Thursday, May 26, 2011

Hi Country, it's US, the States

What do people, dogs, and engagement rings have in common? They all come in different shapes and sizes (especially the 20 karat ones). And they aren’t alone: according to old-fashioned “reality” TV, the great states in which we live in are no exception. The History Channel is running a series on “How the States Got Their Shape.” How, you ask? Through a combination of factors including climate, geographical features (rivers, mountains), politics, and population trends.   Ten states border the Mississippi River and 13 border the Appalachians.  The larger, boxier (some might say “boring”) shape of western states reflect later settlement as developments in transportation facilitated movement west. 

These factors all continue to define the states today.  Geography and climate play major roles in U.S. economics.  The Great Lakes region is a manufacturing hub because of its water and rail transportation routes (although now South Carolina is giving these states a run for their money with tax incentives).   The mid-West is perfect for farmland because of soil deposits from Canada left by glaciers.  The economies of arid Colorado, Nevada, and California would be much different if they did not have access to the Colorado River (too bad New Mexico for coming late to the party). 

Population patterns and changing demographics between states also play a big role in the U.S. economy.  More people are leaving the Northeast.  Florida is a hub for the increasing elderly population because of the heat; immigration from Mexico and Asia has lead to a huge expansion in the Southwest (Texas has more than twice the national average of people of hispanic origin).  The effects of these factors on state economies can be seen in the available data:  wages, employment, industry, and prices all vary by state.  It is the sum of the individual states that makes up the national economic data relied upon to gage how our country is doing (read: will we be able to keep paying the bills?).  Figures released today showed that as a whole, we grew less (generated less wealth) than expected in the first 3 months of this year (1.8% over the last 3 months of 2010).  We continued to buy more from other countries than they buy from us (again, partly due to geography and distribution of natural resources) which subtracts from our wealth.  Yet look at the individual pieces (states) and we see a more dynamic picture.  For example, in 2009, at the height of the economic recession, the Great Lakes states had a larger decrease in output (“gross domestic product”) than any other region.  Oklahoma actually grew (increased output, or wealth) by 6.6% in 2009 while Nevada contracted by -6.4%.   

Ultimately, people go where the jobs are (read: where the money is), and where they are able to live safely and comfortably.  We must be flexible: “where the jobs are” is constantly evolving as the U.S. competes with the world to maintain our economic well-being.  For example, offshoring and large productivity gains mean those people in the Great Lakes reliant on manufacturing for work may have to consider moving or re-training.  Modern manufacturing is more high-skilled, automated, and streamlined – this could be the only way for the U.S. to compete with the world (did you see the memo: we aren’t going to win the wage battle).  Sometimes industries outlive their purpose as demographics and consumer preferences change, that is the way of it.  In this case the key is to encourage new industry growth.  (Hey, old tobacco Winston-Salem, are you listening?  Take a hint from old steel Pittsburgh.) 

Human innovation will lead the way into the future, just as in the past.  The History Channel special indicated that because of air-conditioning, people were able to settle in Texas year round.  Texas is now the proud home of 3 of the nation’s 10 largest cities, hard to imagine 100 years ago when all major cities were still east of the Mississippi.  As the world economy evolves alongside the U.S., where will the next industrial hub be? 

(Bureau of Economic Analysis, Census Bureau, History Channel)

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