In a sharp break with the sin and subsidy city’s past, he’s actually trying. The early signs look good.

If you want to understand the challenge Baltimore reform mayor Martin O’Malley faces, walk out of his office in City Hall and head south one block. You’re in the thick of a bustling adult-entertainment district called The Block, where the nudie clubs and X-rated shops became famous in the fifties thanks to stripper Blaze Starr, the sometime lover of Senator Russell Long. Amid the neon lights of establishments like Club Pussycat, Foxy Lady, and Pleasure Palace sits a government office building, home of the elections board and the housing agency. Police headquarters and the district courthouse are on the next block east. Local legislators, city office workers, cops, and court clerks rub shoulders with hookers, hustlers, and hard guys, and trundle by doormen beckoning them to check out the ladies, who now dance fully nude, courtesy of a recent court ruling.

This old-fashioned mingling of officialdom and underworld is a perfect emblem of the political culture that Democrat O’Malley, now in office for just a year, will have to change in order to halt the decades-long decline of the nation’s 16th-largest city, a museum of unsuccessful federal urban policies and self-defeating government initiatives. Baltimore’s economy bled jobs throughout the long national expansion of the 1990s, as the city’s public-subsidy capitalism couldn’t staunch the hemorrhaging of private sector jobs. Meanwhile, former mayor Kurt Schmoke’s dogged adherence to an ineffective soft-on-drugs policing strategy helped turn Baltimore into one of the nation’s crime capitals. Residents fled—more than 120,000 during the 1990s alone. Sapped of its self-confidence, Baltimore became a city "in love with its own victimhood," as one police sergeant puts it—a city imbued, says police chief Ed Norris, with a "Can’t be done, don’t even try" culture of resignation.

To his credit—and in a real break with Baltimore’s past—O’Malley is trying. Properly, he has made crime his first priority. With a murder rate six times higher than New York’s, Baltimore can’t flourish: frightened residents and determined businesses have little choice but to flee. The mayor’s efforts are showing results. Crime is starting to decline, and the first stirrings of a private sector revival are giving the city a glimmer of hope. The task of renewal will be huge, but for the first time in years, the city looks like it has a chance.

The follies that characterized the 1999 mayoral race were a microcosm of Baltimore’s dysfunctional mix of politics and illegality, with an added fillip of the racial hostility that is another unfortunate city trademark. Incumbent Schmoke, Baltimore’s first elected black mayor, declined to run for a fourth term after a disappointing 12 years in office. That Baltimore failed to flourish under his mayoralty, despite the initial press enthusiasm that hailed the handsome Yale, Oxford, and Harvard Law School grad as a rising black political star, is a considerable understatement. With nearly 10 percent of the population—60,000 people—addicted to drugs, more than 300 murders a year throughout the 1990s, only 16 percent of third-graders meeting state reading standards, 15 percent of teenagers neither in school nor employed, an unemployment rate twice that of the rest of Maryland, and somewhere between 10,000 and 40,000 homes left vacant by the fleeing population, the city he turned over to O’Malley was on life support.

The presumptive favorite to succeed Schmoke as the city’s 47th mayor, former Baltimore congressman and now NAACP head Kweisi Mfume, chose not to run in the Democratic primary, leaving the field open to 17 uninspiring candidates. Cops dragged one contender off to court on an outstanding felony warrant after spotting her during a mayoral forum. Another had a 20-year-long criminal record that included convictions for larceny and impersonating a police officer. The front-runners, City Council president Lawrence Bell and former councilman Carl Stokes (both African-Americans), had had brushes with the law. Bell faced lawsuits for failure to pay personal debts, though he managed to spend more than $4,000 from his campaign war chest on fancy new clothes. The desperate Baltimore Sun’s least-worst candidate, "the quiet councilman" Stokes, had repeatedly neglected to pay his income tax, had lied about earning a college degree, and had been caught driving with an expired license.

Despite this sorry slate of mayoral aspirants, when the 36-year-old O’Malley, a white city councilman representing a majority black district, entered the race at the last minute, most observers gave him little chance. Political analysts thought his big idea—to introduce to Baltimore’s dangerous and disordered neighborhoods the "broken windows" quality-of-life policing that has dramatically slashed New York’s crime rate—wouldn’t resonate in the 65-percent black city.

