Daniel Block in the Washington Monthly: “To avoid watching in horror as the Senate slips away forever while the Electoral College map becomes ever more daunting, liberals need a long-term strategy to combat the decline of heartland cities—to turn Clevelands into Denvers. To do so, they need to first recognize that geographic inequality did not come out of nowhere. It is not the inevitable product of free market forces clustering new skill and innovation around where all the old skill and innovation are found—nothing makes people in St. Louis or Milwaukee any less talented than people in San Francisco or Washington, D.C. Instead, it’s the result of nearly four decades of policy choices in Washington—such as giving large banks and other corporations in elite coastal cities free rein to acquire rival firms headquartered in cities in America’s interior. This has stripped those interior cities of what were once their economic engines, even as it has enriched the already wealthy coastal megalopolises.
“Fixing America’s regional inequality would be a good idea irrespective of its political implications. It would increase innovation and GDP across the country. With economies, as with professional sports leagues, having more cities that can compete ups everyone’s game. It would help curb the broader scourge of income inequality. And it would improve our quality of life by making it easier for talented people to stay with family and friends in the communities where they grew up, or to move wherever else they might like to go, rather than being channeled to a handful of overly expensive, traffic-choked megacities.
“But reducing regional inequality is a case where what’s good for the country would also be good for the Democrats. …
“The Republican Party’s current economic strategy—tax cuts and less regulation with tariffs on top—will not help heartland cities. It isn’t designed to. It’s therefore up to Democrats to advance policies that will distribute economic power and opportunity to parts of America beyond the coasts. That means, first and foremost, challenging monopolies head-on. The next Democratic administration needs to turn up the dial on antitrust enforcement, blocking proposed mergers like the Express Scripts–Cigna deal and breaking up giants that have already accrued too much market power. …
“It also means rewriting banking legislation to disperse financial power from the big coastal money centers and out to the rest of the country, as was the case until the recent era of deregulation. Local businesses can’t thrive without sources of financing, and study after study shows that local and regional banks—because of their rootedness and greater local knowledge—are more willing and able to make those loans than Citibank or Bank of America.”
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IMHO he’s right on the general concept but weak on the particulars. Yeah, the new ways of making money are concentrated in certain places, just as the old ones were. But after all, there’s a reason not just anyone can move to Boston — building housing in Boston is tightly regulated, so housing prices are artificially high, and people in St. Louis can’t afford to move to Boston.
Or we could note (as many on the serious Left have) that free trade in goods really undermines the wages of manufacturing workers in the US. In recent times, the only politician to favor protectionism seems to be Trump. But for unknown reasons, the anti-free-trade crowd isn’t grasping the opportunity to push up the wages of blue-collar folk, though not many years ago, they were willing to riot about it.
The larger picture seems equally bleak. The Trump crowd is basically non-college-educated whites a/k/a working class whites or lower-middle class whites. As far as I can tell, they see their primary competitors to be (1) the class below them, the poor (those who subsist on government benefits), (2) the class above them, the well-educated professional class, and (3) working class non-whites. The Democratic Party seems to be basically a coalition between (1) and (2), and I don’t see any of the policy ideas that are popular with Democrats improving the position of working class whites vis-a-vis any of the other three groups.
Maybe I’m wrong here, but I’ve not seen any Democratic proposals which really help this group.
“But if the more promising solution to income mobility is to create a viable path from poverty to the upper middle class, then political support will tend to disappear. The class of liberal professionals who talk about reducing income inequality are not threatened by talk of taxing the 1 percent. But they would lose out from a broad equalization of incomes between the top 25 percent and the bottom 25 percent.” — Megan McArdle
OTOH, there is one Democratic nostrum that would help: a nationalized medical (insurance) system. Currently, all of the medical technology development in the world is done in the US because that’s the only place that some new-and-shiny thing can be sold at high prices to well-heeled patients — everywhere else tags along at bargin-basement prices, so investments in medical technology can’t make their money back on them. And medical technology development is incredibly concentrated in metro Boston, snd specifically the two miles between Harvard Square and Kendall Square.
Nationalized medical care would immediately kill the profits in medical technology development, and that would immediately kill the investment in medical technology development. So the economy of metro Boston would lose its biggest high-tech driver, which would reduce the inequality between the coastal cities and the interior cities.
As Robert Reich said in “The Work of Nations” in 1992, “America’s problem is that while some Americans are adding substantial value, most are not. In consequence, the gap between those few in the first group and everyone else is widening.” He wasn’t perfectly accurate about who falls into which category; e.g., low-skilled people who can work in the U.S. create significant value simply because affluent people will pay them to do chores for them, and their competition is limited by the U.S. immigration system. But he was right that people with no rare skills whose output can be traded feely around the world do not produce things with a high market value, because people in much poorer countries can produce those things also.
A few days ago I was reminded of this topic by an article in the Boston Globe noting that Maine has the oldest population of any state. The article was long on the problems this causes and entirely silent on what might be done about it.
Going back to “nothing makes people in St. Louis or Milwaukee any less talented than people in San Francisco or Washington, D.C.”, which is utterly incorrect — the percentage of advanced degrees varies significantly by state. (And it correlates very well with whether a state went for Trump or Hillary.) Presumably there isn’t a great variation in where such people are born, but they move to certain places.
The problem becomes how to get the talent to come to Maine when there isn’t a high-tech cluster there already. Fortunately, there are some straightforward policy levers: fund the state universities well so they have good professors, give big tuition discounts to good students in the state universities, and to keep them around after graduation, fund the public schools well (and demand that the teachers be good).
When you’ve got the talented workforce in place, the businesses will come, or be founded there.
(A bizarre version of this happened in Fairfield, Iowa. The Transcendental Meditation organization bought a defunct college campus there and established Maharishi International University. Lots of dedicated TMers moved there, many of them well-educated. But the local businesses didn’t really like hiring them (and probably didn’t need that many college graduates), so TMers founded a lot of relatively high-tech businesses.)
There are a couple of political problems with this approach: (1) it uses money which could be used to pay for services for elders (who dominate the voting population), and (2) the people who benefit most are the smart people from out of state that you attract, rather than current residents.
Also, if you want to get the state to vote Democratic, this doesn’t work all that well. Yes, the highly-educated will vote more Democratic than the current residents, but because the overall population density and cost of living will remain low, Maine won’t have a lot of the problems that Democratic nostrums are good for relieving.