Fighting Poverty in Rural America
In September 1967, a commission tasked by President Lyndon Johnson with studying the economic state of rural America released a report titled The People Left Behind. The report documented a rural poverty rate much higher than that of cities while calling for greater public investment in non-urban communities. A research conference held a half-century later — aptly titled Rural Poverty: Fifty Years after "The People Left Behind" — brought together more than 100 professionals from academia, government, and the non-profit sector to revisit the landmark 1967 report. Their own study, released in October 2018, wasted no time in noting that despite declining through the 1960s, rural poverty rates had "consistently exceeded urban poverty rates" in the decades since.
This was a sobering finding. Similar studies have left economists such as Paul Krugman, who made his academic bones studying the spatial distribution of wealth, fatalistic about rural poverty. Claiming in a 2019 New York Times column that he wanted to "get real" on the subject, Krugman wrote that there are "powerful forces behind the relative and in some cases absolute economic decline of rural America — and the truth is that nobody knows how to reverse those forces." He painted with a broad and arguably bigoted brush, characterizing rural America as a hotbed of immigrant-hostile white nationalists while comparing it to places such as southern Italy, which "remains backward after generations of effort."
Fortunately, not everyone sees rural America's economic glass as half-empty. The Fifty Years report referenced research from two economists, Stephan Weiler and Nicholas Kacher; they found that higher rates of local business births reduced poverty in rural areas. They also looked at business dynamism — a measurement that combines business births and deaths — and discovered that in certain economic sectors, an increase in dynamism not only reduces rural poverty, but does so more effectively than in non-rural parts of the country.
Rural poverty rates have remained high because well-meaning attempts to reduce them have traditionally involved separate, uncoordinated policies thrown haphazardly at the problem. Each month, the government distributes transfer payments from programs like Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program to households throughout impoverished rural communities. But any benefits these payments bring quickly fizzle out. Investment-based government programs, such as broadband initiatives and Small Business Administration loans, are also disbursed. But without local entrepreneurs and well-trained workers, their effect is limited. And, absent any coordinating efforts, the laissez-faire approach of trusting the free market to address the problem fails to alter the status quo.
In the back country, a spark, kindling, and wood are all needed to make a fire. We should think about fighting rural poverty in America the same way. The spark of new industries, technologies, and resources can help alleviate rural poverty, but only when paired with the kindling of prospective business owners who feel a sense of agency and the wood of workers empowered by skills-based education and training. When combined, these three elements produce a culture of business dynamism that can help rural areas escape the cycle of poverty.
Thinking through the necessary ingredients for revitalizing rural communities is important now, because in parts of rural America — from southwest Arkansas to King's Mountain, North Carolina, to California's Salton Sea — energy companies are developing new techniques for extracting lithium reserves from the ground. If combined with smart policies and investments, these techniques could reverse decades of economic and social decline.
RURAL DECLINE
High above the modest city hall of Waldo, Arkansas, a New Deal-era steel water tower announces the town's name to the world. Near its base, the city council arrives for its monthly meeting. Mayor Beverlyn Rowden and six council members representing three wards take seats at the dais, then open with a prayer. Much of the agenda for the meeting revolves around potential economic development — a drug rehabilitation center, a grant for a new park. One resident complains about potholes, one of many signs of the town's physical decay.
Waldo, located in a rural patch of southwest Arkansas, has come to resemble an inner city in the country. Although something of an outsider now, I spent my early years in the town, where I attended school at Waldo Elementary. In the fall of 1973, Mayor Rowden and I started first grade. My teacher was Mrs. McKinney, a matronly black woman whose face bore horn-rimmed glasses and a frequent smile. Mayor Rowden was in the adjacent classroom, where my mother taught. In my memory, Waldo schools contained a roughly even balance of black and white faces, and almost nothing else. A perusal of the 1974 Bow Wow — the yearbook for the entire K-12 school system — confirms this.
Much has changed since then. A Main Street filled with businesses has become a stretch of empty or vanished buildings — holes in the tapestry of a town that once existed. Most of the old school buildings are gone, too, having burned down or been demolished after the schools consolidated into the larger city of Magnolia in 2005. People still live in Waldo, of course, but not as many as before; in the 21st century alone, the town has lost 28% of its population. And since the 1960s, that population has become increasingly black.
