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Lessons from the New Third World- Frederick, Maryland

Can Leaders of Maryland and Frederick County be the Architects of a Regional Economic Recovery?

Lessons from the New Third WorldGood news is trickling in about the economy: signs of job growth, record corporate profits, a down tick in real estate foreclosures.

But it still feels as though the entire country is collectively holding its breath, waiting… waiting for the outcome of the 2012 presidential elections, waiting to see if the European Union can prevent member country defaults, waiting for the housing market to enter a sustained recovery.

Are you getting tired of holding your breath?

If so, here’s a good read: Boomerang:  Lessons from the New Third World, written by Michael Lewis, financial journalist and author of Liar’s Poker.

Boomerang came together from a series of articles that Lewis wrote for Vanity Fair magazine, and you can find most of those articles on their website. They are worth a read, if you want to understand the series of events that took the International Monetary Fund (IMF) to the brink of bankruptcy, and the potential impact to the fiscal health of the U.S.

The final chapter of the book is the focus of this article, and begins with Lewis interviewing Meredith Whitney, a banking analyst and frequent contributor to a variety of cable news programs.

Depending on whom you ask Meredith Whitney is either prophet or pariah. She predicted that U.S. cities and municipalities are in such dire fiscal trouble that there could be 50-100 defaults in the municipal bond (muni) market in the coming year.

The furor that ensued in the muni market as a result of that appearance resulted in a temporary crash and several death threats to her!

The defaults Whitney predicted have not come to pass, but what she says about the importance of fiscal responsibility at the state, city, and county levels makes a lot of sense.

States and local municipalities piled up debt and took extraordinary risks with pension funds just like corporations did during the go-go years of 2002-2008. Many states are now suffering because stock market gains failed to materialize, state spending ballooned, health care plans were underfunded, real estate property tax revenues declined, and federal subsidies were cut.

The states will survive, because they can cut funding to municipalities to prevent default, but where does that leave our cities and towns?

Whitney’s theory is that in recovering from this economic recession, the U.S. will reorganize into a collection of regional economies–“zones of financial security and zones of financial crisis”–with those regions where companies are able to flourish being the strongest. Obviously, individuals will go where the good jobs are, leaving those who do not have the means to follow jobs living in the areas that can least afford to support them.

A vicious cycle ensues.

So how do we prevent Maryland and Frederick from becoming a “third world” region of the U.S.?

Third World? “Oh, give me a break!” you might say.

Right now, our proximity to D.C. ensures a plenitude of federal jobs, to the tune of about 42% of all jobs in the region.

Those jobs have insulated Maryland and Frederick from the worst side effects of this recession, but 42% is an awful lot of eggs in the federal basket, in this man’s opinion.

If Maryland (and by extension Frederick County) is going to remain a region of financial security—a desirable place for people to live and corporations to locate—our leaders have their work cut out for them.

Up front, state government needs a serious ideological adjustment. Governor O’Malley and his administration need to understand how important an influx of corporate jobs are going to be to this region, and what “business friendly” really looks like. It’s a shame that Maryland had to resort to bribing Bechtel to the tune of $9.8 million to keep just a part of their operations here.

The MacRo Report Blog has repeatedly featured posts about PlanMaryland, which is in fact taking our state in the opposite direction of business friendly.

On the local level, the Frederick Board of County Commissioners led by Blaine Young has taken dramatic and quite controversial steps to ensure that Frederick enjoys fiscal health, through a focus on the following:

  • analyzing and adjusting pay and benefits of county employees to ensure that the county can support current and future obligations;
    • restructuring the Department of Economic Development into a new Business Development and Retention Division to more effectively attract new businesses to the area;
    • making hard decisions about funding to various social services; and
    • re-establishing an environment of trust within the business community.

While not taking as aggressive an effort as the county government, the leaders of the City of Frederick have moved positively toward trying to ensure that their treasury remains solvent and can meet its obligations.

What does the success of these endeavors depend upon?

First and foremost, voters should pay very careful attention to who they elect to run our state and local governments!

Conservatives may be lukewarm toward the current slate of presidential candidates, but it’s clear from this blogger’s perspective that the majority of the efforts made by our local elected leaders are pressing forward with an approach to limiting government as a means of lifting our economy out of this recession.

If the State of Maryland doesn’t get with the program, then Frederick is going to need to develop greater autonomy in creating its own micro-economy. A charter government structure could go a long way to establishing greater control of Frederick’s economic destiny.

What do you think?

Can Frederick County stop holding its breath and start engineering its own economic recovery?

Do you believe that despite the efforts within our county to be more business friendly, that Maryland is tightening the noose on the state’s economic competitiveness in this region?

How would this region survive ?

Will local corporations and citizens continue their outmigration to the greener pastures of Virginia and other states?

Speaking of business friendly, stay tuned for a future post when we answer the question “what does business friendly REALLY look like?”

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The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com.

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