schools and the like. He wrote:

“Further expenditures would be used to subsidize a dynamic new trend of working women and feminists that is ultimately detrimental to the family by entrenching status-quo of nonparental primary nurture of children.” The kicker is his view that feminism is one of the “real enemies of the traditional family.”

Well, a hell of lot of good that thinking has done since he has steadily, deliberately humiliated his wife in a bid to avoid jail time. A parade of defense witnesses, mostly McDonnell cronies, have humiliated Ms. McDonnell as a grabby, irrational, fashion-mad bimbo who just didn’t get it when Bob patiently told her that the stock she held in Star Scientific, Williams’ firm, had lost half their value and were a bad investment.

There are other giveaways that paint McDonnell as a self-important, entitled, superior little prig. Maureen had an apparently successful home-based business selling nutraceuticals like face creams. The Bob that may have sounded so pointlessly “womanish” but it is a big business. When he ran for statewide offices, he told Maureen to nix the biz.

Now wait a minute. Why should he tell his wife that she can’t run her own business she built up because his mission as a conservative political savior is just too important? Why does he get to decide?

One reason has roots in a kind of mid- 20th century philosophy that one used to see in black and white movies and television shows. There has been a deluge of testimony about the Virginia suburbs of DC roots of the McDonnells. Lots of military, conservative, family values, do-goodism, ticket punching (making colonel or the appropriate GS level position) having some silly affection for the Redskins or golf club bags with your school logo and so on. But the most obnoxious attitude is that the self-pride that one is doing something very important for his country and fellow citizens.

If you are male, you get to wear this cloak. If you are a woman, your first and foremost goal is to mind the kids and support your man and be a handmaiden to HIS career and ambitions. Watch the 1950s “Strategic Air Command” film” with Jimmy Stewart as a ballplayer pilot and his dutiful wife June Allyson. He makes the big decisions and flies the big bombers. She’s always waiting at the air base fence for him to come home so she can cook him fried eggs.

But McDonnell has a bigger problem than just this over-the-top sense of duty. By his own testimony, McDonnell is seriously addicted to political ambition. It is his oxycodone. His heroin. He gets a real kick by planning the next stage (vice president? president?) Maureen is left by herself and her screaming fits. Bob just tunes her out and spends as much time traveling and in his office as he can.

As he testified, McDonnell got a buzz from being a state legate and an even bigger buzz by running for attorney general and governor. One woman who seemed to be cheering him every step of the way was Janet Kelly, who ended up being Secretary of the Commonwealth when he became governor. She testified that when he wanted her for that spot, she told him flat out she could not work with Maureen. She didn’t.

Family values, anyone?

Virginia’s Entrepreneurial Vitality

inc5000

How does Virginia reinvigorate a lagging economy dragged down by sequestration-driven cuts to defense spending? Foster a business environment conducive to new business formation.

There’s a good-news, bad-news story coming out of publication of the 2014 Inc. 5000 compilation of the nation’s fastest-growing companies. As Virginia Business reports, the 284 Virginia companies on the list ranked Virginia 5th in the country, lagging only California, Texas, New York and Florida, states with far larger populations and business communities. That’s a positive indicator of Virginia’s business vitality.

It’s a mixed-news story, however, because three-quarters of the fast-growing companies are located in Northern Virginia. While NoVa is an incredibly fertile ground for entrepreneurship, RoVa (the rest of Virginia) is not. Take away Northern Virginia, and what you get is… middle America.

Many (including me) have questioned the ability of the NoVa business community, which is heavily skewed to defense contracting work, to restructure itself to thrive in an era of federal budget cuts. I’m less worried now than iI once was. Ironically, budget cuts may benefit the region in the long run. With one of the best educated, highly skilled populations anywhere in the country, NoVa residents have no lack of ideas for new enterprises. The contraction of the government-contractor sector releases employees, office space and other resources  to start-up companies. While NoVa is suffering now, the number of fast-growth firms suggests that the region will recover and within a few years resume its position as Virginia’s economic growth leader.

Charlottesville looks like a mini growth story but the metropolitan region is too small to have much spillover effect for the statewide economy. Hampton Roads and Richmond appear to host small, fast-growth companies roughly in line with national averages — a lukewarm performance.  Virginia’s smaller metros and rural areas are laggards, as are small metros and rural areas are across the country. (I’m on vacation and haven’t had time to calculate the number of fast growth companies per capita, so these impressions are rough and subject to revision.)

