28.12.16

POLITICAL AGGLOMERATION ECONOMIES?

Thickly settled areas tend to vote Democrat in presidential elections, while the Republican voters are dispersed.  That phenomenon is nothing new: the last time a Republican won the presidency, I raised the possibility that the blue cities were obsolete, and there was a version of the "urban archipelago" item that appeared at the time, although with Mr Bush winning the electoral vote and more total votes than Mr Kerry, there wasn't the defensiveness that I fear gets into similar maps showing how little of the country's geography Mrs Clinton carried.  On the other hand, Mrs Clinton's rhetoric about "deplorables" is just preaching to the converted.  (The essay that I fisked at the time has since gone down the memory hole.)  I had some reservations about the urban archipelago, particularly the linking of Democratic pluralities to high-crime areas, and at the same time I noted that an urban-hipster-changing-demographic strategy might not be one to bet the election on, particularly if the outmigration we see in Illinois is also present in the other states home to big cities.

But the post-mortems continue to focus on some sort of urban-exurban split among voters.  Consider "How A Train Ticket Could Have Saved The Clinton Campaign."
It’s just intriguing that the easiest way that one can witness the demise of the Rust Belt sits less than a half-mile away from [Mrs] Clinton’s former Senate office. The Capitol Limited is a 780-mile Amtrak route from the nation’s capital to Chicago. It traces several hundred miles of flyover country, a slow burn through the Rust Belt and the remnants of a 20th-century economic boom. Politicians en route to Chicago clearly prefer the two-hour flight to an 18-hour train ride. But if Clinton or any other Democratic leader had simply boarded the train, they might have seen first hand what this stretch of land has become over the last 40 years.

Braddock, Penn., not far from Pittsburgh, was once a cornerstone of the nation’s industrial era. Today it’s a tragic stretch of abandoned homes, crippled storefronts and dilapidated industrial buildings. The city has lost 90% of its peak population over the decades. The same problems can be found along the towns surrounding Harper’s Ferry, West Va.; Garfield, Ohio; Sandusky, Ohio; and Waterloo, Ind., all the way to Chicago.

This is where Americans used to make things, the backbone of a rich and great economy. In these towns there are no “up-and-coming” neighborhoods, no HGTV fixer uppers, no grand plans to push capital back into desperate communities. From the train window, all one sees are the skeletons of something once great, something gutted in favor of cheap Chinese imports and trade deals that underestimated the economic impact on middle America.
The view from the large windows of the Acela are similar, but get off the train and head to the office and you see the fruits of the rent-seeking and hear the stories about the fixer-uppers.  What's different is that once off the Corridor, the surroundings aren't so nice until you get to downtown Chicago, and even then you'd best not stray too far from the Loop.Nut Economist's View's Tim Duy, who we also noted contemplating the effects of globalization here, had already suggested that the people making trade deals were prepared to write off the residents along the Capitol's tracks.  That's not a good way to win elections.
The tsunami of globalization washed over them with nary a concern on the part of the political class. To be sure, in many ways it was inevitable, just as was the march of technology that had been eating away at manufacturing jobs for decades. But the damage was intensified by trade deals that lacked sufficient redistributive policies. And to add insult to injury, the speed of decline was hastened further by the refusal of the US Treasury to express concern about currency manipulation twenty years ago. Then came the housing crash and the ensuing humiliation of the foreclosure crisis.

The subsequent impact on the white working class – the poverty, the opioid epidemic, the rising death rates – are well documented. An environment that serves as fertile breeding ground for resentment, hatred and racism, a desire to strike back at someone, anyone, simply to feel some control, to be recognized. Hence Trump.

Is there a way forward for Democrats? One strategy is to do nothing and hope that the fast growing Sunbelt shifts the electoral map in their favor. Not entirely unreasonable. Maybe even the white working class turns on Trump when it becomes evident that he has no better plan for the white working class than anyone else (then again maybe he skates by with a few small but high profile wins). But who do they turn to next?

And how long will a "hold the course" strategy take? One more election cycle? Or ten? How much damage to our institutions will occur as a result? Can the Democrats afford the time? Or should they find a new standard bearer that can win the Sunbelt states and bridge the divide with the white working class? I tend to think the latter strategy has the higher likelihood of success. But to pursue such a strategy, the liberal elite might find it necessary to learn some humility. Lecturing the white working class on their own self-interest hasn’t worked in the past, and I don’t see how it will work in the future.
Yes, a strategy that builds communities, rather than railing against sin or shaming supposed deplorables, is likely to have some purchase.