If any city needed quality-of-life policing, though, it was Baltimore. Enthusiastically endorsing the idea of policing as social work, Schmoke had all but decriminalized drug use, insisting that it was a health, not a criminal, problem. Cops grew frustrated arresting druggies only to find them back on the streets a short time later, ostensibly in rehab but in fact selling their wares in menacing open-air drug markets. According to the now-famous broken-windows theory behind quality-of-life policing, widespread tolerance of this kind of uncivil behavior signals a breakdown in the social order, encouraging more serious criminals to act on their darker impulses. An urban environment where cops crack down on the drug dealers sends the opposite message: the social order remains strong, so the bad guys had better watch out. The contrasting experiences of Baltimore and New York bear the theory out. During the nineties, tolerant Baltimore’s crime rate, much of it drug-fueled, rocketed upward (75 percent of the city’s murders were drug-related); tough-on-crime New York’s plummeted.

In a city in which Schmoke won his final term by appealing to racial pride, O’Malley’s race quickly became controversial. "Racism," screamed some of the city’s black preachers. "An O’Malley victory is the worse thing that could happen to the city, it would tear the city apart," thundered Reverend Doug Miles. But both Bell and Stokes ran race-baiting campaigns so over the top that the two candidates self-destructed. Bell’s supporters sent out white-hate fliers endorsing O’Malley—fliers that many thought the Bell campaign itself had produced. The candidate, surrounding himself with menacing Nation of Islam bodyguards, called for black voters to "vote for someone who looks like you." In the campaign’s waning days, he even brought in those old warhorses of urban disaster, Marion and Cora Barry, to rally support. Stokes played the race card too, though not quite so crudely. He came across as the same kind of well-meaning but ineffectual politician as Schmoke, insisting that New York’s policing success was "nonsense"—"a license to hunt minorities." "I don’t need to go to New York for new ideas," he exclaimed to campaign crowds.

A new approach, however, was exactly what voters wanted. O’Malley won an astounding upset victory in the primary, garnering 53 percent of the total vote and 30 percent of the black vote. Compared with Baltimore’s 1995 elections, in which post-election sampling found that 90 percent of voters supported candidates of their own race, O’Malley’s success in crossing racial lines was truly impressive. "People are tired of the crime—tired," said one middle-aged black woman who voted for O’Malley.

Easily defeating Republican candidate David Tufaro in the November general election—Democrats outnumber Republicans in Baltimore by nine to one—O’Malley used his inauguration speech to get across the can-do spirit his administration hoped to exemplify. "If there is no wind," he told a large, racially mixed crowd outside of City Hall in December, "you have to row. The best days in life are those when, out of failure and despair, you take on a new challenge. And you feel alive with the promise of what might be." After the dispiriting Schmoke years, refreshingly optimistic words.

On the face of it, O’Malley has some powerful tools for grappling with Baltimore’s ills. The city has a strong-executive model of government, which gives the mayor power to set budgetary priorities with little threat of opposition: the 19-member City Council can only cut, not add to, his budget. As long as the mayor can maintain the loyalty of ten or more councilmen, his agenda can safely sail through the lawmaking process. And for now, anyway, O’Malley enjoys nearly universal council support. The mayor also controls three of the five votes on the Board of Estimates, a powerful entity that must approve most city spending.

But Baltimore’s plight will test O’Malley’s mayoral powers to the limit. Consider the city’s economy. For decades, Baltimore has pursued a development strategy that brought it economic trophies that were part of a Potemkin economy, masking underlying failure. Baltimore’s approach has emphasized a state-sponsored capitalism that relies almost entirely on federal and state subsidies, rather than market investments, as the key to economic growth.

