SPACE, TECHNOLOGY AND THE EDGE CITY:
PATTERNS OF SERVICE AND INFRASTRUCTURE INVESTMENTS--
The US National Capital Region
Kingsley E. Haynes
Roger R. Stough
The purpose of this paper is to describe how science
and technology development impacts local metropolitan development.
From this description it should be clear that national policy
toward science and technology has a very real impact not simply
on the intended innovation, development and commercialization
of technology in particular industrial sectors and overall economic
competitiveness but that such policies impact intentionally
or not the local environments of where these industrial sectors
operate. These secondary and often unanticipated impacts of science
and technology policy are often centrally important to local development.
Our argument is that technology -- its development
and use -- is impacting the organization and spatial patterns
of US metropolitan regions. We use the high technology in general
and information technology in particular to demonstrate the impact
of the spatial reorganization of the Washington US National Capital
Region as a case in point. Further it is our view that such a
system of impacts on metropolitan organization may be broader
than simply the present US case.
We focus on the US National Capital Region and patterns
of infrastructure investment in a dynamic information technology
sub region -- Northern Virginia -- to describe and analyze this
situation.
The low density, decentralized, multinodal metropolitan
region is moving quickly from an American to a global pattern
of urban organization. In spite of resistance from city and regional
planners and extremely powerful state and provincial regulation
the pattern continues to proliferate particularly in developed
economies. Further predictions of disastrously long commuting
times and mass return to the inner city appear to be over drawn.
This is a pattern of urban spatial organization that is not likely
to go away in high income automobile oriented democratic societies.
Policies may modify this pattern at the margins but are not likely
to create wholesale restructuring. Such systems of edge cities
have patterns of organizational, public service delivery and infrastructure
investment that are intriguing in their own right -- whether you
like them or not.
Regional Organization
The emergence of the new urban region raises a number
of important policy questions. Many of these focus on the changing
role of actors such as the nation state, the state/province, local
government and business and community organizations in the economic
development process. Others focus on the fact that these are
high cost regional economies and need access to low cost inputs
such as back office production operations. As these new regional
economies emerged their role expanded and in many cases now supersedes
that of local and state/provincial governments in providing leadership
and steering for economic development. The steering of development
activities and policies has been largely organized in the form
of a partnership between the public and private sectors. Universities
and other research organizations (e.g., national research laboratories)
also figure prominently in these partnerships. Today one finds
formal but not governmental organizations representing the interests
of regions and taking responsibility for steering their development
like, for example, Baltimore, Cascadia and the Ruhrgebiet (a region
that overlaps with parts of France, Germany and the Netherlands).
This leadership/steering process has not been widely
institutionalized in formal government bodies although much experimentation
is underway in Europe (e.g., formation of autonomic regions in
Spain, Portugal and Italy; and, regional decentralization in France).
Experience in the US is that the development and steering of
economic development strategy comes initially from the non-government
sector where longer range objectives can be considered in a non-partisan
and non-political context but where short term objectives tend
to dominate. The partnership later broadens to include government
representatives (political partners are important but not dominant)
and other groups.
The highly fragmented jurisdictional complex as in
the national capital region has retarded the development of organizations
that can lead or steer economic development at the metropolitan
level. Yet other new urban technology regions have highly sophisticated
and well developed organizations that maintain economic development
strategies. These strategies have targeted
product and service niches along with associated markets; have
advanced regional production and marketing network cultures that
includes regionally coordinated and integrated technology development;
and have relatively smooth interaction among public and private
sector components, and among research and educational components.
The National Capital is a complex of at best loosely confederated
counties that belong to the Washington Metropolitan Region which
is composed of a federal district and several other suburban counties
located in the states of Maryland, Virginia and West Virginia.
Most other metropolitan regions are located in one or two states
and as a consequence have developed richer region-wide institutional
infrastructures including region-wide community foundations; transportation,
housing, social services, etc.; planning and management bodies,
development policies and institutions to implement them; and in
some cases region-wide governments. Because of the high level
of jurisdictional fragmentation in the larger functional region
and the DC plus the rest of region (inside/outside beltway) mentality,
these institutions have developed in only the most rudimentary
fashion for the National Capital. However important building
regional cohesion at the National Capital Region level may be
an activity that will most likely evolve slowly and more importantly
will evolve even more slowly as long as the level of cohesion
in its sub-regional components remains low. Northern Virginia's
relatively high placement in the regional value added chain places
it in a position to provide leadership for cohesive planning and
development of the National Capital Region, However, it must become
more cohesive itself before it can exercise this leadership potential.
The Northern Virginia sub-region, for example, was for the most
part dominated by a rural orientation as recently as twenty years
ago, Life among its residents was relatively uncomplicated and
predictable and for the most part county level institutions and
government were sufficient to address all but a few issues (for
example, waste water treatment became a regional issue in the
early 1970s). Consequently, few regional institutions were needed
and only a few such institutions existed (for example, the Northern
Virginia Planning District Council was formed in the late 1960s
but even today its role is primarily information provision and
advisory in nature), With the increased growth of the 1970s and
1980s issues and problems spilled across local jurisdictional
boundaries. Yet the development of institutions to deal with
these new region-wide issues (e.g., transportation, development,
housing, human services, health--AIDS) have been slow to develop
and to the extent that they have they may for the most part be
viewed as being in a nascent stage of development. Even the business
community which operates across jurisdictional boundaries has
been slow to develop representative bodies that cross jurisdictional
boundaries, e.g., each jurisdiction has its own chamber of commerce,
economic development agency or authority, and the Northern Virginia
Technology Council which is a region-wide organization is still
almost totally dominated by participation from one jurisdiction,
Fairfax County.
