Poor States, Rich States.

Great Debates
21

Urban areas are rich, rural areas are poor. Places like California and New York have large urban areas.

Urban areas also tend to sprout near waterways. So either along rivers, lakes or oceans.

Southern states with urban areas are doing well. Texas, North Carolina, Georgia, Florida, etc. The rural states like Mississippi not so much.

Urban areas are attractive to both businesses and workers with high levels of human capital. So gdp tends to be higher there.

On top of that, cities like the ones in California have great weather. But Chicago and NYC have terrible weather and they are still rich.

22

There are obviously a variety of reasons. But one that I think deserves more attention is that even at the time of the founding of this country, Southern states were much more conservative economically. States like New York were interested in spending public money on canals and dredging harbors. (So it’s not just access to water but using it properly.) In the South, they believed that was not the proper role of government but should be undertaken only by private enterprise. My impression is that this more economically libertarian philosophy (which abated only briefly during the FDR/Huey Long era) has held the Southern states’ economies back for centuries now. To this day, they fight unions with so called “right to work” laws and seem hellbent on attracting low wage employers whose main competition is with even lower wages in developing countries.

That’s no way to be successful economically in the 21st century. In fact, the contrast between those states and the blue states with greater regulation, higher taxes, stronger public investment in infrastructure/public health/education, and recently much higher minimum wages, is pretty dramatic real world proof that conservative economic theories are inferior to the Keynesian approach.

23

I don’t think so. Look at the transfer of manufacturing out of the US to countries like China. You think those nice cities in China and all the infrastructure China can build due to them selling us what we used to make is a failure on China’s part?

Look at the cost of living in NYC or other strong union areas that still have industry. The cost of living reflects the wages or even outpaces the wages. What’s the point in flipping a burger with a so-called higher minimum wage if you have to share a bunk bed in a closet?

24

It was the same pattern. The south underbid the north on wages, then China underbid the south.

The difference is, is that China having a much more controlled economy means that the money that they made from moving the trade to their country was used to increase not only their capacity but their internal demand for the products that they produced for us. They are already outsourcing much of their low skilled manufacturing jobs to less developed countries and rather than have workers left behind laid off with their jobs gone, they are now working better jobs as far as pay and conditions. Our displaced workers are trying to use politics to make their jobs come back.

I don’t think that unions are the reason for the high cost of living in a major city like NY. The reason that you are going to have a high cost of living is because a large number of people want to live there. Why? They all have their own reasons. I like living somewhere with a much lower cost of living, but if I really wanted to live in NY, then having a tiny place to live would simply be one of the costs of attaining that desire.

It is true that mobile corporations moved to places that had less protections for unions, as it was a race to the bottom, but you can see that that didn’t actually work out as well as those states had hoped, as the corporations found someone willing to work for even less than them, and moved there.

Maybe, if we lower or even eliminate the minimum wage and maybe some OSHA regs, we can get China to start getting us to build them consumer products in our very own sweatshops.

25

Yes, cost-of-living is higher in blue states for the most part. But they also have a much more robust safety net and far better public education open to all, plus lots of opportunities for free or low-cost recreation. There are probably certain members of society who are better off in the South because of the lower cost of living, as long as they are culturally comfortable there. But it’s not going to be as good for the highly educated and for upwardly mobile professionals, and it’s certainly not going to be as good for the poorest 20 or 30 percent of the population. Many people down there literally live in shacks, are not well educated, do not have access to healthcare or even healthy food, etc. The roads are terrible, asthma is rampant from pollution, and on and on. It’s just no way to run a modern industrialized economy.

ETA: And let’s not forget that those red states would be even worse off if the blue states were not subsidizing them to the tune of billions of dollars per year. One of the great ironies of modern life is that these supposedly libertarian small government states are basically welfare queens, with the tab picked up by more enlightened progressive states whose agenda is constantly thwarted in the Senate by these red states who are on the dole.

26

From an outsider’s POV, what I see is a whole lot of history. It looks to me that the old slave-owning States are generally worse off than the States where people worked for a wage. California started off rich because of their natural resources and New York City became rich due to trade and immigration - lazy deadbeats did not get on a ship and head off to the New World.

27

For GDP, you need people and productivity. For GDP per capita, you just need productivity. For whatever reason, larger cities (really cities with larger workforces) tend to have higher productivity. However, that correlation is fuzzy. So while the richer states also mostly have the larger cities, I think what is interesting is looking at other factors while controlling for size. We know education is important. But what else?

