When we were wealthy

In a recent post, I said the following about Iowa’s sudden shift to the political right:

It’s weird when you move away from a place for several decades. You still believe that you understand the place from when you lived in the area. But you really don’t. Unless you live somewhere, you cannot understand it. And maybe it’s impossible to truly understand a place even if you do live there.

Today, I’d like to focus on economics, not politics.

I was born in Michigan (in 1955) and grew up in Wisconsin. I went to grad school in Chicago. According to a recent article in Bloomberg, this was the richest part of America in the period after WWII:

As a child, I never gave much thought to economic disparities. I recall a general view that “hillbilly” areas like West Virginia were backward, as was the deep south. Other than that, I thought we were pretty normal. West Coast, Midwest, East Coast, Texas, Florida, it was all pretty much the same in my mind. Was I wrong? (BTW, the people on TV news shows mostly had midwestern accents.)

When I moved to Boston in 1982, I certainly did not have any sort of feeling that I was moving to a more advanced part of America. But by the time I left in 2017, Boston did seem much more advanced, as does Orange County, California, where I live now.

I’m sort of getting used to the way the media now portrays the Midwest as backward, but at a deeper level I don’t think that view will ever cease to feel a bit strange. I wasn’t living there when the transition occurred. I don’t remember it as being backward. Commenters tell me that Iowans have become Trumpistas because they are uneducated. I’m skeptical. The Midwest never seemed uneducated to me back then—indeed I recall midwestern states often scored high on various test rankings.

When I saw the Milwaukee Bucks win the title in 1971, it was America’s 12th largest city. Now it feels weird when I hear commentators refer to Milwaukee as a “small market”, and indeed when they again won the title in 2021 it was America’s 31st largest city. (There are only 30 NBA teams.)

Is it possible that all this will flip again by 2070? Might Mississippi become richer than Massachusetts? Or does the past 50 years represent a once and for all change due to population sorting—taking a (mostly) geographically homogeneous nation and doing radical sorting by education level? Are we now “locked in” to this pattern? I have no idea.



13 Responses to “When we were wealthy”

  1. Gravatar of Student Student
    24. July 2023 at 07:09

    Nothing is ever locked in and the paths seem rather random. Ancient history gives us many example of drastic shifts (though the shifts occurred over extremely long cycles). Think of Minoan Greece and the the Bronze Age collapse and then classical Athens and then it’s decline. Or Rome going from 1.5 million people in 0 AD and being a or the center of the world before becoming a backwater by 1000 AD before return to being a leading global city by 2000. Or the Middle East being the center of the world technologically in the Middle Ages before falling into dark ages by the enlightenment and becoming rich again (to much lesser and backward extent) by 2000 via the fossil fuel boom.

    In 1490 Lisbon was was arguably the most import city in the world, certainly in Western Europe… yet 300-400 years later London was the center of the largest empire the world had ever seen.

    More recently, consider Detroit. In 1850 it was a rather insignificant town of 20,000 people but 100 years later it was one of the most important cities in the world… the city that won WWII and ushered in the USA as the world preeminent power. Yet 50 years later it had lost more than 50% of its population and had entire neighborhood were crumbling piles of rubble.

    Imagine if fresh water became real scare (Lake Meade and other spices dried up) how valuable the Great Lakes would be or if Nuclear Fusion was commercialized in Toledo Ohio or if a miracle cure for all types of cancer were discovered at the Cleveland Clinic.

    By 2070… who knows… It all seems to be be a rather random process. Fertile gardens can be made but you never know when the rains cometh and goeth.

  2. Gravatar of Student Student
    24. July 2023 at 07:27

    Shoot, by 2070 Anchorage Alaska might be a leading global city. And interesting take anyways…


  3. Gravatar of ssumner ssumner
    24. July 2023 at 08:18

    Student, I doubt that fresh water will be an important issue, even California has plenty of water.

  4. Gravatar of Student Student
    24. July 2023 at 11:27

    You are probably right, I was just making a point that city size/importance is a random walk it seems… and yet, it’s a bit of a mystery why it follows zipfs law.

    I def don’t think we are locked into any pattern. We have no idea which cities will be the big players in 2070 just as we have no idea when the next recession will occur. It’s animal spirit stuff.

  5. Gravatar of Rajat Rajat
    24. July 2023 at 12:57

    [Please delete my duplicate comment under moderation.]

    Isn’t this about the shift from manufacturing based in the Midwest (eg cars, steel) to services, including finance (NYC), leisure & tourism (California and Florida)) and technology (which grew around elite universities, defence and Boeing (the coasts))? BTW, for much of the world’s population, the Midwest has too extreme a climate to be appealing. For that reason, I can’t see it coming back in vogue.

