The Big Blue Cities*

The Big Blue Cities

“The Hollowing Out of America” in the July 12th TLR discussed the geographical polarization of America. The “United States” isn’t as “United” as the Founders had hoped. America has become a more polarized country, highly divided between those in the big coastal cities and those in the Great Middle. Analysts often attribute the divide to the cumulative impact of population migration from the countryside to cities that has created concentrations of similarly-minded, culturally-differentiated people. Whatever the reasons, America’s largest cities, and the substantial majority of its smaller ones, are bastions of the Democratic Party and hotbeds of liberalism with a growing tilt towards socialism, while America’s Great Middle is a stronghold of the Republican Party and of right-wing conservatism that harbors flare-ups of alt-right, reactionary extremism.

More than one-third of Americans live in its three largest conurbations: the BostonNYPhillyDC metropolis; the SeattleSFLASD megalopolis; and Chicagoland. These three urban megacities share a number of commonalities. Each hosts core 21st Century industries which anchor their wealth and opportunity. Each is the home of a number of the world’s America’s leading educational institutions. Each is a global destination that attracts immigrants, tourists, multinational corporations, and multinational law, advisory and accounting firms. Each is an important financial center and a leading regional national global medical incubator and patient destination. And each is a hub for international shipping and distribution and for transportation by plane, train, drone, helicopter and automobile. There are other American metropolitan areas that share many, though not all, of these attributes (Miami, Dallas/Fort Worth, and Houston are a notable threesome); however, the three Big Blues are unique in two further respects: The cost-of-living in each is among the very highest on Earth …, and their residents pay the highest taxes in America the world. All of the differences, and especially the latter two, separate residents of the Big Blues from their fellow Americans …, and those differences are growing rather than shrinking. This has long-term implications.

The high cost-of-living in the Big Blue Cities is a result of the density of their populations … which is both a cause and a consequence of their attractiveness. It began with an exodus to the cities of eager, job-seeking farmworkers and their immigrant cousins. Their congregation in the cities required the creation of economic infrastructures and supply chains to house and feed them. That required the construction of factories and the creation of supporting businesses, which created a demand for more workers, which made the cities more of a magnet for entrepreneurs, immigrants and further rural migration and resulted in greater population density that attracted more business and industry, which made cities even more attractive …, etc., etc., etc. Expanding urban populations required ever-increasing infrastructure, services, housing, security, medical care, entertainment and education, which at first was supplied almost exclusively by private industry – even the necessary maintenance of order initially was a task for private police forces such as the Pinkertons (which the Federal government also relied on, but ceased doing so after abuses led to enactment of the Anti-Pinkerton Act of 1893). In the cities, the inevitable conflicts that result from intensifying business competition, shrinking availability of land, and compression of living space … as well as the attempted suppression of immigrants, minorities, ethnicities and religions … led to creeping State and local government regulation of what had been the free-wheeling operations of America’s private, capitalist operators, a trend that continues today.

Although advances in technology were supposed to decentralize American cities, rendering the over-concentration of urbanized workers and businesses obsolete through tele-commuting and cloud computerization, what actually happened is that 21st Century technology enhanced the value of close worker contact. The magnetism of the cities, their plentiful employment opportunities, and the quality of their services has sucked superfluous workers out of the countryside and continues to attract immigrants to cities to fill the lowest-paying service jobs. Significantly, 21st Century technology and business opportunity also has meant that the Big Blues attract the most highly-educated and ambitious as well. There’s a reason why the Federal government provides medical students with grants if they’ll commit to using their skills in rural locations far away from the Big Blues. Those areas are underserved not only by the medical industry, but also by the educational, entertainment, and transportation industries … in a trend that shows no signs of reversing.

Quality of life improvements continue a trend in favor of the Big Blues over the Great Middle.

The hollowing out of America is not slowing down. It’s accelerating. It’s reinforced by the increasing economic magnetism – the job opportunities – of urban life … predominantly in the Big Blue Cities. The negatives of urban living are not insignificant, but the congestion, costs and hassles of city life are showing signs of a downward trend, a significant one at that.