There is a need for much more robust and more rapid development
of institutions that can address the regional manifestations of
problems and opportunities. Some of the key issues that need
to be effectively managed by such regional institutions include
the cost of congestion and high cost of business operations in
such an environment as Northern Virginia as well as barriers to
entry for individuals (affordable housing) and to firms. A first
step that would be helpful in this would be the formation of a
regional organization for strategic regional economic development.
This does not speak to the patterns of growth of shadow governments
(e.g., TYTRANS-Tyson's Corner's Business Transportation Organization
or local housing owners associations (that manages private streets
and garbage disposal) or privately delivered "public"
services (e.g., multi-purpose mall and commercial center private
security services). There are patterns of developing new organizations
to meet rapidly expanding local needs in locations where previous
systems for meeting those needs were not in place.
Infrastructure
Infrastructure policy is driven by many considerations--public
interest, institutional dynamics, political assessment, ideology,
and knowledge or perception about how a process works. Historically,
infrastructure investment has been seen as an acceptable point
for public policy intervention in the national and regional economy.
In fact, traditionally infrastructure investment has been the
pivotal point of partnership between the private and public sector
in pursuit of economic transformation. The use of infrastructure
by the private sector to assemble inputs and distribute outputs
has been widely appreciated. Further, the ability of private
sector organizations to benefit from shared use of infrastructure
investments is also well recognized. Similarly the role of the
public sector in directing large, risky investments and allocating
their use among competitors may be a contentious issue but certainly
is not new. What is less appreciated is the changing meaning
of infrastructure and its many roles in regional system dynamics.
A new conceptualization of infrastructure is central to the development
of strategies for infrastructure investment in the restructured
economies of the twenty-first century. It is also central to
our appreciation of the comparative advantages of regions. Most
recently we have seen new attempts to link change in national
and regional productivity to patterns and levels of infrastructure
investments (Reich, 1991; Munnel, 1990). In the US, Senator Moynihan's
proposal for a national infrastructure policy and a federally
backed infrastructure investment fund is another manifestation
of the recognition of linkage between infrastructure, economic
development and the role of public policy in stimulating or providing
an underpinning for private sector expansion. However, before
policies are enunciated it is important that we recognize some
central concerns in infrastructure definition and in its changing
role in regional economies.
The division of infrastructure into social and economic components
is a place to begin. The concept of social overhead capital or
simply soft infrastructure has been linked to education, health,
social and recreational support, and partially to environmental
concerns. This human capital/quality of life perspective is augmented
by a direct orientation to the welfare of human resources and
its consequences which is assumed to be increased labor productivity.
Economic or "hard" infrastructure in the form of roads,
harbors, airports, and utilities is also seen as a complement
to productivity. In this case it is recognized as complement
to producer capital in the form of making factories, machinery,
equipment, and production technology more efficient. Finally,
consumer capital is also made more efficient through the volume
and quality of housing and the distribution structure produced
(Chatterjee and Hasnath, 1990). In such cases the purpose of
public infrastructure investment is to lower relative prices,
increase access to labor, raw materials and technology and to
reduce the costs of production and hence the cost of final products.
Theoretically at least this moves us from one equilibrium level
to another with lower prices and higher consumption resulting
in better incomes and higher levels of employment (Lakshmanan,
1989).
The long time horizon of the productive life of infrastructure
facilities, their large scale, and the all or nothing nature of
the investments, make them very sensitive to the costs of capital
and inherently risky. This, it has been suggested, requires a
public sector role for such investments. Further, the fact that
infrastructure is shared both by public and private sector users
and across alternative private sector users with no industry or
firm specific characteristics, and often has natural monopoly
elements to it, suggests that the public sector has an appropriate
production, allocation and distributional responsibility. Hence,
although it is assumed that private sector benefits flow from
infrastructure investment the public sector has traditionally
played a central role.
There has been much discussion of the crucial role of infrastructure
and the temporal order in which infrastructure and other forms
of capital should be provided so as to stimulate economic development.
However, what infrastructure consists of is rarely reviewed,
and its characteristics and composition are often defined ad-hoc.
In spite of speculation about the causes and the patterns of
economic change, there is no coherent theory of economic development
into which infrastructure has been incorporated. This makes the
attempts to describe the role of infrastructure difficult, since
countries or regions in different stages of technological evolution
are usually interested in incorporating infrastructure investment
into policies for expanding economic development.
In developed economies, on the other hand, especially those undergoing
structural transformation from an emphasis on manufacturing and
goods production to services and information management, infrastructure
investment is still a central concern. The change from a goods
producing economy towards a service economy relates to both what
is produced, how it is produced and where (Gershuny, 1978; Stanbeck
et. al., 1981). Not only is there a trend toward a greater variety
of services but increasingly services are produced jointly with
goods. Further, goods are produced that incorporate a demand
for services for effective utilization. There is a significant
growth in producer services and producer service like functions
and an expanding emphasis on investments in human capital. Change
in the organization of production reflects the shifts in technology,
in labor and consumer markets, and in the organizational system
as a whole including the process of service delivery itself which
has become increasingly routinized, standardized and "industrialized"
(Levitt, 1976; Gershuny, 1978). As a consequence of the above
changes, different types of services appear to be locating at
different levels in the urban hierarchy thus transforming the
urban system (Daniels, 1985).
Information utilization is the differentiating characteristic
of the expanding service sector industries. Telecommunications
systems are central not only to solicit business, to deliver products
but to design products that fit specific consumer wishes. To
quote Lakshmanan (1989):
Communication systems are to service industries what road, railways
and canals are to (goods-producing) manufacturing. A major effect
of the emerging innovations in telecommunications, electronics
and computing is to increase the sizes of the service markets
by breaking down the market barriers, integrating dispersed markets
and facilitating the creation of new markets. These innovations
increase the speed, density, and quality of information flows,
which in turn augment the potential pace of technological change
and the diffusion of innovations. Further, since these developments
in the telecommunications sector are taking place in a period
of increasing international of the service sector, the facilities
and networks extend beyond national boundaries (undersea Cable,
Geostationary Satellites, etc.). Currently the impacts of these
telecommunications developments are keenly felt in many information-rich
producer services, whose range and quality are being transformed.