When analysts consider the causes of American poverty, they often point to the racial fear and prejudice that helped hollow out both urban cores and small towns. Michelle Obama decried a similar dynamic at work in Chicago during her childhood. "Y'all were running from us," she said in a 2019 speech, blaming the loss of fleeing whites' tax dollars and social capital for her old neighborhood's rapid and deep decline.
Racism was certainly an influence on what came to be called "white flight," but powerful economic factors were also at work. As economist Leah Boustan noted in her book Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets, Minneapolis-St. Paul saw people move to the suburbs after World War II despite the city's having a relatively small black population at the time. Indeed, many small, largely white Midwestern towns were devastated economically and demographically in the latter decades of the 20th century as people and productive capital decamped for other locales. Meanwhile, competitive forces drove manufacturing overseas just as the automobile was making suburban life possible and undercutting the raison d'être of small, decentralized places like Waldo, which had once been a critical shopping hub for nearby farmers who moved by horse and buggy. Mobility gives, and mobility takes away.
I left Waldo in the summer of 1976. My parents were divorced, and my father lived in Houston, where he had grown up. Our move revolved around being closer to him, though I also recall my parents saying that there were better schools in Houston. (Better is a subjective term: I was shocked when my mother told me not to expect any recess, as I was used to three per day in Waldo.)
Not all whites left Waldo, of course, and not all blacks stayed. But census counts don't lie. The town's all-time peak population was registered at 1,722 in 1960, of which 1,051 were white and 671 black. The 2020 census showed a total of 1,151, of which 276 were white and 825 black (along with 50 of other and mixed races). But the human shrinkage is almost minor compared to the town's physical decline, of which roads and buildings are the most obvious markers.
One of the most basic representations of an economy, the neoclassical growth model, is a mathematical function that, in its simplest form, depicts the economy as using two inputs — human labor (people) and productive capital (buildings, machinery, etc.) — to produce an output of goods and services. As the population of a region increases and productive capital improves or simply accumulates, the economy grows. Conversely, population decline and capital loss produce economic impoverishment. In Waldo, this cycle has been reinforcing itself to the point of seeming fated: The more people left town, the more the tax base diminished, the more the infrastructure fell into disuse and decay, and the more people decided to leave.
Not everyone remaining is poor, of course. Most are not, and some do well financially. But the 29.7% that do live below the poverty line is close to twice that of the state overall. The rate is high among white residents (25.4%) and even higher among black residents (49.2%). And the economic opportunities available to change their situation are usually not found within city limits. According to census data, the average one-way commute time for the employed of Waldo is 42.6 minutes, compared to an average of 21.7 minutes statewide.
For a small town like Waldo, being the mayor is a part-time gig. Mayor Rowden is also the principal of an alternative learning environment serving the Magnolia school system, which helps students who, for a variety of reasons, face extra challenges. When I asked her about the economic obstacles Waldo faces, she pointed to a critical difference between the town of today and the one I remember from my childhood: It is no longer self-sustaining. Indeed, only a handful of businesses remain — a convenience store, a Dollar General, a small grocery, and a few others. "We only have one in-home daycare in this town," she told me. "People have to go out of town for so many things. And we have a lot of senior citizens and disabled people who don't have transportation."
Waldo's decline occurred over decades, but the school closure in 2006 was a watershed. "That's why the roads are looking the way they are," said Rowden, "because we don't have the tax revenue anymore. But even before the consolidation, there was white flight because many of our Caucasian families sent their children to school outside of Waldo. They had more opportunities as far as sports and academics than we did. But this has hurt us tremendously."
Mayor Rowden's efforts to change Waldo's trajectory include a beautification project and a plan to help elderly and disabled residents better maintain their properties — sprucing up what physical capital remains. So many of these efforts now, even just filling potholes, require outside grants, which are irregular and uncertain. In some ways, it makes governing this small town more difficult than if it were a large city with a broad tax base.
