Places like St. Louis and New York City were once similarly prosperous. Then, 30 years ago, the United States turned its back on the policies that had been encouraging parity.
Until the early 1980s, a long-running feature of American history was the gradual convergence of income across regions. The trend goes back to at least the 1840s, but grew particularly strong during the middle decades of the 20th century.
The rise of the broad American middle class in that era was largely a story of incomes converging across regions to the point that people commonly and appropriately spoke of a single American standard of living. This regional convergence of income was also a major reason why national measures of income inequality dropped sharply during this period.
Yet starting in the early 1980s, the long trend toward regional equality abruptly switched. Since then, geography has come roaring back as a determinant of economic fortune, as a few elite cities have surged ahead of the rest of the country in their wealth and income.
Adding to the anomaly is a historic reversal in the patterns of migration within the United States. Throughout almost all of the nation’s history, Americans tended to move from places where wages were lower to places where wages were higher. … But over the last generation this trend, too, has reversed.
The Emergence of a Single American Standard of Living: Regional Per Capita Income as a Percentage of the National Average
A major factor that has not received sufficient attention is the role of public policy. Throughout most of the country’s history, American government at all levels has pursued policies designed to preserve local control of businesses and to check the tendency of a few dominant cities to monopolize power over the rest of the country. These efforts moved to the federal level beginning in the late 19th century and reached a climax of enforcement in the 1960s and ’70s. Yet starting shortly thereafter, each of these policy levers were flipped, one after the other, in the opposite direction, usually in the guise of “deregulation.” Understanding this history, largely forgotten today, is essential to turning the problem of inequality around.
Beginning in the late 1970s, however, nearly all the policy levers that had been used to push for greater regional income equality suddenly reversed direction.
The Rise in Per Capita Income for Selected Cities Compared to the Rise for the U.S. as a Whole
The Per Capita Income of Various Regions Compared to the New York Metropolitan Area’s
Empirical studies have shown that when a city loses a major corporate headquarters in a merger, the replacement of locally based managers by “absentee” managers usually leads to lower levels of local corporate giving, civic engagement, employment, and investment, often setting in motion further regional decline.
The spectacular rise in the affluence of the D.C. metro area since the 1970s belies the idea that “deregulation” has brought a triumph of open and competitive markets. Instead, it is the result of a boom in what libertarians in other contexts like to call “rent seeking,” or the enrichment of a few through the manipulation of government and the cornering of markets.