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How Capitalism Underdeveloped Rural America

A toxic brew of economic suffering, racism, and community decline prepared the ground for authoritarian populism in America’s devastated rural areas. Trumpism will not be defeated unless the Left can promote a progressive agenda to rebuild rural America.

Kris Notaro / flickr

In the wake of the 2016 US presidential election, the liberal intelligentsia belatedly realized that rural and small-town America was in crisis. One sector of liberal opinion insisted that the key to Donald Trump’s victory lay in racism rather than economic distress (partly because of its own complicity with the neoliberal, free-market project). Another sector, blind to the central importance of racial inequality for US capitalism, preferred to stress narrowly economic explanations for Trump’s rise.

Both schools of thought failed to grasp the different ways in which economic suffering, racism, and community decline have interacted to prepare the ground for authoritarian populism. They also grossly underestimated the human toll of the catastrophe engulfing rural areas and small towns, overlooking the “social pathologies of collapse” that have become ever more glaring.

Since the turn to more cutthroat free-market policies in the 1980s, American capitalism has systematically underdeveloped rural and small-town regions of the United States. The 2008 crash poured gasoline on the fire. Mutual savings banks and credit unions, cooperatives, mom-and-pop businesses, local industries and newspapers, health and elder care facilities, schools, and libraries have all fallen victim to relentless austerity policies or private-equity raiders.

As people could no longer share in the wealth they had produced, while community tax bases and social institutions withered away, “rural resentment” and economic anxiety boosted fear of cultural and demographic changes and heightened receptivity to authoritarian appeals and conspiracy theories. Aggrieved masculinity and a loss of white privilege were certainly vital ingredients in this toxic brew, along with the question of gun rights. But such “cultural issues” were also bound up with economic decline and social fragmentation: white men who have experienced economic setbacks “are the group of owners most attached to their guns,” and the ones most likely to view the home as a bunker requiring defense against threatening outsiders.

Losing the War on Poverty

In July 2018, the White House Council of Economic Advisers claimed that the “War on Poverty” first initiated during the Johnson presidency in the 1960s was now “largely over and a success.” This rosy assessment flew in the face of ample evidence that things were getting much worse.

After 1980, wages stagnated and became detached from productivity growth. Between 1940 and 1980, the wage gap between poorer and richer cities had narrowed by an annual rate of 1.4 percent, but after 1980, this convergence ended. On the international stage, the collapse of the Bretton Woods framework in the mid-1970s spurred an “opening up” of global finance and trade. On the home front, concerted attacks on organized labor, especially after Ronald Reagan entered the White House, undermined the bargaining power of workers.

By 2018, 40 million Americans lived in poverty, 18.5 million in extreme poverty, and 5.3 million “in Third World conditions of absolute poverty.” By 2011, 1.5 million households — half of them white — were surviving on incomes of less than $2 per person per day. Those households included 3 million children. Nine million Americans have zero cash income. By 2016, 63 percent of Americans lacked $500 in savings to cover an emergency, and 34 percent had no savings at all. That same year, the official poverty rate was 12.7 percent.

A 2017 study of fifteen states, which accounted for 39 percent of all US households, found that so-called ALICE households (“asset-limited, income-constrained, employed”) — those who were above the poverty line but earned less than the “bare-minimum survival budget” — made up two-fifths of the total. Between 2007 and 2016, median household wealth fell by 31 percent.

Many of the poor and near-poor are employed, often in multiple low-wage jobs, and have to rely on food stamps to eat — in effect a public subsidy for their employers, which include some of the world’s largest and most profitable corporations. In 2017, 78 percent of US workers reported that they were living from paycheck to paycheck. Nearly 40 percent of working-age adults indicated that they had trouble meeting at least one basic need — food, health care, housing, or utilities — in 2017.

A rapidly growing number of the poor sell their blood plasma twice weekly in order to survive. Blood collections doubled between 2008 and 2016. While plasma exports are booming, frequent donors often suffer negative health consequences.

Low-income Americans spend a huge part of their income on gasoline and the cars that are essential for commuting to work, especially in rural areas that lack systems of public transport. Evangelical Christian and right-wing talk shows dominate the airwaves on these unavoidable long-distance journeys. A hospital visit or car repair can trigger a downward spiral that culminates in job loss and homelessness. US households are deeply indebted from mortgages, automobiles, credit cards, medical bills, and student loans. Business indebtedness, which has long played an important role in the demise of farms and other small enterprises, is an additional source of stress for many.

