19.1.08

PATH DEPENDENCE.

It's been my karma to grow up in Milwaukee and work in Detroit and Greater DeKalb during an era of great economic change. There was probably no better seat to observe industrial decline than that of a tenure-tracker at Wayne State. Now comes former Chicago Tribune reporter and Chicago Council on Global Affairs senior fellow Richard Longworth with Caught in the Middle, one observer's perspective on those changes. Mr Longworth suggests that Thomas Friedman's world-flattening is manifesting itself in anything but a level manner in what he calls the Midwest but what might more accurately be called the North Central states (if I remember my Census regions correctly). This Book Review No. 4 will concur in part and dissent in part with Mr Longworth's findings, interpretations, and recommendations.

Mr Longworth argues that both leaders and the Midwestern work force took the persistence of broadly shared prosperity based on manufacturing and farming for granted. Because those lines of business were subject to business cycles, sometimes of great amplitude, many interpreted the turmoil in autos and steel that began in the late 1970s as simply one more nasty recession (to some extent it was) that would pass (but some things changed permanently). Those lines of business enjoyed protection from the rest of the world: with the full power of the government in the case of farming, by default in the case of autos and steel, with that era of broadly shared prosperity the prosperity of a temporarily closed market extracting rents from others. (But if you say that too loudly, people will squawk.) The technology and the absence of competition made it possible for a person with a strong back to earn a decent living and be able to purchase lakeside property and all manner of gasoline-powered toys that ran on the cheap gas of the era. At the same time, the North Central states had some of the strongest universities in the world (the Big Ten, Chicago, what Mr Longworth characterizes as a "rosary" of Catholic universities) and a social-democratic compact in which the muscle workers would pay taxes to support the educational aspirations of the mind workers.

All gone, now. Mr Longworth treats as inevitable the opening of world markets that disrupted the closed environment that was the midwestern economy. There are reasons, however, that the automotive and primary metals were among the first to go. The prosperity of those businesses and the unionized workers was sustained by numerous wedges between price and cost, as well as costs padded by perquisites. Where such a wedge exists, some entrepreneur will attempt to exploit the resulting profit opportunity. But it's more than oligopolistic smugness: the comparative advantage of the United States has involved knowledge-intensive, high-technology products. That's what steel and automobiles were, 100 years ago, and that's what biotechnology is today, and as Mr Longworth noted at his talk last Thursday, we've got plants and animals if that's what high-tech involves. But getting the money and the smart people?

Thus, another problem. As the traditional economic base crumbled, states shifted resources from their universities to supporting other social services, or to building prisons. If the most ambitious faculty and students pursued opportunities elsewhere, perhaps the best response was to withdraw resources. Mr Longworth argues that the history of high-paying yet intellectually undemanding work made skepticism about book-learning rational, while policymakers reacted to deindustrialization with more of the traditional jobs program. In consequence, there's a mismatch of skills to jobs, and the opportunity ambitious youngsters used to have of working their way through university at in-state tuition with a twenty hour a week job during the school term and a factory job as a summer replacement (those union vacations) are gone. (The president of the University of Michigan receives only seven percent of his operating budget from Lansing, although that probably doesn't stop Lansing from micromanaging 100% of Michigan's decisions.) The outcome is likely to be greater social stratification.

But as dismal as prospects are for much of the midwest's traditional economic base, what's left looks pretty good for people pushed into even deeper poverty in underdeveloped regions by the flattening of the world. Thus the most prosperous Midwestern communities either have work for symbolic analysts or lots of illegal immigrants. But where there are illegal immigrants, there is a curious kind of prosperity, and the potential of continued employment for people. That's not without tradeoffs of its own: the union factories close and reopen as sweatshops, and the employers look the other way at fake identity papers, or locate away from the rapid transit and bus lines but send buses into barrios (but never the 'hood.) Thus, the ethnic tensions in poor and changing neighborhoods are exacerbated by a form of redlining in which the projects and the 'hoods simply disappear from view.

Mr Longworth observes that political solutions to the region's troubles are difficult because of the fragmented governance structure, a survival of the Northwest Ordinance and the constraints inherent in making a day trip to the county seat on horseback. Thus political cooperation is difficult, with Wisconsin and Ohio vying for a factory when the overseas investor is thinking only "Great Lakes" or "Intracoastal Waterway." There's also what he views as a wasteful duplication of development offices, state universities, and other public capital. He proposes greater cooperation among states (making the somewhat provocative observation that the European Union is a recognition of the ineffectiveness of individual sovereign governments ... imagine telling Charles deGaulle or Konrad Adenauer that) and the possible creation of a region-wide reciprocity pact in which any resident of any Big Ten state would receive the resident tuition rate at any state university, including the mid-majors and the compass points. In his vision, that would accompany a division of function (the computer science goes to Illinois, the engineering to Wisconsin, the music to Minnesota) and potentially reduce college costs.

To some extent, Mr Longworth's findings echo and extend an observation from The Nine Nations of North America, which argues that the political divisions (whether we're referring to the North Central states, or to Mexico, the United States, and Canada) do not reflect economic and cultural realities. Perhaps not, but political boundaries are not easily redrawn short of war. Furthermore, the creation of a regional policy forum, as he suggests, brings to mind the very North American Free Trade Agreement that many of the people most adversely affected by the flattening world identify as the source of their troubles.

I concur in part and dissent in part with two of Mr Longworth's substantive proposals. He suggests an improved high-speed rail network would make conducting business within the region more convenient and he characterizes the Northeast Corridor as helping unite Boston with New York with Philadelphia with Washington (which, where the global economy is concerned, is pretty much a boring one-industry town in his view.) He also notes that civic leaders in Milwaukee push the airport and the fast train ride to Chicago as a strength of the city. Regular readers know my view about the proper way to speed up a corridor.

Then there's the universities. He envisions, as the most drastic change, turning the flagship land-grants into research-only universities, possibly admitting some juniors and seniors, with the converted teachers' colleges doing the bulk of the baccalaureate work, if that, and that's if the high school curriculum isn't transformed so that some people can be either in the work force or starting college after the tenth grade. There's a lot to consider there, although I suspect that segregating the future symbolic analysts from the boffins so completely is not sound.

Crossposted, pending moderation, at the Fifty Book Challenge.

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