02 February 2017

The Economics And History Of The Rural-Urban Divide

This question and answer is migrated off of Politics Stack-Exchange:


Rural counties in the US generally tend, (often overwhelmingly), to vote Republican, while metropolitan counties similarly tend to vote Democrat.

Over the last few decades which portions of the average rural voter's disposable income in dollars, (or if there is no change, their quality of life), have consistently improved as a result of Republican policies, relative to Democratic policies?

Over the last few decades which portions of the average metropolitan voter's disposable income in dollars, (or if there is no change, their quality of life), have consistently improved as a result of Democratic policies, relative to Republican policies?

The question is not about the subjective values people place on different changes in their lives. It would be nice to factor state-of-health into that somehow too, but I realize that will get too murky.

This question aims to find historical factors, (or elicit pointers to them), that could be used to evaluate how much, or how little, influence pocketbook voting factors have had. I'm looking for drivers of whatever rational components exist that might be obscured by more conspicuous subjective motivations.


The question is one that any accurate answer to must be very complex and detailed. This answer explores the underlying facts that would drive an ultimate answer without trying too hard to actually quantify and spell out in more detail the economic benefits and losses associated with various policies.

Subtypes of Rural Voters

One important difficulty in the analysis it that there are multiple types of "rural voters" who have different kinds of economic interests. Each one has its own economic interests that are easier to analyze separately than in the aggregate when economics incentives to get get muddied.

The stereotypical rural voter is a family farmer. But, only about 2% of the population of the United States is employed in farming, and even if you have a substantial multiplier for people who economically benefit when farmers are doing well, this is still only a modest share of the rural population in the United States. Farming is one of the few sectors of the U.S. economy that produces a trade surplus, rather than a trade deficit. For the most part, the farming industry has been reasonably health and stable with increased productivity and decreased employment almost every decade since the 1790s and earlier (new organic farms finally broke the trend in 2010). Almost all of the gradual but very long term decline in the proportion of the population engaged in farming is due to technologically driven improvements in farming productivity. But, the tobacco farming industry has collapsed in the last decade or two, and a lot of big U.S. farm products are heavily dependent upon federal subsidies (for much of recent history, 50% of the income of corn, sugar and cotton farmers came in the form of federal subsidies), in part, because their international competitor are also heavily subsidized. Tobacco, sugar and cotton are all predominantly Southern crops. Corn is predominantly a crop of the Great Plains. Ranching, which is a major part of farming in the mountain West, is less heavily subsidized, as is fruit growing and wine making which is a particularly large part of farm economies in Florida, California and Arizona, each of which has a larger than average percentage of people living in urban areas.

A rapidly growing, but much less familiar form of rural voter is someone who lives in a "exurb", which is a low population density area, usually adjacent or near a genuine suburb, and commonly home to affluent individuals stereotypically living on 5 acre "ranchettes" who either are willing to have a long commute in exchange for a less crowded rural lifestyle, or are retired, or can telecommute or otherwise work from home. This segment of the rural population includes a disproportionate share of people in the top 1% of income and wealth, respectively, and of the top 10%.

Another group of rural voters are those who rely on extractive industries like coal mining, oil and gas drilling, and the like for their livelihood. The coal industry is seeing huge declines as cheaper renewables, cheaper natural gas, and greater air pollution controls make it less attractive as a fuel, this is a long term trend that has recently accelerated and reached crisis proportions. The oil and gas industry has historically been a boom and bust proposition dependent on global oil prices, but has recently seen a huge boom due to fracking that has greatly reduced U.S. oil imports and has created demand for pipelines to make newly developed fracking based production available where demand is greatest.

Quite a large share of rural voters are elderly retirees or elderly farm economy asset owners who live mostly off rents. Often they settled in rural communities when they were economically more healthy (e.g. in a small town that relied on one factory that left or mine that shut down), but never moved away. For example, a significant share of my extended family consists of older relatives who live in towns listed in books like "the ghost towns of Ohio" and "the ghost towns of Michigan". These towns are very solidly Republican.

