At the tail end of a brief but busy visit to Spain and the UK to meet with current and potential inward investors, Edward G Rendell, governor of the Commonwealth of Pennsylvania, gave fDi a lift to the dinner being held in his honour at the Oxford and Cambridge Club in London.

He and the First Lady, a glamorous-looking federal judge, joke that they are looking forward to arriving back home so that they can eat cereal rather than canapés, but if the gregarious governor is all talked out he does not show it. There is much to discuss about Pennsylvania’s FDI proposition and the renewed emphasis he has placed on investment promotion in his second term.

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First elected in January 2003 and returned to office by a large margin in January 2007, the former mayor of Philadelphia says he has made economic development and growth a priority because “it is the tide that lifts all boats”. The tide is high: last year, at budget time, the Pennsylvania economy produced a near $1bn surplus.

Economic diversity

“We sat down in 2003 and looked at the strengths and the weakness of the Commonwealth, where we could go and how we could continue the diversification of the state’s economy,” he explains. “Remember, it was not very long ago that we were a totally industrial state economy. Coal, steel, aluminium alloy and railroads drove our economy and put it on top for decade after decade after decade.

“However, when the world changed and more competition came in and the technology changed and environmental regulations came in, so many of those original industries are no longer drivers of the economy. They are parts of the economy but no longer drivers, and so we have had to diversify.”

Mr Rendell’s team developed what was called the Stimulus Program, part of which was focused on revitalising the struggling mid-sized cities that had been the biggest losers in the changing economic dynamic. “They were coal towns and steel towns and when the transformation occurred many of them did not have the luck of Pittsburgh to transform themselves and they were left to wither and die on the vine, so a lot of our strategy went towards revitalising and reinvigorating them,” he says.

Export support

“We were looking at ways to expand and grow the economy and the Stimulus was one strategy, but new markets was another.” The administration began to ratchet up the export support it offered to Pennsylvania businesses, particularly small and medium-sized enterprises.

Then, as the outsourcing revolution gripped the country, and the corresponding public backlash followed, the governor saw another opportunity.

He recalls: “I said, ‘Look, if outsourcing is going to be a fact of life then we have to begin insourcing and I think we can do it.’ We developed a strategy, put some dollars behind it, hired a whole new group of investment officers in foreign countries, made it a significant portion of what we do in terms of our economic growth strategy and went from there. Indeed, we became pretty aggressive and involved in it.”

The state also staked a claim to being the most significant player east of the Mississippi River in the development of alternative energy and renewables – a move that brought the leadership “four-square into direct investment”, the governor says, because so many of the world’s alternative and renewable energy producers are foreign-based. “Hence those two things combined and we have pushed off and are seeing some excellent results in many areas,” including not only alternative energy and renewables but also pharmaceuticals and advanced manufacturing.