Just-in-time inventory management and the increasing flow of data means that manufacturers and their suppliers are more disposed to moving their operations closer to the Big Blues, providing a roadmap for exurban/urban expansion. The reversal of globalization is likely to enhance that trend as factories return to America … and not to rural areas which lack both technologically-trained workforces and contiguous consumers. Increasing data-collection and automation enable more efficient manufacturing and delivery processes, and proximity (without environmental degradation) has become a more important, and a more controllable, factor. Factory construction and supply chain enhancements will be complemented by the plentiful supply of highly-educated and -trained workers who will operate the 21st Century’s automated manufacturing facilities. Those are the same urban-dwelling workers who the Big Blues are educating and training … and the Great Middle is not.

Rural areas that attracted 20th Century low-cost, unskilled manufacturing labor are not as attractive for 21st Century businesses. Rural workers skilled in 20th Century manufacturing do not have the same skills required for automated, robotically-managed 21st Century factories.

Technological innovation similarly is focusing on urban consumers because they have been and will continue to drive demand. And the benefits of technology are accruing mostly, and sometimes exclusively, to urban dwellers. Self-driving autos, and especially those having electric motors, are ideal for city life … and not rural living. During the next decade they, and delivery drones, will reduce traffic congestion, the costs and some of the hassles of urban living … but not of rural living. Although Uber and Lyft most clearly have reduced urban costs, they have exacerbated congestion … and had no impact whatsoever on rural living. That will change with on-demand automated transportation … and will change even more with self-driving trucks and their associated automated warehousing and delivery systems. They will operate 24/7 without incurring employee overtime and will further alleviate urban costs and hassles. Self-driving vehicles and delivery systems will change urban life and, although they will impact on rural living as well, their impact outside America’s cities will be incremental … at best.

Job creation and education will remain the cornerstones of Big Blue growth. The trends in virtually all economically relevant measures favor greater GDP growth in the Big Blues over the Great Middle.

The economic divide between the Big Blues and the Great Middle therefore is likely to widen … from an already wide margin … and with it the American cultural and social schism. The divide will be magnified by the Trump Administration’s 2017 repeal of State and Local Tax deductions – the so-called SALT issue. Although Federal taxes prior to 2018 were intended to impact proportionally State-to-State, progressive Federal taxes naturally fall heaviest among higher earners. Higher earners, especially those in the upper middle class, live primarily in the Big Blues. One of the arguable rationales for the SALT repeal was to eliminate the Federal tax benefit conferred on higher earners living in the Big Blues and thereby place residents of the Big Blues in the same position as residents of the Great Middle by reducing their post-tax economic differences …, but the surprising effect may be to increase rather than decrease that disparity. In order to offset the repeal, incomes in the Big Blues are rising faster, far faster, than incomes in the Great Middle, and this is likely to continue. The goal of businesses in the Big Blues, as well as businesses that are increasing their presence in the Big Blues, is to attract the best and the brightest with an optimal mix of quality-of-life and compensation. Because of the concentration of consumers in the Big Blues, improving their quality-of-life is also being specifically targeted by entrepreneurs and innovators. A rising economic wave therefore is moving increasingly in the direction of urbanization … and towards the Big Blues. State and local governments in the Big Blues are responding in typical Big Government fashion by adopting minimum wage laws to offset the rising costs-of-living of their lower-compensated citizens and adding regulatory protections for them as well, steps that are likely to suck unskilled workers from rural areas … and further divide urban living from rural living. For the most part, businesses in the Great Middle cannot financially afford the same level of wages, benefits or protections. Meanwhile, the one-percenters who can afford to relocate to States unaffected by the SALT repeal – specifically, Texas and Florida which have significant existing urban areas and populations – are doing so, adding to America’s urbanization … and to America’s urban-rural divide.

America’s cities are drawing further and further away from their rural cousins economically, politically, culturally and socially. Although the goal is for a “United” States, America’s cities are more-and-more likely to be America’s future.

Finally (from a good friend)

*┬® Copyright 2019 by William Natbony. All rights reserved.

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