It is worth noting that while people under age 65 in the U.S. live in a heavily market dominated economy where poor employment outcomes mean poverty and a lack of access to health care, almost everyone over age 65 has most of their healthcare paid for by Medicare (a FICA tax financed, single payer system that pays providers more or less the same rates as private insurance companies and has few cost controls), more than half of their nursing home costs paid by Medicaid (which is stingy in how much it pays providers and moderately means tested), and receives enough of a guaranteed income from the combination of Social Security and SSI payments to keep the poverty rate for people age 65+ (even if they have no retirement savings of their own) above the poverty line, regardless of the state of the local economy. People in this age bracket are also most likely to own a home with a paid off mortgage and to have significant financial investments compared to all other age groups. But, people who own homes in rural areas have seen far less housing price appreciation than people in urban areas, so they can't afford to move from rural areas to urban areas because this would increase their housing costs so much. So, for seniors, there is an economic incentive to maximize their purchasing power by living in places with a low cost of living, and to stay in places with low housing costs if they already living in houses in those areas, because their income does not depend upon where they live (unlike non-seniors who earn less in rural areas removing much of the benefit from a lower cost of living). Essentially, the U.S. has a European style welfare state for all of its senior citizens, and one of the weakest welfare states in the OECD for people who are not senior citizens. While some of the programs that benefit seniors (SSI and Medicaid nursing home coverage) are means tested, the lion's share of this welfare state for seniors (Social Security and Medicare) is not means tested and is instead structured as social insurance.

A lot of rural voters in the hill country of the South particularly, but in small towns across the county, live in what amount to company towns where one or two modest sized factories provide most private employment. Everybody knows about the decline of the large, often unionized factories owned by big businesses, often in big cities, in the "Rust Belt" and the Northeast. Far fewer people realize that a significant share of the remaining manufacturing capacity in the United States has relocated to union unfriendly, small towns in the South, usually in fairly small enterprises that have supplier relationships with big name manufacturing companies but aren't big names themselves. Many of these towns were hard hit by the Great Recession in 2008, due to the general disruption to consumption caused by the initial real estate and financial market crisis that started this recession.

A variation on this theme are small towns centered around smaller military bases or military academies (public and private). Also, active duty military personnel at both the enlisted and officer level are disproportionately from the South in particular (around 50%), and Red States, generally, regardless of where they are stationed. As a result, veterans, including disabled veterans and veterans who have served in combat, disproportionately live in the South. It is also worth noting that the military is one of the most racially integrated employers in the United States. There is no big private business in the United States where such a large percentage of their workers spend a large share of their routine work days with other workers of different races as the military. The size of the U.S. military has decreased greatly since the end of the Cold War in 1989 (with a more than 25% of active duty personnel levels since the 1980s, and obviously a far greatly decline since Vietnam era peaks). Military spending on expensive major weapons systems like aircraft and ships and submarines built in large cities has grown much faster than military spending on personnel who frequently hail from rural areas (which has actually declined as military spending overall has surged).

Also notably, the military that has such a huge rural economy is basically a socialist economy. Access to resources is governed by bureaucratic decision making and politics, not market forces or profit margins or productivity. Service members have also no freedom to decide where they will live and work, and routinely get shuffled around contrary to their own wishes. Lots of basic economic needs are provided for in kind, rather than in cash. The cost of basic groceries and consumer purchases is subsidized through the PX system. Everyone has at least one guaranteed job per household, but nobody is allowed to quit. There is universal health care, dental care, and housing. Children in military families have access to military provided schools. Pensions and post-retirement benefits are very generous relative to the private sector. Active duty military personnel with larger families receive more compensation (including in kind compensation) than those without families or with smaller families. Income inequality among active duty military personnel is profoundly less great than in the general economy even after accounting for the non-monetary privileges of rank with economic value.

Another variation on this theme are small towns centered around one or more prisons (e.g. Canon City, Colorado). Prison populations grew steadily for decades until just a few years ago when declining crime rates (which have fallen since the 1990s) and state budget concerns led a movement towards "smarter" sentencing and controlling incarcerations rates. Incarceration rates tend to be higher in Southern states which are often more rural as well.

There are also a few kinds of rural voters who tend to be liberal leaning contrary to the usual trend, although they are a decided minority of the rural population:

* Residents of small college towns and research facilities and towns with notable boarding schools where colleges take the place of factories in a small town economy.

* Residents of small towns that rely on tourism and/or artists colonies and/or retreats for their economic well being (think of towns like Jackson Hole, Taos, Telluride, Martha's Vineyard, and Manitou Springs).

* Residents of small towns that are predominantly non-white (there are lots of predominately Hispanic small towns along the Texas border with Mexico, in New Mexico, in Southern Colorado, there are many Native American and Native Hawaiian towns in the American West, Hawaii and Alaska, there are a fair number of predominantly African-American small towns in the South).

* Organic farmers and legal marijuana growers.

* Solar utility operators.

* Park rangers and communities around national and large state parks, other than the farmers and ranchers in those communities.

