In this year of virulent politics, the war in Iraq, charges and countercharges on issues of policy, battles over jobs and the state of the economy, anger seems to be the dominant political thematic emotion. What is interesting, to me at least, is what lies beneath the anger. Once again we find ourselves divided, in part between so-called Red States sure bets for Bush and Blue States sure bets for Kerry. And here we find the North-South distinction rearing its ugly head in American politics once more.
The South and the North are dividing. Up to now, states in the red zone have been distinguished from their Northern cousins by matters of tradition, religion, industry, political behavior, racial relations, education, sports, family and military tradition.
For some time, perhaps since the heady days of the Civil Rights Movement, there has been balance in America. In its most simplified form, the South made and the North paid. But new forces are creating asymmetries in the economic and demographic landscape that are altering this balance. These include an asymmetrical shift in the distribution of retiring families south; an accompanying shift of capital southward and a disproportionate shift of the burden of managing aging households to the South as well.
THE DISCIPLINE OF THE FUTURIST
Before I forecast the reorganization of the American social landscape and what it will do to the cities and states affected, let me briefly explain how I predict the future. One day, I was more or less minding someone else's business, when my secretary (ah, those were the days) came bouncing into my office to tell me that The Wall Street Journal had named me one of America's five leading business futurists. I had, admittedly, written a book with Watts Wacker on the future, but I neither knew that futurism was a discipline, nor that I was a futurist. Nevertheless, the declaration by a journal as august as the one on Wall Street changed my life; it made me a futurist.
Without overstating the methodological depth of my forecasting process, I developed a strategy that enabled me to make provocative speculations on everything from the future of sunglasses to the social effect of Osama Bin Laden on the public acceptability of nuclear weapons. My process assumes that two key factors of human life are always in play whenever there is a collision between the expected and the unexpected.
The first of these has to do with the things that do not change. People as individuals mature and, in that sense, change over the course of a lifetime, but human beings as a species do not change. Our search for family, kinship, property, self-esteem, material object identification, language, creativity, social organization and a place in the cosmos remains a constant. As far back as the anthropological record takes us, those values don't change. At the same time, a 25,000-year record of observable human history shows that the objects available to us for dcor, weapons, tools, systems of social orchestration, political systems, geographic and environmental dominance, and the philosophies by which we reconcile our poor lonely existence have evolved.
These two ideas: that we are the calm, unchanging eye of the hurricane around which the social order rotates allow me to make predictions about how shifts in the storm will change life. Change, human change, is therefore, a kind of illusion. I count on people staying the same: greedy, loving, moody, aggressive, familial, intelligent, witless, etc. so that the consequences of an arising asymmetrical event can be forecasted for the humans affected.
An asymmetrical event is any event in the social order that disturbs established harmonies in relations between people, their governance or their pattern of social relations. The attack on Iraq is an asymmetrical event that altered the balance of consequences for individuals, nations and religions. But, so also was school busing. To see asymmetry in action, give a disproportionately, (asymmetrical) valuable gift to a colleague. The response will not be Gee, thanks. Instead, it will be, What does this mean?
THE THIRD GREAT AMERICAN MIGRATION
America has seen two spectacular migrations of its non-native population to date. The first of these began at the end of the 17th century. From the solid establishment of defensible emergent cities, people moved west and kept moving west until, by the middle of the 19th century, we were a bicoastal country. The second great migration grew out of the Great Depression. From the Midwest, people went west. From the South, they went north. From the North they clustered around cities. Long after the Depression, the helices of livelihood and aspiration perpetuated U.S. migration patterns well into the '70s and, to a lesser extent, they continue today.
We are entering a new, third great American migration. People from the South who left to work the auto plants are retiring and heading home to the land of their fathers. Joining them are corporate transplants, the urban poor and those who are looking for an uncomplicated life as a reward for years of hard work. The motivation for migration is a warmer climate and a simpler life. As many as three-quarters of the people pondering retirement have established a good reason to head for America below the 35th Parallel north. And this may mean as many as 50 million migrs to the South over the next 20 years.
