The City-States will veto Red States in the Culture War


This new “religious freedom” law in Indiana and the unprecedented backlash to follow is a major turning point for the tension between red & blue states and the tiresome “Culture War” — far more than I initially realized. I think that you may find that the recent progress of fundamentalists to be turned back in a significant way in the years to come, fueled by potent social trends, but also historical economic shifts.

Josh Marshall at TalkingPointsMemo notes that Indiana politicians have been truly surprised at the reaction to this legislation that they thought was merely a local matter. “If we want to express our reservations about marriage equality by passing legislation that allows discrimination, why should anybody else care?,” or so the thinking goes. Well, it turns out Angie’s List cares, and just suspended its planned expansion into the state. George Takei cared enough to ask Gen Con, the world’s largest gaming convention with over 180,000 attendees, to consider abandoning the state. The CEO of Gen Con, Adrian Swartout put out a letter saying that while the company’s contract runs through 2020 with the city of Indianapolis, 2021 is now up for grabs. Eli Lilly cares, Salesforce cares, and many future conferences might choose Chicago, Orlando, or Las Vegas instead. We’re talking about billions of dollars of impact here.

I had an epiphany about the future of the culture war having seen the depth and power of this reaction. Sure, there are the very important social trends — that according to the Pew Research Center, 67% of Millennials favor marriage equality, up from 51% ten years ago. That gives you a sense of the political future of this issue — it’s essentially decided if you wait a sufficient number of years.

The economic veto of city-states emerges

But it’s the economic trends that are so powerful. Check it — more than 80% of GDP is now produced in urban areas, the highest percentage in history, all caused by the development of the knowledge economy and the decline of people working in agriculture. Moreover, this GDP is increasingly concentrated in top-tier cities as manufacturing disappears from the economy, replaced by more research, innovation, and intellectual property. That means less GDP is coming from Cleveland, St. Louis, and Indianapolis, and more from Washington DC, Boston, and San Francisco, something that’s very clear in the price of rent.

What does this mean? Clearly, given the last week’s events, it means that the economic powerhouse city-states can deeply affect the local economies of places like Indiana if their political decisions stray too far from the values on the coasts. Back in 2004, I remember the horror among those in the big blue coastal cities that the mores, values, and religious fervor of Wyoming and Kansas would guide the whole country because of the electoral college. Well, due to the innovation economy, the shoe is now on the other foot. Perhaps you can get the votes to outlaw marriage equality or to allow discrimination, but the fact is there are a whole lot of gay people working at high levels of industry and government in LA, San Fran, and DC. They are our friends and neighbors, and they decide, among other things, where to hold $200 million conferences. In short, yes, your religion and politics may be a local matter — but the money is on the coasts and might veto your decisions with those almighty market forces I hear so much about.

Politically, it ain’t 2005 anymore, and it probably won’t ever be again.

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I provide strategy and competitive analysis to executives from business and government here and I’ve been known to rock a microphone here.

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