Waldo and the wider region, however, still have one thing cities lack — natural resources embedded in the land. And this asset might now be on the verge of paying dividends. The saltwater aquifers beneath southwest Arkansas are uncommonly rich with lithium, a critical ingredient of batteries in electric vehicles. Near the city of El Dorado, the energy firm Standard Lithium recently demonstrated a new direct-lithium-extraction (DLE) process that it plans to leverage across up to 33,000 acres of mineral leases, centered some 10 miles west of Waldo. ExxonMobil has acquired drilling rights to 120,000 acres just south of Standard Lithium's claim, from which it hopes to supply lithium for "well over a million electric vehicles per year" by 2030.
Mayor Rowden has heard the talk of new jobs and money as southwest Arkansas joins the nation's battery belt, but she has yet to see anything concrete, so her own plans are measured. Despite there being towns such as Lewisville closer to the planned action, she hopes that a beautified Waldo might appeal to people drawn to the area by lithium.
THE COMPLEXITY OF POVERTY
There is an entire category of non-fiction known informally as "poverty journalism." It is at least as old as Daniel Defoe's 1697 pamphlet An Essay upon Projects and as recent as Matthew Desmond's 2023 bestseller Poverty, by America. The latter work is filled with engaging writing and fresh reporting, but its policy ideas — from grand-scale unionization of the labor force to universal basic income to improved access to contraception and abortion — are mostly spiffed-up progressive hand-me-downs, ones that could only be realized through large increases in tax revenue or public debt.
Not surprisingly, the political left has feted Desmond, with Oprah Daily calling him "our national conscience." But it's a conscience that could benefit from less self-certainty. The book pays far too little attention to the potential unintended consequences and moral hazards of its proposals. If taxpayers will cover your rent, why would you bother to do so? How, exactly, would doubling the minimum wage not lead to bankruptcy for small businesses, unemployment for marginally productive workers, and inflation for all? The greatest moral hazard of all might be a government grown accustomed to expropriating the greater part of the fruits of its citizens' labor to distribute as it deems fit.
As justification for his ideas, Desmond, a Princeton sociologist, argues the essentially Marxist position that poverty exists because those who aren't poor don't want to fix it; they prefer to keep others oppressed because that is the source of their own wealth.
To suggest that the wealthy should care more about the state of the poor is admirable. But to further imply that they are happily enriching themselves at the expense of the poor is at best an oversimplification and at worst absurd. Most well-off people I know would love to see the poor, especially those facing debilitating poverty, overcome their obstacles to find more financially and socially rewarding lives. The question is how it can be done.
Too often, the political left views poverty as a mere financial problem: The poor don't have enough, the rich too much. Empower government to rebalance the books, and the spiritual ills more prevalent in a life of poverty — from broken families to substance abuse to mental illness — will follow suit.
Some on the right see the problem in reverse: Until they get their inner lives in better order, the poor will have to accept a diminished financial state as the logical outward reflection of underlying issues. But the truth lies somewhere in between. The financial and spiritual aspects of poverty are interrelated, with cause and effect running in both directions simultaneously. To be effective, solutions must somehow rebalance the psyches of the least advantaged as well as their pocketbooks.
When someone is caught in place-based poverty, the psychological aspects can include a sense of hopelessness at being physically outside the system of wealth creation, with no good path in. Opportunities seem remote in many different ways. Once internalized, this state becomes a kind of bad equilibrium. Idleness, promiscuity, substance abuse, and even crime might begin to look like reasonable pastimes, though they only reinforce the equilibrium. Meaningful change that goes deeper than the margins of the problem requires altering the status quo. It requires a new opportunity, perhaps even a new ability to see opportunities, such as those contained in the land itself. It requires a powerful spark.
THE LITHIUM OPPORTUNITY
In its pure state, lithium is a soft, silvery-white metal that is highly flammable. The lightest of all metals, when combined with other elements to form compounds, its ability to absorb, store, and release energy quickly makes it a near-ideal ingredient for electric batteries. This is why the energy industry is currently beating a path to southwest Arkansas.