Financialization on Main Street

In Glass House: The 1% Economy and the Shattering of the All-American Town, Brian Alexander describes an Ohio community whose story is replicated in thousands of others throughout the United States. Home to a large glass plant, it was a place where “a factory worker might live three blocks from a factory owner,” and where owners backed bond issues to fund good schools and hospitals that attracted skilled employees.

In the 1980s, corporate predators mounted a raid, loaded the company with debt, dismembered it, crushed the union, and cashed out. The new owners — hedge funds and private-equity shops — slashed wages and pensions, and ordered executives to live elsewhere “so they wouldn’t be troubled by requests for civic involvement or charitable contributions.”

The priority now was maximizing shareholder value, not making things — let alone squandering profits on community institutions. The deindustrialization of the United States reached a crescendo after the 2008 crash: non-metro areas outpaced the rest of the country in industrial job losses, with a 35 percent drop in manufacturing employment.

Populist demagogues like Trump blame those job cuts exclusively on free trade and factory flight — their liberal critics also cite automation and a failure to innovate — but neoliberal financialization has clearly been central.

Financialization — the involvement of financial actors in business and markets, and the ownership of assets not for what they might produce but for how they might be stripped and flipped to generate shareholder value — has its origins far away from the affected communities, and it tends to be an opaque process. As Jennifer Clapp points out: “This lack of transparency about which actors are involved in driving these trends creates space for competing narratives — often advanced by the financial actors themselves — that point to other explanations for negative social and environmental outcomes.” As neoliberalism fails to deliver the promised prosperity, people trying to understand what has happened to their communities increasingly fall back on conspiracy theories and “post-factual” claims.

Banking Deserts

Mutual savings banks used to power small-town economies. Their directors contributed to local institutions, knew clients, and sometimes made loans based on trust. From the 1980s on, private-equity investors seeded mutual and savings banks across the country with small deposits, anticipating their conversion into stock institutions. Depositors could buy stock at insider prices before initial public offerings (IPOs). Typically, shares appreciated by 15 percent on the day of the IPO, and 20–50 percent more over the following months.

Directors and investors encouraged giant regional banks to gobble up and shutter the local ones, then cashed in as shares soared 200 to 400 percent above the IPO level. In the process, they sucked wealth out of communities, imposed stricter lending criteria, and cut the ground from under small businesses. Many people found themselves trapped in “banking deserts,” forced to rely on high-cost check-cashing outlets and payday lenders (often financed at one remove by the larger banks that had created those deserts in the first place).

Like mutual banks, cooperatives and credit unions reinvested wealth that communities produced locally and acted as a bulwark against rapacious corporations and banks. About one-quarter of the 8,000 credit unions active in 2007 had closed by 2017. Between 2000 and 2015, more than a third of the 3,346 agricultural cooperatives still active at the beginning of the century had been forced to shut down.

Unhousing the Poor

When the mortgage bubble burst in 2008, homelessness soared as homeowners defaulted on what had often been predatory loans. Across the United States, residential foreclosures rose dramatically, from a little over 380,000 in 2006 to 1 million annually between 2009 and 2012. Foreclosures only returned to pre-crisis levels in 2016. By 2012, nearly a quarter of US homeowners with mortgages were “underwater,” with debts that exceed the value of their homes. A staggering $7 trillion in home equity evaporated.

Evictions from rented accommodation were even more widespread, with 83 million nationwide between 2000 and 2016 — an average of 4.9 million per year. That figure excludes the many “informal evictions” that took place when renters gave in to pressure from their landlords to move before facing legal action. At least one-quarter of poor renting families spend 70 percent or more of their income on rent and utilities. Just one in four households that qualify for affordable-housing programs actually receive assistance.

The housing crisis has had a devastating impact. A single foreclosure ruins an individual’s credit rating, and legal eviction from rental housing generates a court record. Either misfortune can prevent them from obtaining jobs or accommodation in the future, since employers and landlords routinely perform credit checks or screen applicants for an eviction record. Eviction also leads to the loss of employment, as overstressed workers make mistakes and get fired.

People with no permanent address additionally struggle when filling out job applications. They frequently lose access to food stamps, Medicaid, and other benefits when renewal notices are posted to their former addresses. Children have to switch schools mid-year, harming their education.

Large investor groups also create housing insecurity by targeting “mom-and-pop” trailer parks, hiking rents, and siphoning off money that would otherwise be spent locally. Frank Rolfe and Dave Reynolds, who boast a $500 million portfolio of mobile-home parks, run a “Mobile Home University” that teaches investors how to get started on a business that promises annual returns of up to 20 percent.