Other Facts

The South was less industrialized than the North on the eve of the U.S. Civil War. Its economy was destroyed during the Civil War, and took further blows during the Reconstruction era at the hand of "carpetbaggers" from the North, particularly involving Northern banks providing financing to plantation owners who would pledge their land as collateral and often lost that land when they failed to repay the loans as agreed. Only in the last few decades has the South made appreciable strides towards catching up economically with the rest of the country from these setbacks and the "Deep South" is still decidedly behind economically even today as is Appalachia (for quite different reasons).

Appalachia's economy is a predominantly combination of near subsistence farming, coal mining, and small factories. Most of the region is in a state of serious economic decline and has been for decades.

Rural areas, in general, average about half of the per capita economic productivity of metropolitan areas. Indeed, there are a strong and predictable relationship between the size of a metropolitan area or rural region with a comparable geographic area, and per capita economic productivity. Almost uniformly, in every country on Earth, the larger the population of a metropolitan area or the rural equivalent, the more productive it is per capita, and the lower its population is, the less productive it is per capita.

Red States are overwhelmingly receive more federal funds than they pay in federal taxes, while Blue States tend to receive less in federal funds than they pay in federal taxes.

Unsurprisingly, if you think about it, rural areas tend to have little net migration into those areas (and few immigrants who are domiciled there) and urban areas tend to have more in migration and more immigrants. (If you have lots of migrants into your area, you cease to be rural quite quickly.)

Rural areas are generally stagnant or declining in population. Urban areas in some places are stagnant in population (particularly in the Northeast and Midwest) and in others are growing rapidly (particularly in the South and West). But, the shift from less urban to more urban areas while relentless and continuing for centuries, has taken place more slowly than most people realize.

More rural states tend to have more regressive taxes and lower taxes overall than more urban states.

In the South, there are substantial African-American populations in both urban and rural areas and the percentage of the population that is African-American is quite high compared to states outside the South. In the North, African-American populations are largely confined to large urban areas and their less affluent first ring suburbs, and segregated neighborhoods that are a legacy of pre-Civil Rights era patterns of housing discrimination remain the norm in older parts of non-Southern cities (although newer suburbs tend to be considerably more integrated than older neighborhoods outside the South). About half of the African-American population in the United States lives in the South, and the extent of the ongoing economic, family and cross-migration ties between the South and urban African-American populations in large American cities like Chicago, is greatly under-appreciated. In the South, essentially all African-Americans prior to the Civil War were engaged as slaves in agriculture and after the Civil War, most African-Americans continued to be engaged in agriculture because there was no other healthy sector of the economy to earn a living in. In the North, African-Americans trace their roots to the "Great Migration" and less intense versions of that movement of people before and after that wave of migration, mostly to industrial cities seeking factory jobs at the height of the U.S. industrial economy that declined starting around the 1970s and has continued to decline in employment but not productivity, partially due to automation and partially due to offshoring of jobs to lower wage, less regulated countries. The loss of urban factory jobs led to the collapse of the African-American married couple family structure as far fewer men has steady good jobs that allowed them to support a wife and kids economically (a pattern that less educated whites would follow a couple of decades later), and to the decline of Rust Belt cities across the Midwest and Northeast. The story of African-American migration to the American West is quite different as it wasn't as large and wasn't driving primarily by the pursuit of factory jobs that came in abundance and then left for good.

One implication of the different spatial distribution of people by race is that lots of metropolitan areas have de facto segregated schools, while Brown v. Board of Education and the cases that followed were quite effective in requiring schools in small towns and rural areas with racially mixed populations to be integrated, since they don't have many schools period and don't have nearly as great residential segregation into large nearly mono-racial groups of neighborhoods the way that many large cities do. Small towns and rural areas also generally don't have enough students to support significant choice options or charter schools within the public school system. Also, many non-Southern cities have a long traditional of Catholic K-12 schools sponsored by the Roman Catholic Church, subsidized by parishes, while the South which has few Roman Catholics also has few Catholic schools as a result.

A significant share of the gaps in income, education, crime and other socio-economic indicators between Southern states and non-Southern states in the U.S. is associated statistically with having larger African-American populations, although Southern whites are still lower in income, less likely to receive educations, and more likely to commit crimes, etc. than whites in metropolitan areas outside the South.

The cost of living is lower in most rural areas than in most urban areas, although part of that lower cost of living is attributable to subsidies of rural governmental functions like road and bridge maintenance and K-12 education by residents of more urban areas. As a result, lower incomes in rural areas imply less of a hit to purchasing power from disposable income than a crude comparison of nominal income between urban and rural areas would suggest. The biggest source of regional differences in the cost of living is the cost of housing which is much greater in healthy urban areas than in rural ones, although housing is also very cheap in depressed Rust Belt urban areas where populations are just starting to stabilize after several decades of declining populations.

