How the Rust Belt Really Died

How the Rust Belt really died—it’s the type of question that used to keep an obsessive like me up at night.

(Yes, in referencing death, I’m actually discussing a region’s birth, which was not of the uplifting variety.)

The insomnia persisted, of course, because the answers didn’t add up.

You know this story.

Iron ore from around Lake Superior got married to coal from Appalachia, the knot being tied in places like Gary (IN), Cleveland, Pittsburgh, and Buffalo.

The result was a perfect marriage known as steel, which birthed beautiful children known as cars.

There was pride and prosperity, enough to support Eastern European immigrants, Black migrants from the South, and whoever else wanted a sliver of the pie.

And then, one day, it all disappeared.

There was foreign competition, aka globalization.

There was automation.

In the mix was a failure to modernize.

Somewhere in there was greed, both corporate and courtesy labor.

Then, apparently, everyone became stupid.

And racist.

And drug-addicted.

That’s how the Rust Belt really died, we were told.

But something never quite made sense.

We have e-books, but people still go to bookstores.

We have Amazon, but people still go to malls.

Downsizing is not synonymous with collapse.

Yet the story of the Rust Belt, at least in spots, is one of collapse.

Something was missing, and I knew I had to find the answer.

Now, unlike Indiana Jones, my quests never take me far.

They usually start with AI, which in this case spit back the story above.

Disappointed, I rewound the clock to 2021 and opened Wikipedia.

And from there, after finding inspiration, I went back in TIME (magazine) to 1982.

Shocked, I ran upstairs and woke up my wife, whose upbringing in Detroit and coal country made her feign 2-a.m. interest.

The Rust Belt, I said, didn’t die of old age. It died from strangulation. It was murdered!

She fell back asleep, and I kept reading.

It was 1979, and Paul Volcker had been appointed Chairman of the Federal Reserve.

The conundrum of the day was runaway inflation, and Volcker would be the savior.

He jacked up interest rates, which peaked at over 20 percent, triggering a recession or two.

Borrowing costs for industry became prohibitive. To make things worse, foreign money flooded into US banks, strengthening the dollar. As a result, US exports became more expensive while imports came on the cheap.

They called it the Volcker shock, and it lasted about three years.

As far as inflation was concerned, it worked.

As far as manufacturing went, it turned a noticeable limp into frank paralysis—and then death. Factories were shuttered, never to reopen.

But not all was lost.

Demand for personal computers soared. On the back end, for a variety of reasons, Wall Street blossomed.

In short, while manufacturing had been killed, tech had been born. And the markets had been unleashed.

Sound familiar?