Baltimore has been one of the few cities in the nation that still have an economy organized around winning clout in Washington in order to funnel federal grant money back home. Democratic senators Paul Sarbanes and Barbara Mikulski, both former Baltimore city legislators, make sure their old town gets treated well in the national budgetary process, Sarbanes from his perch as ranking Democrat on the Banking Committee and Mikulski as the key senator on the HUD budget. Together, the two senators have helped make sure that every unworkable federal program—from Urban Development Action Grants to Empowerment Zones—showers funds upon the city.

The city uses the public funds to subsidize well-connected businesses and developers in public-private partnerships. Virtually every major downtown development in Baltimore since the 1950s has involved some sort of public enticement for developers, whether it’s a matter of grants, loans, or tax incentives. In Baltimore, the saying goes, the definition of developer is an acronym: OPM—Other People’s Money.

One of O’Malley’s predecessors, the colorful William Donald Schaefer, who ruled the city from 1972 to 1986, was a champion of state capitalism. He turned to federal grants and city bonds to finance various development projects, and when those monies proved insufficient, he even created his own city bank to seed development: the Loan and Guarantee Fund. The fund financed itself by selling city property and then leasing it back to itself, and by selling bonds that would stick future taxpayers with much of the bill. When the Baltimore Sun exposed the fund’s shadowy practices, the mayor exploded: "Stay absolutely within the pattern and we would still have, down at the Inner Harbor, a nice rat-infested place."

He’s right: the Inner Harbor tourist and entertainment complex, the city’s biggest draw after the Baltimore Orioles baseball team, wouldn’t exist without massive government subvention. A single example can stand for many: Harborplace, the area’s crown jewel, enjoys a $1-a-year lease on the city-owned property—and this after the city demolished the existing waterfront structures, rebuilt the bulkhead along the harbor, and agreed to provide ongoing maintenance.

Yet the Inner Harbor, for all its glittering facade, is emblematic of the potential pitfalls of state capitalism. To see the underside of Inner Harbor’s success, suggests economist Steve Walters of Baltimore’s Loyola College, look to the Columbus Hall of Exploration, shuttered after only seven months for lack of public interest. Designed as a $60 million entertainment and educational center for children and boasting a stunning roof built of fiberglass sails, the center closed with barely a peep of public comment. Says Walters, "Since much of the money came from the state and the feds, failure really wasn’t a problem for Baltimore." The government’s redevelopment of the area, economists point out, has also drained vitality from the adjacent downtown, home to such respected private sector financial firms as T. Rowe Price and Alex Brown. State capitalism in Baltimore has a still darker underside, too: in the 1970s, prosecutors jailed Schaefer’s deputy public works director and several demolition contractors for bid rigging. The feds had to shut down their Urban Development Action Grants development program in the city because of persistent abuses.

Today, Annapolis (the state capital) and Washington provide a full 40 percent of the city’s budget. With both long-term decline and a growing reliance on outside funding, Baltimore has lost control of its own institutions: the jails, the courts, the port administration, the airport, and the community college—all once city entities—are now the state’s bailiwicks. Even the public schools have become a city-state hybrid, with the bulk of power now in state hands.

Central to Baltimore’s story is the failure—economic and otherwise—of Schaefer’s successor and O’Malley’s forerunner, Kurt Schmoke. Taking office in 1987, Schmoke continued the policy of milking Annapolis and Washington for funds and handing out patronage. Key to his reelection in 1995 were his close ties to the Clinton administration (particularly HUD officials), ensuring growing federal support for city programs, including a $100 million Empowerment Zone grant to spur job creation. By most accounts, the Empowerment Zone has been a dismal letdown, just as a similar, though much older, neighborhood revitalization program in Baltimore, the Sandtown-Winchester Development Corporation, also failed, despite 25 years of generous Rouse foundation support and federal funding.

Schmoke’s trademark—speeches and slogans aside—was passivity in the face of the city’s spiraling troubles, explains Gerald Shields of the Baltimore Sun. His favorite refrain, "It’s out of our control," reverberated through city government, where it was common for a call to a city agency to be answered after many rings with a bored "Yeah."

