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Charles Wheelan, Ph.D. The Naked Economist

Charles Wheelan, Ph.D., The Naked Economist

Small Towns, Big Problems

by Charles Wheelan, Ph.D.

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Posted on Wednesday, April 23, 2008, 12:00AM

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:

census map

(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.

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  • George - Tuesday, April 29, 2008, 9:17PM ET  Report Abuse

    • Overall: 4/5

    I too felt that Obama's comments vere taken out of context. I do not agree that people in small towns are bitter. Not everybody wants to live in Los Angeles. But the farm subsidies are making the small farming lifestyle impossible. Too bad.

  • Loopie Hoopie - Tuesday, April 29, 2008, 9:59AM ET  Report Abuse

    • Overall: 5/5

    Ahh, Wheelan wrote for the Economist. No wonder I agree with most of what he says in this column. I am often worried that most people are populists and that our candidates are reflections of that ignorance. Then I read the comments of columns like this and realize that there is intelligent life out there. How do we all get together and fight the stupidity?

  • Yahoo! Finance User - Monday, April 28, 2008, 9:05PM ET  Report Abuse

    • Overall: 4/5

    The author presents the plight of rural America very succinctly, but it's a bummer to think that small town America has such a bleak future. I hope Congress and business leaders can come up with policies (and good jobs!) to help our small towns survive and thrive in the future.

  • Yahoo! Finance User - Monday, April 28, 2008, 1:26PM ET  Report Abuse

    • Overall: 4/5

    Huray to Mister Moose & Steve !Small towns are loosing local manufactureing,and therefore jobs ,which are not being replaced , due to outsourcing !, Lack of money also brings reduced education resulting in poor local leadership and ability to solve econamic ,social problems. Stop the bleeding , don't send the jobs abroad and things will turn around!! Mick

  • Mister Moose - Monday, April 28, 2008, 12:53PM ET  Report Abuse

    • Overall: 5/5

    The author is correct; farm bill lavishes billions of dollars on farmers. The sad part of this scenario is that 70% of that aid goes to large corporate farm operations with an average net worth of $100 million , and this adds billions to the national debt. What a joke this is on the real taxpayers.

  • Gregory - Monday, April 28, 2008, 11:00AM ET  Report Abuse

    • Overall: 3/5

    OK -- have you been to Iowa, Nebraska, Kansas, etc? Flat and boring, it's not rocket science that younger adults leave.

  • Steve - Monday, April 28, 2008, 9:02AM ET  Report Abuse

    • Overall: 2/5

    Lack of opportunity is what drives people out of rural and into the big metro areas. While the article describes the population declines in rural America, it doesn't address the real reason for its decline: the de-industrialization of America. Increases in farm productivity are good and should be encouraged. Farm subsidies are NOT good and should not be encouraged especially by economists. And only big businesses want population growth for the sake of population growth and only so they have more consumers to sell their products. Rural communities need to band together to better market their regions and to make investments in high-speed communications and fast transit while lowering the tax and energy costs burdens of their current and potential denizens.

  • David - Monday, April 28, 2008, 8:50AM ET  Report Abuse

    • Overall: 5/5

    I live in a small county two hours north of Atlanta. We are experiencing growth resulting from seasonal, week end and retirement residents and tourism. Unfortunately the growth is unchecked and seems destined to destroy the goose that lay the golden egg.

  • Yahoo! Finance User - Monday, April 28, 2008, 8:38AM ET  Report Abuse

    • Overall: 2/5

    Urbanite trying to comment on rural America! The main problem for small towns is the lack of leadership, consistently over time - staring back in the late 40's when the post-WWII boom started the urban flight. For those small towns who had leaders were complacent and satisfied, the decline started for the small town as being functionally obsolete. For those communities blessed with forward-thinking leaders who worked to attract business investment and encourage incubators, the communities have been rewarded with "mighty oaks from whom little acorns grow." Almost impossible to catch up now for those who missed the opportunity. Even less likely that the leader who is civic-minded has a business background to make the critical decisions to properly dedicate resources. Example, even if the town had successful local businesses, by now many have been bot by larger cos who run the plants remotely with mangers who rotate in from outside and have little civic interest or political connection to make a difference.

  • Yahoo! Finance User - Monday, April 28, 2008, 2:07AM ET  Report Abuse

    • Overall: 1/5

    This is typical, elitist, economic double speak to sell the New World Orders plans to move the masses of the people off the land, into cities, and onto very small footprints, ecologically,and 'rewild' most of America. I guess the professor hasnt heard of the internet and people working remotely, like they do in many parts of the world. We should 'outsource' economic professors, who are leeches off the taxpayers, and regulate their salaries and tuition increases. he is a 'public' servant, although he serves mainly to try and brainwash americans that the elites are not pursuing specific economic polices of global managed trade, under the WTO, NAFTA, to 'hollow' up America middle class in rural communities and force their migration off the land. This article is pure elitist propaganda. For instance many students move away to attend school, why not locate more universities in rural setting were land and rents are cheap, and sell the expensive university land in the major cities. Really this entire article is one big series of falsehoods and lies.