When the potential of these developments is realized by consumer
services as well, major impacts on the range and quality of services,
on labor utilization, and work organization are likely. The key
analytical questions here are: What role does this increase in
capacity and lowered unit cost in telecommunications and information
technology have on future economic growth and in facilitating
the transition to a dominant service economy? Given the rapid
technological innovation and the growing deregulation of the telecommunications
industry, public policy choices on types, sizes and locations
of communications infrastructure investments become important
to future economic growth in an increasingly international production
system.
Infrastructure Content
In order to clarify the use of the infrastructure concept, Youngson
(1967) concluded that infrastructure is not a set of things but
a set of characteristics. Two such characteristics are recognized.
Capital is infrastructure if a) it is a source of external economies;
and b) it has to be provided in large units "ahead of demand."
If capital expenditures satisfy either of these characteristics,
Youngson suggests they should be viewed as infrastructure. Both
imply the desirability of a certain amount of public investment
since, due to positive, external economies, the pattern of investment
in a private enterprise economy would to be below that which is
socially optimal. The second characteristic of provision ahead
of demand indicates an expectation about the future and this is
an important consideration. Error uncertainty and imperfect knowledge
about that future will play a central role in an infrastructure
investment whose purpose is to serve the cause of regional economic
change.
The argument for such infrastructure is particularly strong in
the case of those investments which may be thought of as somewhat
nonspecific in character--that is, those which can be utilized
in the production of a wide variety of final outputs such as social
overhead capital investment in education. The ultimate return
to society for education may be out of all proportion to the costs.
The indirect benefits which are derived from public and private
spending in education extend far beyond the direct benefits (e.g.,
the economic returns from a major new idea or the effective incorporation
of such an idea into existing technology). It is indeed a matter
of facilitating the evolution of new ideas, of new combinations
of the factors of production, and generally promoting the Schumpeterian
notion of innovation. In that context innovation is the key to
economic advancement. Infrastructure facilitates investment that
promotes innovation (Suarez-Villa and Hasnath, 1993). As appreciation
of the role of infrastructure in facilitating the emergence of
new combinations of factors of production is recognized the analysis-of
infrastructure inevitably includes the study of economic transformation
and system dynamics.
Infrastructure and Regional Dynamics
Many regions that directly provide capital goods--designed both
to supplement and to induce a favorable response from productive
enterprises--take advantage of the beneficial effects of infrastructure.
It would appear that the stock of infrastructure has several
effects on the level and mix of directly productive activities.
First, investments in physical and social overhead capital will
increase the efficiency and reduce the prices of production inputs.
Not only do costs such as those of material assembly and skilled
labor become lower, but increases in the capacity of infrastructure
very often lead to an improved quality of service. A multi-lane
limited-access highway has a greater capacity than a single-lane
road; however, it is also faster and safer, further, it also generates
new demands in terms of labor and capital.
Although the improvement of transportation infrastructure will
result in production expansion in some regions and production
reduction in other regions as interregional trade is facilitated
and competition intensified, relocation of capital and labor will
also take place (Rietveld, 1990). For example, even though infrastructure
construction is locally produced, the locality may not reap the
final benefit of development, as a new transportation line may
create a "corridor" effect by channeling economic activities
through or around the locality to both ends of a distribution
with direct origin and destination linkage bypassing intermediate
nodes.
These cost reduction and output expansion effects of infrastructure
investments are empirically captured through the formulation and
estimations of cost functions and production functions. Since
social overhead capital is available to all firms in a region,
it is viewed as entering the production functions of regional
firms. However, while available to all, total use must be equal
to or less than the physical capacity (e.g., traffic lane capacity,
sewage pipe diameter, etc.) in order to maximize benefits (i.e.,
at an efficient level of congestion). In this way infrastructure
is viewed as a stock variable at least in the intermediate term.
Further, inadequate supply of certain infrastructure elements
will produce bottlenecks hinderous to the full utilization of
other production factors. According to Rietveld (1990), two approaches
are found in relation to bottleneck phenomena: 1) A bottleneck
exists when actual production costs are far above potential production
costs as predicted by the production function (Biehl, 1986). 2)
A bottleneck exists when the mutual relationships between inputs
as represented by marginal rates of substitution are out of balance
(Blum, 1982).
Infrastructure investments are viewed as facilitating economic
change and rationalizing regional production distribution, in
other words as a mechanism of system dynamics. Public infrastructure
investment affects private investment in two ways. On the one
hand, public capital appears to enhance the productivity of private
capital, thereby raising the rate of return and encouraging more
private sector investment. On the other hand, public capital
may serve as a substitute for private capital; to the extent this
occurs, more public capital will result in less private investment
(Munnel, 1990). This is a critical balance and must be disaggregated
by infrastructure type to be fully appreciated. In particular
it appears that transportation and telecommunication infrastructure
generate the highest regional output elasticities, followed by
water investments with the lowest contributions from public building
investments in public operations (Munnel, 1990).
Future Infrastructure
Much of our focus up to this point has been a review of the general
thinking and analytic procedure we use in evaluating infrastructure
investments for regional systems. However, much of this has been
limited to historically important fixed infrastructure mostly
for the support of traditional manufacturing capital. Lakshmanan
(1989) has suggested movement of information is to the service
sector what goods movement is to the manufacturing sector. With
the rapid expansion of the service sector in general and its information
management subcomponent, communications will be the 21st century's
substitution for highways. In Batten and Thord's (1989) book
on Transportation for the Future the issue of substitutability
between communications and mobility is a constant theme. Anderson,
Anderstiz, and Härsman (1989) develop the argument that knowledge
and communications infrastructure will be the backbone for a global
system of interactions. This integration plays a central role
in bringing together the demand and supply side of a complex global
economy. It is the attempt to reduce the costs of interaction
(transaction costs) that is the driving force in the new infrastructure
patterns and technology choices.
