Charles Wheelan, Ph.D. The Naked Economist

Clearly, Barack Obama did not endear himself to the people in small towns across Pennsylvania. I don't know if people living in those towns really are bitter, as Obama suggested in a fund-raising speech a couple of weeks ago. And if they are bitter, I don't know if that makes them more likely to embrace guns and religion.

But I do know that the entire discussion that's followed from Obama's comment has missed the most important point: Small-town America has big economic problems. And they're likely to get worse.

Rural America Recedes

When I was a correspondent for The Economist, I did a story shortly after the 2000 U.S. census that I referred to informally as "The Incredible Shrinking Iowa." One statistic was so striking that I still remember it to this day: Just under half of Iowa's counties had fewer people in 2000 than they had in 1900. Not 1990, but 1900.

Rural Iowa isn't alone. In a U.S. Census Bureau brief, there's a map using data from the 2000 census that displays population growth during the previous decade by county across the United States:

(Click on the map for a full-size version.)

If you want to understand what's really going on in Pennsylvania, read one paragraph buried in the text of the brief: "A band of counties that lost population -- in some cases declining more than 10 percent -- stretches across the Great Plains states from the Mexican border to the Canadian border. A second band of slow growth counties includes much of the interior Northeast and Appalachia, extending from Maine through western Pennsylvania and West Virginia to eastern Kentucky."

During a decade when the United States as a whole grew by 13 percent, these places were shrinking significantly, and it's often the youngest, most highly educated residents who leave first. So the whole bitterness-guns-religion comment just obscures the more important question about small-town Pennsylvania and other rural areas around the country: Why are their populations shrinking?

Three big economic forces are at work:

1. Rising agricultural productivity means that we need fewer farmers to meet our food needs.

This trend has been going on for 200 years. The typical farm is getting bigger and producing more per acre -- the agricultural equivalent of Wal-Mart. That's not a bad thing; it means that we're getting better at growing things, which is an important part of economic progress.

But it also means that the typical farm-based community is going to shrink unless there are other economic opportunities for the sons and daughters who would have gone into farming 50 or 100 years ago. By and large, those alternative opportunities don't exist -- because of the next big trend at work.

2. Highly skilled people are more productive when they're in close proximity to other highly skilled people.

This makes it hard to live in a rural area. Surgeons need to be near major medical centers. Graphic designers need to be near advertising firms. Securities lawyers need to be near investment banks. As an economy gets more productive, it also gets more specialized. Each of us gets very good at a highly specific task, but that usually means that we need to be around other workers with complementary skills.

I could probably write this column from the middle of Pennsylvania, but I wouldn't be able to teach graduate students there, which is my "day job." Could you do your job in a small town in Kansas? Or, with the rise in the number of dual professional couples, the appropriate question is: Could you and your spouse do your jobs in a small town in Kansas?

Recent research has identified two interesting phenomena that suggest the rise of the "skilled city." First, skilled workers (e.g., college graduates) earn higher wages when they're in places with a higher proportion of other skilled workers. Second, metropolitan areas with a higher proportion of college graduates have had more robust population growth than less-educated regions, holding other factors constant.

When I wrote about "shrinking Iowa," the exception was the state's metro areas -- places like Des Moines and Iowa City. Pennsylvania is the same. The Brookings Institution recently reported that Pennsylvania's 16 largest metropolitan areas account for 92 percent of the state's GDP.

3. Our existing farm subsidy programs don't help, and they probably make the situation worse.

The federal government spends a lot of money in rural America -- but not in a way that's likely to support rural communities. Every farm bill lavishes billions of dollars on farmers. The problem is that the subsidies are based on production, so the biggest growers get the most cash. Between 2003 and 2005, for example, the biggest 10 percent of growers received two-thirds of the total payments.

That doesn't help small farmers. In fact, it puts them at a further disadvantage as large corporate farms use taxpayers' money to gobble up the land around them. More important, it does nothing to expand the non-agricultural economic opportunities in rural America.

Stumbling on a Truth

Is Barack Obama "elitist" and "out of touch"? Perhaps. But he did stumble across a truly important phenomenon: There may be many virtues to life in rural America, but it's increasingly hard to make a living there.

That's what the candidates need to be talking about next month in Indiana and North Carolina -- and in a lot of other states, too.