North America’s Divide - The Political Geography of Inequality - page 133

The balance between regional specificities and interstate externalities was
reversed in the United States. Regional economic specificities were much
stronger, particularly in the race-based political economy of the South. Whereas
mobility data suggest that interstate economic externalities, while present in the
United States, were not as pressing as in Canada. Under these circumstances,
the fragmenting effects of the geography of labor market risk constrained the
development of a centralized system of unemployment insurance. And thus,
consistent with the model, the United States launched a system that combined
moderate levels of interregional redistribution via a tax offset system with the
protection of a decentralized provision of unemployment insurance. In sum,
given a system of representation that privileges regions, the balance between
interregional economic externalities, the geography of inequality, and labor
market risks drives the design and organization of fiscal structures.
The centrality of interterritorial mobility to understanding the structure of
incentives underlying different institutional designs is reinforced by the evolu-
tion over time of American social policy. When, as a consequence of WWII,
the Western American states demanded more labor supply, the Southern states
managed to pass the Bracero program (1942-1964), a policy that arranged the
immigration of temporary Mexican laborers for that purpose. They thereby
succeeded once again in preventing an external influence to undermine the
dependence of their croppers and tenants (Alston and Ferrie 1999 : 99-119).
Over the years, Southern paternalism would disappear because of technical
change and mechanization. Only then did African Americans become more
mobile, entering the national political economy and gaining civil and political
rights. Indeed, the rate of African Americans born in their state of residence
started to decline again between 1940 and 1950, dropping from 76%to68%.
Focusing specifically on the South, Quadagno ( 1994 ) reports that while in
1940 77% of African Americans lived in the South, by 1970 only 53% still
did. As a result, “the presence of black migrants in northern cities moved
racial inequality from the periphery to the center of national politics” (p. 25).
Again mobility increased risk sharing, eventually contributing to a major step
forward in the development of the American welfare state, Lyndon Johnson's
War on Poverty and the Equal Opportunity Act (1964). Only then, “the bar-
riers to equality of opportunity the New Deal had created” were challenged
(p. 31).
Finally, the findings of this chapter relate to earlier scholarship and the
controversies motivating this topic in a number of ways. Contrary to the dom-
inant notion that federalism and decentralization are necessarily inegalitarian,
this chapter has shown how similarly decentralized political systems can vary
in the organization of their fiscal structures, as well as in the scope of their
efforts to prevent the spread of inequality (Lindert 2004 ; Obinger, Leibfried
and Castles 2005 ). In addition, it supports a theory as to why these variations
occur. The argument brings insights from the literatures on economic geog-
raphy (Krugman 1991 ; Venables 2001 , 2007 ) and factor mobility (Cai and
Treisman 2005 ; Wildasin 1991 , 1995 ) to the literature on endogenous fiscal