Smilor and Wakelin (1990) divide future infrastructure into the
same hard and soft categories we have already seen but the content
of their lists change. Hard infrastructure includes transportation,
telecommunication, research parks and support facilities, quality
of life facilities and utilities; soft infrastructure includes
human resources, financing, business services, technology transfer,
leisure activities, legal and institutional services. They argued
that it is this soft category of infrastructure which will grow
at a much accelerated rate and will be essential to future economic
growth and technology development and applications.
1. Aschauer (1989) | |||
2. Munnel (1990a) | |||
3. Hulten and Schwab | |||
4. Costa-Ellson Martin (1987) |
|||
5. Munnel (1990b) (1991) | |||
6. Deno (1988) | |||
7. Eberts (1986) |
As noted above, communication infrastructure includes a variety
of information capital (e.g., telephones, satellite communications,
integrated digital networks, etc.) and information labor. Such
capital reduces the temporal and spatial costs of coordination
and over time increases the division of labor productivity. All
of this in turn increases the output of goods and services, income,
assets, reinvestment in infrastructure, an institutional complexity.
Thus the information communication infrastructure is viewed as
a key sector, receiving resource inputs and imposing transaction
costs and making claims on production output as well as providing
production inputs. This sector influences the nature and level
of social of political participation and the structure of incentives
and organizations in society.
In the competitive game of international economic growth, societies
that have vigor and adaptability in their social and political
institutional structure incur adjustment costs more effectively
and hence speed up their technical change and development. The
private and public organizations in such societies adopt a dynamic
strategic perspective (in addition to their ongoing system maintenance)
and engage in future scanning, goal setting, strategic decision
making and programming, that lead in turn to modification of the
incentive and organization structures. In such adjustment activities
the communication infrastructure plays a key role.
Northern Virginia Infrastructure
What we have outlined here is a highly abbreviated version of
a future model of infrastructure and many more linkages need to
be identified. However, it gives an idea of future infrastructure
development trends and of the need to integrate our current investment
patterns so as to be responsive to these future needs.
Transportation Capital Costs
Highways
Through 1995, funds committed to highway projects total $912.6
million. This figure includes $209.9 million for freeways; $546.9
million for arterial roads; and $155.8 million for other roads,
including local collector roads and miscellaneous projects.
Planning documents adopted by individual local governments for the year 2010 include $1,104.8 million for freeway improvements; $1,162.4 million for arterial highways; and $165.4 million for other roads. Total locally planned expenditures are $2,432.6 million.
The 2010 Virginia Department of Transportation (VDOT) recommended
plan for the Northern Virginia region projects $1,684.3 million
needed for freeways; $1,407.4 million needed for arterial highways;
and the same $165.4 million for other projects. Total highway
expenditures recommended by VDOT are $3,257.1 million through
2010.
HOV
HOV lanes are designated as "separate" express lanes
and "diamond" lanes. Through 1995, $168.8 million has
been committed for constructing separate HOV lanes, and $15 million
for designating and constructing diamond lanes. Total committed
funds are $183.8 million.
Local plans through 2010 call for spending $672.8 million on separate lanes, and an additional $15 million for diamond lanes. Locally adopted plans call for total HOV spending of $687.8 million.
VDOT's recommended plan encourages major expansion of the regions
HOV lane designations. It calls for $753.3 million for separate
lanes, and $563.8 million for diamond lanes. The total recommended
by the state for HOV is $1,317.1 through 2010.
Transit
Public transit plans designate four categories: commuter rail,
other rail (including rehabilitation of Metrorail rolling stock
and facilities), bus on HOV, and Metrobus and local bus (including
rehabilitation of Metrobus stock and facilities). The total committed
for spending through 1995 includes $59 million for commuter rail;
$171 million for other rail; zero for bus on HOV; and $93.7 million
for Metrobus and local bus.
Plans adopted independently by local governments through 2010
include $59 million for commuter rail; $734 million for other
rail; zero for bus on HOV; and $283.4 million for Metrobus and
local bus. Total local public transit spending is planned at
$1,076.4 million.
The VDOT 2010 plan is more strongly supportive of public transit
than the local governments, calling for a total of $2,687.9 million.
It recommends spending $118 million for commuter rail; $2,090
million for other rail; $189.7 million for buses on HOV; and $290.2
for Metrobus and local buses.
All Surface Modes Combined
Committed spending for capital costs through 1995 for all modes
is $1,420.1 million. Locally adopted plans call for spending
$4,196.8 million through 2010, compared to VDOT recommendations
of $7,262.1 million for the long-run period.
Airports
Both Washington National and Dulles airports are in the midst
of major capital improvements. The Metropolitan Washington Airports
Authority Capital Development Program is divided in two components,
one for each airport. Total capital improvements for Washington
National will cost $933 million. Of that, $165 million is already
completed; $186 million is in the construction phase now; $478
million are in various stages of design and procurement; and future
improvements total $104 million. The FY 1994 budget is $205 million.
Capital improvements for Dulles International Airport will cost
$985 million; of that total $119 million is already completed;
$320 million is currently in construction; $61 million is in design
and procurement; $485 million is required for future improvements.
The capital budget for Dulles for FY 1994 is $199 million.
Information Technology Infrastructure
Significant deregulation in the telecommunications industry began
in the late 1970s, followed by a trend toward privatizing the
provision many public services, including information and communications.
One important result of these policies has been a blurring of
the distinction between the public and private sectors, a fact
made clear by ubiquitous calls for public-private partnerships.