A few folks have mentioned cost of living. What I haven’t checked is to see what happens if we adjust for local purchasing power.

28

I’ve been to about 47 states and that generalization of the south is a bit misleading. Even this blue vs red state income transfer is misleading. It would be better to break that down to the political leanings of the individuals that actually pay taxes in each state.

The net transfer of wealth from rich individuals to poor individuals might tell a different story.

Of course in a country with 50 states and several territories someone will have to be in last. It’s had to determine exactly why relative wealth or productivity is what it is. However, absolute wealth and growth can be measured and as long as things are moving in a positive direction there’s no shame being anywhere on the list.

29

And yet, people keep moving to NYC and San Francisco and Seattle despite the horrendous cost of living. Cities have the twin seemingly opposing advantages of diversity and narrowness. You can find anything from any culture in NYC at any time of day. You can also find a small but thriving community of like-minded people for any interest. That’s impossible in Huntsville, AL or Tampa or San Antonio. (Or, admittedly, in upstate NY.) Thriving cities are the intellectual, cultural, and economic cores of a nation. Largeness isn’t the only ingredient. Miami and Houston are huge but don’t compete in the same league.

I’m not sure what this means. As a matter of *federal *tax and *federal *spending, the South gets back much more than it contributes and the North less. This is due to both their greater concentrate of military bases where they can operate easily year-round and the greater per capita need for social welfare in poor states.

30

Right. You and others are making a very important point. First, yes, median income per household is a good measurement for how rich a typical person is in the state. But what we need to do, this is totally doable, is run the median incomes through a salary comparison site and determine what the equivalent salary is versus some baseline state.

I am tempted to do the legwork except that most salary comparison sites are city-specific not state-specific.

Cost of Living Calculator | City and Salary Comparison Tool - NerdWallet is an example

For instance it says that my salary (85k) where I live is the same as $170,000 in San Francisco.

So it could easily turn out that California is not even in the top 25 states when you correct for the cost of living. I understand that in California, making 70k a year household income can qualify you for some forms of government assistance.

31

I understand that. I’m not denigrating the wealth and importance of the successful cities.

Saying all the money that comes out of a state is blue/red is misleading as to who within the state is actually paying and receiving money. It gives the false impression that there is a causal relationship between political ideology and the ability to generate wealth or be productive.

In a democracy, it’s not that hard for a majority of unproductive poor folks to vote themselves other people’s money.

32

Why doesn’t this happen here in the USA? Unfortunately my mind jumps right to racism: poor people here would rather get nothing as long as their tax dollars aren’t helping others of different races they don’t like

33

I think you have to look at history.

First, the rich colonies had good harbours and plenty of resources. New York, for example, is still a major port. Trade creates wealth. I have a book about industrial archeology that mentions that steelmaking was big around New York, New Jersey because they had the ore and they would strip the land for miles around to feed the wood into the blast furnaces. then they had coal nearby as a substitute. Also, New York sat at the entrance to the easiest route to the west - the Hudson and the Erie canal. Travellers could also do some short mountain traversal and get to the Ohio river that took them through even richer farmland. being near the industrial towns, and steel making, they were the first to get railroads too. So the north had raw materials, trade routes, and the infrastructure to get goods to market, which is as important as the industry itself. The south had local industries, but until railroads became widespread no easy distribution network - carts are remarkably less efficient than ships or canal barges.

Climate and slavery are also important. An area that had put all its money into agriculture and slaves was less likely to instead put it into factories. As railroads became more important, local factories would find themselves competing with the massive factories and economies of scale as the north distributed its goods across America. This also explains why no factories, typically, in the west. Those Midwest states with a shortage of real resources and low population could not compete with the eastern factories that were already established, and distributing using the new rail network. Note that Detroit got rich because it was on the Great lakes; Henry Ford, for example, got iron ore and coal via lake freighters from northern Michigan. The one really big and rich Midwest-ish city would be Chicago, that was where the lake freighters unloaded to feed the rail lines west, and resources (cattle, pigs, wheat) came east to be sent to the big cities of the coast. If you wanted to build a factory closer to the west, this was the place - money and workers.

