Place Matters

Place Matters

As in the 1930s, progressives need economic development strategies for the left-behind regions of the country.

June 22, 2017

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This article appears in the Summer 2017 issue of The American Prospect magazine. Subscribe here

Donald Trump’s election may have stunned us all, but it shouldn’t have. There were plenty of signals that regions of the country on whose support Democrats had long counted were in economic collapse. And like most of us, the Democrats failed to see them.

In May 2016, the Economic Innovation Group (EIG) released a study—“The New Map of Economic Growth and Recovery”—that made no discernible impact on progressive discourse or Democrats’ strategy. But, like the Angus Deaton and Anne Case studies on rising death rates within the white working class—which did enter progressive discourse but also had no impact on Democrats’ strategy—it sure as hell should have.

The EIG’s study strikes me as the necessary corollary to the Deaton-Case documentation of the rise in “deaths of despair” within the white working class. What it shows, simply, is that businesses and employment opportunities are concentrated as never before in a shrinking number of metropolises, and that the economies of Everyplace Else in America have all but hollowed out.

AP Photo/David Goldman

Main Street Blues: Storefront in Welch, West Virginia, a mining town that knows all too well about the absence of investment in nonmetropolitan America. 

This hollowing is a development of the past 25 years, as, correspondingly, is the clustering of business in major cities. In the economic recovery of 1992 to 1996, the share of new business establishments created in counties with more than one million residents was just 13 percent. But that share rose to 29 percent in the recovery of 2002 to 2006, and to 58 percent in the recovery of 2010 to 2014.

In counties of 100,000 to 500,000 residents, the share of new businesses was 39 percent in the 1992–1996 recovery, which slumped to 36 percent in the 2002–2006 recovery, and to 19 percent in the 2010–2014 recovery.

And in counties with fewer than 100,000 residents, the share of new businesses created in the 1992–1996 recovery was a robust 32 percent, which tumbled to 15 percent in the 2002–2006 recovery, and collapsed to a flat zero percent in the 2010–2014 recovery.

If you live outside the big cities, what’s not to despair?

The geographic trend in net job creation, of course, tracks the trend in business creation. In the 1992–1996 recovery, counties with fewer than 100,000 residents accounted for 27 percent of the net increase in the nation’s jobs. In the 2010–2014 recovery, they accounted for only one-third of that—just 9 percent of the new jobs. Conversely, in the 1992–1996 recovery, counties with more than one million residents accounted for just 16 percent of the new jobs created, while in the 2010–2014 recovery, they accounted for 41 percent.

It should come as no great surprise, then, that when Working America surveyed the vote in five key swing states in the 2016 election—Florida, North Carolina, Ohio, Pennsylvania, and Wisconsin—it found that the counties in which Hillary Clinton’s share of the vote declined most from that of Barack Obama in 2012 were those states’ rural counties. It also found that the economic metric that most set apart those counties from their urban counterparts was labor force participation: The rates were far lower in rural areas than in major cities.

While the Clinton campaign failed to recognize that these new metro-rural polarities could swing the election, the Trump campaign clearly did. His message resonated in places where work had disappeared; the rural locations of many of his campaign rallies, while bewildering to much of the press corps, actually reflected very acute targeting.

Racist and cultural demagogy clearly played to Trump’s advantage, as they have to Republicans’ advantage at least as far back as the 1960s. But the economic politics of nonmetropolitan decline should have presented the Democrats with a significant opportunity. What was the flight of capital from nonmetropolitan America if not a massive market failure? Nothing under the laissez-faire sun was going to entice enterprise back to the heartland it had abandoned. This regional disparity cried out for the kind of public-sector development policy at which Democrats once excelled.

Not only did the Democrats fail to come up with such a policy; they failed even to see the problem. Over the decades, their ability simply to perceive nonmetropolitan America’s decay had waned—as the unions that once had represented its factory workers dwindled and disappeared, as their elected representatives in those regions grew fewer, and as the centers of their electoral support increasingly clustered in big cities. Some progressive Democrats from heartland states implored the national party to pay attention, but the presidential party wasn’t listening.

