Northam’s Economic-Development Legacy

Governor Ralph Northam

by James A. Bacon

Business Facilities magazine has ranked Virginia first in the nation for its overall business climate, while Tennessee and Massachusetts snagged top spots for business dealmaking and the best workforce/education system, respectively. The site-selection publication cited Virginia’s location adjacent to Washington, D.C., its pro-business work environment, and its strong workforce and educational system.

Not surprisingly, Governor Ralph Northam cited the ranking as a vindication of his economic development policies. “I am proud of the work our administration has done to create the strongest business-friendly environment in the nation. During my term, we’ve attracted more than $80 billion in economic development, creating more than 100,000 jobs — a record for any governor. Virginia has set a new standard for all other states.”

It is a fact that Virginia has reclaimed the top spot in economic-development rankings. However, Virginians might legitimately ask if these plaudits make a difference in the real world. Are Northam’s self-congratulations warranted? Has Virginia really “set the standard” for other states?

As luck would have it, Old Dominion University’s just-published “2021 State of the Commonwealth Report” (cited extensively on this blog yesterday) has some numbers to help us make that judgment. The best single metric of economic growth is Gross Domestic Product (GDP). Here is how Virginia’s GDP growth compares to that of the United States as a whole between 2018 (the year Northam took office) and 2020 (the last year of full-year data):

During Northam’s first two years in office, Virginia lagged the nation’s economic growth. In 2020, the Commonwealth’s economy shrank, but at a slower rate than the nation as a whole. This was predicted — indeed, Virginia Economic Development Partnership President Stephen Moret predicted it here in Bacon’s Rebellion — on the grounds that Virginia’s industry mix is more knowledge-intensive, more amenable to working at home, and thus less vulnerable to COVID shutdowns.

However, Virginia’s economy has snapped back from the 2020 COVID-induced recession more slowly. In the 1st quarter of 2021, Virginia’s economy grew at a 1.4% annualized rate, compared to 6.3% for the U.S. In the 2nd quarter, Virginia grew 5.8% compared to 6.7% for the U.S. (I’m using ODU’s figures for Virginia and Statista figures for the U.S.)

Here’s what many people miss: it is possible to have a successful “economic development” program, in which Virginia successfully competes for out-of-state corporate investment in new manufacturing plants, call centers, and office operations, while still having a run-of-the-mill economy. Virginia excels in economic-development projects because it has top-notch economic-development leadership and infrastructure. But these projects constitute only a fraction of the investment and job creation that occurs, most of it below the radar screen. Economic development projects do not include capital raised through angel networks, venture capital firms, initial public offerings, or private equity funds. They do not reflect capital expenditures and hiring that existing businesses engage in as a routine course of business. They tell us nothing about innovation, new-business formation, and the creation of fast-growth enterprises.

In sum, there is a vast iceberg of capital expenditure and job creation that occurs beneath the surface. When we consider the whole economy, Virginia is a laggard, and it has been for the past decade. The proof is in the sub-par numbers for GDP growth, job growth and net domestic population out-migration.

Virginia began losing its economic mojo long before Northam took office, so it would be unfair to single him out for blame. But it would be fair to say that he has done nothing to reverse the trend, so it is absurd to posture himself as a national exemplar. The sole thing that I would credit Northam for is enforcing less economically destructive COVID shutdown policies than his fellow Democratic governors in other states.

On the other hand, Northam has signed numerous pieces of business-unfriendly legislation, the effects of which have yet to be felt. Most visibly, Northam has presided over the most dramatic meltdown in K-12 educational achievement since the state began measuring it through Standards of Learning (SOL) exams. Virginians will be paying the economic price for the retrogression in learning for years, perhaps decades, to come.

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19 responses to “Northam’s Economic-Development Legacy”

  1. Correspondence from an observer who requests to stay anonymous:

    Some additional context regarding the often cited CNBC ranking that nobody has used in retort. For the first time since the rating system began, Virginia dropped to its lowest ranking in the category of legal/business/regulatory friendliness from an average of around 3, to 11th. If one reads the methodology of the measurement(s) it states, “greater attention than ever was given to a new category of equity and inclusion, not just in this [E+I] category, but throughout the study.”

    So 1. they added a new category of E+I, AND used E+I as a measurement in EVERY category.

