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James T. Brady is a managing director of Ballantrae International, a management consulting firm. He is a member of the boards of T. Rowe Price, Constellation Energy Group and McCormick & Co., and was secretary of the Maryland Department of Business and Economic Development from May 1995 to April 1998.

Q: What challenges or obstacles does Maryland face as it tries to recover from the Great Recession?

A: The primary challenge that Maryland faces as a result of the Great Recession is not the "transition to an innovation economy" but rather the necessary transition from an economy disproportionately dependent upon jobs produced directly or indirectly by government agencies, to one that has an appropriate focus on private-sector job development. While there are many unanswered questions relating to the current downturn, one thing is crystal-clear — the size of governments, federal, state and local, will not return to pre-recession levels anytime soon. This represents a formidable challenge for a state like Maryland that has a long history of not making economic development a high-priority issue.

Q: What are the state's economic strengths? What are its weaknesses?

A: Maryland's inherent economic strengths are considerable. They include a very attractive quality of life, a prime location, a nationally recognized education system, an outstanding transportation network and, very importantly, a highly skilled work force. This is an array of assets that should make it an economic powerhouse. Unfortunately, however, Maryland's weaknesses are also considerable. It is known on a national scale as a state that is not business-friendly with an unpredictable and often punitive regulatory environment, an uncompetitive tax structure and entrenched political leadership that does not view being supportive of business interests as a political or policy priority. In all too many cases, those liabilities have trumped the state's natural advantages when businesses consider their many alternatives. In the past several decades, not one Fortune 500 company has chosen Maryland as it considered a new headquarters location. This is not a coincidence.

Q: You've said that “there is no such thing as an innovation economy,” but that innovation should be supported as part of the state's overall economic development strategy. Specifically, what role do you see innovation playing in this strategy — for example, what innovation industries should be actively fostered, and how?

A: To be clear, my point is not to minimize in any way the importance of a unique focus on innovation. Rather it is to raise a red flag that using catch phrases like "transitioning to an innovation economy" runs the risk of diminishing the continuing importance of the outstanding businesses in the state that represent the core of the economy and are not considered to be part of the so-called "innovation economy."

That having been said, it certainly makes great sense for Maryland to pursue a program of attracting and developing businesses that are innovation-oriented. It capitalizes on our educational and work-force strengths as well as our proximity to some of the most respected research institutions in the world. Cybersecurity, cloud computing, social media, biotechnology and alternative energy would be areas of unusual promise at this time. Companies in these industries traditionally require financing assistance in their early stages and Maryland would be well-served if it developed a more coordinated statewide approach to take advantage of the resources available through the Technology Development Corporation and the state's robust venture capital community.

Q: What are the other components of a comprehensive development strategy?

A: There are many components of a comprehensive development strategy, but two in particular are absolutely essential. First, economic development must be a continuous process and not an episodic response to specific economic downturns. Just as protecting the environment is appropriately a 24/7, 365-day-a-year priority, so should job creation and economic development.

Second, nurturing and supporting existing resident businesses must be a constant focus. History is quite clear that most jobs are created through the growth of these businesses and that this is by far the most cost-effective way to make it happen. Maryland's strategy should include a much more comprehensive effort to identify the legitimate needs of its existing businesses as well as a firm commitment to respond to these needs from a political and legislative standpoint.

Q: What role should the state government play in pursuing such a strategy? Should the state be devoting more resources to economic development to compete with other states?

A: Private-sector job creation is the province of the private sector. Jobs are created not because of tax credits or other incentives but simply because business growth demands it. Government's role is to create an environment that makes it both possible and attractive for that growth to occur. Having regulations that are fair, predictable and efficiently administered, and a tax system that is competitive with other states are extremely important examples of how government can thoughtfully influence and enable economic development. Expensive financial incentive programs should not be the foundation of the state's development agenda and should only be utilized in unique situations that have the promise of exponential benefits to the state.

Q: What's the appropriate balance of private- and public-sector jobs in Maryland? Explain.

A: There is no credible measure that determines the appropriate relationship between private- and public-sector jobs. Maryland's problem has not been that it has attracted too many federal jobs, but, rather, that its success in that regard has allowed the political leadership to be less focused on the rudiments of a sound economic development program. Now that public-sector employment is, and will continue to be, in decline, there is an apparent effort being made to establish a private sector focus — and that effort has adopted the mantra of "transitioning to an innovation economy."

However, rather than a glitzy campaign that sounds good, what is really needed is a new attention to basic blocking and tackling. A constructive first step would be a commitment to fundamentally change the way the state government and the businesses that will ultimately determine our economic future communicate and work together in the interests of all Marylanders. That relationship has not worked effectively for a very long time; now is the time to thoughtfully and aggressively change that dynamic. If this were to happen, the question of the appropriate balance between public- and private-sector jobs would be moot.

Q: Given the current uncertainty over federal spending, what advice would you give the state's many federal contractors?

A: The current economic turmoil is causing virtually every business in Maryland to re-examine its strategy and adapt it to what is expected to be the new reality. While federal contracts will not disappear, it is critical that contractors view this period of uncertainty as an opportunity to inventory their considerable skill strengths and creatively relate them to non-government situations. That is no small task, but the only realistic alternative is downsizing. It would serve them well to enlist the assistance of experienced business consultants to help them make this transition. It is highly likely that the ability to develop a proper public-private balance will ultimately determine the long-term winners and losers.

Q: How does a contractor such as Lockheed Martin — whose existence is largely based on working for the federal government — transform itself into a company with a major private-sector business?

A: Lockheed Martin is a world-class enterprise with outstanding technical expertise, substantial financial resources and a long history of adapting to significant environmental change. The company has already begun moving aggressively into new areas where its extraordinary depth of talent and experience can make a profound difference. Professional agility has been a hallmark of Lockheed Martin's past success and will serve the company extremely well in these challenging times.