– JAB

“The Economy of the Past Is Over.” But What Comes Next?

McAuliffeby James A. Bacon

So, Virginia faces a $2.4 billion projected budget shortfall, which Governor Terry McAuliffe blames largely on defense funding cuts mandated by sequestration. Surprise, surprise. We’ve seen this train wreck coming for years. Some (including multiple writers on this blog) have seen it more clearly and shouted about it more loudly than others. Now it’s here — the slowing economic growth, the stalled budget revenues and the general malaise. The question is, what do we do about it?

McAuliffe is making the right noises. As the Washington Post reports, the governor said the state needs to make a fundamental shift away from its reliance on federal spending. “It is obvious that the economy of the past — where we could simply take the economic benefits of the Department of Defense for granted — is over,” he said. “We need to move past this reliance — and build a new entrepreneurial, innovative and dynamic economy.”

Vague and platitudinous as the statement is, it has the virtue of being true. The hard part is figuring out how to move to that new entrepreneurial, innovative and dynamic economy. Part of the answer is not doing the same thing we’ve done before, only more of it.

McAuliffe can make a lasting mark on Virginia if he avoids that trap. But it will be difficult. When he solicits advice, whether in private conversations or through public mechanisms like study commissions, he’ll hear from the established special interests — not from startup entrepreneurs who are too busy building their businesses to participate in the public policy process. He’ll hear from the economic development lobby that we need to spend more money on corporate recruitment. He’ll hear from the convention & visitors lobby that we need to spend more money promoting tourism. He’ll hear from the agriculture lobby that we’ll need to spend more money on overseas trade missions. He’ll hear from incubators that we need to spend more money on incubators. He’ll hear from the public universities we need to spend more money on university R&D. He’ll hear from the chambers of commerce that government, not business, needs to spend more money on workforce development to give Virginians the skills they need in the marketplace.  McAuliffe will touch bases with all the stakeholders and he’ll hear the same thing they’ve been telling state government for decades: Give us more money!

In the early 2000s, back when I started Bacon’s Rebellion,  Governor Mark Warner initiated the state’s first economic development strategic plan. Before running for governor, Warner, a successful technology entrepreneur and venture capitalist, had traveled the state meeting with local business communities and setting up local venture funds. From first-hand experience, he understood the nexus between technology and entrepreneurial innovation. He appointed a highly capable attorney, Michael Schewel, as commerce secretary to oversee the study.

Schewel sought out new thinking, including the work, which was novel at the time, of economic geographer Richard Florida’s on the central role of the creative class. The final product of the study group included some interesting small-bore initiatives, strengthened business-university ties and represented genuine progress over previous thinking. But it conceptualized economic development along the lines of Virginia’s existing administrative organization and reflected the established institutional thinking of the “stakeholders.” Nothing really changed. If Warner and Schewel couldn’t push Virginia economic development into a fundamentally new direction, I fear, no one can. At least they tried. No one since then has made an effort to buck the conventional wisdom.

The most important thing we can do, as I blogged yesterday, is to think how to stimulate new business formation — especially of companies with high growth potential. We need more companies like Washington, D.C.-based SmartThings, an Internet-of-Things start-up which earlier this month sold out to Samsung for $200 million. SmartThings got its start literally two or three years ago with a Kickstarter fund raiser and $15 million in venture funding. That’s the kind of wealth creation we should be looking for.

One strategy would be to cull unnecessary regulation. Contrary to the views of some who frequent this blog, the state regulates many aspects of the economy to the detriment of innovation. Uber, Lyft and the taxicab sector is but one example of many that could be mentioned. Given time, I will detail others. But that is only a partial and incomplete solution. Perhaps more fundamentally, we need to build the kinds of communities where members of the creative class want to live. We need to recognize that economic development equals community development (smart growth). We also can work harder to help government do better those things that only government can do (smart cities).

The traditional pillars of economic development — industrial recruitment, tourism, agriculture — all have valuable contributions to make. But they are not sufficient by themselves to drive the economy forward. It is time for a stem-to-stern rethinking of how to move Virginia to the next level. If the budget crisis prompts that re-evaluation, it may prove more a blessing than a curse.