The poverty that Democrats were attuned to was urban, and they’ve sought to address that poverty with higher minimum wages, paid sick days, enhanced overtime regulations, and (completely unsuccessfully) labor law reform. But outside the cities? Raising the minimum wage is good in itself, but doesn’t do much for a town where work itself has vanished.

And yet, the political opportunities for the Democrats outside metro America remain very real. Republicans aren’t going to implement any policies that will revive its economy; any for-profit infrastructure projects they may support will steer clear of counties whose residents can’t afford to drive on toll roads. Regions that were home to zero percent of the start-ups in the last recovery aren’t going to get much private-sector investment in infrastructure, or anything else. The economic revival of red America, if it happens at all, will be the work of the blue party—provided the Democrats can commit themselves as thoughtfully and wholeheartedly to a 21st-century version of the public investment that once defined them.

 

IN THE NEW DEALERS, a brilliant and unjustly neglected 1993 account of Franklin Roosevelt’s presidency, historian Jordan Schwarz chronicles an often downplayed focus of the New Deal: its investment in the public works and regional development policies that would help raise the economies of the South and the West to nearer the national norm. The Tennessee Valley Authority, the mega-hydroelectric projects in the West, and the Rural Electrification Administration brought power and higher living standards to the nation’s backwaters. New financial regulations strengthened regional banks and held Wall Street in check.

AP Photo

When Democrats Delivered: Campaigning (successfully) for re-election in 1940, Franklin Roosevelt dedicates the Chickamauga Dam, part of the Tennessee Valley Authority that brought electric power to the South. 

New Dealers like Jerome Frank and Beardsley Ruml floated proposals for regional investment banks to bolster particularly hard-hit parts of the country. Their proposals weren’t adopted, but defense spending in the buildup to and prosecution of World War II rode to the economy’s rescue. And straight through the end of the Cold War, the arms economy served as the nation’s public investment/economic development program. (So did President Dwight Eisenhower’s interstate highway system, which was at least partly conceived as a necessary component of the defense infrastructure.) Presidents had their annual Pentagon budgets approved by members of Congress who never failed to include funding for defense plants and bases in their districts, while the Reagan administration made a special point of directing that spending to its electoral base in Sun Belt states.

But the Cold War’s end brought with it an end to the military Keynesianism that had propped up much of the nation’s economy, most especially in nonmetropolitan areas. The conflicts that engage the Pentagon today don’t require a Cold War–level of manufacturing (nor does today’s semi-robotized manufacturing require as many people as it used to).

The end of the one post-FDR public policy that had steered public investment to the nation’s nonmetropolitan regions was only one reason why the economy outside big cities tanked. The financial pressure on manufacturers to move factories abroad, where labor was cheap, also played a role, as did the increasing robotization of factory work. The dominant industries of the 21st century, finance and high-tech, clustered in cities, and as those cities grew, their low-wage service and retail-sector workforces grew with them.

This urban clustering of enterprise isn’t a uniquely American phenomenon. In the United Kingdom 30 years ago, London accounted for 15 percent of the U.K.’s gross domestic product. Today the capital accounts for a full 25 percent. But this kind of clustering is peculiar to Anglo-American capitalism, in which finance has driven manufacturing offshore, in which economic planning is shunned, and in which the Reagan-Thatcher infatuation with laissez-faire economics has yet to be fully dispelled. Berlin, we should note, accounts for a measly 4 percent of Germany’s GDP.

That’s not just because Berlin at first glance seems a city of grad students. It’s also, as Bob Kuttner demonstrates elsewhere in this issue, because West Germany, partly at the urging of its postwar U.S. occupiers (a number of them veterans of the New Deal), dispersed its manufacturing across the country. It also consistently resisted developing the kind of mega-banks that came to dominate public policy and eviscerate manufacturing in the United States and the United Kingdom in favor of regional development banks.

