Manifest Destiny 3.0

American Demographics, Sept 1, 2004 by Dr. Jim Taylor

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.

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.