California is an anomaly. It boomed at first because of the gold rush, and then the large population centered around the main port of San Francisco became a distribution point for the west; when the transcontinental rail line was finished around 1870 it meant trade both ways. The China tea trade had been booming and California became a prime entry point for the Pacific trade. (The Kansas Pacific railway connected to the line and made it possible to go transcontinental without a ferry crossing on the Missouri, which probably helped cement Kansas City as a bigger more industrial city too.)

it’s my impression that the depression after the civil war, combined with the competition from ex-slaves, probably discouraged migration to the south and the emergence of industries. Plus, unlike the very dry southwest, the general climate, humidity, heat, and mosquitos were a bigger problem.

The newer industries of the 20th century - movies, computers and software, etc. - do not require massive resources and so relocate to desirable climates - hence, silicon valley, Hollywood. If you shoot a lot of movies, it’s convenient to locate to a place that rarely rains, and has everything from forests to mountains to desert nearby. (Ever notice how so many westerns look like the hills near Los Angeles?) Industries tend to cluster near each other - makes it easier to poach good employees, and the suppliers that feed those industries are already in place.

IMHO, education levels are just a function of the richness of the area and the number of educated people already living there - Silicon Valley workers expect their kids to get the same education they have, and care about that. Industries tend to hire (need) more highly educated people than agriculture.

34

I wonder if that has something to do with unemployed people moving to places with a stronger economy in hopes of getting a job…?

35

And in the modern day South, there are massive numbers of people who are out of the workforce and often on disability. Those who are working are often getting low pay and few benefits, while working really unpleasant jobs.

What does this have to do with the actual reality? I already pointed out that the people who represent these states in the US Senate actually tend to vote against social safety net type programs that their states’ populations disproportionately benefit from.

36

Yes, added population creates a need for more jobs which creates an attraction for people living in places without jobs.

Jobs should be a good indicator of wealth, but in recent years the correlation has in fact lowered. As I said earlier, while the South is creating many more jobs than the North, these jobs, spread over the workforce as a whole, are not high-paying or long-lasting. They may be just barely adequate. In the 1950s the industrial labor force often enjoyed jobs that boosted them into the comfortable middle-class. (Not all of them, to be sure. My father worked at a factory and we were definitely poor.) Millions of people today are complaining loudly that their jobs don’t pay enough for them to enjoy a middle-class lifestyle. That lifestyle is what constitutes wealth outside the 1% and the South still lags in providing it.

37

I think you would need to do that at the county, not state level. The income vs standard of living would be very different in New York County, NY (Manhattan) vs Essex County, NY way up state.

I don’t think it’s racism. At least not directly. Conservatives have glommed onto an idealized capitalist ideology believing that government is corrupt and inefficient so if you lower taxes the free market will generate wealth. The problem is, to generate wealth you also need effective infrastructure, which is typically funded by government and taxes.

Then again, there are states like Connecticut that are extremely wealthy due to its proximity to New York City, and yet most of the cities are terrible. Connecticut also has high taxes and is driving a lot of people and businesses out of the state.

38

Tell me about it. Upstate NY is almost a different planet. The cities are much closer culturally to the Midwest and the rural areas closer to Appalachia. Almost nobody realizes that the tail end of the Appalachian chain is in upstate NY and the same forces that drive West Virginia drive a poverty spike up almost to Lake Ontario.

Western Connecticut is wealthy because it is a suburb of New York and Connecticut couldn’t develop cities because it is a suburb of New York. All the talent and capital gravitated to the only place that mattered. Once you get place the suburbs (roughly Danbury to the north, New Haven to the east) most of the state is farmland without any large population concentrations, except for the special case of Hartford because it’s the capital. It’s extremely hard to generate wealth in suburbs, yet wealthy people expect to be catered to by the government. That’s what’s leaving the state in such a financial bind. It’s basically the gigantic third generation of a wealthy family wondering how they’re going to live up to grandfather’s split billions.

39

And then there’s Northern New York, which is the forgotten part of the forgotten part of New York.

New York has three regions: New York City and its satellites (which is essentially Kingston and everything south of it); Upstate New York (which is centered around the Erie Canal and, as you note, is culturally connected to the Midwest); and Northern New York (which is everything north of a line from Pulaski to Saratoga and is culturally part of New England with a touch of Quebec).

40

Yeah, it’s fascinating that there’s no such thing as a New York state culture. Everything 99.9% of outsiders think is New York culture is merely New York City culture.

But I’m sure that Massachusetts and Illinois, among others, have the same identity problem.