The outcome of these twin trends of deregulation and privatization
has been the emergence of what Fortune magazine has called The
Netplex, more than 1,200 telecommunications and information technology
firms in the National Capital region--most in Northern Virginia--that
have formed the foundation of the nation's information infrastructure.
At the core of the new information infrastructure is the Internet,
the network of more than 25,000 computer networks and systems
around the globe originally pioneered by the Pentagon about 20
years ago to allow communications to continue in any event, without
relying on centralized computer systems. The investment in this
new infrastructure must be measured largely in financial capital
spent for services and data. Depending on what yardstick one
uses,. current annual expenditures range from $1 billion to $2.8
billion. However, MCI, one of the most aggressive providers of
telecommunications and information services, estimates that figure
will rise to as much as $40 billion a year by 1998.
Sewer and Water
Fairfax County
Fairfax County provides sewer service to its citizens through
a system that includes its own sewer lines and pumping stations,
one county-owned treatment plant, and contractual agreements with
the District of Columbia, the Alexandria Sanitation Authority,
and the Upper Occoquan Sewage Authority. Fairfax County has a
capital improvement program that includes support for 19 facilities
expansions or upgrades. Expenditures through FY 1994 for these
projects were $293.5 million. Proposed expenditures for FY 1995-1999
are: FY95, $30.1 million; FY96, $96.43 million; FY97, $105.2 million;
FY98, $105.2 million; FY99, $483.8 million. Total costs planned
for current capital improvement projects from FY 1994-1999 are
$820.8 million.
Fairfax County water services are provided in a manner similar
to sewer services, including a county water authority and agreements
with neighboring jurisdictions. Projects are financed with revenue
bonds and net operating revenues. Revenue bond financed projects
include $116 million through FY 1994; FY95, $26.2 million; FY96,
$10.15 million; FY97, $4 million; FY98, $2 million; FY99, $1.2
million. Total revenue bond project costs FY 1994-1999 are $161.453
million. Additional projects paid for with net revenues bring
the total capital improvement program for water to $249.175 through
FY 1999.
Loudoun County
The Loudoun County Sanitation Authority Capital Improvements Program
(CIP) for water and wastewater systems for the 1994-1998 period
is projected at a cost of approximately $60.6 million. The 1994
CIP is budgeted at $13.9 million; for 1995, $13.7 million; for
996, $12.2 million; for 1997, $10.8 million; and for 1998, $9.9
million.
Educational infrastructure is another key element in fostering
and maintaining economic growth. Continuing knowledge explosion
makes knowledge obsolete at an accelerated rate. Universities
and other educational channels (ranging from local level training
centers to interregional satellite teaching systems) will be an
important part of the future infrastructure package, which will
be made not only human resources producers but also incubators
for new business and technology.
Implications
Clearly the Northern Virginia infrastructure is continuing to
expand at a rapid pace fueled by a modestly strong regional economy
that even during the recent recession had resilience and job generating
capability. The result is a strong tax and user fee base for
support of infrastructure growth. Incomes remain high with the
result that the demands for high quality infrastructure also remains
strong. Further the rapid expansion of infrastructure in the
1980s means that age and technological obsolescence has not caught
up with the infrastructure that has been put in place. Hence
maintenance costs have not been impacted by large scale replacement
requirements.
With respect to a regional perspective the three major transportation
corridors--I-95, I-66 and the Dulles corridor--still dominate
as radial arteries from the Washington-Arlington-Alexandria core.
The beltway's partial circumference is now complemented by the
cross Fairfax Parkway and what soon will be the western bypass.
Except for the two major environment zones residential in-full
is marked by a few dominant employment centers-Garreau's Edge
Cities--Crystal and Pentagon City, Fair Oaks, Tyson's Corner,
and the Dulles Complex. The air interface to other regions and
the rest of the world is dominated by the expanding airports of
National and Dulles.
The northern Dulles Corridor has the largest concentration of
vacant commercial space in the region which can be viewed as a
problem or an opportunity depending on your perspective. However,
significant vacant commercial space still exists throughout the
region particularly on the periphery although residential space
has been rapidly absorbed. The cost of support of the underlying
infrastructure in these peripheral areas will remain significant
for some time to come.
All in all the infrastructure growth pattern is still built on
an optimistic growth perspective and except for ground transportation
still leads development.
Institutional Infrastructure
The development of institutional infrastructure has in part been
dealt with above. However, there are other institutional issues
including education. Here the problem is not so much with the
provision of quality education services in the region but rather
with the provision of educational services in the future that
are integrated directly into and targeted to the needs of the
regional economy, i.e., worker retraining and life long learning.
Only when a long term strategic plan for the development of the
region is adopted and executed will it be possible to accurately
identify many of the areas of retraining that will be needed.
Thus, the efficient design and delivery of practical education
services will depend on the formation of the regional steering
organization described above. Further, it will depend on the
development of a much more advanced intra-regional communications
infrastructure to support new forms for delivering educational
services and learning, e.g., distance learning. Being able to
target educational services in this more precise way is important
given the significance of a highly skilled and adaptable work
force to the continued competitiveness of the high technology
region. Some estimates of the contribution of education (training
and knowledge production) to regional product are as high as 60
percent of the total and more than twice as much as the contribution
of traditional capital.
Currently regional analysis for the Northern Virginia Region is
fragmented. There is a need to make data on the region available
through a centralized or decentralized clearinghouse mechanism
and to add value to this data through analysis that is readily
available, Such a process could be enhanced by a regional communication
and data network with open access to public and private users,
Today research of this nature is provided in part by the Northern
Virginia Planning District Commission, local governments, the
Washington Council of Governments, the Greater Washington Research
Center as well as some private research firms in the area, The
region-wide organizations tend not to take a specifically Northern
Virginia orientation while the Northern Virginia groups tend to
focus on providing information more than to adding value to the
information through analysis (there are some exceptions, some
of the work by the NVPDC is quite good). The Center for Regional
Analysis at GMU is building the capacity to fill this gap.
