By selecting the New York and Washington, D.C., metros, Amazon’s HQ2 process is a telling reminder of the growing gap between a few superstar cities and the rest of the nation. A new Brookings Institution study released today documents this growing divide. The analysis by Clara Hendrickson, Mark Muro, and William Galston shows the deepening economic divergence and worsening spatial inequality that carves America into two separate and distinct nations, shaping the populist backlash. The researchers offer a series of strategies for addressing the gap and beginning to knit the nation back together.
The nation’s 53 large metros (those with more than 1 million people) represent just 2 percent of all places across America, yet accounted for nearly three-quarters of employment growth since the economic crash of 2008. Meanwhile, smaller places across the nation have fallen further and further behind. Since 2010, the more than 200,000 small towns and rural “micro” communities have seen negative economic growth. As the study notes, “nearly a decade after the Great Recession, the outlook for the places that have been left behind appears dim. Employment in many non-metropolitan places remains below its pre-recession level while the longer-term patterns of growth and divergence remain somber.”
The charts below, from the study, show the broad trend. The first shows three trend lines, comparing the economic performance of the median metro to the top 2 percent of metros and the bottom third of metros. From 1969 to 1980, all three kinds grew in lockstep for both average annual wages and employment level. Then in the late 1980s, the dark blue line, representing the top 2 percent of metros, begins to pull away from the rest, with the gap growing ever wider in the 2000s and especially in the wake of the economic crisis.
The next chart shows the change in employment since the 2008 recession in large, medium-size, and small metros, and micro areas including rural communities that are both adjacent and not adjacent to metro areas. Large metros have seen the biggest gains, followed by medium-size and small metros. Micro areas, including rural communities that are both adjacent and non-adjacent to metros, have seen negative employment growth over that time.
Still, it’s worth recognizing the considerable variation in economic performance within each of these types of places. As my recent series on the myths and realities of America’s urban and rural divide shows, our economic divides are fractal and cut across all sizes and types of places. A subset of large urban areas is thriving, but many are faltering. Likewise, a subset of smaller rural places—those with universities or knowledge institutions like federal R&D labs, vibrant arts and cultural scenes, or amenities such as outdoor attractions—are doing quite well, even as many others struggle to survive.
That said, the nation’s worsening economic divergence is the consequence of several key factors and forces. One is deindustrialization, which decimated the economies of many industrial places. Another is globalization, which means that many goods and services are now produced off-shore in specialized global production centers. There are also increasing returns to knowledge and skills, so-called “skill-biased technological changes,” which confer outsize economic benefits to more highly educated and skilled groups and places. And of course, innovative, knowledge-based industries require dense clustering in cities and urban areas. Add to this the ways that public policies like deregulation and lax antitrust enforcement have contributed to the growing gaps between places—all of these elements combined shape deepening spatial inequality, or what I call “winner-take-all urbanism.”
Such growing spatial inequality has registered itself in a deepening political divide. Large, thriving superstar cities and tech hubs have turned politically blue, while lagging smaller and medium-sized places have gone red. As Muro, one of the authors of the report, notes in a recent blog post he co-authored with Jacob Whiton, the Democratic seats in the new House of Representatives add up to more than 60 percent of the economy, while the Republican seats represent 38 percent of it. Or as my own research shows, Hillary Clinton won 56 percent of the vote in metros with one million or more people, while Donald Trump won 57 percent of the vote in those with less than 250,000 people.
And the role of population size, density, and knowledge has only increased in importance in presidential elections since 2008. Echoing themes much discussed here at CityLab, the report notes: “During the postwar period, there was no correlation between regions’ population density and their voting patterns. Today, electoral preferences map almost perfectly onto a region’s density.”
To mitigate such growing spatial inequality and start knitting the country back together, the report recommends a series of “place-sensitive” economic strategies and policies. It strikes a useful and important middle ground between the traditional divide between people-based and place-based policies. Here, it follows the lead of economic geographers Simona Iammarino, Andrés Rodríguez-Pose, and Michael Storper, who advocate for a more balanced approach to “distributed development.” While it recognizes that innovation requires clustering in superstar cities and tech hubs, it seeks to stimulate economic development in outlying places by investing in local skills and capabilities, strengthening connections between local universities and industries, and connecting less-advantaged places with thriving ones.
This is similar to the concept of “smart specialization” developed by regional strategists at the European Commission, which seeks to identify unique economic niches for the less advantaged. The Brookings report hits hard at wasteful and ineffective strategies, such as the big incentives packages like those offered to Foxconn, that divert billions of dollars that could otherwise be used to upgrade local skills and capabilities.
While it is useful and important to develop strategies to upgrade lagging places, the reality is that it may be impossible to mitigate these forces and create the kind of economic convergence of the 1950s and 1960s, a period which economists like Paul Krugman call the Great Moderation. That kind of convergence was the product of America’s extreme economic hegemony and of an industrial system which spread its benefits widely across the economic landscape to places small, urban, suburban, and rural alike.
Left to its own devices, America is becoming more geographically unequal, and politically, it is tearing itself apart. Perhaps for today’s economy, the more efficacious approach would be to recognize our differences and move to a more distributed, decentralized, and devolved system. The goal is to enable smaller places to invest in their own unique economic opportunities and ultimately coexist, despite their economic and political differences.
CityLab editorial fellow Claire Tran contributed research and editorial assistance to this article.