Mobile-home park investors skim profits from what Rolfe contemptuously refers to as “the dregs of society.” Trailer-park residents — 6 percent of the population — are largely helpless to resist: they are more likely to endure the rent increase than to pay the $3,000 it costs to move a trailer to another park.

Farming in Crisis

The 1980s brought the worst crisis for US farming since the Depression of the 1930s. The cost of fertilizers skyrocketed, interest rates soared, banks called in loans, and grain prices plummeted with the loss of sales to the USSR after its invasion of Afghanistan. A handful of giant corporations grabbed an ever-greater share of the profits accruing between farm gate and dinner plate, through rapid consolidation of input and machinery suppliers, and the processing and export of commodities.

Bigger, more powerful machinery made it possible for fewer farmers to farm larger areas, which compounded the problems of indebtedness, land concentration, and a decline in the population sustained by agriculture. Survivors of the 1980s slump recently suffered a second crisis when the commodities boom of the 2000s came to an end. Between 2013 and 2017, farmers suffered a 48 percent drop in real net farm income — the largest four-year decline since the Depression. More than half of farm households now lose money on farming.

As farmers go bankrupt once again, the multiplier effects further destabilize local economies and the communities that depend on them. The concentration of farmland ownership, especially when corporate enterprises replace family-owned units, also leads to declining school attendance in rural districts, and often to the closure of schools that had long been centers of community life.

News Deserts and the Retail Apocalypse

Family-owned stores and diners on small-town Main Streets were sites of human contact. They invested profits locally and provided jobs for rural households. As malls and chain stores proliferated, these “mom-and-pop” businesses withered away. Roughly 600,000 disappeared between 2007 and 2012. Even when the economy rebounded, businesses did not return to their former sites: by 2016, less than one-quarter of US counties had replaced the businesses they lost in the recession.

Fewer small businesses means less advertising revenue for local newspapers, thousands of which closed, having already been hobbled by the migration of readers and ad dollars to the internet. The same destructive financialization that has been strangling industries and banks afflicts local media companies. This deprives communities not only of local news reporting and ads, but also of any space to mark births, deaths, weddings, graduations and sporting achievements — all of the things that make a town’s inhabitants identify with a place, and take pride in it. Furthermore, we can draw a clear connection between newspaper closures and lower voter turnout, reduced competition in local elections, and increased government corruption, as officials no longer face scrutiny by journalistic “watchdogs.”

Hedge funds and private-equity firms bought up local papers at bargain-basement prices all over the country. They cut costs by merging the production, sales, and editorial functions of several newspapers, while putting together audiences large enough to remain attractive to their advertisers (who increasingly tend to be chains rather than local businesses). Often, consolidation meant the closure of “underperforming” papers, creating “news deserts” that leave smaller communities with no source of local news.

After the first waves of retail closures on small-town Main Streets, low-wage jobs in chains and malls also began to disappear with the expansion of e-commerce. According to Bloomberg, it wasn’t just competition from online merchants that drove this trend: “The root cause is that many of these long-standing chains are overloaded with debt — often from leveraged buyouts led by private-equity firms.” This “retail apocalypse” set off a vicious circle: with the demise of brick-and-mortar businesses — whether on Main Street or at the mall — e-commerce behemoths like Amazon became ever more vital for rural residents, many of whom could ill afford the gas and time that would be needed to drive long distances to shop.

To compound the malaise, since the mid-2000s, the surviving big-box businesses have frequently mounted “dark-store lawsuits,” claiming that their tax assessment should be based on sales of vacated comparable properties. That forces small towns to dedicate scarce funds to legal costs and further erodes local tax bases.

Some of the few retail outfits still proliferating in this bleak environment are dollar stores, which drive established groceries out of business. The number of dollar stores has risen from 20,000 to 30,000 since 2011. Chains such as Dollar General — whose owners include BlackRock and Vanguard, and which cater to customers that one market analyst describes as “a permanent underclass” — can spend as little as $250,000 on a new store; by comparison, a Walmart might cost over $15 million. Profits from a local grocery store used to go back to the community, or an owner who lived nearby. Profits from Dollar General go straight to its corporate office.

Empty storefronts and malls, vanished newspapers, and mushrooming dollar outlets are not just signs of job loss and economic precarity. Rural people see them as stark, painful reminders of abandonment and a shredded social fabric.

Eviscerating Health Care, Education, and Public Services

In recent decades, federal and state governments have slashed funding for social services, shrinking the public-sector workforce and eroding its working conditions. Rural hospital closures doubled between 2011–12 and 2013–14. Many struggled because of a shortage of patients with employer-sponsored insurance, which generally provides higher reimbursements than Medicaid and Medicare. Obstetric services are now unavailable in more than half of rural counties. Faced with long, costly drives to providers, many women receive inadequate prenatal care, resulting in higher rates of maternal and infant mortality.