PATTERNS OF TECHNOLOGY INVESTMENTS
Below we provide a summary of an analysis of the technology sector
of the Greater Washington regional economy. It is based upon
original data collected from a data base of technology firms in
the region developed for this project. The study was motivated
by the recognition that much of the rapid economic growth experienced
during the last twenty years was driven by the development of
a large cluster of technology-intensive companies. The report
describes and analyzes the size, distribution of companies by
type of technology, geographic distribution within the region,
economic effects, occupational structure, and educational needs,
as well as some of the barriers and opportunities facing the technology
sector.
The Greater Washington region, in addition to being one of the
nation's fastest growing regions, also has the highest average
family income and the highest educational attainment of any metropolitan
area in the United States. This occurs partly because the region
is the seat of the federal government and, therefore, attracts
highly educated people. It has also been accentuated by growth
of the technology business sector which now forms the core of
the region's economic base, despite a continued high level of
dependence on the federal sector. The study aims to learn more
about the technology sector in order to help sustain economic
development in the region.
Much of Section 1 is devoted to developing a definition of technology
and technology firms, used to determine what firms to include
in the technology data base. Technology firms produce technology,
produce products that are technologically intensive, or use technology
to address complex problems. This definition is consistent with
prevailing views of technology as described in the scholarly literature
on the subject.
Characteristics of the Firms in the Data Base
The Economic Effects of the Technology Sector
The technology sector of the Greater Washington region plays an
important role in the formation and dynamics of the region's economic
base. Directly employing 262,337, the technology sector ranks
second in size behind retail trade among all sources of private
employment. The sector is characterized by above average earnings
and directly generates approximately $21 billion in total industry
output -- 10 percent of the region's total. It also contributes
significantly to state and local government finances. It is the
fastest growing large technology region in the United States,
outpacing, e.g., the employment growth in the Silicon Valley and
the Boston 128 regions by 30 percent or more between 1988 and
1992. Major findings of the study include (Appendix):
Labor Force and Training Requirements
Analysis of the labor market implications of the technology sector
focused on occupational utilization of the sector and the educational
requirements associated with this set of occupations. While some
occupational segments of the technology sector resemble those
of other sectors, there are also some distinct differences.
Barriers and Opportunities
The technology services that characterize much of the technology
businesses in the region in many cases, (1) are in the early part
of development cycles, (2) have limited traditional assets given
that they are human capital intensive, and (3) tend to be small
and medium sized. These attributes, when combined with rapid
innovation and change, pose a number of barriers and opportunities.
Several of the more important ones are considered in the report
and the related findings are summarized below.
From this analysis it can be see that the growth in new technology
and its associated jobs reinforces the dispersed peripheral structure
of the regional metropolitan economy and that this dispersion
is not a function of residential distributions alone.
Further from this pattern infrastructure associations are explicit
and clearly linked to new economic growth patterns and vice versa.
SOCIETAL CONSIDERATIONS
One part of the region's economy is partly dependent on other
parts of the National Capital Region for labor, markets and services.
The quality of physical environment is in part dependent upon
the levels of residuals (airborne and water) generated in other
parts of the National Capital Region and even beyond to include
the watersheds of the Potomac and Chesapeake basins as is the
environmental quality of these larger areas dependent in part
on activities in sub parts of the region. Similar arguments could
be made in terms of quality of life were factors such as crime,
education, entertainment options, and so on are important. In
short, it is important to recognize that parts of the region is
part of a larger frame of reference, that the frames vary depending
upon the purpose or problem being considered and that the future
of the region will depend in part on how its relations with these
other frames of regional reference are managed.
Patterns of Development in the Region
There has been a significant divergence in the development paths
of the District of Columbia and the Northern Virginia and Suburban
Maryland parts of the region, Table 1 shows the population of
the District decreasing from a high of 763,956 in 1960 to 606,900
in 1990, During this period the Maryland and Northern Virginia
suburban areas grew from 1,203,979 to 2,586,997 (115 percent).
While employment levels were similar in 1970 (645 thousand in
the District; 715 thousand in the suburban areas) by 1990 suburban
employment was 1,508 thousand (an ill percent increase) with the
District increasing slightly (14,7 percent) to 740 thousand (Table
2). Similar changes occurred in personal income, commercial construction,
and retail sales.
Beyond these more obvious quantitative indicators other structural
changes occurred, Until the late 1980s unemployment in the District
tended to be at about the national average (Figure 1) , Since
then unemployment rates have increasingly exceeded the national
average. Over the same period suburban unemployment rates have
decreased relative to the District, Crime rates per 100,000 population
in the District are nearly twice as high as in Northern Virginia
or Suburban Maryland (US Federal Bureau of Investigation, Uniform
Crime Reports, 1985 and 1992). High school drop out rates are
nearly twice as high as in the District (US Bureau of the Census,
Summary of Social and Economic Indicators, 1980 and 1990). The
fiscal base of the District is seriously jeopardized with almost
daily reports that it will need a "bail out," make ever
more severe cuts in expenditures to balance the budget or become
insolvent. Finally, business formation rates, an indicator of
innovation levels, have historically been low (about 22 percent
of the regional total) in the District compared to much higher
levels in the suburban jurisdictions (see Table 3), These rates
have decreased in the District relative to the outer parts of
the region over the past several years (at the same time the rates
in Suburban Maryland have decreased relative to Northern Virginia).
Given these significant distinctions between the District and
other parts of the Metropolitan Region one would expect some economic
structural differences to exist.