The 35th Parallel splits the Red and Blue zones as the Mason-Dixon Line once divided the North and the South politically. Imagine drawing a line from San Luis Obispo, Calif., to Cape Hatteras, N.C., and shifting three out of four people who are pre- and post-retirement south of that line. That process is now well under way.
CAPITAL AND THE 35TH PARALLEL
Of the 24 leading economies in the world, 20 have borders completely above the 35th Parallel, and two (the U.S. and China) straddle both sides. Of all the income generated in 2002, $27 trillion was produced above the 35th Parallel north, and $2.2 trillion below it. Being fair and adding back an estimate of U.S. and Chinese sub-35th income, it is closer to $22 trillion above and $7 trillion below. As one would expect, capital is registered, if not invested, in proximate distance to where one lives. Hence, the great capital and industrial centers of the 20th century were established in the North.
All that is about to change: the money that is the mother's milk of economic activity is heading south.
THE SOUTH IS RISING AGAIN
There are roughly 75 million Americans who are over the age of 50, out of a population of approximately 294 million. Another 35 million are between 40 and 50 years of age. And most of these people are thinking about where they will live the second act of their life.
F. Scott Fitzgerald once wrote that there are no second acts in American lives. But when he wrote those words, the average life expectancy in the U.S. was just over 60, and the health of older people was very problematic. Today, most 60-year-olds are pre-symptomatic, and most of the serious, life-threatening diseases they face are subject to effective therapeutic management.
In point of fact, the homes the new migrants buy are likely to be the home they live in for the longest sustained period in their lives. Real estate liquidity in the North, especially, has been driven by a continuous trading up strategy as satellite communities have formed rings of new housing surrounded by belts of office and industrial spaces farther and farther away from a core city. I suspect that these suburban and exurban homeowners expect one last ride on the real estate express before they settle in Ashville, N.C., Savannah, Ga., Santa Fe, N.M., Del Rio and Corpus Christi in Texas, Scottsdale, Ariz. or San Diego.
Cash in hand, and, if they spent their working life with one of the great industrial companies like General Electric or Ford, pension at the ready, social security intact and lifetime medical services assured, they will bring their other cash assets to the banks and brokerages of the South.
But as the new migration grows in strength it will impose its own (asymmetrical) demands on the New South. They want on-demand health services, superb highways, environmental protection and quick access to building permits. Furthermore, they seek communities that offer cultural, occupational and community involvement. And they all want to be the last into the attractive communities before the door of continuing development slams behind them.
The new Southerners represent, therefore, an enormous economic force and they bring a lot of Yankee baggage with them. Absorption will be messy, expensive and politically complex.
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THE NORTH TAKES A HIT
As the migration goes south, the North may well be stripped of people it has forecasted for health care, tax-base, infrastructure and capital planning. The disappearance of 30 million or so middle-class and affluent households will severely test Northern resources to build their economies, provide for their less well-off citizens, and, perhaps most important, strip the North of regionally biased capital.
While this mobility does not threaten market exchanges, it will put severe pressure on northern cities like Cleveland, Milwaukee, Minneapolis, Boston, Philadelphia and Toledo, Ohio. Detroit is the poster child for this movement. Instead of concentrating new investment in the well-established, auto-friendly Michigan-Ohio-Indiana belt, new auto manufacturing is found in South Carolina (BMW), Alabama (Mercedes and Nissan) or Texas (Peterbilt, General Motors), to name a few. With these plants come the supplier base, trade relations, money-center banking and, of course, capital.
Moreover, the sudden exodus of so many people will significantly depress real estate prices. This will place both a new burden on the cities as the tax base erodes, and will almost certainly erode the postretirement cash reserves of our migrating boomers.
