The Fate of a Nation : On the eve of the 21st Century, three economies--the Wired, the Kluge and the Provincial--are struggling for dominance in America. Only one of them promises high wages and continued growth, but it does not have a political voice.
More than class or race, three divisions increasingly define America:
* The Wired economy . The densely packed concentration of entrepreneurs and companies in America's urbanized states that generate virtually all the nation's globally competitive, high-wage industries, such as multimedia, design, software, entertainment, computers, biomedical, engineering, finance and business services.
* The Kluge economy . Slang for Rube Goldberg-like computer code that barely, if ever, achieves its purpose, Kluge describes the economy of major media, public-sector bureaucracies and universities that dominates urban politics.
The core urban states, where the Kluge and the Wired economies are centered, generate about 45% of total U.S. nonfarm employment, or about 50 million jobs. Of those jobs, about 15%-18%, on average, are directly accounted for by government and closely allied employment (including education)--the core Kluge constituency.
* The Provincial economy . The rapidly growing Southern and Intermountain Western regions of the country that now dominate national politics. This economy now accounts for about 35% of total U.S. nonfarm employment, or 40 million jobs.
It is the struggle among these economies, not tired conservative and liberal rhetoric, that will determine the nation's future.
The Wired economy grew up because cutting-edge industries demand a large concentration of specialized, creative firms and individuals that can rapidly team to design and produce products for world markets. Only urban regions offer the critical mix of bottomless talent and proximity that supercharges high-wage, high-skill sectors. It is no accident that the world's most technologically sophisticated economies are found in metropolises like Tokyo, Seoul, Taipei and Los Angeles.
Unlike its Asian neighbors, however, America's Wired economy is constantly under attack by the Kluge economy. Composed of the last surviving caste systems in the United States--government, education institutions, major media--the Kluge economy was once instrumental in fostering metropolitan development. Over time, however, it stagnated; today, its long decline feeds one of the most self-defeating politics in American history.
Public-employee unions, for example, seem to think nothing of endangering their constituents' future by threatening an ever-expanding parade of plagues, from race riots to Dark Age epidemics, if jobs are cut from the public rolls or options for more efficient government are pursued. Universities, once an urban magnet, now frequently repel creative firms and entrepreneurs with their contempt for the private economy. The media too eagerly seize on such perspectives, because they think that declining readership or viewership can only be reversed by sensationalizing every negative aspect of the communities where their customers live.
It is the collision between the Wired and Kluge economies that generates the chronic urban pathologies all too apparent in modern America.
Turned off by Kluge rhetoric, the Wired economy migrates from central cities to less dysfunctional areas, like New York-adjacent New Jersey, Sonoma County, north of San Francisco, or Burbank and Santa Monica. Rather than play to its strength and foster Wired industries, the Kluge economy tries to compensate by increasing the volume of its negativity to induce government bailouts. This, in turn, further alienates the Wired economy, reduces the local tax base and produces yet another round of Kluge apocalyptic rhetoric.
Gleefully exploiting the self-destructiveness of urban regions is the vast Provincial economy, which self-consciously styles itself as a more moral, less "Klugy" alternative for Wired businesses and entrepreneurs. At first glance, its conceit seems justified: Over the last few years, the nation's fastest nonfarm-employment growth almost exclusively occurred in the South and Intermountain West. At the bottom of the heap, with growth rates far below the national average, are the most urbanized states--New York, New Jersey, Pennsylvania, Ohio, Illinois and California among them.
But although the Provincial economy sells itself as the new center of its Wired counterpart, a closer look shows that it's largely unplugged. Utah, for example, the fastest-growing Provincial state, has been relentlessly hyped as the new software capital of the nation. The recently released U.S. economic census, however, shows that the state is home to just 78 prepackaged software companies. New York, Los Angeles and San Francisco each have more than 1,000.
Provincial economic development is driven by the redeployment of less competitive businesses and retirees to low-cost areas, not by building globally competitive industries. Its high-growth core is an honor roll of low-skill, low-wage states: Nevada, Louisiana, Georgia, Arizona and Oregon. Self-congratulatory and smug, the Provincial economy actually offers America a 19th-Century answer for 21st-Century competition.
