American Dream Finds New Home

In a remarkable but largely unpublicized shift, America’s long-struggling heartland is experiencing a renaissance. Driven chiefly by soaring housing costs on the East and West coasts and the growing appeal of traditional values, the region from the Mississippi River to the Rockies has stopped hemorrhaging people and, in some places, even begun to outperform economically some of the much-hyped “cool” cities of the late 1990s boom. Once regarded as backwaters of traditional manufacturing and farming, some states are evolving into prosperous centers of high-end services and information technology.

The region’s renewal also has political implications because its states rank among the critical battlegrounds in the presidential primary and general election campaigns.

Reports on Iowa frequently portray the state as filled with grizzled farmers and hard-boiled industrial workers. In reality, Des Moines and Iowa City boast growing populations of workers in such new-economy industries as information, financial and business services. These industries employ many of the young “knowledge workers” who are making former Vermont Gov. Howard Dean and Sen. John F. Kerry serious contenders in the Iowa caucuses. In old Iowa, Dean and Kerry would have been an almost impossible sell.

In November, however, President Bush may be the one who benefits most from the region’s economic growth and rising prosperity, felt most heartily in Sioux Falls, S.D.; North Dakota’s Fargo and Bismarck; Omaha; and Kansas City. More and more conservative, family-oriented people, including many migrants from the largely Democratic coastal states, are moving to the suburbs of these cities.

Yet more important than the ephemeral political story is the one of a region that was all but lost but now is being refound. In the 19th century, the heartland epitomized American optimism, hope and egalitarian values; it was the cradle of the national character. “[I]n the North Dakotan,” observed Bishop Cameron Mann of the Episcopal Church in 1902, “one finds a man prompt, generous, speculative, ready to learn each new thing, hard to tie to anything, but, when tried, staunch, sturdy and loyal.”

Shortly afterward, things began to go wrong. Farm prices collapsed in the 1920s, drought set in, factory jobs disappeared. Millions fled the Dust Bowl for better job opportunities elsewhere. By the 1930s, the heartland had become increasingly dependent on government handouts and subsidies. “Relief,” wrote historian Elwyn Robinson, “became the biggest business” in some states.

Growth of manufacturing sustained some of the region’s larger cities until the 1970s, when the industrial economy began to contract as large companies sought lower-cost locations in the South or abroad. Family farms were abandoned, small towns shrank and cities stagnated. Some prominent academics even proposed that the federal government turn much of the region back into a “buffalo commons.”

But even as the decline became conventional wisdom, underlying realities began to change. Out-migration began slowing in the mid-1980s and by the end of the 1990s had virtually ceased. More telling, some heartland cities -- notably, less-manufacturing-dependent Kansas City and Minneapolis -- were becoming major magnets for college-educated workers. In fact, they were far more successful in terms of percentage net gains among college-educated workers in the “talent hunt game” than Chicago, New York or Los Angeles.

Since the early 1990s, according to an analysis by Brookings Institution demographer William Frey, these migration patterns may have accelerated as more people left such cities as San Francisco, New York and Chicago. At the same time, many heartland cities began attracting foreign immigrants; in the 1990s, immigrant populations in St. Louis, Kansas City and Minneapolis were more than twice as large as in the 1980s.

Many heartland cities also appear to have weathered the tech and financial busts in the early 2000s better than such new-economy strongholds as Seattle, San Francisco, San Jose, Boston and New York. Generally speaking, a software engineer has fared better in Fargo than in San Jose or Seattle; a financial analyst or business-service professional has better prospects in Des Moines or Sioux Falls than in New York or Boston.

This remarkable reversal has been driven by several factors. One is housing affordability. U.S. population growth in the 1990s -- from 248 million to nearly 300 million -- forced up housing costs, particularly on the East and West coasts. In some places, the impact has been so severe that even a prolonged recession has only marginally reduced prices. In New York, Boston, Los Angeles, Seattle, Portland and their suburbs, houses are so expensive that barely half of families can afford them.

By contrast, housing costs in the great middle belt of the country -- from St. Louis and Omaha to Bismarck -- are low enough that, in general, three of four families can afford to buy a home. That gives these communities enormous advantages in retaining and attracting skilled labor, particularly younger workers who used to head for the coasts.

“Some of [the population movement] has to do with what is happening in the major cities on the coasts,” says Ernie Goss, a regional economist based at Creighton University in Omaha. “People are coming here to start businesses because they see this as a better place for them to raise their families.”

Lower labor costs are usually accompanied by relatively lower office rents and taxes and less severe regulatory environments. In the dot-com boom of the late 1990s, such considerations were often irrelevant. But in the much tougher business climate of the 2000s -- marked by a growing shift of higher-end jobs to China, India and other developing countries -- pressure has mounted to relocate where costs are lower.

“In some ways, the middle of the country is doing to the coasts what China and India are doing to America,” says Randy Schilling, president of Quilogy, a fast-growing computer firm in St. Charles, Mo., a suburb of St. Louis. Schilling says he has little trouble attracting skilled programmers from either coast, though he offers less money. The lure is that lower costs still allow for a higher standard of living.

In addition to economics, social factors have made the heartland more attractive. Since Sept. 11, 2001, says demographer Frey, there has been a “sharp and immediate flight from [population] density.” People are looking for safer environments; meanwhile, federal regulators and shareholders have urged companies to move some of their operations to less high-profile areas.

Security concerns are only part of the story, though. The country’s mood, especially among younger people, seems more conservative. Recent surveys of college students, conducted by researchers at UCLA’s Higher Education Research Institute and Harvard’s Institute of Politics, have found them more interested in religion and family and more supportive of the military than their 1990s counterparts.

Similarly, a recent Zogby poll reported a dramatic shift in people’s definition of the American dream. In the 1990s, 33% identified the “dream” with spiritual values; by 2002, 52% said concerns other than material were more important. These attitudinal shifts bode well for the Plains states, where, irrespective of politics, people more openly identify with values of faith, work, community and family than in less-rooted megalopolises.

The rise of the Internet has amplified these trends because it has enabled companies to compete for individuals and opportunities in remote locations. “I have customers all over the country, but our costs are low and our people can afford to live well here,” says Thane Paulsen, president of two Sioux Falls business-service firms. “We appeal to a lot of people who want to come here to enjoy the South Dakota lifestyle.”

More important, the new American “field of dreams” may reconnect all of us to that part of the country that contributed some of the best features of our national character.