Thinking about the DC area as a center for business and technology

There is an interesting article in the Washington Business Journal, where area business leaders provide insights and their biggest lessons from the past decade ("These were the takeaways of the decade for Greater Washington business leaders).

Many make the point that DC is becoming more than a center for politics and governance, one stating that DC will be "Silicon Valley East" more than NYC, etc.

I could be way wrong, this might actually happen, but I think there might be the wrong lesson in the DC area's business activity and drivers and it's worrisome.

The Washington Post series from 2012 on the rise of the homeland security function ("Top Secret America") outlines how the rise of the National Security State in the post-9/11 environment has significantly benefited the DC region, and more IT-related military contractors (like SAIC) are relocating their headequarters to Northern Virginia to be closer to their clients. (Also see "Montgomery County's real jobs problem is that it is an adjunct, not a full-fledged, member of the military-industrial complex.")

Brexit as a lesson: why did Labour do well in 2017 and crashed in 2019?  There was an interesting comment in one of the post-2019 UK election stories about the failure of Labour, whether or not there needs to be a more radical political agenda, etc., and the point that was made that people took the wrong lesson from Labour's relative success in 2017.

The result in 2017--Labour was expected to get crushed and they didn't--was seen as a confirmation not just of a more radical political agenda, but Jeremy Corbyn as party leader.  Corbyn is a hard core radical in the best oppositional tradition.  The commenter said, no, the result wasn't so much about Corbyn and a radical agenda, but at that particular moment, Labour was seen as the best hope for "remain."  So Labour got virtually all the votes of remainers.

In 2019, with a muddled position on Brexit and face it, the excoriation of Labour especially Jeremy Corbyn by the media, and other political parties with an equal or better position on remain, the Remain vote splintered, and Labour got crushed.  The Conservatives received fewer votes than the Remain parties, but because of their election system, and a failed approach to "strategic voting" on the part of the center-left, the Conservatives crushed the opposition in England and Wales.

For me the question is, is the DC area the next Silicon Valley East or do we need more nuanced lessons?

The military budget as the driving force for DC area technology.  The thing about Amazon's HQ2 decision to locate in Arlington County, Virginia is probably not business-to-consumer activity--they won't be running the sales operations there, but Amazon Web Services, hopes for the JEDI contract and other government contracting work ("Amazon Web Services powers tech giant's profits," GeekWire).

Similarly, a lot of the technology business in Northern Virginia is related to, has roots in the Department of Defense.

And the government more generally.  With government contracting and regulation, it's advantageous for certain companies to be based here.

Plus the rise of crony capitalism, especially under the Trump Administration.  Corporations are being pressured to support various Trump Administration initiatives be it rollbacks of emission regulations ("GM, Fiat Chrysler and Toyota side with Trump in legal fight," Los Angeles Times) or tariffs ("Trump Floats Tariff Exclusions for Apple at Texas," New York Times) in return for preferential treatment and the threat of negative treatment otherwise.

Or how Trump tried to tamper with the merger between ATT and Time Warner ("Report: Trump asked Cohn to block AT&T/Time Warner merger
," CNN) and made statements strong enough about a DOD IT contract that Amazon has a strong basis for appealing the award to Microsoft ("Amazon Accuses Trump of 'Improper Pressure' on JEDI," New York Times).

It's like how in countries like Greece, the role of the government in business is so pronounced, that Athens has become the primary center for the country's business and commerce.  (London too.)  It's not that it would necessarily be the best place otherwise.

WRT regulation, some firms find proximity to various regulatory agencies beneficial.  Like the joke that MCI was headquartered in DC -- with an antenna on the roof -- because mostly they were a law firm at the time, trying to change the regulatory environment in order to allow for competition in the telephony field.

Similarly, the NYT just ran an article about all the various tax breaks just enacted ("Congressional Negotiators Agree to Extend Some Tax Credits and Add to Debt," New York Times).  From the article:

The tax-break bonanza has become a rite of passage in Washington, transcending partisan bickering and congressional rancor and allowing lawmakers to dole out special-interest tax breaks by attaching the provisions to must-pass legislation.

Crony Capitalism and a less innovative economy.  In The Great Reversal, economist Thomas Phillipon posits that the US is a lot less innovative as an economy because of corporate consolidation, oligopolistic firms, and crony elements of the regulatory regime ("Are anti-competitive firms killing American innovation?," Economist Magazine).  From the article:

When Thomas Philippon moved from France to America in 1999 to begin a phd in economics, he found a consumer paradise. Domestic flights were dazzlingly cheap. Household electronics were a relative bargain. In the days of dial-up modems Americans, who were charged a flat rate for local calls, paid far less than Europeans to get online. But over the past two decades, Mr Philippon writes in “The Great Reversal”, this paradise has been lost. Europeans now enjoy cheap cross-continent flights, high-street banking, and phone and internet services; Americans are often at the mercy of indifferent corporate giants. Perking up their economy might mean cutting those giants down to size.

Much that has happened to the American economy since the 1990s has not been to the typical worker’s advantage. Growth in output, wages and productivity has slowed. Inequality has risen, as have the market share and profitability of the most dominant firms. Economics journals are packed with papers on these trends, many of which argue that the dominance of big firms bears some blame for other ills. Between 1987 and 2016 the share of employment accounted for by firms with over 5,000 employees rose from 28% to 34%. Between 1997 and 2012, this newspaper reported in 2016, the average share of revenues accounted for by the top four firms in each of 900 economic sectors grew from 26% to 32%.

This is a problem more generally, less of economic activity in the DC area.  But it is still worth taking as a warning.

Economic activity that has a positive spillover benefit versus that which doesn't.  I've been meaning to write a piece about "what would a Democratic Party rural agenda look like"?  It's in bits and pieces so far.

But I was reading an article ("Can a coal town reinvent itself?") in the New York Times recently about Grundy, Virginia, an area that has been wiped out by the decline of the coal industry, and various post-coal economic development initiatives such as creating a nursing school and a law school.

I laughed when reading about the law school.  They should have created an engineering college, and technical programs at the community colleges in the area, boosted economic development initiatives in agriculture extension programs, etc.

Also see the past blog entries:

-- "Better leveraging higher education institutions in cities and counties: Greensboro; Spokane; Mesa; Phoenix; Montgomery County, Maryland; Washington, DC," 2016
-- "Naturally occurring innovation districts | Technology districts and the tech sector," 2014

Engineers make things.  Lawyers don't.

Medical research creates products of value, etc.

Relatedly, there was another NYT article on the rise of small scale manufacturing in New York City, by firms addressing local problems and needing to manufacture the "mechanical" solutions they created ("Underwater Drones, Mars Rover Parts and a High-Tech Revival").

Aaron Renn made a point in discussing the belief that there is a lot of opportunity for water-related technological development in the Great Lakes region, because they have so much water.

His point is that innovation is a function of scarcity more than it is of abundance.

Down and out places do have plenty of opportunities, just not the technical infrastructure necessary to address it.