Democrats Need to Fix Rural Economiesand Get the Credit for It – The American Prospect

There was a lot to like about President Bidens first State of the Union address, but sadly, I disagree with his conclusion. The state of the union is not strong; in fact, the American people have rarely been less united. And the political rupture that threatens to tear our nation apart is largely occurring along the urban/rural divide.

The causes of this division are many and the solutions are often daunting or obscure, but it is impossible to deny that one of the largest contributing factors has been the extreme geographic inequality that has grown over the past four decades of bipartisan neoliberal rule. Throughout rural America, once-vibrant factory towns have been impoverished and dismantled through the offshoring of manufacturing jobs. Local businesses have been struggling to compete against the concentrated buying power of national chains, while local workers have been forced to struggle to make ends meet as monopsony employers have relentlessly pushed down wages. Small and midsize farmers have been at the mercy of a handful of agribusiness giants with the power to dictate the crops to be sown, the livestock to be raised, and the price to be paid for them. Local tax bases have eroded, and with them the services, schools, infrastructure, and other public investments necessary to secure a prosperous future.

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The American economy continued to expand throughout the neoliberal era, but nearly all of the benefits of this growth accrued to a relatively small number of big cities and their surrounding counties, a trend that only appears to be accelerating. At the median, rural workers now earn only 82 cents on every dollar earned by their urban counterparts, and as rural jobs grow more scarce and less diverse, rural workers have fewer opportunities to close the gap. Nationally, the U.S. workforce grew by 68 percent since 1975 while rural employment actually shrank by nearly a third. Between 2007 and 2018, just 11 percent of counties captured 9 out of every 10 new jobs, a massive concentration of employment and wage growth in a handful of deep-blue metros. In second-tier cities, small towns, and rural counties, the health and well-being of residents are being left behind.

Compared to their urban counterparts, rural Americans are 22 percent more likely to experience poverty, food insecurity (by a 19 percent margin), and to lack health insurance (by 15 percent), contributing to higher rates of depression, addiction, suicide, and other deaths of despair. The COVID-19 virus has shone a particularly harsh light on the consequences of rural economic dislocation. Early in the crisis, cases predictably surged in the dense big cities where community transmission was hardest to avoid. But over the long course of the pandemic, regional socioeconomic disparities conspired with higher rates of obesity, diabetes, hypertension, and other comorbidities to leave rural Americans far more likely to suffer severe illness or death.

If rural voters are angry, they have every right to beand if they look at the relative wealth and good fortune of urban elites and blame their woes on Democratic policies, its not hard to understand why. Yes, there is massive and growing inequality within big blue cities too, but in the aggregate these booming cities are receiving nearly all the benefits of the information economy while rural America reliably gets none. Rural voters are angry, and lacking a more obvious villain they routinely punish Democrats, the party of the cities, at the polls. As the violent rhetoric surrounding the January 6th insurrection indicates, theres a not insignificant number of Republicans who passionately believe that electoral defeat isnt nearly punishment enough.

Rural voters are angry, and lacking a more obvious villain they routinely punish Democrats, the party of the cities, at the polls.

In a truly representative democracy, such extreme geographic inequality would be alarming, but given the peculiar characteristics of the American political system, it threatens to undermine democracy itself. The U.S. Constitution vastly overrepresents small rural states in the U.S. Senate and to a lesser extent in the Electoral College, while a centuries-old tradition of partisan gerrymandering has combined with 21st-century demographics to overrepresent rural voters in state legislatures and in the U.S. House. In nearly every recent election cycle, Democratic candidates routinely receive millions more votes than Republican candidates for the House, the Senate, and the White House, and yet the Republican Party could plausibly establish a regime of minority rule (not to mention a stranglehold on the federal courts) for at least a generation to come. Beholden, both ideologically and financially, to corporate interests, Republican elected officials do little if anything to actually help their rural constituents. Instead, they nurture a politics of grievance. But given the failure of Democrats to offer a compelling alternative, grievance alone appears more than enough for Republicans to continue to secure the rural vote.