Between 1990 and 2015, the number of maternal deaths per thousand in the United States soared to 26.4; in Louisiana, it reached a shocking 58.1, the same rate as Jordan, and slightly worse than that found in El Salvador and Iraq. During the same period, maternal deaths dropped below 10 per thousand in Germany, France, Japan, Canada, and the UK. More than 440 rural nursing homes have closed or merged in the last decade, often because Medicaid payments aren’t enough to cover their costs; when residents have to relocate to distant facilities, they’re cut off from lifelong friends or elderly spouses who are unable to make the drive. Health disparities become even greater when cash-strapped local authorities sell public parks to raise revenue, depriving residents of space for exercise and recreation.

Post offices have long served as lifelines for people in rural areas, who rely on them for information, essential medicines, and basic human contact. In 2012, some 3,000 rural post offices narrowly escaped closure, but a slow attrition is thinning their ranks anyway. The growing importance of Amazon in rural areas has stretched the underfunded US Postal Service (USPS) to breaking point, since private couriers such as FedEx and UPS don’t operate in many rural areas, especially for “last-mile delivery.” USPS carriers are working longer shifts, often for no extra pay, and offices are understaffed. These conditions are being used as pretexts for privatization — along with the 2006 congressional mandate that required USPS to pre-fund seventy-five years of future retiree health-care benefits, causing its deficit to soar.

Trump’s task force to “reform” the USPS was partly inspired by right-wing ideological hostility to the public sector, and by a hunger to boost the profits of private delivery services. The fact that Amazon is USPS’s largest customer was also important: Amazon CEO Jeff Bezos publishes the Washington Post, which has been strongly critical of the Trump administration.

The federal authorities and many state governments have systematically starved schools of money. Because property taxes are a key source of funding for education, when populations and tax bases decline, schools either close, shift to four-day schedules, or consolidate with neighboring districts. This strips away another vital focus of small-town social life and collective identity. Thirty percent of all school closures nationwide in 2011–12 were in rural districts, stranding students in isolated areas and forcing them to take long bus rides that drag down their academic performance.

Rural public libraries are “de facto community centers,” often providing the only public meeting spaces. For those unable to afford computers or access to the internet, libraries provide an essential gateway to educational resources, medical information, government services, and job applications. While library closings in devastated cities like Detroit received a lot of attention after the 2008 crisis, the same picture can be found across the country, especially in rural areas: reduced opening hours, difficulties holding on to qualified staff, inadequate, deteriorating facilities, and funding cutbacks. Powerful right-wing lobbies, such as the Koch brothers’ “Americans for Prosperity” have also campaigned against ballot initiatives that sought to fund public libraries.

When underfunded schools descend into mediocrity, critical thinking suffers, and people become more susceptible to demagogic manipulation and social media trolls. Public library cutbacks have the same effect. As the St. Louis Post-Dispatch editorialized in 2016: “Defund libraries. Create a nation of fools.

Killing the Pain

The scale of the opioid problem is staggering. In 2015, 92 million people — 38 percent of US adults — used prescription opioids, with 11.5 million (nearly 5 percent) reporting misuse. Pharmaceutical distributors aggressively marketed painkillers like OxyContin and fentanyl: in some states, doctors wrote more prescriptions than there were people. From 2008 to 2017, drug companies shipped almost 21 million opioid pills to just two pharmacies in one rural West Virginian town with a population of 2,900. Unsurprisingly, deaths from overdoses are higher in West Virginia than in any other US state.

Under the Controlled Substances Act, wholesalers are obliged to report suspicious orders to the Drug Enforcement Administration. However, according to a minority report from the Senate’s Homeland Security and Governmental Affairs Committee, the “big three” distributors — McKesson, AmerisourceBergen, and Cardinal Health — have “consistently failed to meet their reporting obligations over the past ten years.” Big pharma companies targeted regions, doctors, and even individual patients to hike sales. They systematically understated the risks of addiction, and even acquired patents for addiction treatment, so that they could profit from the disaster they had done so much to create.

At ground level, doctors who run “pill mills” engaged in schemes to bilk Medicaid and private insurers. They have frequently accepted kickbacks from drug manufacturers, and lucrative speaking engagements where they tout the virtues and minimize the dangers of particular opioids. Big Pharma spends more than any other lobby in Washington.

