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Something strange happened on the road to our much-celebrated post-industrial utopia. The real winners of the global economy have turned out to be not the creative types or the data junkies, but the material boys: countries, states and companies that have perfected the art of physical production in agriculture, energy and, remarkably, manufacturing.
The strongest economies of the high-income world (Norway, Canada, Australia, some Persian Gulf countries) produce oil and gas, coal, industrial minerals or food for the expanding global marketplace. The greatest success story, China, has based its rise largely on manufacturing. Brazil has been powered by a trifecta of higher energy production, a strong industrial sector and the highest volume of agricultural exports after the United States.
Things are really looking up for the material boys here in North America. Over the past decade, the strongest regional economies (as measured by GDP, job and wage growth) have overwhelmingly been those that produces material goods. This includes large swaths of the Great Plains, the Gulf Coast and the Intermountain West, three regions that, as I point out in a recent Manhattan Institute study, have withstood the great recession far better than the rest of the country.
Today virtually all the “material boy” states now boast unemployment well below the national average; the lowest are the Dakotas, Wyoming and Nebraska. Texas, the biggest of the U.S. material boys, boasts an unemployment rate around 6%, well below California (nearly 10%) and New York (8%). One key reason: While Texas has created over 180,000 generally well-paid energy jobs over the past decade, California, with abundant energy reserves, has generated barely one-tenth as many. New York, despite ample potential in impoverished upstate areas, largely has disdained developing its energy sector.
These realities contrast greatly with the conventional wisdom that with the rise of the information age, the application of “brains” to abstract concepts, images and media would come to trump the “brawn” of producers, a thesis advanced influentially in 1973 by Daniel Bell in The Coming of Post Industrial Society. More recently Thomas Friedman has cited the East Asian countries such as Taiwan and Japan as suggesting that a lack of natural resources actually sparks innovation and economic health, while too great a concentration generally hinders progress.
So how is it that the rubes, with their grease-stained hands, reeking of the smell of manure or chemical fertilizers, have outperformed the darlings of the information age? The answer lies largely in the forces that are reshaping the world. This includes, most portentously, rising demand for fuel, food and fiber in developing countries, notably in East Asia and Latin America.
In the past commodity-based economies suffered frequent cyclical recessions whenever a handful of wealthy consuming countries — the EU, Japan and North America — experienced a recession or slow growth. Now a set of new consumers are fuelling strong demand even when high-income countries tank; this is keeping prices up far more reliably than in the past. Of course, a major global economic catastrophe, or some new breakthrough in energy or agricultural technology, could bring prices down precipitously, but for the most part demographic trends seem likely to favor commodity producers over the coming decade or two.
Arguably the biggest surprise has been the United States’ strong advantages in the resource race. America has a far richer endowment of raw materials than its primary competitors, including the European Union, India, China and Japan. Only the Russian Federation is equally well-endowed: The Siberian periphery that was first conquered in the great period of Russian expansion between the 16th and mid-19th centuries remains one of the greatest resource regions on the planet and the base of that country’s economy.
Agriculture is perhaps the least appreciated of the new drivers of the U.S. economy. Farm exports have been surging; in 2011 the U.S. exported a record $135 billion worth of agricultural goods, with a net favorable balance of $47 billion, the highest in nominal dollars since the 1980s.What accounts for this boom? One key driver is China, which consumes almost 60% of the world’s soybean exports and 40% of its cotton.
Perhaps even more transformative has been the energy boom, largely sparked by new technologies such as fracking and deepwater drilling. This has transformed the Great Plains alone into the world’s 14th largest oil producer, roughly on a par with Nigeria and Norway. Unless stopped by regulatory constraints, this expansion may only be in its infancy. We can expect large increases in production not only in North Dakota; Texas’ Eagle Ford shale oil is expected to quintuple its daily production by 2014 . New finds in the Wattenberg Field north of Denver alone could contain more than a billion barrels of recoverable oil and natural gas, essentially matching the huge Eagle Ford or the Bakken Field in western North Dakota. Another find, the Green River formation in Wyoming, could contain an astounding 1.4 trillion barrels of oil shale.
The energy revolution already has been transformative in the material states. Between 2010 and 2011, according to an analysis by EMSI, all six of the fastest-growing job classifications were related to energy development. Since 2009 the industry, according to EMSI, has added some 430,000 jobs, with the largest share going to Texas, Oklahoma, and Pennsylvania.
Perhaps even more important, the expansion of the energy sector is galvanizing manufacturing, hitherto the weakest link in the material boy economy. The energy boom could create more than a million industrial jobs nationwide over the decade both to supply the industry and as a result of lower energy costs, according to a recent PricewaterhouseCoopers study.This new industrial economy is already evident in those parts of the country embracing the energy revolution, notably Texas, Oklahoma, Louisiana, Pennsylvania, and Ohio.
Some see the rise of the material boys as just another “bubble” soon to collapse. Derek Thompson at the Atlantic suggests that the North Dakota boom may have already crested. And to be sure, labor and infrastructure limits may slow the rate of growth compared to past years, but projections by JPMorgan Chase suggest that North Dakota will continue to enjoy GDP growth two to three times the national average for the next few years. And as for the labor shortages, help is also on the way; North Dakota now boasts the highest rate of domestic in-migration in the country.