President Biden and congressional Democrats have a frighteningly narrow window to persuade a small but electorally significant percentage of rural voters that only Democrats can and will serve their communities needs. To do this, Democrats need to aggressively run on rural revitalization as a centerpiece of their economic agenda in 2022, 2024, and beyond, while immediately using every policy tool at their disposal to begin the difficult work of reversing the extreme geographic inequality that the past 40 years of neoliberalism has wrought.

This should start with the creation of a Cabinet-level director of rural economic revitalization to coordinate the mishmash of existing programs, to guide the development of future policies and programs, and just as important, to serve as the relentlessly visible face of the administrations dedication to improving the lives of rural Americans. To be clear, it is not enough for Democrats to genuinely attempt to solve this problem. It is not even enough for Democrats to succeed. If Democrats are to have lasting success at improving the lives of rural Americans, they must be seen by rural Americans as having success. The first rule of electoral politics is you cant be the grown-up in the room if youre not in the room. Democrats need to get over their preference for highbrow policy wonkery and get about the lowly task of shamelessly advertising their accomplishments for a change.

If you think this is a job for the secretary of agriculture, think again. According to the U.S. Census Bureau fewer than 1 in 10 rural workers are employed in resource-based industries like agriculture, forestry, fishing, hunting and mining, and according to the U.S. Department of Agriculture (USDA), farming itself accounts for only 1.4 percent of employment nationwide. In fact, by far the largest employer of rural workers is the education services, health care and social assistance industry, which accounts for 22.3 percent of rural employment, followed by manufacturing and retail trade, at 12.1 percent and 10.9 percent, respectively. Our tendency to conflate rural with agricultural has made it harder to understand the problems facing rural communities, let alone solve them. The USDA, with its primary emphasis on promoting and regulating the agribusiness and food industries, has neither the focus nor the expertise to rise to the task. Neither do the hodgepodge of other agencies that moonlight in economic development, many of which offer one-size-fits-all programs intended to serve both urban and rural communities alike.

There are literally hundreds of existing policies and programssome of which can and do helpalthough many are chronically underfunded, difficult to access, difficult even to find, and often poorly implemented. A confusingly complex web of programs is currently available to rural communities: There are some 400 economic and community development programs alone that span a dozen federal agencies. There are more than a dozen congressional committees that have jurisdiction over authorizing legislation.

The first job of the director, then, is to identify, consolidate, and coordinate these programs under centralized administration. The second job is to establish and amply staff regional offices nationwide charged with guiding local authorities through the complicated process of navigating the web of available programs. The Small Business Administration and the Economic Development Administration both have networks of regional officesthough all located in urban districts. The federal governments regional revitalization offices should be distributed widely, within driving distance of every rural community, providing one-stop-shopping access to local leaders and constituents alike. It is a well-known weakness of our current system that the communities most in need of federal aid are often those most lacking the resources necessary to acquire it, while those that are most successful at accessing these programs are often those with the least need. It is through these regional revitalization offices that the White House has an opportunity to play its most active, impactful, and again, most visible role.

Yet however competent the administration, more of the same is clearly not enough. Many of the economic-development challenges facing rural economies are fundamentally different from those in large cities and call for a fundamentally different approach. Addressing this crisis at scale requires both big new ideas and the active input and efforts of the local political, business, and civic leaders who know their communities best. To this end, we should balance the top-down Office of Rural Economic Revitalization and its regional offices with the creation of hundreds of local Economic Revitalization Councils. Some will succeed, some will fail. It is the job of the director through the regional offices to nurture, guide, and fund these local efforts, and then to help propagate their most promising innovations to other local councils. Because rural economies are diverse, revitalization will require a diversity of local solutions. This can never be achieved through top-down administration alone, however competent or well-meaning. The ultimate goal of the director is to help local communities revitalize themselves.

Economic-development challenges facing rural economies are fundamentally different from those in large cities and call for a different approach.

That said, our current crisis of geographic inequality is the direct consequence of policy choices made at the national level, and thus the director must also play a leading role in developing and advocating for substantial federal policy reforms. To this end, the local councils can also play an important part, serving as a source, a sounding board, and a political force for national policy innovations.