 

IF THE DEMOCRATS ARE at all serious about developing a 50-state political strategy, they need a 50-state economic development strategy.

That’s no easy challenge, since many of the jobs Democrats once knew how to create aren’t coming back. Anyone who’s spent time in a modern factory knows that machinery now does a large and growing share of the work that humans once performed. “Thirty years ago, it took ten hours per worker to produce one ton of steel,” John Surma, then the CEO of U.S. Steel, told me in 2011. “Today, it takes two hours”—and doubtless less than that today. Construction has also become a good deal more capital-intensive than it was in the heyday of the WPA, most of whose workers used picks and shovels. “The work itself has changed since the ’30s—or the ’60s,” Robert Balgenorth, then the president of the AFL-CIO’s Building and Construction Trades Council of California, told me several years ago. In the 1960s, Balgenorth was an electrician working on building schools. “It took 15 to 20 electricians to build a high school then,” he told me. “It takes four or five today. Stuff that we had to assemble then comes pre-assembled today.” Heavy equipment has changed as well. “You can haul more in bigger trucks today,” he said. “You need fewer drivers.”

That said, the decay of the nation’s infrastructure—from Flint’s water system to LaGuardia Airport—is one of the very few aspects of the American condition acknowledged at all points on the political spectrum. The sheer volume of the work required to restore that infrastructure, much less create the wind turbines and energy-efficient buildings of tomorrow, means that even capital-intensive construction work could still employ millions.

Trump’s barely perfunctory infrastructure proposal is just the latest version of a venerable libertarian fantasy: Have the private sector do it. As Eileen Appelbaum and Rosemary Batt recount, Trump plans to turn over infrastructure to tax-subsidized private equity investors. Such is the condition of nonmetropolitan America, however, that even its Republican representatives have voiced apprehensions about turning over the infrastructure to the private sector. Republican Senators Jerry Moran of Kansas, John Thune of South Dakota, and Roger Wicker of Mississippi have expressed fears that Trump’s plan to privatize air traffic control could lead to the shutdown of small-town airports—completing the devastation wrought by airline deregulation. GOP Senators John Barrasso of Wyoming and Shelley Moore Capito of West Virginia have said that their constituents might not generate enough business to support new highways if they were privately funded toll roads.

For years, a number of progressive Democratic legislators, led by Connecticut Representative Rosa DeLauro, have proposed establishing a national infrastructure bank—a proposal that never went anywhere with GOP control of Congress, and won only belated and lukewarm support from the Obama administration. Other Democratic officials have periodically advanced proposals for state banks, both to fund infrastructure and to provide credit to small businesses; Phil Murphy, the current Democratic nominee for governor of New Jersey, has made such a proposal the centerpiece of his campaign. The plan turned Murphy’s main political liability—his career at Goldman Sachs—into something of an asset (OK, at least he may know how to run a bank).

For Democrats to actually make a politically winning issue of their commitment to infrastructure and the jobs it creates, however, they need to do what California Democrats have been doing for years: lay out specific infrastructure plans for each state, and if need be for each district and each community. In the 1970s and 1980s, Californians were presented with ballot measures that would authorize public bonding to create infrastructure projects; they almost always failed. Once the authors of such proposals wised up and began promoting ballot measures that specified which highways would be built where, and which upgraded, and which districts would get more schools and more parks, the ballot measures began to pass. Elsewhere in this issue, David Dayen tells the story of how voters in L.A. County have twice voted by more than the required two-thirds margin to raise their sales tax to pay for a new $120 billion transit plan that stipulated which rail lines and roads and even bike paths would be built, and when, and where.

AP Photo/David Goldman

A rusted conveyer belt leads to an abandoned coal power plant in Lynch, Kentucky. 