Elite institutions of higher education are disproportionately outside the South and outside Red States, and students from Red States who attend these elite institutions frequently assimilate into Northern/Blue State culture and do not return to their home states. There has been long term brain drain (and plain old population shifts) from rural America to urban America more or less continuously since the 1870s, with the possible interruption of the Great Depression and World War II. In general, the most economically fit individuals tend migrate away from places that are economically weak, and the least economically fit individuals tend to continue to live where they were born.

White Americans without college degrees are much more likely to not marry and to divorce and to have multiple marriages during a pre-elderly lifetime than they were historically, while white Americans with college degrees are now more likely to marry and less likely to divorce than they were for the past several decades. This has been driven economically by basically 0% earned income growth for men without a college education since about 1970 combined with rising job insecurity and growing disability rates, accompanied by rapid earned income growth for women without a college education, combined with a rise in the tendency to marry someone with similar education. Women without college educations are dramatically less economically dependent upon their husbands than they used to be, while the economic dependence of women with college educations on their husbands remains high because both men and women with college degrees have seen surging incomes since the 1970s and most women with college degrees experience large income penalties for leaving the work force for a while to raise children while women without college degrees don't face those kinds of income penalties in their far less skilled jobs.

Rural areas have a larger proportion of jobs that don't require college educations than urban areas.

Rural people are far more likely to own firearms, especially long guns purchased primarily for hunting and protection from wild animals, than urban people, because it is much cheaper and easier to hunt and fish in rural areas than in urban areas. There is less of a rural-urban disparity in hand gun ownership because hunting and protection from wild animals are not factors in hand gun ownership. Also, crime rates are lower in rural areas than in urban city centers, and police response times are much slower in rural areas than in urban areas due to the lower population density which means long distances from a police station to the average crime scene.

Large urban areas have large immigrant populations spanning a range from very low income to very high income professionals and are vital to large urban economies. Highly skilled immigrants are a significant share of the work force in medicine, in academia, in engineering and in other technology industries, all of which involve jobs disproportionately located in large urban areas.

This trend is long standing and dates back to the late 1800s. The economic tendency of immigrants to work in large urban areas is one of the main reasons that large urban areas have much more religious diversity and many more residents who are neither WASP nor African-American, that rural areas. Catholic migration to rural areas was largely confined to the North and the West and largely dates to the 19th century, after which further Catholic migration to the U.S. was largely to large urban areas like all other forms of immigration to the U.S.

A number of refugee communities (e.g. in Saint Louis and Great Detroit and in Wisconsin) have migrated to Rust Belt cities where they have filled inexpensive neighborhoods largely deserted by the original residents and revitalized them as ethnic enclaves.

Rural areas have far more local governments and far more elected officials per capita than urban areas. As a result, far more rural people have run for elective office or held an elective office or know someone who has done so, and rural people have far more influence in a direct democracy manner over their local governments than people in urban areas. But, also, as a direct consequence of the larger proportion of elected officials, and also as a result of the lower rates of educational attainment in rural areas, elected officials in rural areas are far less "elite" educationally, socioeconomically, and in political and administrative competence than elected officials in urban areas, on average. Political activity is far more "professional" at the local government level in urban areas where there are far fewer governments and far fewer elected officials per capita, and a far greater supply of people who higher education and with high level managerial and professional work experience.

In addition to true local governments, many economic functions that are carried out by investor owned companies in urban areas are handled by consumer or producer cooperatives in rural areas. Rural phone companies and electric utilities, rural financial institutions, rural farm product marketing companies, companies that provide irrigation water, and lots of the companies that sell goods to farmers, for example, are all organized as cooperatives of either consumers or producers and run on a much more democratic basis than investor owned companies. This is a legacy of New Deal policies that has remained in place due to historical contingency and inertia.

Thus, no only due rural people have a greater democratic say in how their local governments are run, they also have a greater democratic say in how some of their key utilities and economic institutions and are far more likely per capita to serve on the governing boards of such institutions (even though, as in the case of governments, they have far less formal training and expertise in doing so than their urban counterparts running investor owned corporations that do the same things in urban areas).


A full analysis of the economic implications of these facts for the pocketbooks of rural v. urban people would take a long time and more space than a single answer would allow, but these facts suggest pretty directly some conclusions about which policies would and would not help rural v. urban people economically.


Dave Barnes said...

you have a lot more to write on this topic

andrew said...

Installments, of course.