The tendency to corruption that ran through the Schaefer years persisted under Schmoke. In 1995, federal officials grew suspicious about how the city’s housing authority had wasted $25.6 million in HUD funds targeted for housing repair. When the Sun published a series detailing serious abuses—including cost overruns and faulty work by no-bid contractors, some with close ties to the mayor—Schmoke’s first move was to spend $24,000 in city funds on newspaper ads that stressed that the authority had used "only federal funds, not local tax dollars," and that if officials didn’t spend it, they’d have to return the money to Washington. After the feds demanded repayment of $750,000, Schmoke’s housing chief, Dan Henson, defiantly said the city didn’t owe Washington "diddly." Though the scandal personally implicated neither Schmoke nor Henson, it resulted in the federal convictions of 13 contractors.

In 1998, the inspector general of HUD announced a probe of the Schmoke administration’s handling of federal housing aid. Scores of investigators, including FBI agents, were to spend three years scouring the city’s books for improprieties. The threatened probe sent shock waves through the city’s power structure. First Henson, then Schmoke himself, charged that racism motivated the inquiry. Congressman Elijah Cummings from West Baltimore demanded a separate White House investigation into the inspector general’s decision. In the end, Schmoke won: HUD secretary Andrew Cuomo pulled the plug on the probe, claiming it was indeed racially motivated.

Even as Schmoke poured state and federal funds into Baltimore’s artificial economy, the city’s private sector firms were fleeing to the suburbs in droves. Throughout the long national boom of the 1990s, as other formerly industrial cities renewed themselves, Baltimore’s economy sagged—even though the city entered the nineties with a solid footing in industries that would prove to be among the nation’s fastest-growing elsewhere: financial services and health care.

There remains a viable regional economy, but it’s shaped like a doughnut: as Baltimore lost employment, the suburbs gained. From 1990 to 1999, Baltimore lost 58,000 jobs, but the entire metropolitan area—Baltimore plus fast-growing suburban areas like Howard County—added a total of 62,000 jobs. In other words, factoring the city’s losses out of the whole region’s performance, the rest of greater Baltimore added an impressive 120,000 jobs during the 1990s.

Manufacturing accounted only for a minor part of Baltimore’s economic decline. The city began the decade with only 42,000 manufacturing jobs (less than 10 percent of its economy) and lost another 13,000 before the end of the nineties. But its economy also shrank in places that in other cities were growing. Devastated by the population loss, for example, the city’s retail and wholesale employment slumped by 23,400 jobs throughout the decade, losing more than a quarter of its total. The city’s finance, insurance, and real-estate businesses shriveled by 12,300 jobs, or more than 27 percent, despite the presence of flourishing brokerage and mutual-fund firms like T. Rowe Price and Legg Mason.

Even in the services sector, the fastest-growing of all major job categories nationally, the city performed poorly. Baltimore began the decade with half of all the region’s services jobs, but added only 10,000 more. By contrast, the rest of greater Baltimore boosted its services employment by 80,000 jobs during the nineties.

Johns Hopkins, with its vast medical research complex, remained the largest employer in the city—helped out by the federal government, which made it the biggest recipient of federal research grants in the nation. If Hopkins were in California, it might have been a vast economic engine; instead, stranded in Baltimore, it was without greater economic impact: there were almost no spin-offs from Hopkins research. With so little impact from the university, the city’s health-care sector barely budged in the 1990s, growing by just 1,900 jobs, or 3.6 percent, while across Maryland, health-care employment expanded by nearly 40,000 jobs, a 25 percent growth rate.

If O’Malley has any hope of jumpstarting Baltimore’s stalled economy, he must start from a crucial premise: the city lost jobs because its business environment is unfriendly in the extreme. The city’s property taxes are the highest in Maryland, for starters. The city bureaucracy also exhibits a hostile attitude toward business interests. In the mid-1990s, to take one example, Baltimore’s biggest law firm, Piper Marbury, looking for new office space to stay in the downtown area, eyed becoming the anchor tenant in one of two new office towers scheduled to go up on land controlled by Baltimore Community College. But political wrangling held up the project, and eventually Piper Marbury fled the city, taking 500 mostly high-paying jobs with it to the suburbs.

