America 2040: New American Heartland
The Heartland, from the Rio Grande to the Canadian border, has vast economic potential
Also see
America 2040: the rent is to damn high
Key takeaways
1. This post provides a blueprint for a government-directed economic development strategy to revitalize the New American Heartland and export goods to the rapidly growing global middle class
2. The Heartland is ripe for a manufacturing renaissance, leveraging advanced technologies like 3D printing and robotics
3. America's Midwestern farmland is set to pivot from biofuel to food production
4. The Gulf Coast's petrochemical complex is poised to expand further, fueled by the shale revolution and rising global demand for petrochemical products
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The “Asian Tigers” were 4 countries - Hong Kong, Singapore, South Korea, and Taiwan – which experienced rapid growth from the 1960s to the 1990s. They are known for their development from underdeveloped economies to advanced economies in just a few decades. Governments in these countries played a significant role in guiding the economy, often through directing credit to specific industries and protecting these industries from competition. These countries focused on producing goods for export, which fueled their economic growth. China largely copied this government-led playbook from the 1980s to the 2010s and grew its economy 244x from 1960 to 2020[i]. By contrast, the US economy grew only 38x during the same period.
Figure 1:Comparison of economic growth[ii]
Today in America there is vast economic potential. The transition of America from a massive industrial economy into a post-industrial services economy after the 1970s was mostly conducted without government direction. The offshoring of America’s industrial base (see American Deindustrialization) has led to numerous social, economic, and security problems.
The passage of the CHIPS Act and Inflation Reduction Act in 2022 has shown that there is bipartisan support for government-led economic development in the US. America should utilize its strengths in midwestern manufacturing, agricultural production, and the Gulf Coast petrochemical complex to export goods to the global middle class. All these assets lie in the interior of America, the New American Heartland.
Midwestern Manufacturing
Before the rust belt began to oxidize in the 1970s, the region was one of the most concentrated manufacturing clusters on the planet. Firms used the Great Lakes, numerous rivers, and man-made canals to inexpensively ship goods to market. Abundant coal deposits made electricity, a key manufacturing input, cheap in the region.
All those factors still hold if government policy can be crafted to incentivize reindustrialization. Today, the region is home to clean nuclear, hydroelectric, renewable, and especially natural gas resources, which bring the regions electricity cost below the national average. The Marcellus shale formation in Pennsylvania and Ohio contains hundreds of years of natural gas reserves. The existing infrastructure and industrial plant will reduce investment costs. The region already has a well-trained workforce and many local technical colleges and universities.
Government policy should incentivize advanced manufacturing, including 3D printing, robotics, and AI-optimized facilities. Green steel, made from clean hydrogen, is especially interesting given the region’s past. The government should collaborate with world-class universities in the region, such as Michigan and Purdue. The goal should be to develop a manufacturing cluster more competitive than the Pearl River or Yangtze River Delta in China.
Figure 2:The geography of American manufacturing[iii]
Breadbasket
The midwestern plains are the largest contiguous tract of arable land on the planet. Unfortunately, in 2023 the US became a net-importer of food[iv]. This is due to many factors, but a major reason is the US devotes 40%[v] of its corn to the biofuel ethanol instead of food production. The environmental benefits of ethanol are not clear and this farmland should be repurposed to food crops. US government policy should double-down on agricultural production and the Midwest should be the breadbasket of the world.
Government funding into agricultural research, such as crop-science, should be increased. Collaborations with Silicon Valley on productivity enhancing ag-tech should be incentivized. The US should use the disruptions of the war in Ukraine (Russia and Ukraine are major grain producers) to gain market share globally.
Figure 3: US farmland[vi]
Petrochemical powerhouse
The American Gulf Coast petrochemical complex is among the finest such provinces in the world, rivalling the Arabian Gulf. The shale revolution and subsequent revitalization of the Permian Basin has turbocharged the region. Oil exports were again allowed in 2015 (they were banned in the 1970s) and by 2019, the US was a net oil exporter. LNG exports from the Gulf Coast have boomed and have been sent into overdrive by Europe’s need for non-Russian gas. The abundance of non-oil associated liquids (NGLs) from the Permian Basin has led to a spree of chemicals manufacturing investment and exports. The US is already exporting to the global middle class from the Gulf Coast.
America needs to end its guilt over its production of oil, gas, and other petrochemical products and recognize the Gulf Coast for the national treasure that it is. The energy industry was the number one growth employer after the Great Recession in 2008 – who knows where we would be otherwise. The world still needs petrochemical products (2023 will set another consumption record) and until it doesn’t, America should be the leading provider.
Figure 4: US Gulf Coast energy infrastructure[vii]
Exporting to the global middle class
As of 2020, the global middle class was estimated to be worth $35 trillion in spending and is projected to grow to $64 trillion by 2030, representing about 36% of the global GDP. By 2030, it will be half of the global population. Later in the 21st century, the global middle class will be even bigger.
The US government should pursue policy to reindustrialize America, focusing on the New American Heartland. Its goal should be a political-economic model that exports goods to the global middle class. The needed reforms will be extensive but a few starting items are:
2. Establish an Infrastructure Bank to finance projects in the US-Mexico-Canada economic corridor
a. Upgrade the Houston ship channel
b. Upgrade the Veracruz, MX container port
c. Reform permitting and build pipelines
d. Debottleneck border crossings
3. Buildout the Permian-Gulf Coast Energy Corridor
4. Develop more noncollege career pathways to expand labor force
5. Devalue US dollar to encourage exports
Figure 5: US-Mexico-Canada economic corridor
In conclusion, this post outlines a strategic blueprint for revitalizing the United States' economy by capitalizing on its vast resources and innovative potential. The Heartland, stretching from the Rio Grande to the Canadian border, is positioned to become an economic powerhouse by revitalizing its manufacturing sector, harnessing its agricultural bounty, and leveraging its petrochemical resources. These efforts aim to position the US as the key player in the global economy, specifically targeting the burgeoning global middle class. The blueprint calls for a paradigm shift, embracing a more government-directed approach akin to that of the Asian Tigers and China, which have demonstrated remarkable economic transformations. By focusing on advanced manufacturing, agriculture, and energy, America can reclaim its industrial heritage while paving the way for a prosperous future. This vision for 2040 not only seeks to reassert America's economic dominance but also to make the New American Heartland a beacon of innovation and prosperity globally.
[i] Macrotrends.net
[ii] Macrotrends.net, St. Louis Fed
[iii] https://www.aei.org/articles/right-in-the-middle-the-midwests-growth-lessons-for-america/
[iv] USDA
[v] https://www.ers.usda.gov/publications/pub-details/?pubid=105761#:~:text=Ethanol%20manufacturers%20use%20about%2040,the%20domestic%20transportation%20fuel%20market.
[vi] https://www.mdpi.com/2072-4292/13/21/4227
[vii] https://rbnenergy.com/products/gis/us-gulf-coast-crude-oil-infrastructure-map/info