Wednesday, January 24, 2018

The Prosperity Paradox

From Ronald Brownstein, at CNN, "The prosperity paradox is dividing the country in two":

While President Donald Trump relentlessly claims credit for the strengthening economy, the nation's economic growth is being driven overwhelmingly by the places that are most resistant to him.

Counties that voted for Hillary Clinton against Trump in 2016 accounted for nearly three-fourths of the nation's increased economic output and almost two-thirds of its new jobs in the years leading up to his election, according to previously unpublished findings provided to CNN by the Metropolitan Policy Program at the Brookings Institution.

That imbalance looks even starker when considering that Clinton won less than one-sixth of the nation's counties. Trump carried more counties than any candidate in either party since Ronald Reagan in 1984.

Yet it is the diverse major metropolitan areas that voted in preponderant numbers against Trump that have clearly emerged as the nation's engines of growth. In the process, the big blue metros have pulled further away from the small town and rural communities that provide the foundation of Trump's support.

The key to this divergence has been the large metro areas' dominance of the job opportunities created by the diffusion of digital technologies, largely in white-collar industries from business consulting to software development. Meanwhile, smaller places remain much more reliant on resource extraction (like oil and gas production), manufacturing and agriculture, which have not grown nearly as reliably, or explosively, as the digital economy.

"We have two quite different economies, and what is happening in recent years is growth is largely emanating from these big county metros," says Mark Muro, director of policy at the Metropolitan Policy Program. "These are not political trends. They are deep economic and technological long waves. And while we are in the midst of this long wave, we are not near the end of it."

These trends long predate Trump's presidency. But the President's policy agenda, which prioritizes reviving manufacturing and promoting energy development, generally favors the smaller places over the large metros -- many of which feel threatened by his initiatives, from restricting immigration and trade to limiting the deductibility of state and local taxes.

Muro, like many economic analysts, is dubious that anything Trump does can meaningfully unwind the consolidation of economic opportunity into the largest metropolitan areas. If anything, Muro says, the tilt toward the big blue metros has intensified in recent years. "We think this is a fundamental sea change," he says.

This pattern creates what could be called the prosperity paradox. Even as economic growth is concentrating in Democratic-leaning metropolitan areas thriving in the information economy, Republicans rooted in non-urban communities largely excluded from those opportunities now control all the levers of power in Washington and in most states. That disjuncture raises a pointed long-term question: How long can the places that are mostly lagging in the economy dictate the terms of politics and policy to the places that are mostly succeeding?

Generally through American history, political power has followed economic power. From the Civil War through the Great Depression, Republicans controlled the White House for 56 of 72 years as the party of the rapidly industrializing and urbanizing Northeast and Midwest. During that era, Democrats were marginalized politically as the champions of the agricultural and resource-producing South and West that felt sublimated by the Northern-based industrial and financial economic order.

In the decades just before and after World War II, Franklin Roosevelt built an impregnable New Deal Democratic coalition that married support from traditionally internationalist Eastern business and finance interests with new efforts to integrate the South and West into the national economy (through mechanisms ranging from the Tennessee Valley Authority to the World War II defense buildup). Similarly, the shift of economic clout to the Sun Belt after World War II prefigured the conservative movement's resurgence from the 1960s through the 1990s around Republicans Barry Goldwater of Arizona and Ronald Reagan of California.

Today the nation's core economic divide is less between regions than within them. After mostly declining through the late 20th century, the large metropolitan areas have restored their position as the locus of growth across the country by emerging as the epicenter of the information economy.

That advantage has allowed many metropolitan areas to achieve booming levels of growth and investment unmatched for decades: Tim Burgess, who served as acting Seattle mayor last fall, for instance, recently told me that the city is now enjoying its best economy since the Klondike gold rush in the 1890s. The intense nationwide competition for the second Amazon headquarters -- which produced finalists located solely in large metropolitan areas -- underscores how digital technologies are concentrating economic opportunity into the nation's biggest places.

Data from Muro and Brookings research assistant Jacob Whiton quantify the dramatic extent of that shift.

In 2016, Clinton won fewer than 500 counties and Trump won more than 2,600. But the counties that Clinton carried accounted for 72% of the nation's increased economic output from 2014 through 2016, the most recent years for which figures are available, according to Brookings. The Clinton counties accounted for 66% of the new job growth over that period as well.

In both output and employment the Clinton counties over that recent period accounted for an even higher percentage of the new growth than they did from 2010 through 2016, the full period of recovery from the financial crash of 2008.

The tilt away from Trump is even more pronounced at the very top of the economic pyramid. Of the 30 counties that generated the largest share of new jobs from 2014 through 2016, Trump carried only two: Collin County (north of Dallas) and Maricopa (Arizona), where Republican-leaning suburbs slightly outvoted a strongly Democratic metro core in Phoenix.

Clinton carried all the other places leading the employment growth list. That included not only such blue state behemoths as Los Angeles, Chicago, New York and Seattle, but also the economic hubs in purple and even Republican-leaning states, from Miami, Oakland County (outside Detroit), to Mecklenburg (Charlotte) and Wake (Raleigh) counties in North Carolina, and Dallas, Bexar (San Antonio) and Travis counties (Austin) in Texas.

In all, Brookings calculated, Clinton won 79 of the 100 counties that contributed the most to economic growth from 2014 to 2016, and 76 of the 100 that generated the most job growth...
These are the fault lines of the next American civil war. When and how it all goes to hell, who knows? But something this fundamentally radical will bring an eruption at some point, and those who anticipate the collapse will be better prepared for the fighting and the fallout.

Still more.