The job of the director is to lead, not to follow. In his State of the Union address, President Biden twice emphasized that we must grow our economy from the bottom up and from the middle out. Absolutely. But if we are to substantially reverse decades of geographic inequality and the divisive politics it has sown, political leadership, guidance, and funding must come from the top down.

Central to understanding why the challenges facing rural economic development are different from those in cities, as well as the nature of the reforms we must embrace, is to recognize the three major economic forces that are driving geographic inequality: agglomeration, globalization, and corporate concentration.

It is no secret why high-paying tech companies tend to agglomerate in a handful of metro areas: Technological innovation is the product of large numbers of highly educated workers with a huge diversity of specialized skills cooperating across immensely dense social and economic networks. This convergence of density and diversity is an order of magnitude more important than any other factor in our modern technological economy; it creates thick labor markets in which employers can more easily find workers with the skills that exactly fit their needs, and in which workers can find jobs that exactly fit their own career goals and skill sets. Thick labor markets can be expensive, but they are extremely efficient, and they can only develop in and around cities with the scale necessary to support them. No tax incentive, real estate giveaway, or union-busting right to work regime can make up for it. That is why both workers and employers are so eager to pay the high costs required to live and work in a handful of booming blue metros.

Agglomeration is about as close to a force of nature as youll find in economics. It is an increasing returns phenomenon. You cannot effectively legislate for or against it. The same is not true of globalization or corporate concentration, both of which are creatures of the laws, regulations, and institutions we choose to create.

While certainly aided by advances in transportation and communications, the export of U.S. manufacturing jobs to low-wage countries and the relentless downward pressure on the wages of those manufacturing jobs that remain is largely the consequence of neoliberal trade and labor policies adopted since the 1970s. Whatever ones views on the net benefits of globalization, one must still acknowledge that our current regime of free trade is a purely legal constructand that allowing capital and goods to flow freely across borders, while humans remain more rooted to a place, inevitably disempowers workers. Likewise, the vast concentration of corporate power we have allowed to accumulate over the past few decades is a legal construct too, only rather than being a consequence of changes to our antitrust laws, it has largely resulted from the changing legal interpretations of courts and administrations. Prior to the 1970s, our courts and regulators would not allow a handful of companies to dominate an industry through mergers and acquisitions, regardless of the alleged benefits to consumers. Today, such domination is the norm.

The impact of these changes in the legal order on nonurban communities has been particularly devastating. Millions of manufacturing jobs that once supported these regions have moved overseas, while many of those that remain no longer pay middle-class wages. Locally owned businesses that once proudly anchored small towns have been outcompeted or consolidated away. What job growth these regions have seen has largely been in the low-paying service sector dominated by retail and fast-food giants with the market power to force down wages both for their own workers and for those at remaining locally owned businesses. This Walmart Effect is well documented. But so too is the ability of targeted policy changes to combat it.

One of our most effective policy tools is the minimum wage, but rather than relying on a one-size-fits-all lowest-common-denominator approach, it is time to consider a graduated wage in which the largest employers pay a higher minimum. For example, a small locally owned business might be required to pay a $15 hourly minimum wage, while the local Walmart or Amazon warehouse might be required to pay a minimum of $25 an hour. We might think of this as a countervailing wage, intended to countervail the outsized power of these corporate giants on behalf of both local workers and local businesses, both of which recycle money throughout the local economy rather than extracting profits to distant corporate shareholders.

Retail should not be the only target. For example, meatpacking jobs have always been dangerous and difficult work, but for decades they were unionized and paid middle-class wages. Today, four giant meatpacking companies process 85 percent of American beef and have used their market domination to drive down both the wages paid to workers and the prices paid to ranchers, while driving up the cost to consumers and the profits to shareholders. Slaughterhouse and meatpacking jobs are nonexportable; they must be located near the source of the livestock. These companies saw their profit margins jump by a ridiculous 300 percent over the course of the pandemic. There is simply no good economic reason why they cannot pay a middle-class wage once again.

The regional inequity inherent in agglomeration may be the most difficult to effectively address.