The clear majority of residents of nonmetropolitan America have neither the will nor wallet to vote increases to their local taxes, of course. But that’s all the more reason why Democrats should canvass residents and experts in as many states and districts as they can to devise specific proposals to build what those communities need—to be paid for by progressively funded federal dollars. Those kinds of specific, necessary local improvements should be part of the kind of national project that the Center for American Progress called for this May: a Marshall Plan for America. CAP’s report proposed establishing a new version of the WPA that could “have a target of maintaining the employment rate for prime-age workers without a bachelor’s degree at the 2000 level of 79 percent. Currently, this would require the creation of 4.4 million jobs.” With the jobs paying $15 an hour, CAP estimates the yearly cost would come to $158 billion—a lot of money, but nothing that an increase in the capital gains tax couldn’t cover. (And a survey this May from the Public Religion Research Institute showed that 58 percent of working-class whites favored raising taxes on the rich.)

Elsewhere in this issue, Guy Molyneux argues that those white working-class voters whose support could swing from Republicans to Democrats harbor a profound mistrust and loathing for politicians—but not for equitable government programs that they believe will benefit their communities. Winning their electoral support will require Democratic candidates in districts where such voters predominate not only to demonstrate their independence from the political and financial establishments, but also to run on plausible local or regional economic development plans.

Many of the party’s existing economic priorities play well in both spheres of underdevelopment, the urban and the rural, and among groups found in both places, such as millennials. Reducing costs or eliminating tuition at public colleges and universities is popular everywhere. The public’s level of support for Medicaid, which congressional Republicans’ proposed ACA repeal seeks to slash, is overwhelming: A Quinnipiac Poll from March found just 22 percent of Americans favored cuts to Medicaid while 74 percent opposed them; among white working-class respondents, 29 percent favored the cuts and 66 percent didn’t. The declining incomes of white workers and the rising eligibility thresholds of the ACA have combined to increase the number of Medicaid recipients within the white working class—a development that Paul Ryan and his ilk failed to anticipate.

None of this is to deny that the Democrats’ commitments to racial and gender equity, their support for immigrant and LGBTQ rights, and their general affinity for cultural pluralism all make them toxic to large swaths of the white working class. Worse yet, the economic and demographic isolation of nonmetropolitan America is compounded by an informational isolation, as the various news outlets that bombard them increasingly convey fake news. But unless and until the Democrats devise compelling programs for these Americans—programs that not only help revive their economy but make clear that they are as much a part of the Democrats’ vision of America as any other group—Democrats’ electoral prospects in district after district and state after state will remain dim. And the Democrats’ ability to deliver for their base will continue to be thwarted by basic electoral arithmetic.

Just as Democrats speak to preponderantly urban and largely minority service-sector workers not just with national programs but also with their support for raising the local minimum wage and kindred measures, they need to speak to preponderantly nonmetropolitan and largely white working-class voters with policies for nonmetropolitan development and job creation. Donald Trump won the White House on vague promises to do that, fool’s gold though they’re turning out to be. Now, the Democrats need to deliver the real thing.

They did once. In 1959, as he was beginning his not-quite-public campaign for the presidency, Lyndon Johnson traveled to Hyde Park to speak about his political hero, Franklin Roosevelt. Here is what Johnson said:

He was a New Yorker and an Easterner. But one of the first tasks which he set himself was the raising up of the South, economic problem number one, still suffering from the destruction of capital in the War Between the States. He was an Easterner and a New Yorker, but the second important task he set himself was to bring to the West the electric power, the rural electrification, and the water which it needed to grow. And the West and the South will forever love him—and follow where he led.

That love had begun to fade, of course, even before Johnson spoke, but his appreciation of Roosevelt’s trans-regional empathy and economic and political smarts nonetheless rings true today. If they want to win more working-class votes, white and nonwhite, and actually build the more equitable economy they seek, the Democrats could use some of that empathy, and a lot of those smarts.

Click here to read the rest of our series on the White Working Class and the Democrats. 

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