The AB-Appalachia group spent two hours last night with my cousin, Adam Schneider, who provided some interesting context for our upcoming adventure. During and after college, Adam spent summers working in the Appalachian region - indeed, these experiences led to his career choices to work with underprivileged individuals, particularly in Baltimore City.
In his presentation, entitled "Why is Appalachia Poor?," Adam helped our group to understand the underlying issues that have contributed to poverty in this region of the US. Below are some highlights from his presentation handouts:
What is poverty?
Quantitative definition- The value of using quantitative data: it’s easy to gather, the government gathers it for you, and numbers are easy to compare.
- The pitfalls of quantitative data: it does a poor job of reflecting what poverty is. Since the federal poverty measure(s) of (absolute) poverty is simply a number (annual income for 1 person: 10,400; 2 people: 14,000; 3 people: 17,600; 4 people: 22,200; 5 people: 24,800; 6 people: 28,400; 7: 32,00; 8: 36,600), it doesn’t reflect the experience of poverty. Moreover, the number poorly reflects reality – e.g., it was developed with 1955 data and took the cost of the Department of Agriculture’s least expensive food plan and multiplied by 3, and it’s not been updated to account for changing consumption patterns and expenses.
Qualitative/functional definition
- The value of qualitative (or mixed) data: It provides an understanding of what poverty is. Poverty is deprivation. It’s not having enough of what one needs to live (according to an absolute or relative standard). Today in the United States, extreme poverty tends to be found at the intersection of three things: lack of decent, affordable housing; lack of adequate incomes; and lack of accessible health care.
- The trouble with qualitative data: it’s harder to gather/compare. Qualitative data on the experience of living in poverty provides depth, but takes much more time and money to gather. Moreover, it’s difficult to compare: are things today better or worse than 30 years ago? Which family is better off: the one with a minimum wage and health insurance or the one making $15/hour without?
Poverty in Appalachia
1. It’s rural. - There is an historic pattern of rural poverty rates being higher than the poverty rate. The higher incidence of nonmetro poverty relative to metro poverty has existed since the 1960s when poverty rates were first officially recorded. Not surprisingly, the large majority (340 of 386) of the persistent poverty counties are nonmetro counties. This is an indication that poverty tends to be wider and deeper in more rural areas – seen by noting that 4 percent of the metro counties, 13 percent of the micropolitan counties (the more urbanized nonmetro counties), and 18 percent of the noncore, nonmetro counties (the most rural of nonmetro counties) were persistent poverty counties.
2. It’s persistent.
- We can see the 386 persistently poor counties in the United States (comprising 12 percent of all U.S. counties and 4 percent of the U.S. population). Time is an important component of poverty because an area that has a high level of poverty this year, but not next year, is likely better off than an area that has a high level of poverty in both years. Moreover, when an area is persistently poor – 20 or more of its population was living in poverty over the last 30 years – explanations that appeal to individual failings (as opposed to structural ones) are suspect.
There is no neat explanation of why things are the way they are,
but we will explore three theories.
- The culture of poverty, a.k.a. "Hillbillies are just lazy and stupid.”but we will explore three theories.
- Strengths: Antisocial feuds, buying a mobile home (a depreciating asset – 23.5% of units are mobile homes in WV, 11.4% nationwide)
- Weaknesses: Anecdotal. Causal or correlative? Symptom or disease? Little explanatory power. Real world data does not fit the classical model. Since Oscar Lewis first coined the phrase “culture of poverty” in 1961, research has consistently demonstrated it mythical – differences in values and behaviors among poor people are just as great as those between poor and wealthy people.
- The colonialism explanation, such as "Coal companies and external capitalists are really cruel and mean.”
- The Region has along history of rigid class stratification and tight control by elites which has long fostered, and continues to foster, an underclass.
- Although we tend to focus on coal as the beginning of Appalachian, the history stretches much farther back. Early American society inherited from England a hierarchical social structure akin to feudalism. Poverty in Appalachia traces its historical roots to English, Scottish, and Welch indentured servants who were held in bondage by wealthy investors. Freed or escaped, they settled in the frontier of Appalachia.
