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In the summer of 2016, America’s educated elites were searching for an explanation for Donald Trump’s unprecedented rise. They found it in part in a remarkable book written by 32-year-old lawyer JD Vance. Vance’s autobiographical essay on his upbringing in and among the Appalachian working class folk who had given Trump near worshipful support, Hillbilly Elegy, became an unlikely best-seller. Now in its’ 68th week on the New York Times bestseller list for hardcover non-fiction, Vance’s portrait of a people whose challenges are changing American politics is a must read for anyone interested in “flyover country”.
But Vance is now on to something perhaps more important. In partnership with Steve Case, the founder of one of the big firms from the early Internet era, America Online, Vance has launched a venture capital fund called Rise of the Rest. Backed by $150 million from some of the biggest investors and business leaders in America, such as the Koch Brothers and Amazon founder Jeff Bezos, Rise of the Rest will seek out and invest in start-ups in America’s Rust Belt and flyover country. That could help reverse one of the biggest causes of the despair that fueled Trump’s rise: terminal economic decline.
Vance describes this decline in his book. His grandparents were like thousands of others who were lured out of their rural poverty in the 1940s through the 1960s by manufacturing firms in the Midwest. Manufacturing provided good pay for jobs that people without any college education could do, getting them out of poverty and into the middle class. But, as Vance notes, these jobs started to dry up in and after the 1970s. The firm that attracted Vance’s grandparents, Armco (now AK Steel), fell on hard times as so many other old-line American manufacturers did. While the company still operates a plant in Vance’s hometown of Middletown Ohio, it no longer employs as many people as it once did. As a result, Middletown’s population has been declining for nearly twenty years; the people who remain often engage in the sort of self-destructive behaviors, such as opioid addiction and drug use, that are on the rise throughout America’s flyover country.1
This slow decline has been occurring for decades, but it was exacerbated by two factors that arose only in the new century: Chinese competition and the 2007 financial crash. China’s entry into the World Trade Organisation created a flood of competition for lesser-skilled manufacturing jobs throughout the world, but especially in America. Economist Richard Freeman notes that the opening of Eastern Europe, China, and India to Western investment after the end of the Cold War roughly doubled the size of the global labour force. America’s separate free trade agreement with Mexico and Canada, the North American Free Trade Agreement, opened Mexico’s then-nearly 100 million people to US investment.2
The resulting competition helped to drain plants and capital away from older, more expensive locations like the American Midwest and towards lower-cost markets. Labour economists David Autor and Gordon Hanson have estimated that Chinese competition alone cost America more than 2.4 million jobs between 1990 and 2007.3
That date, 2007, is key because of what happened after. What is known in the US as the Great Recession and elsewhere as the Great Financial Crash had an immediate and, so far, long lasting effect on American manufacturing. Unemployment skyrocketed throughout the US in the aftermath of the crash, but particularly so in the industrial Midwest. Unemployment doubled between October 2007 and 2009 in each of the four primarily industrial Midwest states that flipped from Barack Obama in 2012 to Donald Trump in 2016.4
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