  2. Nancy Naive Avatar
    Nancy Naive

    Have you considered dropping ‘Bacon’s Rebellion’ in favor of ‘Parting Shots’? The graphics needn’t change.

  3. LarrytheG Avatar

    Virginia ranks in the top 10 of K-12 education in the nation as well as ranking high in business , workforce training and more, yet the BR naysayers and boobirds can’t abide it. Hard to figure unless the boobirds just do what they do…

    1. blah blah woof woof. Try presenting data showing that Virginia ranks in the Top 10 nationally in terms of economic performance — the subject of this post.

      1. LarrytheG Avatar

        Context is important when judging. The naysayers and boobirds in BR including JAB almost always present a wholly negative view of Virginia – on a range of issues that is just plain inaccurate but it’s what the naysayers do.

        We ain’t the best state by a long shot but we ain’t the worst either despite the perpetual gloom & doom that emanates from JAB/BR.

        1. We’re just over a week from 2022. 2014-2019 isn’t where we are or have been the past two years.

          1. LarrytheG Avatar

            ??? The last 4 years of Virginia’s economic and educational performance is the issue that JAB/BR keeps bringing up over and over in a biased and inaccurate way that claims that Virginia has not done well and the truth and facts dispute that narrative.

            Like was said, Virginia is not in the top tier across the board – true – but in some areas it is in the top tier and in other areas maybe more middling, but no where near at the bottom as JAB and his ilk might have us believe.

            We can’t seem to get honest and objective narratives here on issues – IMHO of course.

            Virginia has a reasonably stable if not spectacular economy. We do some things right and others not as well as we should but it’s not solely because of Northam or Dems or GOPs… that’s just childish partisanship.

            No matter what one thinks of Northam politically, he has been steady at the fiscal helm of Virginia – even accused of keeping too much tax.

            I know. I know. You’re gonna ask why I comment here if I don’t agree 85% of the time, right?

            How did you phrase it?

          2. So 2014, 2015, 2016,. 2017 have nothing to do with Northam, okay?

          3. LarrytheG Avatar

            none of the years have that much to do with a specifc governor IMHO. It’s a silly exercise.

    2. Matt Adams Avatar

      No matter how many times you repeat the lie, it isn’t going to be true. Va doesn’t rank in the top 10 for education nationally.

      1. how_it_works Avatar

        Especially if you remove Northern Virginia from the equation. Seriously, without Northern Virginia and it’s proximity to DC, what would Virginia be?

        Mississippi? Arkansas? Louisiana?

        1. LarrytheG Avatar

          you could say that about many/most states if you removed their urban areas… no?

          1. how_it_works Avatar

            Most states don’t have urban areas singularly dependent on Federal spending.

          2. how_it_works Avatar

            I think if you go as a percentage of the population, Virginia is #1 for Federal employees. It’s definitely #1 in per-capita Federal spending.

            And, since I’m not a Federal employee and I really don’t like working on Federal contracts, I don’t think I’ll be living here for much longer.

            There are very, very few private-sector non-Federal contract IT jobs here.

          3. LarrytheG Avatar

            I don’t disagree. It’s mainly a matter of geography and because of it Virginia is relatively stable and it has the type of govt jobs that want college educated.

            I do think Amazon liked NoVA for the available highly-educated and diverse workforce.

            We were down in Charlotte last week. I thought NoVa traffic sucked – Charlotte is just as bad or worse and it seems to be overrun with Cult type mega churches… geeze

  4. James Wyatt Whitehead Avatar
    James Wyatt Whitehead

    If it had not been for this yearbook picture, Northam’s legacy would be entirely different.

  5. Eric the half a troll Avatar
    Eric the half a troll

    “However, Virginia’s economy has snapped back from the 2020 COVID-induced recession more slowly. In the 1st quarter of 2021, Virginia’s economy grew at a 1.4% annualized rate, compared to 6.3% for the U.S.”

    So Va’s economy did not sink as low during the Trump recession so, using the Trump recession as the low point, it did not have as far to dig itself back out. Economic stability is a good thing, you know JAB!

    1. LarrytheG Avatar

      No, no. Virginia is BAD … ESPECIALLY with the Dems governing.. remember… JAB wrote this:

      It’s his basic mindset… in general… and no matter what Virginia does or where it actually ranks… it sucks .. because that’s what Govt does (except of course when the GOP is running the show and giving tax cuts)!

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