Every now and then there’s a discovery that changes our very understanding of the world around us.
At 2 o’clock in the morning of Oct. 12, 1492, a sailor in Christopher Columbus’ fleet named Rodrigo de Triana shouted out “¡Tierra! ¡Tierra!” (“Land! Land!”) — and suddenly a whole new hemisphere was opened up for colonization.
In the early 1900s, a patent clerk named Albert Einstein start scribbling down some thoughts about the nature of light, space and time — and they led to the splitting of the atom.
Some economists now believe they have made a discovery of their own that’s just as earth-shattering — and one that has direct implications for Southwest and Southside Virginia.
In their language, economists say that “convergence” has stopped and “divergence” has begun. In ordinary language, we’d phrase it like this: The old economic theories don’t seem to work anymore — which means the economic platforms of both major political parties may not work, either.
This involves work from economists at Princeton and the University of California-Berkeley, but the immediate prompt comes from a study recently released by The Third Way, a Washington, D.C., think tank that seeks to craft middle-of-the-road policy solutions.
The study looked at job gains and losses in each county in the United States from 1995 to 2015. Not surprisingly, some counties gained jobs, some lost jobs. However, here’s the interesting thing the study uncovered: Although the number of jobs nationally has grown, those jobs are increasingly concentrated in fewer places, while the number of job-losing counties is increasing.
In fact, most counties are now losing employers.
From 1995 to 2005, the study found 964 counties lost employers, while nearly 2,200 counties gained employers.
From 2005 to 2015, though, 2,109 counties lost employers while only 1,029 gained employers.
If you look simply at the bottom line, the nation’s doing great — we have more jobs than ever before. However, an increasingly bigger swath of the country is going backwards. In fact, geographically speaking, two-thirds of the country is going backwards.
That two-thirds includes most of Southwest and Southside Virginia. The study found that from 1995 to 2005, virtually all of Virginia’s localities gained businesses — and, presumably, jobs. From 2005 to 2015, though, the study found most of Southwest, Southside and the counties along the Chesapeake Bay lost employers.
Note that the 2005 start date is before the last recession, and the 2015 end date is well after the recovery began, so the numbers shouldn’t be skewed by the downturn in between. In reality, though, what the study shows is that the recovery never really happened in much of rural America, or large swaths of the industrial heartland from the Midwest to New England. To some extent, we know this intuitively, but this study puts actual data points behind what we “know” in our bones.
Economists believe this represents the discovery of a new phenomenon. Historically, when a country’s wealthiest communities did well, the poorest communities tended to improve as well. Whether you consider that “trickle-down economics” or “a rising tide lifts all boats,” the result was the same. “Policymakers and macroeconomists could focus on trying to improve overall national well-being, with confidence that a higher growth rate or lower unemployment would be, over time, widely shared,” writes Neil Irwin, senior economics correspondent for The New York Times in a recent story on the report. Now, though, that “convergence” — the technical term — isn’t happening. Instead, what we’re seeing is just the opposite — “divergence.” Princeton economist Elisa Giannone recently authored a paper which found poorer communities were, indeed, gaining on wealthier ones from 1940 to 1980. Since then, they haven’t been. On the contrary, the Third Way report shows that divergence has set in. What changed?
Some on the left might focus on 1980 as the year that Ronald Reagan was elected and blame Reaganomics. Economists, though, focus on something even bigger: The economy is changing, in ways that punish many rural areas and benefit certain urban ones. Low-skilled manufacturing jobs are disappearing — either moved overseas where companies can find cheaper workers, or simply gone altogether as certain jobs get automated. The communities doing best are the ones that have mastered the new technology-based economy.
The Third Way study noted a direct political correlation between economics and politics. In 2004, there George W. Bush and John Kerry ran about equally well in both “opportunity rising” and “opportunity falling” America. By 2016, there was a big gap — with Hillary Clinton crushing Donald Trump in “opportunity rising” communities but losing, often badly, in “opportunity falling” communities. That’s an understandable reaction — if things are not going well, voters typically tend to vote for a change. It also explains Trump’s trade policies — he’s convinced he can bring back some of those low-skilled manufacturing jobs. Can he really, though? And is that really the right bet in the long run?
The McKinsey Global Institute reported last fall that automation is likely to eliminate 73 million American jobs by 2030 — and 800 million around the world. It’s incorrect to say that manufacturing jobs are disappearing — but low-skilled ones are. The future in manufacturing is in “advanced manufacturing,” which often resembles computer work more than the traditional factory job. That’s bad news for a lot of older workers.
Curiously, the Third Way report does a good job of describing the problem but doesn’t offer any solutions: “Two-thirds of America’s counties shed businesses over a ten-year period and one-third gained them. In essence, the digital age has created two different economies spread out through America. In one economy, opportunity gathered; in the other it disbursed. As recently as twelve years ago, these two sets of counties voted almost identically. Now they are not only different economically, they are different politically. The polarization of opportunity has been a precursor to the polarization of politics. The antidote to the ugly populism seizing much of America may be to spread opportunity to more people and more places.”
So who’s going to do that? And how? Tomorrow, we’ll look at some of the options.