Economic Development Paradigm Shifts

It's a tale of two recessions. Pittsburgh and the State of Pennsylvania has their Great Recession in the early 1980s. Similar to the countries that suffered through Asian Financial Crisis, parts of the Rust Belt were prepared to take advantage of the next global reset:

“There’s a new game, a new playbook,” said Bruce Katz, director of the Metropolitan Policy Program at the Brookings Institution. “If you want to play globally today, you better get very specific very fast.”

As a result, he added, “governors keep getting more and more focused, and more and more deliberate.”

States acting as policy incubators, of course, is not a 21st-century invention. The New Deal and Reaganomics grew from governorships, and in the 1980s, Rust Belt states like Indiana and Pennsylvania pioneered a new approach to economic development with expanded financial incentives and public-private partnerships.

These days, predictable ideology is still part of the mix — more Democrats are pushing investments in infrastructure, and more Republicans want broad tax cuts.

But after years of financial struggle for many states, incoming governors now seem determined to create new models that combine evolving versions of the old with novel ideas — almost anything that might work.

“More than any other time since 1982, you will have governors with a clean slate,” said Timothy P. McNulty, a former economic advisor to Tom Ridge, the Republican governor of Pennsylvania from 1995 to 2001. “I don’t think anyone could tell you they know exactly the recipe of economic policies that make sense for this period. We’re going into a reinvention.” ...

... Experts identify two risks to economic development overhauls. The first is that the changes not go far enough, and instead create jobs for campaign donors.

“The danger is that you fall into an ‘I gotta have a program’ mentality instead of really engaging with people who are trying to start companies and see how they do it,” said Mr. McNulty, the Pennsylvania economic adviser.

I believe the article is quoting this McNulty:

McNulty joined Carnegie Mellon in January 2003 after 8 years in the Administration of Governor’s Tom Ridge and Mark Schweiker-serving in the Department of Community and Economic Development as Executive Deputy Secretary and Acting Secretary and as Deputy Chief of Staff to the Governor for Technology Initiatives. McNulty directed the design and implementation of Governor Tom Ridge’s Digital and Life Sciences Greenhouses, the Governor’s $2 billion investment in biotechnology and participated in Governor Ridge’s success in restoring commercial shipbuilding at the Philadelphia Shipyard. McNulty led the Pittsburgh Regional Revitalization Initiative in 1994 for the Allegheny Conference on Community Development. He is a member of the board of the Commonwealth of Pennsylvania’s Tobacco Settlement Investment Board and the board of Innovation Works. McNulty also volunteers as a board member of a number of technology and education related organizations, including the Pennsylvania Assistive Technology Foundation, the SciTech Spectacular, Asset Incorporated, and the Pennsylvania Learning Network.

McNulty holds a bachelors degree in Political Science from Indiana University and a Masters of Arts in Public Policy from the University of Illinois at Chicago.

Many months ago, I had lunch with McNulty to discuss my diaspora networking ideas. He talked about his experience with the City of Chicago and its renaissance. At that time, I had no clue that Pittsburgh was already a famous economic redevelopment model. Even more recently, I wouldn't have put Pittsburgh's comeback in the same universe as Chicago's. I'm now confident that the next decade will be a lot brighter in Pittsburgh than in Chicago.

At the state level, Pennsylvania appears poised to storm (relatively speaking) out of the recession still evident in the unemployment numbers. As the United States (as well as the rest of the world) finds a new economic baseline, I expect Pennsylvania to be well ahead of the curve. This is a result of all the work that came before the last downturn. In most places, the situation is historically bad. In states such as Oklahoma, the reshuffling of the deck is welcome news.

We will see many more states and metros pick up Pennsylvania's and Pittsburgh's "playbook". If you don't want to wait for the turnaround, then you know where to move. Until then, keep an eye on Dan Onorato:

Can putting new businesses closer to universities — or financing them with public money — help create another Google?

Meg Whitman, the Republican candidate for governor in California and a former chief executive of eBay, is one of at least a dozen candidates with that idea. It is not a radical thought, considering that some of the most successful job creation policies of the last few decades have come from partnerships among government, colleges and businesses, according to experts. Pennsylvania’s Ben Franklin Technology Partners, they say, is a model of how to help fledgling companies grow.

As a result, many incoming governors are looking to tighten the bond between education and entrepreneurship.

They are pushing to apply business concepts to public education, either with new curricula focused on innovation, or by shutting down schools that fail and tying teachers’ pay to student achievement — a proposal from Mr. Snyder in Michigan, among others.

They are pushing in the other direction, too: directing universities to become incubators for new companies, and directing community colleges to give students skills for hard-to-fill jobs.

Ms. Whitman, for one, would create “economic opportunity zones” at the state’s universities, with incentives for companies that take root near campuses. Mr. Snyder wants laid-off auto workers to be taught how to start businesses of their own, while Mr. Branstad, who was governor of Iowa from 1983 to 1999 before becoming the president of Des Moines University, has said he wants to create an “entrepreneurial mindset” in every grade, starting as early as kindergarten.

There is also broad support for continuing or expanding the various public-private venture capital funds that have sprung up across the country to finance start-ups, especially in life sciences.

Dan Onorato, the Democrat running for governor in Pennsylvania, has proposed a new pool of competitive funding for university research, in addition to increased support for the Ben Franklin Partners, and what he calls the Pennsylvania 100, a group of entrepreneurs-in-residence at the state’s most promising research labs.

As is often the case in today's world, the rich get richer.