Wealth and income inequality have been getting a lot of attention in recent months–at least in the New York Times. Op-Ed columnist Bob Herbert has been especially persistent about keeping the topic on readers’ radar screens; read some of his columns here, here, here, and here. Paul Krugman, Frank Rich, and Robert Frank have had a say, too. Wealth inequality was also the subject of a “Room for Debate” feature a few weeks ago.
But geographic analysis of inequality has been little examined in the mainstream media until The Economist Magazine ran a couple of stories about uneven development and spatial inequality in the March 10, 2011 issue. The first “Internal affairs: The gap between rich and poor regions widened because of the recession,” analyzes various nations’ spatial inequality as measured by income and GDP. This analysis shows that Britain is the nation with the widest geography-based income gap: the per capita GDP is nine times greater in central London than it is in some Welsh regions. The smallest regional spreads, on the other hand, were in Italy and Germany, where “incomes in their most affluent areas are [nevertheless] almost three times those of the poorest.” The United States falls at the British end of the spectrum, coming in second for inequality across regions among the nations studied. The District of Columbia, for example, is five times as rich as Mississippi. Further, the situation has worsened in the past few years.
Between 2007 and 2009 real GDP per head in the five richest states actually rose by an average of 2%, but fell by 3% in the five poorest. Both groups outperformed the national average, a fall of more than 4%. (The biggest slumps, both by more than 10%, were in Michigan, the eighth-poorest state, and in Nevada, site of the biggest house-price crash.)
The Economist notes that this is merely a continuation of a long-standing trend, and it attributes the phenomenon, in part, to the “dependence of poorer states on manufacturing, which has suffered big job cuts over the past decade.” The feature concludes that “the income gap between richer and poorer areas is likely to widen further as government-spending cuts disproportionately hurt less prosperous parts.”
One of the story’s big attention getters is its comparison of GDP among regions and cities of different nations.
[O]ver a quarter of regions in Britain and Italy and one-tenth of those in Germany will this year have a lower GDP per head than the municipality of Shanghai. All the American states remain richer, but Shanghai looks set to overtake Mississippi by 2015; within ten years half of all the states, including Florida, Michigan and Ohio, could have a GDP per head lower than Shanghai and Beijing.
If the comparison were at the scale of the county rather than that of the state, these Chinese cities would no doubt be shown well out-pacing our nation’s persistent poverty counties.
The second Economist feature on spatial inequality, “Gaponomics,” takes up the question of what should be done to respond to this problem, particularly in the context of Britain. Instead of investing in particular regions or giving tax breaks to “enterprise zones” in these downtrodden areas, The Economist offers this proposal:
[M]ake it easier for people to move. Given inherent gaps in regional productivity prospects, there is a case for boosting mobility from declining regions to prospering ones. In Britain the main problem is the fetish for home-ownership and high house prices in the south-east, partly the result of severe shortages of supply. Easing planning restrictions below the Watford Gap would be a better way of helping Britons than propping up the north.
As a ruralist, I am immediately suspicious of policies that would aggravate uneven development. Among other things, they ignore those who will remain immobile and inevitably left behind. They also ignore attachment to place as an aspect of the political economy of rural areas in particular.
This story’s second proposal is far more palatable: invest in education because it results in “the single biggest reward” for the nation–even if northerners then move south with their enhanced human capital. (Regarding the latter, I am reminded of this book on the rural brain drain).
Back in the United States, a recent New York Times editorial echoes the second of these ideas in relation to New York’s funding scheme for education. In “Rich District, Poor District,” the editorial staff consider how two of the state’s school districts will fare under the Cuomo budget: “Ilion in the economically depressed Mohawk Valley, and Syosset, a wealthy town in Long Island’s Nassau County. ” Needless to say, it’s not a pretty picture. Here’ a summary:
The cuts would scarcely affect wealthy districts that rely primarily on local taxes to support lavishly appointed schools. But they would be catastrophic for impoverished rural districts that have been starved of state aid for decades and are still reeling from cuts levied last year …. Already struggling to furnish even basic course offerings, the poorest districts would need to cannibalize themselves to keep the doors open and the lights on.
As the editors express it, the $1.1 million cut Ilion is being asked to take to its $25 million budget “would not even come to a rounding error in the state’s richest districts,” like Syosset, which is being asked to absorb only a $1.4 million cut to its $188 million budget. But the New York Times editors aren’t just arguing that school funding should be more equitable because “it’s the right thing to do,” they make an argument grounded in economics: Depressed regions like that around Illion “stand[ ] little chance of attracting high-skill jobs if [their] schools are allowed to deteriorate.”
Going back to The Economist articles for a moment, I noted that enhanced investment in education is one reason for the income convergence across Germany, even as spatial inequalities become more acute in other nations. The story describes “huge national and European Union funds for infrastructure, R&D and education, as well as the transfer of some manufacturing jobs from factories in the western states to the east.” For some reason, Germany sees reasons to take care of its citizens where they are–not to create incentives for residents of the less affluent East to move West. I’d like to know more about those reasons because I suspect they go beyond a sentimental desire to permit people to stay where they are and the attractive orderliness of a more evenly populated. I am guessing these policies are based in part on economic calculations about the value of existing infrastructure and human capital in the historically deprived East. Better understanding those reasons might inform debates in the United States about why regional development and reducing spatial inequalities–not fueling them–makes good sense from myriad perspectives.