Even more telling were efforts to find a new use for the old, city-owned Memorial Stadium, where the Baltimore Orioles played before moving to their spectacular new home in Camden Yards. A team headed by A&R Development proposed converting the stadium area into a research park with office space and promised $45 million in private investment to do the job. Instead, Schmoke and his housing commissioner turned the site over to a nonprofit group that had landed an HUD grant to build senior-citizen housing, even though Baltimore, with its population drain, has a housing surplus. Several neighborhood groups, allowed a say on how to develop the site, weighed in for the nonprofit. One minority community member put it directly: "Give me the skills for one of those high-tech jobs. Then we can talk"—that is, if the jobs are going to be for high-skilled white yuppies rather than unskilled minorities, better no jobs at all. Recently, the state has scuttled the project, sending it back to the drawing board.

A final example: the architecture firm of Whitman, Requardt and Associates began a search for new office space in downtown Baltimore several years ago and settled on a former brownfields site in historic Fells Point, on the edge of the downtown business district. The city had zoned the area strictly, allowing only for a 40-foot-high building. Whitman Requardt requested a variance to build a 54-foot-high building, which would contain the office space it needed. The city’s commissioner of Housing and Community Development turned the firm down. "The city’s bureaucracy is largely uncooperative, and very old in its thinking," complained C. Richard Lortz, Whitman’s managing partner. (The O’Malley administration recently approved a deal that included a $1 million construction loan from the city.)

Faced with such anti-business attitudes, Baltimore’s leading companies have expanded in the suburbs instead of in the city. Since the mid-nineties, for example, rapidly growing T. Rowe Price has built five buildings in Owings Mill, Maryland, with 565,000 square feet of office space for 2,200 employees. The Price campus in Owings Mill adds to the nearly 5 million square feet of office space that developers have built in the suburb since the late 1980s, with yet another million square feet scheduled to go up in the near future.

With all these negative things happening to economic development during the nineties, the elephant in the dining room was that you couldn’t step outside your office building without risking your life. Under Schmoke’s crime-tolerant community-policing regime, locals nicknamed Baltimore "Bodymore, Murderland," for it had become the second-deadliest city in the nation, with more than 300 murders a year, for ten years running. In December, as if to symbolize the end of Schmoke’s failed mayoralty, Baltimore experienced one of the most horrific crimes in its history: the execution-style murders of five women—helpless witnesses in a brutal drug-turf war.

In a recent interview, Schmoke admitted frustration over his inability to do anything about the city’s crime problem, particularly the frightening murder rate. "After trying a number of things—police athletic centers, community policing, changing the leadership of the police department—and seeing that number stay year after year above 300 [murders], I ran out of ideas," he laments. "There have been many positive changes," said Schmoke, summing up his years in office. "But you can go ten blocks in any direction and see the worst in urban America."

O’Malley’s big task is to make Baltimore a safer city, no longer a place where one sees "the worst in urban America." One of his first steps was to bring in a new police chief who knew the drill on quality-of-life policing: Edward Norris, a career officer of the New York City Police Department, was sworn in last May. Asked why Baltimore’s murder rate had skyrocketed, Norris responds bluntly: "This culture of ‘can’t do’ became pervasive in the police department. Over the last ten years, maybe longer, they were told, as a police department: you can’t do it, don’t try, don’t arrest drug dealers, you can only get us in trouble if you take proactive steps, you can’t do anything about it unless [drugs] are legalized," he says. "Enforcement was something that was really frowned upon." Or as a public commission put it in December, "Our Police Department has become demoralized" by its inability to fight crime.

Norris needed to change the department’s crime-fighting strategy dramatically. In a city the Drug Enforcement Agency says has the worst heroin epidemic in the nation, and one of the worst crack problems, only 23 detectives were investigating narcotics cases citywide when Norris arrived. "I mean, how serious are you about this?" he asks incredulously. In the short time since he’s become commissioner, that number is up above 150, and he’s seeking federal assistance to boost it to 300 or 400. Similarly, when he took over the department, only four officers were assigned to track down suspects named in 54,000 open warrants—250 of them for murder or attempted murder. He’s assigned a total of 75 officers to the warrant squad, and so far under his watch cops have arrested 96 people wanted for murder or attempted murder, compared with only 11 in all of 1999.

