Belmont Club

"Just a crummy bunch of towns"

Joel Klotkin, writing in the journal of the American Enterprise Institute discusses the relative outlooks of the Blue and Red State models, terms he uses as shorthand not only to describe a cultural divide, but also an economic outlook. Klotkin argues that the core ethos of the Blue State economic model is the notion that future economic growth will come largely from knowledge-based or “creative” industries.  From that comes a vision in which the stereotypical Blue State man, gliding to work in a pollution free environment from which noisome Red State activities have been driven out, inhabits campus-like idea workplaces kept clean and absolutely safe by hordes of public employees.  The Blue State economic model sees itself as the engine of economic growth, on which the Red State Model has been leeching to pay for its outmoded and sentimental attachment to things like the Armed Forces, church picnics and NASCAR races, when what is needed is more government services, cap and trade and better music. As he puts it:

Today two principles now drive the political economy of the blue states—and so shape the Obama administration today. The first one is the relentless expansion of public sector employment and political power. Although traditional progressives such as Franklin D. Roosevelt, Harry Truman, Fiorello La Guardia, and Pat Brown built up government employment, they never contemplated the growth of public employee unions that have emerged so powerfully since the 1960s. …

The only way to pay for these expenditures rests on the second key blue economic principle—the notion of an ever expanding high-end “creative economy.” This conceit is based on the notion that tangible things matter little and that, as former Wired magazine editor Kevin Kelly put it, “communication is the economy.”

New York pioneered the idea that the economy could depend totally on the efforts of the talented few, mostly those on Wall Street but also those in the media and other “creative” industries. This formula has been widely accepted since New York Mayors John Lindsay and Ed Koch allowed New York City’s public sector to expand, often with borrowed money.

The only problem, according to Klotkin, is the increasing evidence that the Blue State economic model isn’t subsidizing anything at all. In fact, it can barely pay its own way. “While state and local budget crises have extended to some red states, the most severe fiscal and economic basket cases largely are concentrated in places such as New York, New Jersey, Illinois, Pennsylvania, Michigan, Oregon, and, perhaps most vividly of all, California. The last three have among the highest unemployment rates in the country; all the aforementioned are deeply in debt and have been forced to impose employee cutbacks and higher taxes almost certain to blunt a strong recovery.” People are fleeing Blue States in such numbers that they could actually see their Congressional delegations shrink.

Nothing daunted, Klotkin argued the Blues hoped Obama would put the hinterland in its place and thereby reverse their long decline, only to find him transplanting the Chicago Way to Washington and building an ultra-Blue inner circle which treated them like conquered rubes. He writes:

many in the true blue states greeted Barack Obama’s election like the coming of a Messiah who would redress these serious problems. After all, it is widely believed in blue states that the red-state barbarians had looted the Treasury for their clients in the energy, industrial, home-building, pharmaceutical, and defense industries. Now the blue states, and their industries, would get payback. A vast expansion of public infrastructure, more emphasis on basic industry, and incentives for new entrepreneurial ventures could now help rapidly declining areas in the blue states. … The financial bailout reflects one part of this. Money lavished on bankers and lawyers, most of them in New York and Chicago, represents relief to what is now a core Obama constituency. Indeed the whole Troubled Asset Relief Program mechanism is being run by what Simon Johnson, a former chief economist at the International Monetary Fund, has described as a “wonderfully closed circle.”

Klotkin’s piece is perceptive, but a little too pat. Things cannot be so neatly divided into two categories. The economy interlocks in many ways. And all industries, not only the creative industries, are knowledge driven to a large degree. It is doubtful whether very many people walk around thinking of themselves as Blue or Red Men. But to the extent to which a set of interests corresponding to “Blueness” and “Redness” exist, they may be acting like attractors dividing the body politic. In other words, Blue and Red are serving as organizing principles which are splitting things apart. The strangeness of the Presidencies of the last 16 years may be due to the fact they were an incomplete portrait, like an RGB (Red Green Blue) color model image from either R or B was always missing at any one time.  Obama pitched his candidacy with the subliminal promise that he would “fix” things. But instead of dissipating the attractors and restoring the color model, Obama has subtracted yet one more color from the picture: green. And now the picture may vanish altogether. The real insight of the Klotkin’s piece, I think, is not its categories of Red and Blue but how it highlights the political forces that have been subtracting cohesion from the entire system, causing a gradual divergence, to the point where each has interests of its own.  One way to reverse this trend is to reform the rules in such a way that the game becomes non-zero sum again; so that not only will the welfare of the Blues and the Reds increase together, but depend on each other. Klotkin paints this picture of alienation in the Bluest of states: California.

Perhaps the most searing disaster is unfolding in the rich Central Valley. Large areas are about to be returned to desert—due less to a mild drought than to regulations designed to save obscure fish species in the state’s delta. Over 450,000 acres have been allowed to go fallow. Nearly 30,000 agriculture jobs—mostly held by Latinos—were lost just in May. Unemployment, 17 percent across the Central Valley, reaches to more than 40 percent in some towns such as Mendota.

“We are getting the sense some people want us to die,” notes native son Tim Stearns, a professor of entrepreneurship at California State University at Fresno. “It’s kind of like they like the status quo and what happens in the Central Valley doesn’t matter. These are just a bunch of crummy towns to them.”

Kevin Kelly‘s ideas, I think, get short-changed in the quotation.  He understood that wisdom came in small packets from everywhere. “Dumb parts, properly constituted into a swarm, yield smart results. The surest way to smartness is through massive dumbness. The aim of swarm power is superior performance in a turbulent environment.” Politicians, in order to survive, are network-breakers; manufacturers of identities. But for the foreseeable future changing the game will not be on the agenda. There’s too much political potential in serving niche markets, whether they are crummy towns, creative centers or the Windy City. Maybe there will be one or two more election cycles of politics as usual before the really basic issues are discussed. Perhaps Barack Obama’s greatest contribution will have been to erase so much of the picture that there will be nothing for it but to imagine a new one.

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