Opinion and Economic Analysis

Hicks: Economic geography changed with labor

November 30, 2013

Thanksgiving weekend sees most of us huddled with three or more generations of family. That makes these holidays a good time to think about long-term economic changes and how they affect us. Let us begin by picking two dates 70 years apart, say 1940 and 2010.

In 1940, about one-third of all U.S. workers were involved in manufacturing, 15 percent in agriculture, 5 percent in providing energy, and more than 10 percent in moving goods. Altogether, about 65 percent of folks worked in industries in which most of the goods produced were “exported” to places outside of where they lived.

This was a less-affluent time, and much of household income was spent on food, clothing and heat. To no surprise, by 1940, cities had sprung up around the places where people manufactured goods; mined coal; or loaded goods, coal and food products onto transportation equipment.

Over the coming seven decades, households got richer because we got better at food production, mining, manufacturing and moving all that stuff around.

Instead of 65 of 100 workers mining, growing, making and moving goods, fewer than 14 were needed to meet demand.

As households got richer, they also bought fewer things that could be exported from the region and spent more money on things that could not be readily moved around—health care, financial services, restaurant visits, amusements and recreation, telecom services and housing.

What does this mean to the geography of wealth and affluence?

In 1940, vibrant cities had big factories, rail yards and lots of associated workers. In 2010, vibrant cities had lots of people in many occupations whose product is mostly consumed locally.

This doesn’t mean there aren’t a few fantastic towns with factories, but it is the vibrant town that ultimately makes the difference.

If this is so, why are so many communities so dead set on luring the next factory instead of making the town a good place to live?

The answer is simply that too many folks don’t know what else to do.

I believe we still need to attract business at the state, and maybe the regional, level. A new factory anywhere in Indiana will draw workers from a dozen counties.

Still, the simple truth is that, for Hoosier counties, efforts to lure a new factory in hopes it will spur economic growth is like filling the bathtub during a house fire. It involves something that seems like it might be able to put out the fire, and it keeps you busy, but it won’t make much difference in the long run.•

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Hicks is director of the Center for Business and Economic Research and a professor of economics at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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