The area where Standard Lithium and ExxonMobil have aggregated mineral leases is among the least populous in the state. There, pine and hardwood forests are cut by meandering bayous and lonely two-lane roads on which you can drive half an hour and only pass one other car. Five-to-ten thousand feet below the topsoil, the porous limestone of the Smackover Formation stretches eastward from Arkansas into the Florida panhandle and westward into central Texas. According to Standard Lithium's website, it contains "the highest reported lithium in brine values in North America." The company plans to pump brine (saltwater) up and extract the lithium before returning the brine underground, a process that is more environmentally friendly than techniques such as strip mining or evaporative pooling.
Like a handful of other rural places across the United States, southwest Arkansas appears to be positioned to profit from a national transition to renewable energy. Such a transition will help America develop its own sources of lithium, a metal for which China currently dominates the global supply chain. Some of these lithium-gifted places have, like southwest Arkansas, been left behind by decades of global economic and technological evolution. But can a battery-based economy really undo the damage?
Radical economic transformations do happen. When I was a kid, apart from the university town of Fayetteville, northwest Arkansas was best known for mountain scenery and a hillbilly theme park called Dogpatch USA. Today, it is flush with money and jobs thanks to the growth of Walmart, which is based in Bentonville. And there is precedent for transformation in Waldo itself. Its healthiest economic era coincided with oil being drained from the same geological formation that now promises lithium to power the world's electric vehicles and smartphones.
Absent that prior boom, it is hard for me to imagine how I would even exist. My maternal grandfather was among those who rode the flow of the oil fields into the middle class, working his way up the rig hierarchy to tool pusher — the equivalent of a factory foreman. This enabled my mother to attend college. After graduating, she found a teaching job in Houston, where she met my father.
Perhaps the lithium industry will offer similarly life-changing opportunities to other families. Some news reports suggest that Arkansas might one day supply as much as 15% of the world's lithium demand. Hugh McDonald, secretary of the Arkansas Department of Commerce and former president of the utility company Entergy Arkansas, said he wasn't sure of the figure's origin, but he believed the current activity from Standard Lithium and ExxonMobil, as well as TETRA Technologies and Norwegian energy firm Equinor, proves the magnitude of the opportunity.
"The industry certainly believes it's big enough and it's got decades worth of potential," he told me. "They're risking their capital to make these investments."
Much still depends on the DLE technique that Standard Lithium has been testing at its El Dorado demonstration plant since 2020. Then-governor Asa Hutchinson and the state's two U.S. senators (John Boozman and Tom Cotton) all attended the plant's ribbon cutting. More recently, a lithium summit held in Little Rock attracted Boozman, current governor Sarah Huckabee Sanders, and some 700 energy executives, policymakers, and stakeholders.
McDonald expressed confidence that the DLE code had been cracked and will prove profitably scalable. If there was still a point of uncertainty in his mind, it concerned the lithium royalty structure yet to be decided by the Arkansas Oil and Gas Commission (OGC). Landowners, who hope for a high royalty rate, and energy companies, who do not, have been fighting over what the final figure will be. McDonald told me the royalty needs to "lift all boats" but not be set so high as to discourage the energy companies from developing the play. "It's really, really important we get it right," he added. "If we don't, nobody gains anything....If the [energy] industry flourishes, everybody benefits."
But for meaningful benefits to remain and circulate in the local area, McDonald believes it will be critical to develop an "industry value chain further downstream from the extraction and the refining process." "The greater that ecosystem becomes in the state," he observed, "the greater the long-term value...to communities in southwest Arkansas."
One of the communities expecting to benefit from such value is Lewisville, Arkansas — population 881 — which sits next door to Standard Lithium's DLE play. Like Waldo, it has experienced decades of demographic change and economic decline. Ethan Dunbar, mayor of Lewisville since 2019, saw it firsthand on trips home after leaving town in 1982 for a career in the U.S. Army. "When it was time for me to retire [in 2015]," he told me, "I was torn about what to do, and finally was led to come back home just to see if I could help."