- Coal is an extractive industry created to make money. It ain’t pretty. Because coal requires large capital expenditures and large scale, it is often done by large operators funded by outside capital. These have near monopsonistic control. (A monopoly is a single maker, monopsony is a single consumer -- i.e. the US government is a monopsony for warplanes in the United States.) Since they are the only ones hiring they don’t have to compete for labor and therefore don’t have to pay as much. At the same time, fierce competition existed in the bituminous coal industry even during times of market and production expansion. Because many areas contained large coal reserves, and set-up was both relatively easy and inexpensive, constant overcapacity and overproduction resulted. Mining was only profitable if costs were held to an absolute minimum.
- The coal companies, thus, established both the economic and political control of the area. The whole of the local economy was dependent on the coal companies—and so the mine owners and operators—for income and employment. The companies thwarted investment in public and private-sector ventures so as to retain their absolute control. Because the only potential source of revenue for community investment was the coal companies, they had the power to block any taxation efforts community leaders might propose. Given Supreme Court rulings, they also had the power to block local legislation that would regulate their business—providing better wages or safer working conditions for their employees. Were the operators simply abusing power, or were they operating in some sort of enlightened self interest?
- Single industry economies are “extra” cyclical, thus leaving workers continually vulnerable. In the past 50 years, mechanization has dramatically improved productivity. These improvements in productivity mean that the industry increased coal production 70% between 1950 and 1984. At the same time, however, employment was reduced from 416,000 to 178,000.
- Those miners who kept their jobs after mechanization have gained better pay, and have become part of the "haves". We now live in an era of relative stability and good wages in the coal industry, however, there are not enough of these jobs for would-be workers in the region. So what does everyone else do? “Always low prices – and incomes. Always!”
Geography
- Mountains prevent communication and trade, which hinders capitalistic efficiencies. Through trade, we discover competitive advantages and increase efficiencies. - E.g., let’s assume this room and all the people in it are a community. Now, if ours is like most rooms of smart, do-gooding, university students, Adam is one of the best electricians around. So, Adam works on electricity in our little community and thinks he’s great. In the larger world, Adam is really not that good – probably worth only about $12 an hour as an electrician. Turns out he’s much better at being a policy analyst, a lobbyist, ….. Instead of being an electrician, he adds far more value to the economy – and potentially (though not really) making more money – than he would as an electrician. How did he learn that? He got out of this room and started trading with people; offering people time and expertise in exchange for pay, medical benefits, and satisfaction. There are problems with capitalism – no doubt. But in many cases capitalism does a good job at telling people and things exactly what they are worth in a given market. It’s cruel, even. This kind of feedback loop is absolutely critical to increasing efficiency, and increasing efficiency is the key to economic growth.
- Isolation harms trade: e.g., China. Looking at the world in the year 1400, you likely would have guessed that we would all be speaking Chinese. They had guns, rockets, superior sailing ships and navigation, and the population base for one kick butt military. What happened? A political coup led to near-complete isolation. They are just now catching up.
- The market for potential goods is smaller. Since the market is small, you can’t specialize as much. People can’t get really good at making computers, say, because they also have to make clock radios and TVs to stay afloat. They don’t get to specialize, and by specialization, improve.
- You can't figure out what larger group values. When they do specialize, isolated people specialize in things that aren’t real useful in the broader markets, which can make economic development difficult. Because of this, some isolated communities have skills that are saved when they are lost elsewhere.
- Transnodal points do not develop – firms, other things being equal, locate where transportation costs are lowest.
- E.g., Baltimore. Transnodal points are where goods change forms. All things being equal, firms will locate where transport costs are lowest. That’s why many factories in 19th century America located in port cities. Take the example of Baltimore. Baltimore started out about 1790 as a tiny little town with a pretty decent port. Farmers from mid Pennsylvania and Maryland would deliver their wheat to Baltimore to ship to Europe. Wheat ships better as flour than as wheat, it’s both lighter and less susceptible to rot. At the same time, you need to have quite a bit of wheat to make it worth your while to own and operate a mill. The mills began to locate at the port, Baltimore, where they were taking grain off wagons to put onto ships (transnodal point). In a lucky geographic accident, Baltimore is also located near a fall line, a rare topographic gift where there are both streams descending quickly and a port. Falling streams can be harnessed for mill power, so Baltimore became a boomtown grinding flour.
