Trends of Regional Divergence and Convergence

All hail economic divergence. Amazon, the iconic company of the cloud computing era, staked its second headquarters flag in the US twin towers of domestic hegemony. Adding another jewel to the NYC-DC crown, economists and policy analysts warily eyed the deepening divide of two Americas. What to do with the "left-behind places"?

The hand-wringing concerning Flyover Country misunderstands the impact of globalization. The shocks to the world system during the 1970s and 1980s signaled an end to economic divergence. The declining manufacturing advantage informed the emerging trend of regional divergence in the United States. Fortune favored those areas transitioning out of the production of goods towards the export of knowledge. Today's observed divergence was and is but a time lag in the course of economic restructuring.

As more US regions deleverage from global divergence in this era of global economic convergence, the domestic trends of convergence will become apparent. The pressing problem will be, as already the case in Silicon Valley, divergence within regions. In fact, that labor market bifurcation is a strong indicator of globalization penetrating a left-behind place. Those who toil in legacy tradable industries or non-tradable services will look across a gaping chasm of economic restructuring at knowledge workers spending big city wages in markets well down the urban hierarchy.

The same forces reshuffling America are at work in China. The power of artificial intelligence rests on the low-paid efforts of humans, signalling a shift from divergence to convergence:

The data factories are popping up in areas far from the biggest cities, often in relatively remote areas where both labor and office space are cheap. Many of the data factory workers are the kinds of people who once worked on assembly lines and construction sites in those big cities. But work is drying up, wage growth has slowed and many Chinese people prefer to live closer to home.

China is deleveraging from global economic convergence. The age of rural-to-urban migration is at an end. Mechanical Turks can reside wherever one can access the cloud, teaching machines how to produce knowledge. Only the highly skilled need to move, which is already the case in the United States.