More Americans die each year from drug overdoses than perished in the Vietnam, Afghan, and Iraq wars put together. To make things even worse, the methamphetamine scourge, centered in rural areas, has “returned with a vengeance” after subsiding in the 2000s. This is partly because users can find cheap opioids to dampen meth’s intense rush. In some states, deaths from meth now vastly outnumber those from opioids.

Incarceration rates for white people — especially white women — have risen since 2000, probably because of an increased law-enforcement presence in drug-consuming rural areas. The absence of family members adds to the pressure on households and communities. Drug addicts also make unreliable family members, neighbors, and employees, further undermining social cohesion and economic life.

Angry Politics in Shattered Communities

Many working-class Trump supporters experience severe financial stress, compounded by high levels of diabetes, lack of exercise, heavy drinking, and obesity. Researchers consider stress to be a precursor and a consequence for these conditions, and an element in the development of fear, hatred for outgroups, and sympathy for authoritarianism. In 2017, for the third year in a row, life expectancy in the United States fell, with drug overdoses and other “deaths of despair” playing a significant part. From 1999 to 2016, suicide rates increased in 49 out of 50 states, with rises of over 30 percent in twenty-five mostly rural states. Farmers, in particular, are killing themselves in record numbers.

Trump tapped into this anger and alienation. His country-club racism, casual authoritarianism, simple-minded nationalism, and overblown promises struck a chord in shattered communities. Trump’s framing of the economic crisis appealed to the instincts of an audience that had long harbored existential fears and deep resentments of cosmopolitan elites, racial minorities, immigrants, and unscrupulous foreign trading partners. Trump’s tirades also appealed to nouveau-riche entrepreneurs and well-to-do suburbanites, who lapped up Republican rhetoric about “burdensome” regulation, “big government,” and “undeserving” minorities, immigrants, or public employees. Whites who are intolerant of “outgroups” are less supportive of democracy and more likely to hanker after a “strong leader.”

By 2016, rural people had seen governments seemingly unable or unwilling to address the convergence of multiple crises that afflicted their communities. This revived past memories of broken promises — not least those of neoliberal Democratic administrations. The Democratic Party could not even perceive the existence of a crisis, let alone put forward credible — and necessarily radical — solutions to it. By nominating a candidate, Hillary Clinton, who was widely and accurately viewed as a quintessential member of the country’s established political class, it lent credence to Trump’s bombast about “American carnage.” As in other countries where demagogic authoritarian populists have won power, sectors of the population who were suffering greater economic marginalization punished establishment “moderates” and “centrists.” The feeling of abandonment and downward mobility made white rural Americans more receptive to a candidate who spoke about their distress in familiar terms and cast himself as an “outsider.”

The Authoritarian Populist Moment in the United States

Rural decline was not simply the product of deindustrialization, free trade, the farm crisis, or automation. Since the 1980s, financial capital has developed imaginative new ways to strip and seize a wide range of assets that could be found in rural districts, from manufacturing plants to mutual savings banks, local shops, and newspapers — or even people’s blood plasma. An austerity agenda that prioritized tax cuts for the rich undermined the capacity of small communities to fund vital institutions like schools, libraries, and nursing homes.

Deregulatory policies pushed by big capital left unions decimated, eroded health and safety standards in the workplace, and ravaged the environment. Workers found themselves trapped in precarious employment, relying on multiple low-wage jobs to make ends meet, often not knowing what shifts they would be given until the last minute or deprived of any labor rights as so-called “independent contractors.” The lion’s share of the vast wealth produced by rural zones ended up in the pockets of shareholders from companies and financial institutions with their headquarters in distant urban centers.

To insist on the importance of these interlocking crises in explaining the rise of Trump is not to downplay the racism of many of his supporters, who in 2016 included a majority of both working-class and affluent white voters, women and men. The daily outrages of the Trump administration seem to have little or no impact on the devotion of the president’s base. Whether or not “Trumpism” is “a religion founded on patriarchy and white supremacy” — as Charles M. Blow suggested in the New York Times — or a millenarian cargo cult of desperate people “praying for factories,” in the words of Mike Davis, its attraction relies heavily upon emotional appeals and triggers, much like authoritarian populist regimes elsewhere.

It also serves as a protective facade for a hard-right project that invokes “family values,” retrograde attitudes about gender and sexuality, and an exclusionary vision of the nation in order to play upon social divisions, roll back progressive gains, and intensify the exploitation of human beings and the environment. The task of turning back the authoritarian populist onslaught could not be more urgent. At the very least, this must involve massive public investment, funded by progressive taxation, to create a more stable, inclusive, and just society that provides opportunities for all — especially in the zones that have been sacrificed to capital over the past thirty years.