- In addition to wheat, Baltimore could, of course, handle and process other crops so farmers could use the same brokers and shippers. Baltimore developed quite the canning industry. That canning technology was also applicable to seafood, which otherwise was very difficult to transport. More importantly, however, is that the same skills needed to keep a mill or canning operation running, also serves you in a wide range of industrial applications. New manufacturing naturally grew up in Baltimore because they had both the consumers (all the millworkers) and the inputs (the water power and the expertise in harnessing it). These same companies became steam powered mills and eventually became mighty corporations. All this started due to some lucky geography and farmers looking for a port. Now, Baltimore isn’t the 2nd largest city in the country anymore because this part of geography isn’t as important as it used to be. But, Appalachia never had a chance to become a Baltimore, or a Cincinnati or a Chicago, because these mountains don’t lend themselves to transnodal points forming.
What can we do to help Appalachia?
- What have we done?- “Flattening” the mountains, the building of roads. Roadbuilding is a big deal in Appalachia. One, it’s a big employer. Two, it “flattens” the land by connecting two points that were previously separated by much more.
- The Appalachian Regional Commission, the TVA, the outsized presence of Depression era camps here, intrastate transfers mainly through school funding. The federal government has a long history of involvement in the region, through the Tennessee Valley Authority to bring power, the Civilian Conservation Corps, and then the War on Poverty to today’s Appalachian Regional Commission. Further, many states subsidize their Appalachian schools. Western Virginia pays a fraction of its school bill, and Kentucky has been forced under a court order to fund its schools in Eastern Kentucky better. Have they helped? Yes. Have they “solved” the problem? No.
- Help Appalachia increase its per capita income while “catching up” in the global economy. For example, the purchasing power of the minimum wage is continually eroding, and is no where close to what someone needs to support themselves, let alone a family. But raising the minimum wage doesn’t address the core problem: that a willing to work employee isn’t adding $6 an hour in value to the economy.
- Admitting the mid-20th century population counts were the aberration, readjusting carrying capacity expectations, and then developing undevelopment. First, we have to see that the population loss in McDowell and other counties is not the aberration; rather, the coal industry supported an unsustainable population. Going back to Native American times, Appalachia has never supported a large population. Economic development plans should remember that towns of 800 tend not to need 4 lane divided highways built to them. At the same time, allow people leave, and if they want to, give them the resources to leave and contribute. Does it make sense to subsidize their staying here? Then (essentially) develop the undevelopment.
- Leveraging technology in Appalachia, the loss of accents, the availability of technology. Though Appalachia won’t have the next Silicon Valley, and the big biotech breakthrough won’t be up some holler, technology has powerful potential here. It has already had an affect. TV has gone along way to shaping attitudes and accents and patterns of speech. The internet has two big effects, both that “flatten” the mountains and make them more accessible. One is the continuing disconnection between your job and your location. Many professionals now can really locate anywhere. The rural lifestyle in West Virginia will certainly appeal to people. It won’t be an all-the-time telecommute. Rather, it will be people that work in Pittsburgh, DC, Atlanta, Charlotte, or Lexington 2 days a week and work the rest for The Olde Homeplace. At the same time, the internet as a consumer resource allows people to both buy things they couldn’t normally get and get them at lower prices.
- The creeping cities. Although we’ve seen some reverse in this trend (and will likely see more with increased energy costs), some people insist on living farther and farther out from our city cores. Some of these cities, the same suspects I mentioned above, are going to send more and more people out to the hills. A growing Lexington, Atlanta, Charlotte, Knoxville, DC, and Roanoke are going to change a significant part of Appalachia.
- Appalachia’s consensus on the appropriate amount of environmental degradation. As any good economist or political scientist will tell you, everything has a trade off: it’s all cost/ benefit analysis. Killing off the coal mines is going to cost jobs, chopping the top off of mountains is going to change the land forever. How much is that worth? An old West Virginian man I knew once told me, “West Virginia’s got plenty of mountains, we could use some flat places,” and the “white hats” tend not to be able to push zoning regulations through referenda. Others say, “My well doesn’t work anymore” and “The Mountains are the best thing West Virginia has.” Quite frankly, that’s one of the big reasons why we have government: to sort this out and to apply the public will in order to make the people that incur the benefits pay the costs.
- Changing government priorities to support disability and transfer payments; decent and affordable housing; quality health care for all; and investments in education. Most of these problems will require local, state, and federal government intervention as they are not problems that the private market solves well.
And, thanks to the Appalachian AB trip participants for their insightful questions and engaging discussion!
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