Not long ago TAI featured a Brookings-based piece on the U.S. rural/urban divide called “the geography of discontent.” Our board member Bill Galston was part of the authorial committee, as was his colleague, Mark Muro. I subsequently asked Dr. Muro to write a follow up that would internationalize the observations in their study. He declined; claimed he was too busy. Not unusual as replies go.
Why did I ask him to do this? It had dawned on me long before that the urban/rural divide in the United States, which is based on a mix of economic and cultural sources, and which has major national political implications that ought to have been vividly clear even before the recent midterm elections, is matched in many other countries around the world. Obviously France, with its Yellow Vests, is a prime example, and Cristophe Guilluy has written insightfully on it, and become something of a celebrity in the process thanks to his ideological edge and gift for cutting phraseology. Germany, Italy, Austria, Poland, Hungary, and many other countries furnish more examples, and in almost all of them someone has noticed the rural/urban divide and seen its political significance in an age of populist political insurgency. Jeff Gedmin, TAI’s editor-in-chief, is writing a book about this with Germany as the focus. But with the partial exception of Guilluy and a few others (more on them below) everyone who writes about this does so from the perspective of a one-country one-off. In the United States it sometimes goes state by state, as with this essay about North Carolina. Few see the phenomenon as a general one, as part of the substructure, so to speak, of globalization’s afterwash.
Each case does bear unique elements, of course. For example, the German economy is doing well compared to many others, but there is still a rural/urban divide, and in Germany a West/East divide overlays and magnifies it. So the sources of the divide there have to be relatively more cultural and political than economic compared to the situation in, say Poland or the United States. But there is still a unity in the manifold, as Kant would have put it. Regional differences can and do evince similar patterns because nearly all regions are affected by transactional dynamics that are global. Indeed, I think it safe to say that the basic dynamic of what I call segmented economies is pretty much the same, at least in modern Western societies, with local variations. What do I mean by that?
Countries bear many kinds of internal diversity. Rural economies have rural commodity and food price levels, production levels, housing costs, and so on that are lower than what we might call national or global price levels. It’s more expensive to do or get virtually everything in Paris than it is in rural Provence, just as New York City prices and wage levels are significantly higher than those in, say, Corning.
But who cares? Insofar as these economies live more or less separately, there is no problem since low wage levels correspond to low prices; the basic standard of living is therefore little affected. As far as national economic statistics and policy go, too, it all levels out in a macro sense.
And of course this sort of thing has been going on ever since urban areas came into existence. Historians and especially economic historians know it well. Anyone can pick up the late William H. McNeill’s brilliant analysis of cities in The Rise of the West (1963) and see, among many other things, that population density is an uncanny predictor of transactional metabolisms. And transactional metabolism in commerce has price consequences, partly due to a kind of demonstration effect—a sort of generic “keeping up with the Joneses” phenomenon. Seeing lots of hot new doorknockers make people want to buy a hot new doorknocker, but if you live out in the country and you don’t ever see one, you don’t want one. That translates into greater demand in urban areas, and demand chases prices upward.
But there is a problem, through not one for economists, statisticians, historians, and policy wonks. The problem affects “only” ordinary people. What happens when national prices intrude upon or are imported into rural economies, with obvious examples including prices for electricity, transportation fuel, medical care and pharmaceuticals, telecommunications equipment and service, higher education in many cases, intercity transportation, and more? As national prices come to take up an ever-growing share of the whole for the rural family budget, that being the price for inclusion in advanced modernity, we end up with local ends unable to meet. So quite aside from well recognized culprits like offshoring/outsourcing to lower-cost production platforms and automation, segmented economies take a toll of rural serenity and basic fairness.
Occasionally, there is some humor in this. Here is how Claire Berlinski told a funny tale:
In a satirical treatment filmed at a Carrefour supermarket, a Gilet Jaune marches stolidly before the camera, then unburdens himself of his discontent. “At the end of the month,” he says, his wife by his side, “I have to pay the rent, and the gas, and the electricity, and the insurance, and the food, and the car”—his wife begins to look uneasy—“and my wife’s car, and the iPhone, and my children’s iPhone, and gifts for Noël, and the contractor for the renovations,” whereupon his wife says: “Jean, shut up.”
But usually there’s nothing the least bit funny about this.
Urban elites, which include nearly the entire political class in most countries, have tended to have little idea about such problems—until the problems bite them in the arse. Case in point: The political class of both parties in United States appeared before the last presidential election to be almost completely clueless about the downdrafts of segmented economics, but Donald Trump was not. The rural source of much of Trump’s early support is part of what I meant when, in March 2016, I tried “to point out a few of the deeper and more remote sources for the Trumpenproletariat.” “Trump is for real, like it or not,” I wrote, “because the people who are attracted to him have real problems, and for the most part they are problems not of their own making. Both major political parties have failed for different reasons to deal effectively with the sources of mostly uncreative destruction, and both have therefore become the butt of much resentment—justifiably in my view.”
Nor have most garden-variety macroeconomists, apparently, focused in on rural circumstances. When Dr. Muro declined my invitation, I asked Tyler Cowen, another of our board members and a confessed economist, “Who studies this sort of thing among economists?” His answer was that hardly anyone does. Academic economics is so specialized nowadays, he said, that this kind of big-picture comparative analysis almost never gets done because it doesn’t get rewarded. It is not tenure-useful.
