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Musings Report 2017:18 5-6-17 The Rural-Urban Divide and Globalization
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The Rural-Urban Divide and Globalization
Many pundits have commented on the remarkable asymmetry of counties won by the Democratic Party (blue counties) and in 2016 and those won by Republican Party (red counties): the Democrats won big in heavily urban counties and the Republicans won most rural counties.
This visible division prompted numerous article such as this:
Cities vs. Trump: Red state, blue state? The urban-rural divide is more significant.
"Like most red-state cities, Idaho’s capital is remarkably short on conservatives. Last November, while Hillary Clinton mustered only 27.5 percent of the statewide vote, she hit north of 75 percent in some of Boise’s urban precincts. Politically, the city might as well be on a different planet from towns that lie a couple of exits away.
The article follows a simple and superficially appealing narrative: the reason for the divide is cultural: cities are liberal, the countryside is conservative."
But there must be more to the divide than values and political culture; difficult social issues like addiction that once were defined as urban problems are now rural problems:
American Epidemic: The Nation’s Struggle With Opioid Addiction (34:26).
In Musings 13 I explored the loss of Collective Memory--the household/ community/ institutional memory-knowledge of how to be self-reliant and resilient, i.e.entrepreneurial and adaptive.
Correspondent Bart D. (Australia), who raised the issue of Collective Memory, recently made some insightful comments about the decimation of rural economies. Though he is speaking about Australia, anecdotally I see evidence for the same trends in the U.S., Japan and Europe.
"I worry that the collective memory required to nurture self-employment and self-reliance have already been lost to much of the populace.
The thing that disturbs me most about the fate of the rural region I grew up in is the huge loss of economic diversity. A list of businesses/function my childhood town used to have but now does not:
Bank
Post office
Council office
Roadworks/council depot/workshops
Mechanics workshop
2 small convenience stores
A small ‘all goods’ shop (surviving as a tea/coffee and cake eatery)
There is a tiny junior school that has been under threat of closure (lack of pupils) for past few years.
These are the basic building blocks of an economic community. Sporting clubs have perished as have social clubs (and even the tavern is only just staying alive) as the people, and their families, who once worked these family businesses disappear into the state capital with it’s bubble priced housing and much reduced sense of community cohesion. It’s not just my home town either... there are 3 others near by that have gone the same way.
The only economic activity left is big Agri-Biz. The number of family farms has reduced by about half in the last 30 years; so the scale of operation is huge and the debt matches it. Little of the farmers' money goes into the 'local' or even 'regional' economy. It goes to the multinationals: Bank Corp, Chemical Corp, Fertilizer Corp, Fuel Corp, Machine Corp … the economic centres for which are not even in our Nation let alone state or region.
Also worth noting that the cascade of losses was very rapid. Once we lost our council depot, the town basically withered up economically in just a few years.
We, the people, are being steadily herded into mega-cities. On the surface it seems like a voluntary migration to pursue economic opportunity... but reality is it’s forced. Those of us that want to return to these communities to raise the next generation of kids … can’t. There are no viable economic activities to pursue … even with the alleged benefits of internet based opportunity which should make it possible to do most things from most places.
These towns all have beautiful, huge, old stone houses, with huge gardens at prices that are actually affordable to an ‘average’ wage earner … if they could find a way to make said wage living there. Instead we have to cram ourselves into bubble priced houses made of paper and fibro-cement sheeting, crammed onto tiny blocks, where you can hear your neighbours fart from opposite ends of the buildings.
We fool ourselves into believing this style of living is a choice ... that we are 'going where the opportunities are' ... but we lie to ourselves. It’s exciting for a while as a teenager, then when proper adult perspective kicks in you find yourself trapped in suburban bleakness and servitude."
Thank you, Bart.
I see the outlines of a dynamic that has hollowed out the incomes and local economies of rural regions around the world: globalization, i.e. the borderless flow of capital, credit, goods and services, a flow dominated by large corporations that work hand in glove with international institutions and governments.
I think this article gets close to the dominant dynamics in play. (Note that "liberal order" doesn't refer to political liberals vs. conservatives, it refers to the "neoliberal order" that promotes "free trade", borderless flows of capital, international institutions such as the World Bank, etc.)
The Liberal Order Is Rigged: Fix It Now or Watch It Wither
We did not pay enough attention as capitalism hijacked globalization. Economic elites designed international institutions to serve their own interests and to create firmer links between themselves and governments. Ordinary people were left out. The time has come to acknowledge this reality and push for policies that can save the liberal order before it is too late.
The local economies in rural counties are especially vulnerable to "lower prices always" supply chains that bring in agricultural, mining and forestry products from far away at prices below domestic production costs.
When these industries are gutted by globalization's low costs, there isn't much of a service sector left to support employment. Rather, the service jobs in rural areas depend on the ag/mining/forestry jobs. When those jobs vanish, the service jobs evaporate as well.
People have to move to find jobs, and that further pressures the remaining businesses.