The interplay of the three economies creates crucial, but still unrecognized challenges for America. The nation's high-skill, high-wage industrial growth is throttled by the dominance of Kluge politics in urban centers. The Provincial industries that America fosters outside of its stalemated urban regions offer the nation a one-way ticket to a second-class society. And the American pattern of slow Wired-economic growth, coupled with rapid Provincial expansion, generates fewer and fewer surplus resources that can be used to cope with the country's underclass, a problem even the most remote Provincial states cannot hope to evade.
Yet, the peculiar feature of American politics is that there is no voice for the Wired economy. Democrats are the standard-bearer for the Kluges. Trapped by their bureaucratic, public-sector base, they can offer only the most leaden, 1930s-era metaphors--the "information superhighway" or the "National Information Infrastructure," for example--when they discuss Wired issues.
The Provincial economy is solidly Republican. Superficially, it promises the Wired economy a high-tech but family-value world, combining the security of small-town America with Internet links to maintain urban contacts. Wired businesses know, however, that not only are faxes and e-mail poor substitutes for the constant interpersonal transactions that drive their sectors, they are also competing against other countries, like Japan, where companies enjoy both global network access and dense physical proximity. To lead the pack, a firm has to be wired where the action is, not surfing the web from an Idaho bunker.
Many of the people creating the nation's high-wage urban industries are so alienated from mainstream parties, in fact, that they have become anti-politics, living in the quixotic hope that government will simply ignore them if they ignore it. Indeed, scores of interviews with Wired-business owners and their top employees reveal a common message of indifference, if not contempt, for conventional politics.
"Government doesn't understand us," many say, "and it is largely irrelevant to what we do." When government or universities announce yet another bureaucratic "high-tech" program, it is often dismissed out of hand by Wired businesses, which discount the possibility that out-of-touch academics, using outmoded equipment in projects managed by slow-motion public bureaucracies, could possibly generate anything of value for them.
Living in the shadow of urban Kluge politics, much of the Wired economy has simply shifted to stealth mode, or has even gone underground. Given current choices, as mayoral elections in Los Angeles and New York dramatically illustrate, the Wired economy will increasingly vote--in a desultory fashion, to be sure--for the candidates who will least harm it, generally the Republicans. Stuck between the archaic nostrums offered by both the Kluges and the Provincials, the Wired economy treat politics as an unpleasant nuisance.
A far more positive result, and one with tremendous potential payoffs for the politicians who can embrace it, is to directly address the concerns of the Wired economy. To do this, the mainstream parties will have to reshape their philosophies, or a third alternative may be necessary. A central goal of Wired politics, for example, is to unshackle the cities from the remarkably disproportionate tax and regulatory burdens years of Kluge and Provincial political rule have imposed. This would return funds from federal and state governments to the regional firms that actually invest in local businesses and create jobs--at the cost, to be sure, of tax "grants" to Kluge constituencies.
Meanwhile, the Provincial economy will have to accept that income-based tax and government spending, plus America's regulatory structure, greatly tilt the economic playing field in favor of low-wage, elderly populations living in more rural states. These burdens must be equalized, in real terms, so that tax and regulatory arbitrage alone does not artificially pump resources from the Wired economy into the much less dynamic, marginally productive Provincial states.
Finally, a Wired political agenda would unite urban regions that, against all logic, persist in attacking each other, rather than dealing with their real competitors in the Provincial economy. New York and Los Angeles share an overriding common agenda in responding to the cultural, political and economic challenges mounted by Georgia, Utah and other Provincial states, an agenda they, and other major metropolises, have yet to pursue.
As the United States girds for its next national elections, much of the nation's future prosperity and social stability will depend on rediscovering its forgotten, but critical, Wired constituency. Given the alternatives, it is increasingly clear that America can ill-afford to treat its most productive, competitive economy as an afterthought rather than as the central focus of national politics.*
