Friday, May 27, 2011

Putting North Dakota's Economy in Context...

"Revenge of the Squares"?

Brandishing the values of "yesteryears," some Mayberryish place that exists only in conservatives' minds, North Dakota is the nation's economic hot spot. Although it ironically has become hip to write little fluff pieces on how refreshing it is North Dakota, being so neglected by America's elite, has managed to stave off Capitalism's latest crisis, a few contextual points are in order.

First off, the oil. North Dakota has oil. Now this point is almost certainly mentioned by the glorymongerers, as it is in the above piece, but this key fact has little to do with culture and lots to do with luck and new technology that allows access to oil that was once unprofitable to be refined. A quick look through history tells us oil is, at most, a finite mixed blessing. Oil, unlike the infamous North Dakota weather, tends to keep the "riff-raff" in.

Next, we have the State bank. North Dakota is the only state in the country with its own bank. A relic from the WWI era Socialist wave that swept the Midwest (brought by German and Scandinavian immigrants), North Dakota was able to withstand the worst of the credit crunch because they often provided their own credit. Although it's unfortunately ran like a for-profit private bank, it really is an island of economic sovereignty in an ocean of consolidation. There is little doubt the bank kept many North Dakotan small businesses open. This point is never mentioned by the rosy-eyed revisionists.

North Dakota has an extremely small population. To be exact, North Dakota, while the 19th biggest state in area, has only 672,591 inhabitants. Only Vermont and Wyoming have less. Jordan, the neighborhood in Hong Kong my brother and his wife live in, has 150,000 people. (All .4 square mile of it.) This small number is huge. To put it simply, it's much easier to govern less people. Less people equals less problems, at least from a social services point of view, and services for humans is where states spend the vast majority of their money. It's for this reason you know who the mayor of New York City is and not the mayor of Minot.

Federal money. Like many red states, North Dakota takes in more money than it pays out. A lot more. For every $1 a North Dakotan is taxed, they get $1.62 back. That's a pretty good deal! So these big blue states, like New York and California, who routinely catch the ire of small state politicians for having no "common sense," end up subsidizing states like Mississippi, North Dakota, and Alaska. Moreover, despite the oil boom, North Dakota still has an economy based on agriculture. Every five years politicians, both Democrat and Republican, hammer out a Farm Bill that costs the Federal government hundreds of billions of dollars. North Dakota, despite a ban on corporate farming, is carved up by a small number of plantation-like enterprises masquerading as "family farms." Many of the same people who decry Federal money being spent on after-school programs in the Twin Cities happily collect their Farm Bill check year after year after year.

North Dakota is a low wage state, with little opportunity for quality long-term work. This has to do with having no significant metro areas, but it also has to do with its anti-worker laws. It's a "right to work" state. This means that if your coworkers negotiate a contract with your employer, and you don't want to join the union, you get to reap the rewards of that process without any of the sacrifice. While they paid their union dues, you didn't, and still get the benefits. That's, of course, assuming your workplace has a union, which is a pretty big assumption. It's virtually impossible to unionize in anywhere in the US, let alone "right to work" states. Put simply, in North Dakota you will get paid less than you would almost anywhere else and the lower cost of living (which isn't always that lower in the larger towns) often doesn't make up for it. That's not a real good incentive to even stay there, let alone permanently pack up and move to the state. They are now only now starting to stop the brain drain of the previous several years, and this is largely due to the economy being so bad everywhere else. People graduate and move. This is so common most young people don't even give it a second thought. Politicians, even in the midst of this boom, are forced to acknowledge the scope of this massive problem. The reason for this is obvious- there are more opportunities elsewhere.

North Dakota is beautiful. I was born there and lived there for the vast majority of my life. I am proud of that. But the idea that it has somehow been immune to the underlying contradictions during this current crisis of Capitalism is absurd. North Dakota is in a better situation right now than many other states. This is primarily because of luck, and frankly, its limited economic output. It's in spite of, not because of, the often bizarre, and backwards, politicians that run the state. It's dangerous to think otherwise.

I would like to respectfully offer some kind words of caution to North Dakota voters: Minnesota, where I live now, had a 4 billion dollar budget surplus in the late nineties. (That's larger than the entire budget of ND today.) Now we have an estimated 6 billion dollar budget deficit (when adjusted for inflation). This is the direct result of Republican tax cuts (which are really subsidies for businesses and individuals), both at the state and federal level. Jesse Ventura handed out famous sales tax rebates (your "Jesse check"); Tim Pawlenty is infamous within the state for gimmicky budgeting, which shifted costs to local governments and basically kicked the deficit can down the road to be bigger and badder when we catch up with it. (We did and it is.) The Democrats, for their part, continue to ramble nonsensically about the much fetishized "middle ground," which essentially means a bit less cuts than the Republicans. Their "resistance" to Republican social engineering via budgeting is them highlighting their fundamental agreements with Republican proposals in certain crowds and slightly disagreeing just enough to seem opposed in front of others. Despite what both parties say, this is hardly a spending issue. If Minnesota taxed its citizen at the same rate they did in 1998, there would still be a surplus. Now Minnesota is on its way to becoming Mississippi.

North Dakota would do well to rekindle its past political independence from the two parties of business, particularly now when things are relatively good. I know there was talk, at least at one time, of using part of the budget surplus to create a state oil refinery. This would be a good first step in ensuring resources are used collectively for the benefit of all North Dakotans. Unfortunately, the state is controlled by Republicans and Democrats alike who are intent on selling the state to the highest bidder, ensuring a select few receive obscene profits. North Dakota of 1919 decided to buck the system and do what was in the interest of their citizens, let's hope North Dakota of 2011 does too.