To be sure, the material boys will face real challenges in the years ahead. The need to train skilled blue-collar workers — something the country has neglected for generations — presents a major challenge in places like Louisiana and Texas, where education levels remain below the national average, as well as the more literate but less populous Dakotas. Infrastructure needs like pipelines and electrical transmission lines will become more evident as production increases.
But even the most effete coastal denizens should appreciate what the rise of the “material boys” means for America’s future. The growth of basic industries also creates demand for high-end business services — everything from architects and investment bankers to data-miners, advertising, and public relations firms — concentrated in such places as San Francisco, Seattle, New York, and Boston.
But clearly the biggest beneficiaries will be the cities of the commodity belt, starting with Houston, the epicenter of the energy industry, as well as Oklahoma City, Dallas-Ft. Worth, Omaha, Salt Lake City and Denver. Rapid growth is even evident in smaller places in the Dakotas such as Sioux Falls, Bismarck, and Fargo.
Most importantly, the rise of the material boys expands the nation’s geography of opportunity in ways rarely imagined just a decade ago. It is a process that all Americans should appreciate and encourage.
Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.
This piece originally appeared in Forbes.
Welder photo by Bigstock.
Energy Production is Essential to Economic Growth and Stability
There is arguably no sector more integrated with the U.S. economy than the oil and natural gas industry.
Information from the World Economic Forum suggests that a robust energy sector is vital to the economic growth and recovery of the U.S.
Between 2006 and 2011, roughly 4.5 million jobs were eliminated due to the poor economic climate. During this same timeframe, however, the energy sector created roughly 120,000 new jobs.
A study by IHS has also determined that every state, regardless of its capacity for natural resource production, is benefiting from job growth and tax revenues generated by the oil and gas industry.
The oil and natural gas industry is also the highest-taxed industrial sector in the nation, and provides roughly $86 million a day of taxes and fees to our federal government.
Furthermore, between the years 2006-2011, the effective tax rate of the oil and gas industry averaged 44.3 percent.
Meanwhile, healthcare service providers paid a rate of 35.1 percent, pharmaceuticals paid a tax rate of 24.2 percent and the average tax rate of industrial conglomerates was 15.8 percent, according to Standard & Poor’s Research Insight.
The manufacturing sector uses one-third of the nation’s energy and is the largest energy consumer in the U.S.
Because of this, higher energy taxes will likely cause the production of goods Americans use every day to become more expensive as manufacturers are forced to offset their additional overhead costs.
This will increase the cost of living for consumers and lower the amount of discretionary income consumers will have to redistribute back into the economy.
US Growth Corridors have secret weapon that no-one else has
None of Norway, Canada, Australia, China and Brazil, are a match for the growth corridors of the USA.
The crucial ingredient they all lack, is the low cost urban land and the freedom to expand the city via development on land in which "planning gain" has been kept to a minimum. This is the USA growth corridors secret weapon.
Norway, Canada, Australia, China and Brazil all have massive urban land price bubbles that will be an economy-killer regardless of how long they remain unburst, or how suddenly and rapidly they burst, or how long and slow the price unwinding is.
It is just a pity that the US growth corridors are members of the same political and monetary union with a few States that have the same recurring problem with THEIR urban land markets, and for the same reasons: "urban planning" fetishes. If the US South was a separate country it would be powering off into the distance now with minimal debt, having had no debt-based bubble splurge, no finance sector rent-seeking, no crash, no bailouts, and no quantitative easing: just strong and steady real growth. The people and businesses flooding to the South from the coasts would actually be international immigrants bettering their fiscal futures by a much wider margin than they currently are.
According to Morgan Stanley,
According to Morgan Stanley, copper costs will enhance 7.6% in 2013 from last year as requirement in Chinese suppliers, the U.S. and even European countries is prediction to improve amongst a provide lack for the steel. in some of these wines
Breezy Factor isn’t a
Breezy Factor isn’t a summer time seaside community so much as a year-round enclave of firefighters and cops who like the place as a globe apart. which Alexei had done before
These workers are just
These workers are just scrambling for crumbs. Don't be distracted. Want to know what I think the difference is between Democrats and Republicans? One party feels it can dominate a class- and race-riven society better than the other one.
One hides behind the slogan that a society or a civilization is judged by how well it treats its most vulnerable members, which becomes in its hands an excuse to ignore the interests of the majority. The other party in contrast at least claims to represent the interests of the majority -- but then betrays them repeatedly for the sake of its own.
Both parties are prepared to trade our republic for empire, each for the sake of its own political flourishing, both for their common economic enrichment. Everybody else, including those material men, are just pawns in their game.
What America needs is a true working- and middle-class party representing the interests of common working families of all races and creeds.
In my humble opinion.
In my humble opinion.
I suggest the first policy for such a party should be.........
Keeping the cost of housing down - as happens in heartland and southern USA because of the absence of urban growth containment regulations - would be an excellent central part of such a political party's platform. A few enlightened people of the Left in the UK are appalled that the "Labour" party over there has for decades been such suckers for the "urban planning" that keeps housing unaffordable, working families deprived of disposable income, and inequality of life outcomes high.