  • Fun - Sunday, April 27, 2008, 7:15PM ET  Report Abuse

    • Overall: 4/5

    The conclusions reached in this article are correct. I grew up in a small town, then left for a big city education and I have now returned to a small town thinking that I would "give back" to the community...and how shocking it is to be back! Our community continues to shed jobs by the hundreds, crime is through the roof and it seems anyone under 35 years old here is a druggie. As a young professional, I feel completely out of place in rural America even though I grew up here. There is no one my age interesting to talk to and even if there were, there is no place to meet them. I look forward to returning to the City as soon as I can sell my house--but that will be impossible because nobody here has a job...except for the drug dealers who seem to be recession proof.

  • Gary A - Sunday, April 27, 2008, 6:23PM ET  Report Abuse

    • Overall: 5/5

    People could have been encouraged to retire to less populated places, except for the fact that prices have been pushed up by the fed Real Estate ponzi scheme of untenable loans to people who couldn't afford them. To bad the ridiculous effort to finance the Iraq War through shoddy loans (and Greenspan wanted that oil according to his own words) has made it even worse in rural areas of the west. See http:/bgamall.stumbleupon.com to really understand the evil actions of our government under Shrub and Cheney.

  • 9inchnail - Sunday, April 27, 2008, 1:39PM ET  Report Abuse

    • Overall: 4/5

    The facts presented in this article are well supported in research into public sector issues. Rural America is losing educators (often due to budget cuts) and educated individuals (who do appear to congregate where other educated people reside) resulting in a brain drain that negatively impacts the ability of rural communities to compete for resources with urban areas. Choosing to ignore or berate these facts or the individuals who study them reminds me very much of children on the playground covering their ears and yelling "la-la-la" when information is presented that contradicts the interests of or forces them to peek from under the psychological safety blanket so tightly held by those who believe the world exists only and exactly in accordance with their perceptions and values and which they vigorously and condescendingly attempt to impose upon others.

  • JeffreyS - Sunday, April 27, 2008, 12:27PM ET  Report Abuse

    • Overall: 3/5

    I don't buy the part about "increasing agricultural productivity." This only implies acceptance of the dominant paradigm, whereby we increasingly depend on fossil fuels for increasing agricultural production, transportation, adn distribution of our foods, rather than a more sustainable and less energy intensive model of locally based agriculture and community. We are bankrupting communities, the land, and the planet with our global trade agricultural system

  • Cubert - Sunday, April 27, 2008, 9:21AM ET  Report Abuse

    • Overall: 4/5

    Everyone can see the draw of the large metropolitan areas, but the necessity to work in a central city, where the jobs are, is a tremendous waste of fuels to transport people to their jobs in distant suburban areas. I would hope that corporate and government interests place telecommuting on the fast track - at least on a part-of-the-time basis.

  • Mike B - Sunday, April 27, 2008, 9:12AM ET  Report Abuse

    • Overall: 2/5

    race was surprisingly not mentioned. The largesse to large agricultural entities follows from American focus on "first". All others dont exist. Govt for the people should read Govt for the elite...however one climbs to such height. Elimination of Corporations and salaries $10m per year might give interesting results. What % of people earn $10million in one year? Canadian.

  • Marcel - Sunday, April 27, 2008, 5:52AM ET  Report Abuse

    • Overall: 5/5

    Well written - makes sense - would be good to understand the full impact of the metro areas in these states. May vey well offset the doom & gloom Charles Weelan pictures.

  • traveler - Saturday, April 26, 2008, 6:57PM ET  Report Abuse

    • Overall: 5/5

    Fellow posters: Some of you dig small town life and make a compelling case for it, others love the city and cite their own compelling reasons. Others post about problems with one or the other. News flash! This is America, the land of the free and the home of the brave. If you don't like where you are or it is not economically feasible for you there, GET A UHAUL. Please do not expect government to 'create opportunity.' The only method of government doing anything is to take money from some and give it to others--giving arbitrary power to the political class, driving up costs and reducing opportunity for everybody else. Nuts to the PhD's who support gov't intervention--kudos to those who battle subsidies of all kinds.

  • Yahoo! Finance User - Saturday, April 26, 2008, 8:58AM ET  Report Abuse

    • Overall: 2/5

    Barack didnt stunble onto these facts, apparent you did! And yes, people are bitter of the Govt handling of the economy, and at the careless spending on programs like the Iraq War, and aid to Israel.

  • Will.N - Saturday, April 26, 2008, 8:16AM ET  Report Abuse

    • Overall: 3/5

    Actually, Penn State - University Park is located at the geographic center of the state of Pennsylvania. So if you lived in the middle of the state, you can teach grad students....Almost any obstacle can be overcome with motivation and creativity!

  • Eduardo - Saturday, April 26, 2008, 2:54AM ET  Report Abuse

    • Overall: 3/5

    Zzzzzz. So, what's new? You read the "One Lesson" in economics too, huh?

