The Causal Factor In The Decline Of Many Midwest Places

For many, the economic state of the Midwest has perceptually become synonymous with the ‘The Rust Belt.’ ‘The Rust Belt’ narrative is one which places the Midwest in a victimized and archaic position and exemplifies post-industrial threats to American prosperity, identity and heritage. The derogatory term was originally coined to describe deindustrializing regions in the United States in the 1980s, where post-1960s mono-industrial towns experienced severe economic decline and population loss (The New Yorker).

Purported to be in decline due to global labor factors, automation, and shifting energy needs, the resulting losses have created sentiments of disenfranchisement amongst specific population segments who have experienced the brunt of wage loss, particularly amongst those in unskilled professions with low education attainment (The Washington Post). Though overall this narrative is unrepresentative of the economic reality of the Midwest, the region’s industrial roots are undeniable. Manufacturing accounted for over 35% of total jobs in the Midwest in 1969, more than 10% higher than the national average (Area Development).

This figure has decreased dramatically but proportionally with the rest of the U.S to present day. In the Midwest, factors of economic recovery post-1960s were most influenced by educational attainment of population (Area Devleopment). Recovery was largely indiscriminant of population size (exemplified by the economic juxtaposition between Detroit, MI and Chicago, IL). It was estimated that degree of educational attainment and share of manufacturing jobs accounted for 40% of economic growth variation across the region since 1969. It has been theorized that increased educational attainment allowed increased ease of diversification and the creation of ‘industry mixes’ with the emphasis on service industries bolstering individual local economies. In short, historic (and arguably future) determinants of economic success in the Midwest were labor force education and industry diversification. In regions where the two combined, the ‘Rust Belt’ perception is largely destroyed, in with rising GDP growth and low unemployment rates (Bureau of Labor Statistics).

Though the ‘Rust Belt’ is unrepresentative of the totality of the Midwestern reality, popular rhetoric and the political utilization of the narrative has served as a valuable demonstration of the region’s potential, and brought increased potential for external ‘revival’/investment efforts. Changes in U.S. political focus, such as the idea of ‘principled realism’ suggest an increased internal focus on rectifying the economic discrepancies within the region. Under ‘principled realism,’ a state will and should act according to their own internal interests and principled values. If U.S. political sentiment holds the belief that an “identity of interests is the surest of bonds” (Thucydides) yet maintains an emphasis on deep-held principles and values based on some sense of American identity and purpose, increased spending, political, and economic focus on the Midwest are inevitable.

For many, American industry is identity; its revival is principal over economy. For the foreign investor, there remains high room for capturing value in educated labor markets (due to the high number of prestigious universities in the U.S.) and the decreased cost of operation (where the cost of living and cost of operation is low relative to the U.S. average) (Forbes). The historic assignment of blame on a Midwestern mentality and an unwillingness to modernize industry (as demonstrated by MarketWatch above) are largely unfounded in fact. In truth, diversification of Midwestern industry and increasing growth in non-manufacturing sectors has led to a revival of the region’s present economy.

The Midwest is not a monolith. It’s economic and perceived cultural proclivity is increasingly distancing hubs of growth (statistically with governmental or university ties) from areas of stagnation. Despite the apparent formidable role global influence has played on the decline of the manufacturing sector in the Midwest, increasing FDI inflows into key ‘regional leader’ states are driving future growth (Area Development). Arguably, under the positioning theory, growth in states like Wisconsin, Illinois, and Michigan will bring increased productivity to their neighbor states, and serve to collectively rise the regional economy. As the Economist put it, “[The Midwest] is often said to be either in decline or to be experiencing a renaissance.” An investor in the region must not treat it as a monolith and inevitable there will be sub regional ‘winners and losers.’ The peculiarity of this economic moment in the Midwest is that it appears to be in both ‘renaissance’ and ‘decline’ at the same time.