What do we make of an economy in which a handful of bubblicious urban areas are magnets for jobs and capital while rural communities have been hollowed out? The short answer is that this progression of urbanization has been one of the core dynamics of civilization for thousands of years: opportunities are greater in cities, and so people move from rural areas with few opportunities to cities with greater opportunities.
But that’s not the only dynamic hollowing out America’s rural communities: globalization plays a key role, too. Rural economies can rarely muster economies of scale that enable globally competitive enterprises. Rural communities generally lack the capital, expertise, global supply chains and cheap transportation costs that are the building blocks of successful global production and distribution.
In a global economy characterized by over-capacity, over-production and mobile capital, localized rural economies can’t compete with the low cost of commoditized products distributed by finely tuned global supply chains and cheap transportation.
Pre-globalization and cheap transport, local bakeries imported bulk flour and baked bread that was lower in cost than loaves shipped in from afar. The local bakeries held the competitive price advantage, and so local bakeries could pay local labor and local taxes that then supported the rest of the local economy.
But in today’s economy, commoditized bread can be delivered rural communities at prices local bakeries cannot match.
The same holds true for virtually all globally tradable goods– foods, clothing, etc. The only economic sectors with a toehold in rural communities are corporate farms, the occasional small specialty corporate factory making non-commoditized components and non-tradable services such as hair salons, motels, thrift shops, cafes, etc.
Proponents of globalization claim the few hundred dollars in annual household savings generated by shipping in commoditized goods are so beneficial nothing else matters. But if the cost of these paltry, essentially meaningless savings is the destruction of the local economy except for a handful of global corporate outposts and jumble shops, was this trade-off a good deal for rural communities?
I have often discussed the tyranny of price: making the sticker price the sole arbiter of value distorts the concept of value to the point of meaninglessness.
Proponents of globalization overlook the intrinsic value of local control and local capital. Once control of the local economy has been ceded to global corporations, the community has lost control of its destiny: the global corporation has only one goal and reason to exist: to increase capital and maximize profits by any means available.
Once the local production can be undercut by production elsewhere in the world, the corporation will shutter the local facility and move on.
Globalization has offered up the shoddy baubles of cheap goods at Walmart and Amazon at the cost of hollowing out local economies everywhere. Those urban areas that specialize in globalized distribution, software, design and data attract mountains of global capital that then distort the cost structure to the point that only the already-wealthy can afford to live there.
You won’t find credit-housing bubbles like this in rural towns, except those favored by the urban wealthy (Telluride, Jackson Hole, etc.): consider the Case-Shiller housing indices of Dallas and Seattle:
The value of local control and local capital far exceed the pathetic “savings” reaped from shoddy commoditized goods. At some point we might recognize this and act on it.
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