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What Would It Take

Summary:
Recent research supports the idea that this under-the-radar migration is already under way. The decline of rural regions and small towns is a global phenomenon, and the causes are many but boil down to two primary dynamics: 1. Cities and megalopolises (aggregations of cities, suburbs and exurbs) attract capital, infrastructure, markets and talent, and these are the engines of job creation. People move to cities to find jobs. The San Francisco Bay Area megalopolis of roughly 8 million people in 9 counties and 101 cities offers an example of this dynamic. The region added over 400,000 new jobs since the 2008-09 Global Financial Crisis and over 1 million additional residents since the early 2000s. In effect, the region absorbed an

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Recent research supports the idea that this under-the-radar migration is already under way.

The decline of rural regions and small towns is a global phenomenon, and the causes are many but boil down to two primary dynamics:

1. Cities and megalopolises (aggregations of cities, suburbs and exurbs) attract capital, infrastructure, markets and talent, and these are the engines of job creation. People move to cities to find jobs.

The San Francisco Bay Area megalopolis of roughly 8 million people in 9 counties and 101 cities offers an example of this dynamic. The region added over 400,000 new jobs since the 2008-09 Global Financial Crisis and over 1 million additional residents since the early 2000s.

In effect, the region absorbed an entire new city with 400,000 jobs and 1 million residents. Roads and public transport did not expand capacity, and housing construction lagged. As a result, traffic is horrific, homelessness endemic and housing costs are unaffordable to all but the favored few.

Rural / small town regions cannot match these employment opportunities and so people move, reluctantly or enthusiastically, to overcrowded, horrendously costly urban zones to find jobs.

2. Globalization has lowered the cost of agricultural commodities by exposing every locality to globally set prices (supply and demand).

The relatively low cost of fuels has enabled produce from thousands of miles away to be shipped to supermarkets virtually everywhere.

These mega-trends have slashed farming incomes while costs have risen across the board. This squeeze as revenues decline and costs increase has driven even the most diligent and devoted farmers out of business.

What would it take reverse these trends?

1. The price of agricultural commodities and products would have to triple or quadruple, so that farming would become lucrative and attract capital and talent.

Imagine an economy where ambitious people wanted to get into agriculture rather than investment banking. It’s a stretch to even imagine this, but if energy suddenly became much more expensive and crop failures globally became the norm due to fungi, plant viruses and pests that can no longer be controlled and adverse weather patterns, this could very rapidly change the price of ag products to the benefit of local producers.

Another potential dynamic is the decline of global trade due to geopolitical issues and domestic politics, i.e. the desire to reshore “strategic industries” such as food production regardless of the higher costs such a trend might cause.

The repudiation of finance as the engine of economic “growth” (or pillage, if we remove the gloves) and the prioritization of real-world production are also trends that could arise as the financial bubbles pop and cannot be reinflated with the usual trickery.

2. Wealthy owners of capital tire of cities and move to small towns, bringing their capital and entrepreneurial drive with them.

There are many historical models in which the spending/investing of wealthy families drives the expansion of local economies. Colonial America and the Roman countryside are two examples of this dynamic.

When capital flows to small towns, jobs are created as the wealthy hire people to serve their needs. These new jobs create new markets for small businesses, and these new opportunities attract new capital.

Some owners of capital are passive owners, collecting rents from afar and spending this income in the local small-town economy. Others are restless entrepreneurial types who will fund new local businesses as a challenge or as an opportunity that’s been ignored in the mad rush to sprawling cities.

Both kinds of owners bring new spending and investment.

Wealth enables this class to bring its luxuries and desires with it, and so cultural activities favored by the wealthy get funding they never had before.

Wealthy types follow leaders just like everyone else, and once they hear of wealthy people extolling “the good life” in a small town, they investigate this option in a way they would never have done before.

Thus capital attracts capital, opens market opportunities, increases employment and starts attracting talent which is frustrated by the high costs and competition of the megalopolises.

Charles Hugh Smith
Charles Hugh Smith is an American writer and blogger. He is the chief writer for the site "Of Two Minds". Started in 2005, this site has been listed No. 7 in CNBC's top alternative financial sites. His commentary is featured on a number of sites including: Zerohedge.com., The American Conservative and Peak Prosperity. He graduated from the University of Hawaii, Manoa in Honolulu. Charles Hugh Smith currently resides in Berkeley, California and Hilo, Hawaii.

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