The Midwesterner: Blogging the Global Midwest

Whatever Happened to Econ-101?

Once upon a time, our economy seemed to obey some rules, passed down from Adam Smith, taught in all universities, assumed by everyone who thought about the economy. We called these laws Economics-101, and we ignored them at our peril.

But lately, the economy is behaving in such strange ways that we wonder whether the laws of economics have been repealed. Is Econ-101 out of date? The answer probably is no. Some laws still stand. But the economy itself has changed, from an industrial economy to a global one, and that changes everything, including the way these laws work, especially here in the Midwest.  

Two Ideas, Old But Good, Rise Again

You can’t keep a good idea down.

Two old ideas have resurfaced. If enacted, both would strengthen both our American economy and the global economy. Both are so good that it’s a shame they haven’t become policy already.

As they say, better late than never.

The first is the so-called Tobin Tax, a tax on financial transactions that, while tiny, could end up producing significant revenues and, more important, reforming financial markets. Eleven European Union nations, including France and Germany, are set to introduce this tax. The Obama Administration says it isn’t interested. It should be.

The second idea is a free trade agreement between the United States and the European Union. Even skeptics of free trade pacts can support this one, and both President Obama and EU leaders seem enthusiastic. Like the Tobin Tax, this idea has been around for a long time: it used to be called TAFTA, for Trans-Atlantic Free Trade Agreement, but this name hasn’t reappeared, possibly because it reminds some people too much of NAFTA.

Is Chicago Global or Miserable? Both

Chicago is by any measure one of the world’s top ten global cities, a glamorous and glittering headquarters of the global economy. It also is one of the four most miserable cities in the country.

Well, which is it? Global or miserable?

Actually, both. Which tells us something about the global economy and the cities where its business is done.

The Questionable Benefits of Right-To-Work Laws

As the right-to-work movement makes progress in the Midwest, it’s time to ask if these laws do any good for the states that adopt them, or for their workers. The answer: Not so’s you’d notice.

Certainly, nothing that you can prove. Two broad gauges of worker well-being are unemployment rates and per capita income. In the unemployment rankings, right-to-work (RTW) states are all over the map, some at the top, some at the bottom. On per capita income, they’re mostly at the bottom, but there are a few near the top.

What does this prove? Not much. Certainly, workers in RTW states earn less on average, but many of these states are in the South, where wages are generally lower. Perhaps there’s a cause-and-effect here, but so many other factors apply that it’s hard to draw firm conclusions.

But one thing can be said, and it’s important. Advocates of right-to-work laws who claim they boost a state’s economy and living standards have not made their case.

Leveraging Philanthropy for the Economy

There's a new community foundation in St. Joseph, Missouri, that is trying something really new -- to marshal the funds it oversees to promote economic development in St. Joseph and the northwestern Missouri region that neighbors it.

A community foundation exists to house personal or family foundations in its area. Most wealthy families can't set up vast billion-dollar foundations, lavishly staffed, like the Fords or MacArthurs. So they set up smaller foundations and park them inside community foundations, which handle the paperwork and see that the funds are spent as the founding families direct.

This money can go to scholarships, or to an arboretum, or to the care and feeding of cats. The Community Foundation of Northwest Missouri will accommodate these directives, if asked. But one of its goals is to educate the region, including its philanthropists, on the importance of repairing the region's tired old economy, generating a new economy and reviving the area as an economically decent place to live.

So far as I know, no other community foundation in the country --and there are more than 700 of them -- has set itself this goal.

Failing Economies Shorten Lives

A recent study has come up with some shocking news: life expectancy of the least educated white Americans, both men and women, is going down. White women without a high school diploma now live five years less on the average than they did 20 years ago: for white male dropouts, the decline is three years.

This is a calamity matched only by the six-year decline in longevity among Russian men in the waning years of Communism there. But that decline, blamed on rampant alcoholism, has been mostly reversed.

What's going on here? No one really knows, but my bet is that the cause is economic -- the collapse of the industrial, steady, low-wage jobs that once supported even the least-educated Americans. These people once were lower middle-class. Now they're just poor, the losers in the global economy, increasingly cut off from jobs, a steady income and, not incidentally, decent health care.

A Sea Change in Midwestern Immigration

Just as President Obama and Congress are moving to solve the nation's immigration problem, the shape of the problem is changing.

Across the Midwest, companies -- mostly agriculture-related -- are hiring many fewer Mexican and other Hispanic immigrants. The reason: half or more of these immigrants were undocumented, and employers were both tired of verifying documents and afraid of the penalties if they slipped. Some highly-publicized raids by federal immigration agents reinforced their fears, as did a new policy of "silent raids" targeting employers themselves.

These Hispanics are increasingly being replaced in packinghouses and on farms by a spectrum of immigrants -- apparently legal -- from other countries. These include immigrants under national quotas, refugees, and winners of the government's visa lotteries. They come from around the world, mostly Africa and Asia, and include Pacific islanders, Congolese, Sudanese, Somalis, Vietnamese, Burmese, Ukrainian Pentecostals and others.

Evidence for this is mostly anecdotal, gleaned from visits and calls to Midwestern towns that once were on their way to being majority Hispanic: I'll fill in some of these details later. So far as I know, there's been little media attention to this shift. At the moment, it's a big story waiting to be reported. 

The Middle Class: Notes on the Great Debate

The Great American Debate these days centers on what's happened to our economy and the middle class it once supported.

This debate has so many moving parts -- inequality, offshoring and reshoring, big government vs. little government, globalization, technology, automation, taxation, education, American decline, the role of business, deficits -- that it's hard to grasp. This hasn't stopped virtually every economist and pundit from weighing in, in an attempt to understand how we got here and what we do about it.

It's about time. As a reporter for the Chicago Tribune, I co-authored a week-long series in 1995 on the vanishing middle class. For that matter, my files contain an article I wrote in 1984 -- 29 years ago -- entitled "Our Endangered Middle Class," pointing out that traditional jobs, especially in manufacturing, were being affected as companies responded to global competition, mostly Japanese in those days, with automation, layoffs and lower wages.

Saving Detroit

For years now, the question has been: What in the world do you do with Detroit? Or: Does Detroit have a future? Or put it another way: Should Detroit have a future, or should this poor, empty, echoing, poverty-stricken, job-bereft shell of a city simply be allowed to decay, to become one of history's cast-offs, of interest only to future archaeologists curious about the Midwestern industrial age and where it ended?

For Detroiters, this is no academic question, and so they've come up with an answer. It's called "Detroit Future City," a painstakingly compiled plan, 184 pages long, written by a planning team appointed by Mayor Dave Bing, laying out what Detroit should -- or must -- do if it's going to survive.

Now the fighting begins. The Detroit Works Long-Term Planning Team, which did the report, stresses that, so far, it's a set of recommendations, not diktats. It plans public programs and other fora aimed at persuading Detroiters -- both residents and politicians -- to buy into it. Given Detroit's dysfunctional politics, this is an uphill slog.

Saving the Countryside

A Midwestern public radio reporter phoned the other day with a really good question. Why do small towns and rural areas matter? she asked. Everybody talks about scarce federal and state resources. So are small towns and rural areas important enough to our future to be worth investing in?

She referred to a recent speech by Tom Vilsack, the agricuture secretary, who said that "it's a fact that rural America with a shrinking population is becoming less and less relevant to the politics of this country, and we had better recognize that and we better begin to reverse it."