The sense of disbelief in Norris’s voice is tangible as he talks about how ill-equipped the police department was to carry out its duties. "You have the Number One drug problem in America, but they did not have the capability to do an eavesdropping case. There were no surveillance vans here," he grumbles. "It was like they were caught in 1957 or something." Since his arrival, he boasts, "we have more wiretaps up now than in the history of the police department."

In the seven and a half months since Norris took over in May, the murder rate has dropped 21 percent, and Baltimore is on schedule to be under 300 murders for the first time in more than a decade.

O’Malley’s third major challenge—in addition to reforming Baltimore’s economy and slashing the crime rate—is to break with Baltimore’s corrupt political culture. O’Malley has one foot inside and one foot outside this culture. As the son-in-law of the state’s attorney general, Joseph Curran, whose family has controlled northeast Baltimore politics since the 1940s, O’Malley belongs to one of the state’s most powerful political dynasties. To help win in 1999, O’Malley relied on notorious political fixer Jack Pollack’s organization—now managed by his son Morton—to get crucial votes out of the city’s highest-voting precincts in northwest Baltimore. O’Malley’s campaign even accepted a $2,500 donation from Rosalie Jackson, the mother of Kenny Jackson, once a top lieutenant in a powerful heroin-trafficking organization, though today, reportedly reformed, a confidante of the city’s black political leadership.

But in truth, O’Malley’s a latecomer to Baltimore politics. He grew up in the Maryland suburbs of D.C. and cut his teeth on the national stage working for Senator Gary Hart’s two presidential campaigns. He first came to Baltimore in the mid-1980s to help Senator Mikulski win re-election. He attended law school, worked as a prosecutor, and in 1990 won the first of two terms in the City Council. In a city where current political allegiances have decades-old roots, O’Malley—just by virtue of being born in the 1960s in another town—is a political arriviste.

As an outsider of sorts, O’Malley brings fresh activism in fighting Baltimore’s seedy political mores. When a councilman, he condemned Schmoke’s drug-law liberalization policies, called for the dismissal of two successive police chiefs, and exposed the manipulation of the city’s crime numbers. He tried to force accountability in the spending of federal housing dollars, and he took the lead in crafting an early-retirement program to reduce government expenses. (An even better target in cutting expenses would be the public schools, a long-time patronage reservoir, which have added more than 5,000 workers over the past several decades, even as enrollment fell 7 percent.) Now that he’s in charge, he’s forcing a can-do attitude on a bureaucracy that’s unaccustomed to a leader who actually expects results.

Perhaps the most tangible expression of O’Malley’s push for governmental effectiveness is his "CitiStat" program. Described by political scientist Don Norris as "an unprecedented attempt to rethink Baltimore," it introduces transparency and accountability into a city notoriously unfamiliar with either. Modeled on the New York City Police Department’s Compstat program to map crime and direct resources where they are needed, CitiStat applies rapid data-gathering and analysis to all city agencies. Every two weeks, the mayor and his cabinet bring agency managers before them to answer for what the latest round of numbers reveals. Everyone working in government has access to the same information, so insiders can’t escape scrutiny.

At the CitiStat session we attended, deputy mayor Michael Enright began by grilling the sanitation commissioner on why he had exceeded his overtime allotment. When the commissioner blamed the problem on broken trucks, the deputy commissioner in charge of repair explained that a big part of the fleet-maintenance problem was simply that repair people weren’t showing up for work or even bothering to call in sick. His response, something previously unheard of in Baltimore, was to fire some of the offending employees.

The knottiest problems involved inter-agency jurisdictional confusions. The rat-abatement program, for example, was languishing because of a dispute between the sanitation and housing departments. In talking to each other in front of the CitiStat board, the commissioners resolved that the sanitation department didn’t need housing’s permission to enter abandoned, privately owned, lots in search of rats. This, said O’Malley, was the "CitiStat rat epiphany moment."