Tyler’s answer initially shocked me, but I soon realized it shouldn’t have. Standard-issue economists in United States have caused even more problems, possibly, than lawyers—although, admittedly, that’s because politicians have given them policy-pride-of-place thanks to the historically bizarre assumption that the only thing that really matters is ever-increasing material well-being. Bernard Williams once said that we should beware whom we take for an enemy because we will grow more like him. We took the positivist, materialist Soviet Union for an enemy, and look what happened? We relegated our native Calvinism to a secondary status.
I then decided to put the question to Oren Cass, a lawyer, not an economist, who has written brilliantly, in this magazine and elsewhere, about work in the broadest sociological and political sense. His answer helped me, some.
Oren told me that my observation about the urban/rural divide is a fascinating one and that he too had been thinking about it. But he defined the problem differently. It’s not so much that national prices intrude upon rural economies as it is that “affluent prices invade working class economies”—urban as well as rural. Those capturing the gains of recent decades, who happen to be relatively more urban, dictate society’s economic terms without regard to those who have missed out on such gains. Or, put bluntly, “inequality matters” not just as an abstract moral issue about fairness, but because it has complex, interactive consequences for very non-abstract flesh-and-blood human beings and their families.
A quintessential example of this, he noted, is health care, where the cost to participate in the risk pool is driven by the quality of care that the upper-middle class demands and will pay for ($20,000/year premiums). The same goes for the cost of a new, entry-level family vehicle, which can hardly be had anymore for less than $35,000, with all sorts of cost-driving safety features and electronic doodads. Or education, where the alternatives-to-teaching available to college-educated professionals continue to score salary increases, leaving every working-class community, which translates into virtually every rural community, with the problem of finding a way to pay those salaries to attract teachers, or choose not to and see the quality of education decline. A working class family with two kids in public schools now requires about $30,000 of taxpayer support for that education, but in rural areas household income might average only $40,000. How is that supposed to work when the tax bases for middle and upper middle class schools and those for schools in working-class areas are kept separate?
Why do I say that Oren Cass helped me only some? Because he told me that he needed to do at least two more years of research before he could write anything. So my author search continued.
Before long I came upon Michael Storper, an LSE professor not of economics, but of “economic geography,” which seems to correspond to the French concept of human geography—and which is something that academic organization in the United States appears more or less to lack. I put the issue to him, and added that the solution to the problem is theoretically simple, although politically (probably) impossible. Either the government needs to subsidize the differential between local wage/salary rates and national/global pricing, according to the proportion of the difference in price levels, or local residents should get a proportionate discount on all national prices set by government—which in Europe are quite a few prices. The basic idea is akin to that of countercyclical policy in the integrated U.S. economy, wherein distributional devices ease the pain and spread the shortfall when some region isn’t doing so well—only understood in terms of population density differentials rather than regional disparities. And if that kind of solution is not available, I asked, what kind of solution is? Because doing nothing is not appealing as a matter of basic fairness, or politically wise, for democratic systems.
As with Oren Cass, Professor Storper helped me, some. He averred that it was an interesting issue I raised. In economic geography and regional economics, he told me, it is framed as the “real income” issue.
He explained it to me by noting that there is a consensus in his field that rural areas compare to urban areas through a combination of lower nominal (money) wages and lower housing prices, the question being how this nets out. His research on the United States found that urban real incomes, after this correction, on average are about 15 percent higher than in other areas, because the wage effect more than compensates for the housing price effect.1 “However, as you say,” he added, “there are other costs and, in Europe, some of these are smoothed out geographically or lowered through policy, whereas they are less likely to be smoothed out/lowered” from market dynamics. He added that he did not know “of good research that quantifies this issue in a comparative way” or that looks as comparative baskets of goods and services beyond housing. “But,” he concluded, “I think the question is interesting and intriguing, especially given the politics of the urban/rural divide that you mention.” He proffered no solution.
This was useful, but I still lacked an author. So I kept looking. In the end, I didn’t find one. I found a comparative approach in Jon Emont’s “The Growing Urban-Rural Divide Around the World,” in The Atlantic. But Emont is a journalist whose short essay cites no data and mostly just quotes garden-variety academics from hither and yon. I found another in political economist Mark Blyth’s “Global Trumpism” in Foreign Affairs. This essay lived at the right level, but, to me at least, Blyth’s ideological shrillness discounted his appeal. I still hold, with the late Dick Gregory, that one should start with the truth before tampering with it.
My editor’s form of due diligence on this puzzle (and others) came to a halt when I stopped being an editor. Why am I telling you this? I am telling you because, first of all, the issue of segmented economies is both interesting and important. But I am also telling you because I feel compelled to explain to readers of this magazine just what the hell I have been doing for nearly the past 14 years.
The editor of a thought magazine like The American Interest does not just spend time fixing other people’s English, which in truth amounts often enough to fixing people’s thinking. The editor of a thought magazine is also something of an intellectual impresario, creating balances of several sorts, in and among issues, that bear meaningful design beyond the literal content of the essays within.
And above all, the editor of magazines like The American Interest must be a generator of good questions, and concomitantly a seeker after talent to provide answers. Sometimes an engagement with an author produces a result that neither could have generated alone. There is, or can be, genuine creativity in all of these functions. And as is the case in all other domains in which creativity plays a major role, the job involves a fair bit of frustration, and the need for both patience and humility. But the challenges are redeemed, with any luck at all, by the occasional brilliance of the outcomes, and by the learning enabled by the generation of good questions even when no answer makes it into “print.”
So respect your editors. They do things for you that you don’t even realize. Now that I no longer work as one, I feel no compunction against saying that in this essay, the first written in post-editor life. I feel better already.
1The most illuminating essay is Michael Storper, “Separate Worlds? Explaining the current wave of regional economic polarization,” Journal of Economic Geography (March 2018).