Editor's Note: This post is part of a new special section called "Reinventing America." As part of this effort, demographer Joel Kotkin and more than a dozen other Forbes contributors and staff writers will focus attention on the challenges facing towns, cities and traditional industries across the nation--and highlight the growing number of surprising success stories we're seeing, too. Over the coming months we'll have stories, rankings of who's doing it right (and wrong), and, we hope, great conversations with readers, so please join in.
This year’s presidential election is fast becoming an ode to diminished expectations. Neither candidate is advancing a reasonable refutation of the conventional wisdom that America is in the grips of a "new normal” -- an era of low growth, persistently high unemployment and less upward mobility, particularly for the working class.
Certainly recent economic news of slowing growth and job creation bolster the pessimists' case. But Americans may face far better prospects than portrayed by our dueling presidential mediocrities. Let’s look at those states that have found their own way out of the “new normal,” in some cases reversing all the losses of the Great Recession and then some.
The states that have added the most jobs since 2007 -- Texas, North Dakota, Louisiana, Oklahoma and Alaska – are located in a vast energy and commodities corridor extending from the western Gulf to the northern tip of the Continent. New York and Washington, D.C., prime beneficiaries of monetary easing and a growing federal government, have also clawed back.
But the big winners are in the central energy corridor. Since 2007, Texas has created almost five times as many jobs as New York; California is still down almost 900,000 jobs and Illinois is off close to 300,000.
This should represent what Walter Russell Mead calls “a new geography of power,” the anointing of new places Americans and business go to find opportunity. One example: five of the six best cities for starting over in 2012, according to TheStreet.com, were in the Dakotas, Utah, Iowa and Nebraska.
Why the energy and agriculture states? Since the onset of the new century, much of the sustained growth in the world has taken place not in the financial or information capitals, but in regions that produce basic commodities like energy and food. In the high-income world, the consistently best-performing countries since 2008 have also tended to be resource-rich ones such as Norway, Australia and Canada. Blue social policies work best when financed by petro-dollars and minerals sales.
Domestic and European demand may fall in the next few years, but increasingly global commodity and energy markets are driven by the expanding needs of the major developing countries. This has helped keep energy prices high, particularly for oil. Being good at exploration and drilling has been more profitable than social media. Texas alone has added nearly 200,000 jobs in its oil and gas sector over the past decade and Oklahoma some 45,000. The Lone Star energy sector created twice as many jobs as exist in the software sector in San Jose and San Francisco combined. These jobs have been an outstanding driver of high-wage employment, with an average salary of upwards of $75,000, and located usually in less expensive areas.
Choice plays an important part in the growth. The energy boom has supercharged the economies of the states that have welcomed this growth, including Texas, Oklahoma, Louisiana, North Dakota, Wyoming and Alaska. It has not been much help to New York and California, which are reluctant to crack rocks to extract even relatively cleaner carbon-based fuels like natural gas. In contrast, long-suffering Ohio and Pennsylvania, where there have been significant new finds of shale oil and gas, appear to have decided that Texas, not California, is the model for spurring growth.
The energy-producing states can look forward to a bright future in the long run. U.S. oil and Canadian reserves now stand at over 2 trillion barrels and constitute more than three times the total estimated reserves of the Middle East and North Africa. Observers such as the New America Foundation’s Michael Lind believe that new discoveries, particularly of natural gas, mean that we might actually be living in an era of “peak renewables,” and at the onset of a “very long age of fossil fuels.” Growth of these sectors -- along with construction and manufacturing -- could prove critical to our beleaguered working class. There’s not much respect among the university-dominated pundit class for people who work with their hands or have specific tangible skills. Instead they need to lower their expectations and seek, as Slate recently suggested, to find work “in the service sector supporting America’s innovative class."
In this neo-Victorian society, the “new normal” means a society dominated by “innovative” or “creative” masters and their chosen, lucky servants. Leave your job and family in the Midwest or Nevada to become a toenail painter in Silicon Valley, San Francisco or Boston. Besides losing any sense of one’s independence, it’s hard to see how a barber or gardener can live decently, particularly with a family, in such expensive places.
This bleak reality may not be inevitable, though. In many places construction employment is on the rise from its nadir in 2010. This recovery has been a nationwide phenomena but is, not surprisingly, most evident in growth states like Montana, Colorado, Indiana, Iowa, Nebraska, Tennessee and Utah.
At the same time over the last two years the nation has added more than 400,000 manufacturing jobs, led by the industrial states hit hardest by the recession. Though these gains are small compared to the losses earlier in the decade, the growth is encouraging; automakers and other industries already are complaining about severe shortages of skilled labor. Maybe, after all, life as a dog-walker and hostel denizen in Palo Alto is not the best one can hope for if you can make enough to afford a nice suburban house outside Columbus or Detroit.
The pundit class may be ready to write off the American dream but many Midwest states are working to restore it. Over the past two years Michigan and Ohio have experienced the biggest drop in unemployment of any states in the union; Michigan leads the way with a drop of almost five percentage points, while Ohio comes in second with a nearly three-point decline. Other key Great Lakes battlegrounds—Wisconsin, Indiana and arguably Missouri—have also seen two-point drops in their unemployment numbers.
Why is this happening? A lot of it has to do with business-friendly state regimes. Unlike Illinois, increasingly the sad sack of the Midwest, these states have cut taxes, worked to increase the availability of skill training and streamlined regulations. This has allowed them to take advantage of new opportunities.
Improving the business climate represents the third critical element for overcoming the new normal. Most rundowns of the states with consistently favorable business and tax climates -- as judged by executives -- start with Texas, Utah and South Dakota. Many states that are recovering best from the recession, like Louisiana, Wisconsin, Florida, Ohio, Michigan and Arizona, all have been improving their rankings in business surveys over recent years.
But this should not be seen as an exclusively red state phenomenon. Some blue states as well, notably Washington, have worked hard to keep taxes tolerable and have promoted a rapid expansion of their industrial sector. Democratic-leaning Colorado, under the leadership of pragmatic Gov. John Hickenlooper, has also strived to main a good business climate and promote growth.
What works, it appears, is not the mindless embrace of GOP or Democratic ideology, but a model that drives economic growth. It’s not rocket science: sensible regulation, moderate taxes and investments to spur job creation and productivity. “There is no Democratic or Republican way to sweep streets,” legendary New York City Mayor Fiorello LaGuardia once remarked and the same is true of economic growth.
The stories of the successful states tell us the key to success lies in promoting basic industries like energy, agriculture and manufacturing -- which then create business service and high-skilled jobs -- combined with a broad agenda favorable to entrepreneurs of all kinds. If only one of our presidential candidates would get the message.