CitiStat’s aim of systematic accountability is normal in business but extraordinary in Baltimore. Over time, as the city works out the system’s kinks and the data become more timely and reliable, CitiStat should improve agency performance. In the meantime, its inception has found a warm welcome from state political leaders who worry about wasteful administration of a city budget that relies on huge sums from Annapolis. Casper Taylor, speaker of the Maryland House of Delegates, recently sat in on a CitiStat session and remarked afterward, "This is going to make a big difference in how Annapolis looks at Baltimore."

Though the problems O’Malley faces are undeniable, the city he leads isn’t without hope. The seeds of a new, digitized urban economy are beginning to sprout along Baltimore’s waterfront—"Digital Harbor," as city leaders now call it. Baltimore is increasingly seen as a cheaper, more livable alternative to the high rents, horrible congestion, and antiseptic environment of tech-booming Northern Virginia, a mere 40 miles south on I-95. There’s a rising demand for unique, cheap office space with nearby housing, things that Baltimore, with its surplus of abandoned industrial buildings and potentially charming waterfront neighborhoods, has in abundance. Local developers seemingly can’t convert old factories into high-tech offices fast enough. Some waterfront areas like Canton, where there has been a fourfold increase in property values, are blossoming.

Eighteen months ago, few people recognized Baltimore’s high-tech potential. Penny Lewandowski, then the just-hired executive director of the newly formed Greater Baltimore Technology Council, complained that "nobody has a clue that this community is growing and thriving right here in the city." At that time, O’Malley’s idea of a tech strategy for the city consisted primarily of putting computers in public schools. Now he’s come to see the high-tech sector as absolutely crucial to the city’s economic success. This July, speaking to the Democratic Leadership Council, O’Malley demonstrated just how far his thoughts about technology had advanced. "We have made recruiting, supporting, and growing tech companies our highest economic development priority," O’Malley said, "because the Digital Harbor is Baltimore’s future. And, as anyone who has visited lately can see, it’s also Baltimore’s present."

O’Malley is touting figures—$300 million in state funding, a truly impressive $3.5 billion in private investment, and 50,000 new permanent jobs for the city in the next five years—that are hard to believe. After all, the latest reliable figures about the size of the Digital Harbor, which date from 1998, aren’t impressive. In a state where 7.9 percent of total private sector employment is in technology jobs, the Baltimore region pales, with only 6.2 percent, and the city lags dramatically, with just 2.4 percent.

Still, the researcher who came up with these statistics—Anirban Basu of Towson University’s Regional Economic Studies Institute—is optimistic. He points out that the employment figures don’t include the tech-laden universities Johns Hopkins and University of Maryland, and suggests also that the fastest, most stable growth in the high-tech sector is among the smaller, start-up tech companies for which Baltimore is fast becoming a magnet. Recent venture-capital trends reflect this shift. "Maryland companies, particularly those in Baltimore, topped their Northern Virginia counterparts in landing the biggest cash infusions of the quarter," the Washington Post reported in November.

A trademark of the new knowledge-based economy is the idea that companies can locate anywhere. But, Basu points out, technology firms tend to cluster in metropolitan areas with large pools of talented workers—where the workers go, firms follow. This leads to a new way of thinking about economic development for cities that doesn’t emphasize incentives to companies so much as it does quality of life for young tech workers. Baltimore’s cityscape, dotted with charming old neighborhoods, is an attractive location for the young "creatives" powering the second, software and content, side of the digital revolution.

O’Malley, who is now enjoying overwhelming public support, sees an unlimited future for Baltimore. "When Baltimore’s homicide rate comes down," he enthuses, "it will be like pulling a sheet off of a beautiful sculpture whose virtues had been forgotten." He may be right: if the tech tide keeps rising as the crime rate declines and the city’s racial hostilities stay in check, look for Baltimore to climb back from the brink.

Still, there are large question marks. O’Malley has transplanted twenty-first-century technology onto an early-twentieth-century political culture. Will the old body eventually reject the new implant? Will O’Malley himself, a man who seems clearly marked for state or national office, stay with the job? It’s not clear, but if the transplant takes hold and O’Malley stays the course, Baltimore seems likely to have a far brighter future.


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