Posted by: CJ | January 29, 2009

Random Wilmington thoughts

Yesterday I read the news about Wilmington, and it got me thinking about several different things I’d read in the past few days. The nickel version of the story is that DHL, a fast shipping company like UPS or FedEx, is closing down a major hub in Wilmington. Many, many businesses in that region depended on DHL, so the ripple effects will make the DHL job losses even worse.

What happened in Wilmington is, of course, bad. A tragedy for the town. But it made me think more generally about the decline of the Midwest, town by town. The bigger cities are doing alright (excepting Detroit), not great but just fine. But the smaller towns and cities are dying slow and painful deaths. Many of those towns and cities are centered around one or a few industries, making their fortunes tied to certain companies’ fortunes. There were times when this seemed like a good idea, like an alliance between labor and companies that would enrich all involved. It hasn’t turned out that way, at least in the long term. In the long run it seems like the places doing best were the ones with very diversified economic strengths; they seem to have been more adaptable.

The really unfortunate thing is it’s unclear what to do about it. It might be nice if the decline of American manufacturing could be halted, but that doesn’t seem realistic right now for a variety of reasons. Amongst them is that without trade barriers of some sort, money will go where it will earn the best return (or rather where people think it will earn the best resturn). For whatever reasons (and I admittedly don’t understand them as well as I should), the people with money don’t think the best return on investments in manufacturing can be found in the Midwest.  In this sense it seems like Midwestern economic woes are structural. Phrased differently, given the state of everything right now, the question, “What is there in the midwest that the midwest is really good at doing compared to other regions in the world?” doesn’t seem to have a good answer.

Megan McArdle had an interesting thought along these lines a few days ago, albeit in a different context. She thought that part of the problem was that the value of US currency, relative to currency in other countries, covers such a wide region that the value doesn’t depreciate even when certain regions of the US, like the Midwest, would benefit from it. This is an idea that intrigues me but that I’m in no position to evaluate. Even so, it’s better than listening to Will Wilkinson, a libertarian political pundit, go on about economic turmoil is a good thing and that people just have to appreciate the true, inerrant wisdom of the marketplace. (Which reminds me that there is almost nothing so galling as a true believer telling you have to faith that your suffering, for their cause mind you, is indeed a noble and great thing.) And at least Megan’s comment makes more sense to me than Alex Tabborok talking about those workers relocating and retraining. How does one relocate in the middle of an horrible, horrible housing market, and in any case what do they retrain for? I truly do not understand this.

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