There is a much deeper pool of capital and service employment in cities, and so it follows that cities are where the jobs are.
Why is this so? Production and production employment are tradable (following Michael Spence's work), meaning they can be traded on the global marketplace as interchangeable goods: a computer chip made in China and one made in Japan are interchangeable (quality may vary of course, but as long as the chips perform the same function, they're interchangeable.)
Service sector employment is largely untradable, as getting a haircut (for example) isn't something you can have done overseas for less money. Healthcare, education, legal services, restaurants, government--all these job-rich sectors are untradable.
The net result is globalization has an outsized impact on tradable rural production employment and very little impact on urban non-tradeable employment.
Although I don't have the statistics on hand, I suspect 90% of urban employment is untradable services rather than tradable production. If employment in government, education, healthcare, legal/professional services, tourism, haircutting salons, etc., all those jobs support a large secondary service sector of other untradable services: cafes, brewpubs, night clubs, etc.
But as the Foreign Affairs article confesses, this Neoliberal Order is rigged against small businesses, local production, and localized economies. Globalization sweeps all of these away as "uncompetitive."
But the playing field was never level; the Neoliberal Corporate-State Order had all the power, and rigged the game to its own advantage.
No wonder the rural regions are rebelling--not against the cities, but against the Neoliberal Global Order that has stripped the wealth and economic diversity from rural economies.
Summary of the Blog This Past Week
There Is One Way Out of Debt-Serfdom: Fanatic Frugality 5/4/17
Redefining the Middle Class: It Isn't What You Earn and Owe, It's What You Own That Generates Income 5/3/17
The Elites Have Destroyed the Status Quo's Ability to Self-Correct 5/2/17
International Workers' Day: Profitable Work Will Be Automated, The Rest Will Be Left to Us 5/1/17
Best Thing That Happened To Me This Week
Saw a very large sea turtle paddling by while swimming in a shallow reef-protected bay.
Market Musings: Crypto-currencies: A Bubble, or Just Beginning?
Crypto-currencies are on a roll recently, with Ethereum being the stand-out--hovering around $100, up from $20 on January 1st of 2017 and from $7 early last year.
The conventional view is one of skepticism: bitcoin et al. are in a bubble that will pop and they will round-trip to pennies, crypto-currencies are a fad, etc.
Skepticism is what investors in a sector want to see. Widespread euphoria is what we don't want to see, as that is evidence of a speculative mania herd psychology that marks the ending phase of a bubble expansion.
When everyone's already in the market and fully invested (and leveraged, i.e. they've borrowed money to increase their holdings), the top is near because there is little remaining "fuel" (new buyers) to keep the market pushing higher.
Skepticism, on the other hand, indicates the vast majority of investors are wary of investing in the sector. They remain potential converts and "fuel" for future gains.
The market value of all bitcoin is currently around $25 billion. This is approximately 5% of the cash held by one corporation, Apple. It is an insignificant drop in the global financial wealth bucket ($170 trillion).
Ethereum's market cap (total value) is $8.7 billion.
It's difficult to see how crypto-currencies could be in a bubble when so few investors own them. The skepticism suggests a beginning, not an end.
This is not to say that crypto-currencies won't be volatile. Their speculative nature, limited liquidity and narrow bases of supply create intrinsic volatility.
There are two drivers which have yet to make an appearance globally: a big financial crisis that can't be solved by central bank actions over a weekend, and inflation. Both of these would scare more people into the relative safe haven of crypto-currencies, which cannot be devalued overnight by a government, because they are not issued by any government--they are decentralized.
There aren't many liquid (easily bought and sold) safe havens from state-issued currencies: the precious metals and... well, there really aren't any others.
This is why many observers see crypto-currencies as hedges against a major dislocation or destabilization in the global financial universe.
From Left Field
Why Poverty Is Like a Disease--written by a fellow born and raised in Appalachia...
Why Germany Still Has So Many Middle-Class Manufacturing Jobs -- apprenticeships
Scenes in and around Kyoto -- travel tips...
Immigrants flooded California construction. Worker pay sank. Here’s why
The sugar conspiracy -- maybe this is why Coca-Cola sales are stagnating?
China’s Credit Excess Is Unlike Anything The World Has Ever Seen --ditto for the fallout when the China "wealth management" bubble bursts..
China's $8.5 Trillion Shadow Bank Industry Is Back in Full Swing--can't be allowed to stop expanding, as the whole asset bubble will pop...
Feudalism and the "Algorithmic Economy": Using AI and algorithms to return to feudal economic models
Social Unrest Is France's Biggest Risk -- elections won't solve as many issues as people seem to believe...
My Beijing: The Sacred City (via Maoxian)
China's Appetite Pushing Fisheries to the Brink--subsidized fishing fleets have stripped the seas...
Hiking the Pacific Crest Trail, 3 seconds at a time (7 min) worth the 7 minutes...
"Continuous effort — not strength or intelligence — is the key to unlocking our potential." Winston Churchill
Thanks for reading--
charles |
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