Figure 2 illustrates the economic structure of the economies of
the District, Northern Virginia, Suburban Maryland and the U.S.
in 1991 using personal income as an indicator of the size of different
sectors, The data show that the whole National Capital Region
may be described as a government, and business and technical services
center and that manufacturing is relatively unimportant,
When the services are examined in more detail (Figure 3) notable
differences appear. Business and engineering/management services
are much more important in Northern Virginia and Suburban Maryland;
membership organizations and legal services are much more important
in the District. Further, the federal sector, while important
throughout the region, is considerably more important in the
District although nearly half of all direct federal employment
in Northern Virginia is in Arlington.
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Jurisdiction | ||||
Northern Virginia Suburban Maryland District of Columbia |
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Source: US Bureau of Economic Analysis, Summary Economic Data, 1969-1991 | ||||
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Jurisdiction | ||||
Northern Virginia Suburban Maryland District of Columbia |
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Source: US Bureau of Economic Analysis, Summary Economic Data, 1969-1991 | ||||
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Year | ||||
During 1980s Since 1991 |
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Source: Fuller, S. "Federal Spending Trends in Northern Virginia, 1984-1993 and The Growing Importance of Small Business as sources of Employment Growth" in R. Stough, (ed.) Proceedings of the First Annual Conference on The Future of t he Northern Virginia Economy. Center for Regional Analysis, George Mason University, 1994, pp, 68-86. | ||||
This analysis shows that the District is the home of the federal
government and as such the superordinant locus of public policy
making in the US. More than 40 percent of income generated in
the District is paid directly by the federal government, Further,
while the service sector generated nearly 40 percent of the income
25 percent of this is in legal services--a large amount of which
is in such government related activities as lobbying and regulation,
Beyond this engineering and management accounts for nearly 20
percent of the services (most of this is in management) . The
other major components of the service sector in the District are
education (a number of universities are based there) and amusement
and recreation services although in the latter case the proportion
is less than for the US, as a whole. In conclusion, the District
economy is dominated by the federal government -- the business
of making and executing public policy and regulation -- with some
additional semi-independent components such as visitor and educational
services.
In contrast, Northern Virginia has only about half as much of
its income generated directly by the federal government as the
District which, by the way, is still a somewhat greater proportion
than for the US. The core of the Northern Virginia economy is
business and engineering/management services of which a significant
part is in, advanced technology enterprises. Approximately 124
thousand work in the technology sector which focuses on technology
services such as systems integration, systems architecture, systems
design, and information technology including the development of
network goods (hardware and software) and services (design, installation
and maintenance of networks).
The Donut Metaphor
The above analysis shows that the relative decline of the economy
and quality of life in the District. We may illustrate this with
a donut metaphor which treats the District as the "hole,"
and Northern Virginia and Suburban Maryland part as the "donut"
(Figure 4). In adopting the donut model it is an easy next step
for some to conclude that the hole is no longer needed, i.e.,
that it is possible for Northern Virginia and Suburban Maryland
to chart development paths essentially independent of the District.
In short, with this view not only is the District considered
to be irrelevant but by continuing to treat it as part of the
region some believe that it will drain resources from the future
development of the donut, The donut model is part of the mind
set of more than a few leaders,
The donut model raises two kinds of questions. First, "what
explains the fact that we can even suggest a donut metaphor to
describe conditions in the region?" This question is considered
in the next part of the paper. Second, we must ask "is the
donut a viable metaphor for policy formation for the future of
Northern Virginia or is not a more collaborative approach more
appropriate?" This question is addressed in a subsequent
part of the paper.
Why the Donut Model
There are several f actors that have led to the differences between
conditions in the District and other parts of the National Capital
Region, One is a long term national trend to locate new development
on the edge of metropolitan regions. The renewed vigor of this
trend over the past 20 years is described in a recent book by
Joel Garreau (1990) Edge Cities. The trend has its roots
in transportation developments in the early part of the Twentieth
Century, namely with the advent of reliable trucks and automobiles,
and highways; and with policies that have kept the cost of operating
vehicles relatively low. There are also cultural and social values
and policies that have contributed to concentrations of the less
well off in the interior parts of metropolitan regions. Thus,
part of the reason for the difference in conditions between the
District and other parts of the region is historical due to intra-urban
migration and business location trends toward the periphery.
A second reason for the divergence between conditions in the District
and the outer parts of the region has been the inability of the
historical core to link development on the periphery to its institutions,
There is a tendency on the part of core cities even in the best
of circumstances (e.g., the unigov environment of Indianapolis)
not to recognize growth on the periphery, especially when state
and/or local boundaries intervene, until that growth has become
quite sizeable relative to the core, This has certainly been the
case in the National Capital Region. The boundaries between the
District and the two states veiled the significance and the regional
impact of growth in the outer areas from institutions such as
the Greater Washington Board of Trade (which did not add the "Greater"
to the organization name until the late 1980s), the Washington
Post, the etc. In fact, it is only recently that these institutions
have recognized the need to significantly reshape their agendas
to more fully align themselves with the altered economic geography
of the region. The f act that the growth in outlying areas occurred
very rapidly. (growth in the outer parts of the region grew at
or above 4% annually for the past 20 years) made it even more
difficult for the traditional institutions to fully appreciate
the changing geography of economic activity until quite recently.
In the 1960s and even in the early 1970s development activities
in the outer parts of the region were not large and were confined
to a few locations. Jurisdictions in these outer areas operated
relatively independent from one another as they always had in
their rural and agricultural dominated past. About the only thing
they had in common was that they served as bedroom communities
for those who worked in the District. The fact that economic
growth in these areas unfolded very rapidly meant that it was
very difficult for the government and non-government institutions
(e.g., chambers of commerce) to adjust in time to provide more
regionally integrated leadership. Consequently, as illustrated
in Figure 5, not only is the District separated from the donut,
but the parts of the donut are highly fragmented among themselves
whether one views this from state or local government levels.