But there's something more at work.  The same sort of urban-rural (or perhaps Clerisy-Yeomanry) dynamic appears at work in Europe.
In Germany, the urban establishment underestimated the backlash the recent influx of refugees would provoke in less densely populated areas.

In northern Europe's biggest countries, the rural-urban divide appears to have shaped Europe in 2016. There is no reason to assume that 2017 will be any different. The divide could affect northern Europe to a much greater extent than southern Europe, however, where cities rather than rural areas are increasingly the source of frustration.

Rural northern Europe has been in crisis for years, as younger and educated men and women have moved to cities to find employment.
That's the story of the rural United States, and, more recently, of the smaller central places of the Steam Era, and it's been in progress for about a century (just read your Sinclair Lewis.)  But there are both agglomerative and deglomerative forces at work.
To those who have stayed in rural areas, a feeling of being left behind has replaced the pride of having grown up outside big cities and away from all the problems that are associated with them.

That sense of abandonment — the same sentiment that won over Midwest voters to support Donald Trump — overwhelmed the advice of most of Britain's economic experts and nearly all of the country's leading politicians during this year's European Union referendum.
The agglomeration economies are evident. A Brookings article noted that Mrs Clinton racked up her pluralities in 472 of 3056 counties that account for 64% of gross domestic product.  Agglomeration or rent-seeking?  Here's how Jim Tankersley in Washington's Post describes the numbers.
U.S. economic activity has grown increasingly concentrated in large, “superstar” metro areas, such as Silicon Valley and New York.

But it's not the case that the counties Clinton won have grown richer at the expense of the rest of the country — they represent about the same share of the economy today as they did in 2000. Instead, it appears that, compared to Gore, Clinton was much more successful in winning over the most successful counties in a geographically unbalanced economy.
Those counties also tend to be more thickly settled, and the simple logic of rent gradients suggests housing might be more costly there, and with more people, the raw crime numbers (which is why crime rates make more sense rendered as per thousand inhabitants) will be larger.  But a major party that devotes more of its attention to poverty and inequality might be in a hard place, as the Brookings essay puts it.  "In the end, our data makes plain that while cultural resentments played a huge role in this month’s election, so too did a massive economic divide between relatively prosperous high-output counties and struggling lower-out rural ones. Hashing out a serviceable politics and policy mix to serve that bifurcated reality is going to be a huge challenge."  That gives Joel Kotkin, writing for The Daily Beast, food for thought.
In most urban areas, particularly outside New York and a few other cities, the much ballyhooed “back to the city” movement — mindlessly overblown by the national media — impacts basically the downtown cores, which account for roughly 1.3 percent of the national population, a percentage they have held since 2000. Some inner-ring communities — often right next to the urban core — have lost population in those 16 years. Overall, the outer suburbs and exurbs, home to more than 40 percent of the metropolitan population, have added population at more than five times the rate of urban cores.

The same pattern applies to jobs. Though some cores have gained some employment, that’s been offset by big losses in the surrounding urban neighborhoods for an overall decline in the number of jobs in and around most city centers.

Bottom line: The suburbs and exurbs disdained by most urbanists and Democratic politicians continue to add residents and jobs as inner cities continue to languish.
Meanwhile, as the article notes, Chicago looks increasingly like "one-third San Francisco and two-thirds Detroit."  (The squatter encampments in San Francisco don't yet have analogues in the Loop, but that echoes my "fifteen square miles of privilege surrounded by the Third World.")  And holding that coalition together might not be so easy.

On the other hand, Via Media suggests that where rent gradients are steep, lowering transportation costs to the exurbs might be sound public policy.
There’s a confluence of trends that make this possible. In the first place, the Millennials, like the Boomers, are a large generation that needs both jobs and affordable homes. Second, the shale revolution means that energy in the United States will likely be relatively abundant and cheap for the foreseeable future. Third, both financial markets and the real economy have recovered from the shock of the financial crisis, and, whatever hiccups and upsets may come their way, are now ready for sustained expansion. Fourth, revolutions in technology (self-driving cars and the internet) make it possible for people to build a third ring of suburbs even farther out from the central cities, where land prices are still low and houses can be affordably built.

For national politicians, this is a huge opportunity. Creating the infrastructure for the third suburban wave—new highways, ring roads and the rest of it for another suburban expansion—will create enormous numbers of jobs. The opportunity for cheap housing in leafy places will allow millions of young people to get a piece of the American Dream. Funding the construction of this infrastructure and these homes gives Wall Street an opportunity to make a lot of money in ways that don’t drive the rest of the country crazy.
Perhaps so, although such a building binge, like the one that accompanied the Levittowns, the Interstates, and urban renewal, might turn out to be yet another suburban growth ponzi scheme.

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