  • binderzz - Friday, April 25, 2008, 5:54PM ET  Report Abuse

    • Overall: 1/5

    The "non-agricultural economic opportunities" in rural America were once found in small manufacturing jobs. Kitchenware. Toasters. Washers/dryers. Clothing. Furniture. Eyeglasses. All were once made within a short drive of where I'm now sitting in rural America. All those "opportunities" have now moved to Mexico and China on the advice of free-trade/PhD economists like Mr. Wheelan in the pursuit of lower labor costs. And now he wonders why it's difficult to make a living in rural America? We have met the enemy, and he is "you". If Barack Obama is "perhaps" elitist, you should own up to the fact that Senator McCain (dumped his first wife to re-marry a multi-millionaire) is more so.

  • Lois - Friday, April 25, 2008, 5:36PM ET  Report Abuse

    • Overall: 5/5

    One area you did not mention was the aging population. People want to retire to the "sunbelt". There are more medical centers in larger cities.

  • Yahoo! Finance User - Friday, April 25, 2008, 3:43PM ET  Report Abuse

    • Overall: 4/5

    Slanting? Did you read the article?

  • Midwestern countryboy - Friday, April 25, 2008, 3:10PM ET  Report Abuse

    • Overall: 2/5

    You are talking about a national issue while making a political statement. Leave out the politicking about Obama and just make your case about small town America. Too much slanting, not enough about the ramificatioins all this will ultimately have.

  • Jonathan R - Friday, April 25, 2008, 11:07AM ET  Report Abuse

    • Overall: 5/5

    No, my wife and I cannot both do our jobs in a small Kansas town. We are having a hard enough time finding a position with my degree in Wichita (650-750k metro area populace). A balanced argument. I don't agree with some of the outputs of the argument, but very well balanced and well written

  • Yahoo! Finance User - Friday, April 25, 2008, 10:59AM ET  Report Abuse

    • Overall: 3/5

    This article seems to have made quite a "stir"! Obama, Subsidies, & Small Towns; three topics, bringing hundreds of opinions. Before I forget the comment made "small towns are where people go to die" & "the city is where the action is & the jobs are"; the person who wrote the comment must be a younger individual who was "bored" in the small town he grew up in & likes to party & the "intensity" the city provides. Personally, I find it sad that some of our small towns (mostly in middle America?) are depressed & experiencing the challenging economy (along with the rest of us). Subsidies: What a mistake & what a mess!!! As a Dietitian & Teacher, I see our food situation as terrifying & quite pathetic. We should create a 5 year plan to eliminate (or significantly reduce) the subsidies, & encourage/promote the re-growth of the smaller, organic farms in the little towns. Lets' revise our economy, let's bring back the production of our own foods, back into our own country. I have beautiful, optimistic visions of small communities with an abundance of farmer's markets...........freshly grown, tasty, healthy fruits & vegetables, grains, & REAL nutritious corn that people can EAT rather than put in their gas tank. Our huge farms are ruining the country & the quality of our food, nutrition & well being. The time is NOW.........we must make drastic changes..........no matter who ends up being our next President.

  • Da Big Guy - Friday, April 25, 2008, 10:46AM ET  Report Abuse

    • Overall: 2/5

    At almost 50 years old, I have seen this trend my entire life. Nothing "new" here. SORRY CHARLIE!

  • Randall - Friday, April 25, 2008, 10:30AM ET  Report Abuse

    • Overall: 2/5

    One of his better articles. He almost said something on the subject of farm subsidies, but did not go so far as to say that government programs are nothing but a bailout for farm special interests and that it is wrong just like all of the other special interests. This like all other special interests combined is what is killing this country and nobody has the courage to oppose it or refuse the money. Nothing but gloom in the future. As far as Obama is concerned he has an admirable life in some ways, but knows nothing about economics and race relations. The only book he has written is about himself, that sums up what he is about. He really can't speak to any other topic. The "bitterness" that may exist in small towns is just speculation on his part and he was hoping to capitalize on it if it is actually there. I find it admirable that he has the courage to say that. Most people I know live in small towns because they like it there and are making a living there. If they weren't then they would just move like the rest of us did. No problems here, don't see why we another government program to address the "problem" of the small towns. Every place can't grow by 10% or more, then we would have another problem, wouldn't we?

  • Jaron - Friday, April 25, 2008, 10:12AM ET  Report Abuse

    • Overall: 5/5

    Dr. Wheelan is correct in what he writes. I currently live in a rural area about five miles outside of a town of approx. 3,000 people in western Kansas and opportunities are few for an educated individual. I can leave this area and increase my salary by 4 to 5 times but, I stay because, as an educated young person, I almost feel like a big fish in a little pond and have developed a great network of people that can help in times of trouble. Plus, I can get a house here with the same style and class you would pay $2.5 million for in LA for as little as $300,000. Unfortunately, most towns in Western Kansas continue to shrink to this day for a multitude of reasons best understood by those who grew up in these towns and not some big city intellectual or politician. However, while my town does not have the glitz and glamour of the big city it does have one thing people living in LA and NYC don't...food! With the food shortages creeping up in the world, where are all those people in LA and NYC who think bread and meat are grown in the grocery store going to get their food if crops fail or prices rise? I can grow my own garden and have access to food right next door (I'm sure my neighbor wouldn't mind losing a cow here and there...)

Showing comments 6-35 of 150<< PreviousNext >>
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