Hence, a new asymmetry in American economic and social life is on the horizon. For the South, the cash will result in an astonishing rate of community formation, re-industrialization, cultural development and the like. At the same time, as land, water and recreational resources become increasingly scarce, the battles for preservation, maintenance of normative Southern and Southwestern culture will heat up and newcomers may not be as welcome as they have been to date. Furthermore, some communities (mine in Santa Fe, for instance) are fundamentally constrained by water and infrastructure deficiencies limiting the size of the welcome mat. Of course, this means the inevitable displacement of people with low discretionary incomes.
So, on the one hand, the migration of Baby Boomers south will lead to substantial strengthening of the capital base (and, hence, economic activity), it will also bring enormous pressure to bear on health care, social services, government, land planning, and, of course, occupational choices as more and more people find themselves serving the needs of an older, formerly metropolitan population.
THE MONEY GOES CONSERVATIVE AS IT GOES SOUTH
While it is true that asymmetrical capital flows can be anticipated, it is also true that the Yankee capital will become increasingly conservative. Older Americans will be looking for local opportunities that minimize risk. The question for the New South becomes how to bring the migrants into the local economy and culture so that they invest where they live.
Answers are already appearing. First, the creation of communities designed for mature Americans with significant cultural, educational and healthy-living institutions is on the rise. The new retirees want to remain active (either as workers or volunteers), want to keep cash flow proportionate to capital burn rate given life expectancy, want quality health services, want continuing opportunities to learn and want to feel that their second act is the best part of their whole life.
Second, the new migrs will buy real estate wherever all these factors come together. In the New South, that means, in all probability, the transformation of smaller, bucolic, well-organized and economically balanced cities like Tupelo, Miss., Selma, Ala., El Dorado, Ark., and Natchez, Miss.. It also means that Southern cities that have tipped over into decay (Vicksburg comes to mind) may well be shut out of the onset of real, deep prosperity.
Third, comes the creation of capital venture organizations that are publicly ratified. For example, New Mexico's public investment in the film industry encourages private confidence in investments in the infrastructure of the industry within the state. So also does public support for the auto industry, high technology, bio-pharma, agricultural processing, oil and gas and alternative energy create confidence in the long-term prospects of the New South.
For example: Arkansas is the center for the development of optical coin readers and optically sensitive metals. Similarly, the South is home to advanced development of fabric, plastics, chemicals, advanced materials, etc. It is home to new ports. It dominates trade with Central and South America. It is home to new professional sports teams. It remains a center of American arts and it is the center of a real estate boom of monumental proportions.
WELCOME TO THE IDEAS OF THE NEW SOUTH
This process of emigration is not passing unrecognized. At the University of Mississippi, and counterparts in Alabama, Louisiana, Florida and North Carolina, surplus university property is being pooled and used to build retirement communities for alumni adjacent to the universities themselves. In Scottsdale and Southern California (and even a property I am associated with, Las Campanas in Santa Fe) amenities are designed to encourage migrants to join the local community and play leadership roles. Volunteerism and giving campaigns targeting the new migrants focus on infrastructure build and service generation. And, throughout the rural South and Southwest, new communities are being conceptualized that are built around activity and cultural preferences that will attract an instantly homogeneous community. It's as much about church, libraries, communal farms and, perhaps, even community auto shops as it is about golf and tennis.
A CONCLUSION OF CURIOSITY
We face a new dilemma: the outflow of energy, experience and capital from the North to the warmer climes below the 35th Parallel. This event is significant beyond the load it puts upon Southern resources, the risk it puts upon Northern cities, the confusion it introduces into Southern culture or the management problems it imposes upon bureaucracies and community planners in both the North and the South.
Never before in America, or since the 14th century in Europe, has the lion's share of capital, innovation or economic growth been south of the 40th Parallel. For centuries the globe's great centers of entrepreneurship have been in climates that are cold, prefer change and growth to tradition and value work over the passionate embrace of the arts. It is not an accident that the family automobile was invented in the North and rock 'n' roll in the South. But now the change: The New South will be challenged to absorb the Old North. But, given the warmth of the South, the big question is: Will the capital take a siesta while the migrs bleed resources dry?