Friday, December 16, 2016

Red, Blue and Purple States in the US

A lot of us have heard these words in the US, but what do they really translate into in economic terms.

I tend to think of the divide as follows

Red State - A state where agricultural production dominates the revenue and the labor pool. Given how mechanized agriculture is in the US, these states have lower population density. Lower population density translates into a high fractional cost of social transactions (you get it wrong and it is a small world - so everyone thinks you aren't any good). This makes the populations conservative, the leadership set ups are visibly feudal (or neo-feudal) and it feels like a pre-industrial society. Given the low rate of wealth generation in such a socioeconomic climate - the entire economy of a Red State is basically driven off a set of long term debt instruments that are essentially underwritten by US Federal bonds. Given the perpetual scarcity of profits and their aging populations, these states receive the bulk of Federal aid (Discretionary and Entitlement) when normalized by the population (i.e. at a per-capita level). The level of education needed to have a job in a Red State is low because you don't need higher education to drive a tractor or combine.

Purple State - This is also called a "swing state". In such a state neither agriculture nor industry dominates the revenue or workforce. A typical scenario is that rural agriculture generates revenue but urban industry employs most of the people. These states typically have small dense population centers near river or sea port  - which are very liberal and very large low density conservative agricultural communities spread over the state. A state like this is constantly in political flux as opposing factions in the population pull the state revenues towards farm subsidies or urban development. As a number of industries are based on agriculture related products - the only thing that unifies the population politically is trade. If the state or federal government attempts to outsource jobs to another country - there is a backlash in the urban areas. If the state or federal government attempts to disrupt the flow of farm products - then there is a backlash in rural areas. These states are economically on the borderline between productive and badly indebted depending on how productive the industrial regions are.

Blue State - A state when non-agricultural production dominates the revenue and the labor pool.  Given how automated and efficient industrial production is in general, these states typically use resources efficiently and can provide employment and shelter to large populations. As the population density is high, you are always confronted with a point of view that is distinct from your and social interaction carry a lower overall cost. This makes the populations intrinsically liberal. Most of the political power is in the corporations, but as there are so many corporations there is a kind of democratic order that is difficult to get around. It looks and feels very vibrant economically and socially. As the wealth generated by value addition is much higher than the base commodity trade, these economies are highly profitable. Every ear of corn grown in a Red State passes through a Blue State before it gets on a ship to its markets in the world.  Since the value addition is complex affair, the populations in Blue States need to have higher education and display a great deal of technical agility. The Blue States end up accounting for a much lower level of per-capital Federal aid.

This basic competition between the two forms of production come into play in elections. The detailed geography of this divide is somewhat smoothed over by "redistricting". As the gerrymandering process is based off several political considerations including voter suppression, one quickly finds that the detailed geography of the divide is difficult to ascertain.

The GOP mass communication models are far better at reaching out to the low density regions that are correctly gerrymandered. The Democratic Party is better at reaching out to higher density populations that are appropriately connected by new media.

The big shift in the 2016 Presidential election was that Donald Trump was able to bypass the existing information channels and access non-traditional high tech avenues for mass communication in rural areas. This allowed him to get past the RNCs tight grip on the party and inspire an internal revolt. That process took him through the primaries. Beyond that it was a small fractional shift in the Purple States that brought him to commanding position in the Electoral Votes.

The result of the election was unexpected even for Donald Trump who told his wife that he was going to lose. The result certainly took the RNC by surprise. Whatever Donald Trump wants to do, the RNC is not prepared to see its control over the party degraded visibly like this.

Many speak of an Elector Revolt. If such a revolt does take place - it will be because the electors are more receptive to the GOPs traditional messaging channels than Trump's internet based channels.

More dynamically every irresponsible tweet and public speech by Donald Trump puts him at a high risk of losing support from Republican electors who are more receptive to the traditional information channels of the GOP. These electors represent the most logical place for the RNC to position its controls on the system.

Paul Staniland, Vipin Narang et al.. have opined that an Elector Revolt would set the country on a very dangerous course. That may be true (though I need to hear more before I am convinced) - from the RNC perspective - this is the only way to restore their primacy in the national political process. If Trump is elected as is - the RNC is pretty much finished.

Perhaps the most obvious indication of this that Donald Trump publicly rolled back both his harsh stance on "Lock her up" and his "Drain the Swamp" slogan. He also attempted to wriggle free of the "It is Rigged" position by saying "I don't care, I won". He also appears to have muted his talk of "term limits in Congress". I think he is looking to reach a modus vivendi with the RNC.

I don't know if the RNC can afford to accommodate him.

The Democratic Party, the Obama Team and the RNC may end up becoming unlikely bedfellows in this strange and bizarre world.

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