For years the Washington region has experienced high growth, driven by its status as the capital of the world’s most powerful, influential and economically prosperous nation. Washington was the ultimate “company town” — the company was the federal government and business was good.
In the post-war period, well-paid government positions attracted highly educated workers, and soon endowed the Washington region with the nation’s most educated workforce. Rising federal government expenditures in the post-9/11 period gave rise to a lucrative government consulting and contracting sector, which attracted even more talent. Soon enough, clusters of firms in high-paying industries such as information technology, life sciences and professional services buttressed the federal bureaucracy.
Today, Washington is one of the wealthiest places on earth. Of the 300 largest metropolitan economies in the world, only six have higher average incomes per person.
After decades of world-beating growth, however, the region has hit the wall. In its recent Global MetroMonitor report, Brookings measured economic growth in the world’s 300 largest metropolitan area economies using gross domestic product per capita and employment growth. These two indicators were chosen to measure rising incomes and standards of living (GDP per capita) and widespread labor market opportunity (employment). In an indexed ranking measuring economic performance in 2014 in these 300 metro areas, Washington placed 275th.
Nor is this a one-year blip. Of the 80 U.S. metropolitan areas in the Brookings analysis, only New Orleans has seen average incomes decline more than Washington since 2010, and job growth has been well below the national average during that period as well. George Mason University economist Stephen Fuller, among others, chalks these declines up to sequestration and broader federal spending cuts. Between 2010 and 2013, federal procurement spending in the region decreased by $13 billion.
This raises a big question for the region’s business, political and civic leaders. Can Washington’s private sector diversify its customer base beyond the federal government and lift the region beyond its status as a company town? Put another way, is the region truly poised to compete on a global scale driven by business-to-business transactions, such as the ones that drive Silicon Valley and Boston?
In many ways, the founding of AOL in the Dulles Corridor in Virginia and the emerging bioscience hub in Montgomery County in the 1980s marked the start of the region’s transformation from a government town to a more diversified economy. Today, Northern Virginia is one of the nation’s premier information technology hubs, and D.C.’s Maryland suburbs make up one of the nation’s top bioscience clusters. An emerging software and app economy is bubbling up in the District’s core, anchored by accelerators like 1776. These strong industry clusters, enviable infrastructure assets like Dulles Airport and the nation’s highest share of college-educated workers make for a strong platform to build upon.
Yet historically, Washington’s success has rarely been intentional. A recent report from the George Mason University Center for Regional Analysis observed that the region is highly fragmented along state lines, does not proactively collaborate on economic strategy, and fails to present a clear value proposition to the rest of the world’s firms. As economic growth continues to shift south and east — two-thirds of the fastest growing regions in 2014 are located in the developing Asia-Pacific region — U.S. metro areas cannot afford to be fragmented or short-sighted.
Understanding both the threats and opportunities associated with globalization, metros such as Chicago, Seattle, Portland and San Diego are developing strategies to tap global markets and upgrade their regional economic development efforts to match 21st century realities.
To be sure, commendable efforts at regional collaboration are underway in Greater Washington, but they have been limited to transportation, land use and emergency preparedness. No comprehensive economic vision for the region exists, and efforts to develop one have yet to attract widespread attention from business leaders outside of the real estate industry.
This is a major missed opportunity. For years, Washington was able to rest on its laurels as federal spending drove historic growth. Now, as the region’s economic fundamentals shift, so too must the region’s leadership.
Joseph Parilla is a research analyst at the Brookings Institution’s Metropolitan Policy Program. Brad McDearman is a fellow and director of global special projects at the Metropolitan Policy Program. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