A countervailing wage is just one example of the kind of innovative policies we might adopt in the service of revitalizing rural economies. Antitrust enforcement, sectoral bargaining, and a renegotiation of our international trade agreements might do the same. No doubt consumers have benefited greatly from globalization, but at the cost of undermining the resiliency of both our supply chains and our communities. Its past time for policymakers to acknowledge that free trade isnt free. But whatever policies we choose to enact, the fundamental goal should be the same: to tilt the economic playing field back toward local workers and local businesses in the face of the overwhelming forces unleashed by agglomeration, globalization, and corporate concentration.

The regional inequity inherent in agglomeration may be the most difficult to effectively address. The problem for rural economies is that cities are enormously more efficient, and the bigger the city the greater its economies of scale. As the theoretical physicist Geoffrey West has discovered, cities reliably scale, not merely arithmetically, but at a super linear universal exponent of about 1.15. As West explains, that means if you double the size of a cityfrom whatever to twice whateveryou dont just get twice as much of everything you had before, but rather a per capita 15 percent increase in productivity, patents, job categories, wages, and so onalong with a 15 percent savings on per capita energy consumption, roads, utilities, and other infrastructure. Size matters: A city of 200,000 produces 15 percent more patents per person than a city of 100,000, while a city of 3.2 million is roughly 100 percent more innovative, productive, and efficient. And most significant to our growing crisis of geographic inequality, this universal scaling applies to social networks at the same levels it applies to networks of roads, utilities, and other physical things.

This new prosperity is the product of the knowledge and know-how distributed across vastly complex networks of highly cooperative specialists, and these networks of people cannot easily be picked up and moved. These economies of scale, both physical and social, are why Amazons search for HQ2 was largely a scam. It was never going to be located in a small town or second-tier city no matter how affordable the real estate or attractive the tax incentives. The field of realistic sites was always limited to the handful of large metros where the agglomeration effect had already established a thick labor market of information workers, and where the resources existed for this market to grow thicker still. No policy initiative can change this dynamic.

But that does not mean that rural economies cannot create or attract high-paying jobs. During the COVID-19 pandemic, we have seen renewed interest in the potential of remote work, and there are many high-paying job categories that are amenable to at least a hybrid model. This could become a boon for small towns and rural communities as high-earning newcomers spend money into the local economy. But it could also prove a burden on incumbent residents if they get priced out due to the rising cost of housing and other essentials. Our objective is to revitalize rural communities, not places, and so we must be wary of policies and programs that achieve revitalization largely through gentrification and displacement. Accordingly, we must be prepared to address the costs of remote work as well as the benefits.

And where private employers or employees cannot be incentivized to move into rural communities, state and federal governments can. Anchor institutions like public hospitals, libraries, research centersand most famously, land-grant universities and their extension programshave long been prized as engines of economic development, and they could play that role in rural America once again. The USDAs Cooperative Extension System, originally created to serve the needs of farmers and ranchers, should be revitalized and expanded to serve the more diversified needs of our modern rural economies. Of course, rural locations cannot provide the same economies of scale as urban ones, but making their economies more vibrant and viable is a national imperative that taxpayers should be willing to help realize in the service of narrowing geographic inequality and toxic political divisions. And whether public or private, any investment in bringing good jobs to rural communities must be matched with investments in affordable housing, transportation, schools, and other critical infrastructure so that incumbent residents are not disadvantaged or displaced by the inflow of new wealth.

Over the years, task force after task force has been convened by one agency or another to address the economic inequities in the American landscape, but the challenge is too great and the problem too complex to be solved through such an uncoordinated approach. The Biden administration has an opportunity to fix this by appointing a director of rural economic revitalization to lead a coordinated response to one of the greatest political crises of our time. That director will have a narrow window to demonstrate to rural voters that Democrats really are on their side. Democrats dont need to persuade a majority of rural voters, or even a lot of them. Just a few percentage points in a handful of swing states would be enough to block the Trumpist forces from seizing hegemonic minority rule. And that would also give Democrats the breathing space they need to do the hard work necessary to assure that the state of the union between urban and rural America is once again strong.

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Democrats Need to Fix Rural Economiesand Get the Credit for It - The American Prospect