In short, there is a high level of fragmentation throughout the
National Capital Region and it exists at many levels.
Convergent or Divergent Development Paths?
We must now ask if there are any compatibilities and necessary
complimentarities between the District economy and the Northern
Virginia economy? If the answer is no then the development paths
of the donut and core could diverge with minimal or no affect
to either part. On the other hand if the answer is yes then it
is important for Northern Virginia leaders to recognize that it
is part of an interrelated whole and to develop strategies and
tactics for charting a more collaborative future.
David Rusk in a recent book Cities Without Suburbs (1992) examines this pattern throughout the US, He observes that when population loss in the traditional core city area falls by more than 20 percent and when income falls below 70 percent of the median income of the outlying areas conditions throughout the whole metropolitan region, which will have already have deteriorated, become extremely resistant to change. By conditions he means a whole gamut of problems ranging from crime and education to tax base and growth to environmental conditions. In short, if the "hole" is allowed to deteriorate below some threshold the whole region will experience negative spillovers that are very difficult to manage. The National capital Region is below the threshold with respect to population loss (about 26 percent) and moving toward the income threshold although it is still well above it at 88 percent. However, Rusk notes that even at the 88 percent income differential negative spillovers tend to occur and become increasingly difficult to manage . Rusk's analysis based on data from 100 US, cities suggests that outer parts of metropolitan areas need to pay attention to what is happening in the interior and help address
deteriorating conditions. Failure to do this may result in the
export or diffusion of conditions in the interior to outlying
areas and thus deterioration of conditions there.
This is probably the strongest reason for taking a more interjurisdictional
approach. Some have estimated that about 60 percent of the Northern
Virginia economy is dependent either directly (employment and/or
contract) or indirectly (via multiplier effects of the directly
generated demand and spending and re-spending) of the federal
sector. The high level of dependency on federal policy making
and budgeting have been important to Northern Virginia in the
recent past (last 20-30 years) and will be important for Northern
Virginia's present and future. The locus of policy making and
budgeting is in the District, For this reason it is also important
to improve and enhance the District as a place where federal policy
is executed and developed. After all, the largest market for
Northern Virginia goods and services (after internal Northern
Virginia consumption) is the federal government. Further, by
improving the quality of the environment (physical and social),
the District's attractiveness for other activities like, for example,
touristic and related visitor services will be enhanced. Yet
the regional leadership and institutional capacity to move in
this direction is not well developed.
Should the Donut Model Guide Regional Development Policy?
The donut model suggests that the outlying parts of the region
and in particular Northern Virginia should adopt an independent
development path. However, the arguments presented above suggest
,that blindly following this path of independence would gradually
lead to a wide variety of negative spillovers and to deterioration
of the highly successful economy and high quality environment
the region has enjoyed over the past 20 years. Thus, some degree
of interdependence must continue to evolve.
Despite the rapid development path that has hindered the emergence
of a more integrated and cohesive region some activities aimed
at helping the National Capital Region build cohesive leadership
have been undertaken. The Washington Council of Governments recently
executed a consciousness raising project that included several
hundred people participating in a variety of meetings throughout
the region. The effort surfaced a wide variety of issues and
identified a number of barriers to developing a more cohesive
approach to regional problem solving and governance (not necessarily
government) . The Washington Board of Trade has formed a senior
leadership development process now called the "Potomac Conference."
The purpose of this group is to develop a more cohesive leadership
for addressing regionwide economic, social and environmental problems.
To the group's credit it has formed a regionwide program to market
the National Capital Region globally. However, its ability to
focus resources on other regionwide issues has been limited.
Beyond these two efforts activity to build a more cohesive ability
to deal with problems throughout the National Capital Region has
been insignificant.
While more efforts of the type undertake by the Washington Council
of Governments and the Greater Washington Board of Trade are needed
progress will be slow because each of the three major subregions
have very different institutional and statutory foundations and
are highly fragmented themselves, particularly in the cases of
Northern Virginia and Suburban Maryland. A more likely intermediate
term possibility to build the capacity to more reasonably and
effectively address regionwide issues would be the development
of more cohesion within each of the three major subareas. Certainly
it will be easier to pull the leadership of Northern Virginia
together to address common issues including relations with the
District (and for that matter, Suburban Maryland or even Baltimore)
and the State of Virginia than it would be to achieve cohesion
at the National Capital Region level. If this were to occur in
each of the major parts of the National Capital Region we would
then have three groups somewhat capable of expressing their region's
priorities, goals and visions and acting on them. One might envision
regionwide development strategy and problem solving being steered
by the interaction of the three groups -- much like the interaction
that occurs among giant tectonic plates. As one moves the others
gradually adjust (sometimes violently but usually through a series
of smaller tremors) and then the whole system settles down until
another plate makes an independent change in course. The tectonic
plate metaphor appears to be a much more viable model for steering
the future development of the National Capital Region than the
donut model which captures a good bit of the current reality.
The tectonic plate metaphor allows each major entity to enjoy
a good bit of autonomy in its development path but at the same
time ensures that the development path of the whole will be conditioned
by checks and balances generated by the other two "plates."
Alternative Models
Besides the "Donut" and "Tectonic Plates"
perspectives, some have advanced the concept of a metropolitan
area made up of a non-hierarchial network of specialized nodes.
Finally and not in jest a new perspective of the leap frogged
and abandoned edge cities with external satellite cities has been
proposed by Stough in Edge City News (Jan./Feb. 1996).
This model maximized the expanded transportation structure and
is dependent on effective use of new telecommunication technology
and efficient application of Intelligent Transportation Infrastructure.
The social implication of these systems in terms of spatial class
and income reorganization for the US society in general and urban
social systems in particular is well beyond the discussion that
most groups have been willing to confront.
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APPENDIX: Selected Maps and Exhibits