Poverty settles in Great Plains

As a college student with summer jobs in the Montana mines and smelters of the Anaconda Corp. in the late 1950s and early 1960s, I felt good about myself economically. I knew that I had a job that paid above-average wages and that I lived in a state that was near the American norm – and far above the bottom economically.

By Lester C. Thurow USA Today

(Thanks to Gene Vukovich- Exec. Dir. of Montana Rural Development Partners, Inc http://www.mtrdp.org for passing this article along.- Russ)

In 1960, Montana’s per-capita personal income ranked it 28th among the 50 states; its income was 69% higher than that of the poorest state – Mississippi.

On a recent journey to rediscover my roots in Montana, I visited a very different state economically. In 2001 Montana’s per-capita income placed it in 46th place; its income was only 9% higher than that of the poorest state, which remains Mississippi. When it comes to wages alone, Montana is the second poorest state ahead of only North Dakota.

When I first became a professional economist, regional poverty was a Southern phenomenon. Before I retire, regional poverty will be a phenomenon of the northern Great Plains, which includes such states as Montana, North Dakota and South Dakota.

The low incomes in the area are a local problem, but are they also a national problem? At an earlier time, Southern poverty was seen as a national problem since black poverty was a big element of it. Social cohesion means that no country can just let a big ethnic group fall behind. The equivalent in the Great Plains is poverty among American Indians. They are not as numerous as blacks, but far poorer – in fact, the poorest of America’s poor.

Last week, the Census Bureau released its latest report on poverty rates, and Native Americans have the highest: 24.5% compared with the 22.7% of African-Americans, 21.4% of Hispanics and 10.2% of Asians and Pacific Islanders. Also, the report found Montana ranked 48th out of 50 states in median family income.

But since this poverty has been occurring in rural areas and not in a big city, it hasn’t gotten as much national attention. Take the 71-day siege at Wounded Knee in 1973, for example, when the American Indian Movement took up armed occupation of the Pine Ridge Reservation to protest the U.S. government’s treatment of Native Americans. That event did not tap into our feelings of guilt and unfairness in the way black urban riots did in the 1960s.

One response to regional poverty is to kick-start economic development. The other is to make sure people in poor areas have the skills to move out to richer areas. If people move out quickly enough, average incomes in the poor areas won’t continue to fall. But the second policy is a hard sell to congressmen who exist only if people continue to live in their areas.

To understand the problem and seek a solution, one needs to understand how the region arrived at this lowly point in the first place.

The high-wage jobs that I enjoyed have mostly disappeared. Few mines and smelters are still operating. Railroad-repair yards have disappeared. Timbering now requires less labor: The chain saw replaced the ax. Wheat prices per bushel are way down. Cattle raising has moved south.

So why haven’t new industries emerged to replace the old industries that faded away?

The decline of the northern Great Plains is a slow phenomenon. It took 40 years to get close to being the poorest area, and it will take another decade before the poorest states in the South are significantly ahead of it. The problem is that over the years there has never been a sense of urgency that something had to be done, much less a consensus on what should be done. No plans were ever laid for a turnaround.

Poor Southern states came to understand that they had to sell themselves. The notion was alien to those in the northern Great Plains, who have never had to do it. For example, Montana residents believe their own slogan – "the last best place" to live. If you believe that, you don’t have to sell yourself.

Moreover, people who move into Montana are retired or semi-retired and enjoy hiring people at the low wage levels that prevail in the area. They also like the area as it is and don’t want economic development. That’s why Montana’s per-capita income is higher than Mississippi’s while its wages are lower.

The region also has not made the case for creating economic advantages to offset some real disadvantages (long distances from big consumer markets). That would be hard, but not impossible. Wal-Mart is headquartered in Arkansas, after all. The Internet makes doing business easier. Call centers can be located anywhere. But the region’s biggest problem is that it won’t admit its problem. As a result, the issue has not been seen as a national problem the way Southern poverty has.

Eliminating Southern poverty started with a federal program, the Tennessee Valley Authority in the 1930s, and continued with aggressive state development efforts (tax breaks and industry-specific labor-training grants) after World War II. Those were bolstered by the civil rights movement and efforts to help African-Americans economically.

Over the years, those efforts have gradually paid off for the South.

What kept the economic rebirth of the South going were the widespread availability of air conditioning and the Sunbelt boom that followed. When they could be comfortable, businesses and people wanted to live in warm, sunny places. Unfortunately, it is hard to find an equivalent for the northern Great Plains.

Now it is the Great Plains’ turn. The low incomes and wages that now prevail in the region are never going to be seen as a national dilemma unless the local people noisily admit that they have a problem – a big one that is only going to get worse.

Lester C. Thurow, a professor of economics and former dean of Massachusetts Institute of Technology’s Sloan School of Management, is a member of USA TODAY’s board of contributors.

http://www.usatoday.com/news/opinion/editorials/2002-09-29-oplede_x.htm