Financial History Issue 114 (Summer 2015) | Page 19

SIXTH DAKOTA By Robert E. Wright Standard maps clearly show two Dakotas, North and South, nestled snuggly betwixt Minnesota and Iowa on the east, Montana and Wyoming on the west, Manitoba and Saskatchewan to the north and Nebraska to the south. But in terms of political economy, it is more accurate to think about six Dakotas: North and South, East and West, and Euroamerican and Native. Many Americans consider the Dakotas mere “flyover country,” an inconvenience when jetting between Boston and Seattle, but otherwise safely ignored. Careful analysis of the six Dakotas, however, can help us to better understand the national economy’s potential, as well as its limitations. Understanding the sixth Dakota, the Indian one, is perhaps most important of all. North Dakota is the emerging fossil fuel energy giant, the offspring of new Test inflation of a balloon at Raven Industries in Sioux Falls, South Dakota, 1963. “fracking” technology and (sometimes) high oil prices. South Dakota, by contrast, has hardly any energy deposits at all. Its Black Hills were once filled with gold (now mostly mined) and other heavy metals and hard rocks (such as amblygonite, bentonite, lepidolite, tungsten and uranium). The Minneapolis Federal Reserve confirms what every South Dakotan knows: that the Mount Rushmore state receives no direct benefit from the Bakken oil fields. They are simply too far away (the Northern Plains are even more vast than they are flat), and of course South Dakota cannot tax energy companies operating in North Dakota. Despite a dearth of fossil fuels, South Dakota’s economy does not lag far behind that of its northern neighbor. Per capita income in North Dakota is higher than in South Dakota, but its lead is largely eaten up by the astronomical cost of living in its boom towns. In February 2014, the Associated Press reported that rents in the town of Williston, North Dakota, far exceeded those in New York City and Los Angeles. For example, 700 square foot, one bedroom apartments rented for $2,400 in Williston, compared to about $1,500 in New York and Boston and about $1,400 in L.A. South Dakota’s per capita income, by contrast, is above the national average, but its cost of living is below it. In March 2015, North Dakota’s unemployment rate was 3.1%, the second lowest in the country, and South Dakota’s was not far behind, the nation’s fourth lowest at just 3.5%. If energy prices remain low, though, North Dakota’s unemployment rate will continue to increase (it was up .4 from March 2014), but South Dakota’s will probably remain about the same (it was unchanged from March 2014) despite an increase in the state’s minimum wage in January 2015. That is because South Dakota’s economy is based on entrepreneurship. Agriculture remains relatively important to the state but still represents only 7% of GDP. Farmers and ranchers, at least those who want to stay in business, are consummate innovators. Agricultural processing, construction, finance, healthcare, higher education, light manufacturing, trade (retail and wholesale) and tourism www.MoAF.org  |  Summer 2015  |  FINANCIAL HISTORY  17