  6. Gravatar of Solon of the East Solon of the East
    24. July 2023 at 16:52

    Detroit was the richest big city on the planet in 1960 (per capita) and was also a leading center for technology. Some of the world’s best art collections too. Architecture.

    Stateless multinationals have no interest in preserving, or even making Detroit greater.

    That is the whole story of the industrial midwest and development there, no?

  7. Gravatar of Student Student
    24. July 2023 at 20:09

    No I don’t think it is Solon. It is the story of technological diffusion. Technology has a life cycle. When a technology is new and therefore difficult to copy, rents accrue to it. Once it ages and people in other places figure out how to copy it, it spreads to lower cost labor markets. Detroit mastered automobile production methods (the assembly line) and design and parts production. Those huge factories pumped out the products of the arsenal of democracy during WWII. After which, the technology diffused.

    That is the story of Detroit. It is the same story that has occurred throughout world history. This is also why places on the technological frontier must continually innovate, why there is such a premium to education in advanced economies and why birth rates fall in advanced economies.

    The slightly more mysterious part of the story is why they didn’t continue to produce new types of industries and meta ideas. Perhaps the critical innovations are randomly distributed. Perhaps success leads to rigidity and rejection of weird new ideas (if it ain’t broke why fix it). Perhaps jobs/ideas follow people and once their were cars and long haul trucking and air conditioning, why live in the cold north? To my the growth of cities is easy to explain… the decline of them is less so.

  8. Gravatar of Sean Brown Sean Brown
    24. July 2023 at 22:29

    There are actually causative elements in the above 1949 chart. Unions “artificially” boosted median incomes in Detroit, Cleveland, Chicago, etc. Those same unions led directly to subpar job creation, lack of tech innovation at their companies, lack of upskilling, etc. All those factors led to poor median incomes several generations later.

  9. Gravatar of Sara Sara
    25. July 2023 at 06:25

    There is already a shift taking place. Companies are leaving California and Massachusetts for Texas and Florida, where the cost of doing business is cheaper. Assuming the elites don’t get what they want: which is a one party state, more and more companies will move elsewhere. Elon already said he’d bring Twitter to Austin with his other companies, shortly, which will be the nail in the coffin for the fentanyl, crack-head, poop stained, ghost city, once known as SFO. States that are business friendly will succeed, and states that go down the woke, totalitarian path, will fail.

  10. Gravatar of Student Student
    26. July 2023 at 09:59

    The vast majority of GDP is begotten in cities… which are overwhelmingly liberal. You all point to Austin Tx… a real conservative bastion lol. Recall Travis County TX (Austin) went 71%+ for Biden.

    Now to the union stuff, thats a good point… but the technology was going to diffuse either way… whether or not the workers got a larger or small piece of the rents.

  11. Gravatar of ssumner ssumner
    26. July 2023 at 13:26

    Solon, You said:

    “Stateless multinationals have no interest in preserving, or even making Detroit greater.”

    I wish that were true, but what about some of those white elephants they built trying to revive the city?

  12. Gravatar of postkey postkey
    27. July 2023 at 00:06

    No ‘BAU’?
    ‘Most’ ‘economic thinking’ is ‘short run’ and ‘redundant’? ‘It’ ignores the ‘supply side’?
    ‘Growth’ {and ‘civilisation’} depends upon ‘cheap’ F.F. – those so called ‘halcyon days’ are ‘over’. ?

    “If only we could accelerate the technological development of the wider world, then we would surely see an explosion in the value created as eight or even ten billion humans harnessed the power of modern technology in an increasingly globalised economy. And so, we encouraged development around the world, with the huge populations of China and India leading the charge. Thus, the growth of the Chinese and Indian economies over the last two decades should have ushered in a new golden age of prosperity. But that isn’t what happened. Even before the 2008 crash, the western economies had struggled to maintain a decent growth rate. After the crash, they barely grew at all. And in the post-lockdown economies, growth has gone into reverse.

    But even now, when it ought to be obvious to all that neither labour nor technology is the source of value, economists and pundits reach for more patches to try to repair our increasingly threadbare understanding of how the economy works.”?


  13. Gravatar of Student Student
    27. July 2023 at 11:13

    Technology isn’t the source of growth/value? That is the dumbest thing I have ever heard written about economic growth. Specialization, trade, and new ideas/knowledge is the essence of economic growth.

    When you read something that dumb, remind yourself to stop reading from that source. If knew knowledge about better ways to use old resources or knew knowledge about ways to do new things isn’t the cause of growth… then is?

    That the dumbest thing I have heard in a while.

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