Bacon's Rebellion

An Issue That Needs More Than Platitudes

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by

James A. Bacon
in

Every four years Virginia’s gubernatorial candidates announce their positions on economic development: they’re in favor of it.

This election year, economic development requires more than platitudes. There are several issues related to economic development that are roiling and will require leadership from the new Governor. One Man’s Trash recently surveyed two of the important issues: the future of regionalism and the use of costly incentives to lure companies to the Old Dominion. To those I would add special programs and spending to help “distressed areas” and the heavy use of state resources to promote selling to state government as a business development tool.

I’ll be looking for Fitch, Kaine, Kilgore, and Potts to talk specifics when they’re asked about economic development. Should we spend more on incentives to be “competitive” with other states, or does this just encourage “shopping” by companies looking for the best short-term deal? Should the state keep encouraging regional pooling of economic development resources, or are potential withdrawals by members of the Greater Richmond Partnership a harbinger of collapsing regionalism? Does Virginia need more “Virginia Works” spending on untested creative ideas or should existing state organizations be held accountable?

Economic Development is in the midst of tremendous change. Not all those in the business are adjusting their approach enough in the face of change–leadership is critical. I’ll be looking for the candidate who recognizes change and addresses new realities. A cautious approach is exactly what we don’t need, but so far I haven’t seen a lot risk-taking by any of the campaigns.

It’s still early, though.

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  1. Paul Avatar
    Paul

    What about the Southside University? I know some studies said that it wouldn’t grow any jobs…but I just find that a bit hard to believe. If you infuse an area with the type of intellectual captital that a university provides (see: Charlottesville) and try to keep them in the region with jobs, good things will happen!

  2. Jim Bacon Avatar
    Jim Bacon

    Will has articulated a crucial issue. The economic development profession is undergoing an existential crisis right now. To put it simply, the corporate relocation leads that give meaning in life to economic developers are drying up. Increasingly, corporations are either (a) outsourcing, or (b) investing in bolstering the productivity of existing manufacturing facilities. Thus, thanks to its strong business climate, Virginia continues to see a good number of existing plant expansions, most of which would occur without any assistance from economic developers. But the number of new facilities being built, I suspect research would show, is considerably smaller than in the 1990s and 1980s.

    This is not a matter of economic developers failing to do their jobs well. It is a matter of structural changes in the global economy. Economic development professionals, their business allies, and state leaders need to come to grips with this sea change. The Commonwealth needs to shift strategies. In the future, economic development will consist of creating the conditions that create home-grown, entrepreneurial growth companies. The single most important condition is a wealth of human capital. Instead of recruiting corporate capital, economic development activity will consist of recruiting human capital.

  3. Will Vehrs Avatar
    Will Vehrs

    Paul, I’m a big booster of Southside University, but I don’t think it’s going to happen. Just the other day I heard a Virginia Chamber of Commerce official all but oppose the idea. This same official was ok with $21 million for “Virginia Works.”

    Jim, I agree with your assessment and I should have added workforce programs to the list of critical issues for the new governor. Efforts to streamline and consolidate programs have been stymied by petty turf battles and lack of a coherent vision.

  4. Paul Avatar
    Paul

    I must admit I’m a bit green on this issue – do you guys have any anecdotes of failed economic development projects?

  5. Anonymous Avatar
    Anonymous

    How about all the regional airports that built new multimillion dollar air terminals – Like Manassas and Winchester – that failed to attract commercial air service?
    St. Mary’s County, Cumberland, Winchester and many others also have unused or barely used facilities. St. Mary’s is used as a Police station, Manassas as a museum.

  6. Will Vehrs Avatar
    Will Vehrs

    Paul, if you’ll go to the One Man’s Trash link in my post, he has a link to a Daily Press investigative report into companies (Gateway, Ericsson, & others) that got multi-million dollar incentives to locate in Virginia, then closed their facilities without repaying state and local governments.

  7. Paul Avatar
    Paul

    Interesting. Did the Wilder Commission cover these savings?

  8. Terry M. Avatar
    Terry M.

    A Southside university would cause some economic development, namely the 124 state jobs with a $10M payroll. Eventually, yes, it might stimulate more jobs and more growth, but would it be at a rate sufficient to justify $10M per year in general fund support?

    And yes, Charlottesville has done well because of UVA…after how many years though? Not quite two centuries. Further, UVA has a student population now that is 23 times larger than what is proposed for NCV.

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