Mayor Dunbar knew that improving things meant going to people with "the power or the resources"; he didn't realize that soon, such people would be coming to him. It began with sightings of drilling trucks in the area, followed closely by rumors that slowly gained substance. Eventually, informational meetings were organized at which energy-company representatives laid out their plans, including a partnership between Standard Lithium and Equinor to build a $1.3 billion DLE plant south of Lewisville.
For now, activity and rumors have plateaued as everyone awaits the OGC's next royalty ruling. But as was the case with McDonald, the substantial investments already made give Dunbar confidence that benefits will eventually come.
"I want to make sure we are positioned to take full advantage of what's going to happen," he said. "What I don't want is for people to come here and get these good jobs and live in Magnolia or Texarkana and not here in Lewisville. Then maybe 20 years later the plants shift focus or close, and we're back on that downward slope of economic decline."
He was thinking about the long game, which is smart. Natural-resource booms don't last forever. There is already scientific research underway for the next generation of electric batteries powered by sodium rather than lithium. Finding a way to propagate the economic spark from lithium, for however long it lasts, could mean the difference between creating enduring opportunities in places like Lewisville and Waldo, and an eventual return to economic stagnation and a growing dependence on wealthier places to survive.
AVOIDING THE PATERNALISM TRAP
Public policies and aid can help spread economic opportunity throughout impoverished areas as kindling spreads a flame, but only if they emphasize agency over dependence. The Acton Institute's 2014 documentary Poverty, Inc., which should be screened in every U.S. high school, provides a striking lesson in how not to provide economic aid. Although it looks at the question from an international perspective, its arguments about the dangers of paternalism are directly applicable to place-based poverty within the United States.
One of the most tragic examples of paternalism has been America's provision of rice aid to the troubled nation of Haiti. This began during the Reagan administration as part of a grand, well-meaning scheme called the Caribbean Basin Initiative. An important side goal of the plan was fostering democracy, and in 1991 Haiti inaugurated Jean-Bertrand Aristide as its first democratically elected president. But just seven months later, he was ousted by a violent coup and wound up in exile in the United States, where newly elected president Bill Clinton tried to negotiate the return of the democratic government. During that time, rice aid to the troubled nation continued expanding.
The rice initiative brought a financial windfall to U.S. growers, who practically buried the island nation under bags of rice. But it also devastated Haiti's own rice industry, which found it difficult to compete with subsidized output from abroad being given away. Rice went from being an important but periodic part of Haiti's diet to something the average Haitian lives on every day. With the perspective of time, it is painfully clear that in giving so much food to Haiti, the United States also took something away — the country's ability to feed itself.
Poverty, Inc. tells similar stories from other less-developed nations, where goods such as free clothing and shoes from the West have crowded out pre-existing domestic production. It diagrams a vast transnational-aid complex — made up of international charities, consultants, institutions such as the World Bank, and (often corrupt) local governing elites — that exists to move assets from taxpayers and donors in developed nations to the developing world. From top to bottom, the system's survival depends on the perpetuation of need — a moral hazard if there ever was one.
Writing recently in these pages about the role self-esteem plays in poverty, Stephen Eide noted the following: "Pride, the opposite of humiliation, stems from a sense of contribution — the feeling that someone else is relying on you, and that you are able and willing to meet his needs." If this is true, then aid such as that profiled by Poverty, Inc. is not free, but paid for with a currency of pride that is being extracted from recipient nations and mounded up in donor nations like a new form of mercantilism.
Whether you're an ordinary American donating to a church clothing drive or a celebrity landing in the developing world for photo ops, it feels good to give, to demonstrate that you care about others. But as T. S. Eliot noted, a great deal of damage has been done by people "absorbed in the endless struggle/To think well of themselves."
The answer to this quandary is not to end humanitarian aid: At times, it is all that prevents individual or even national catastrophes. But smart aid recognizes the difference between short-term need and long-term dependency. Most people living in poverty have the ability and intelligence to create better lives for themselves. But their talents are not being tapped.
In southwest Arkansas, aid should include things not diminished in the giving — such as training in the soft and hard skills necessary to take advantage of the coming lithium boom. Job-specific education will be important, but so will entrepreneurial skills for keeping new money spinning in the local economy.
There is already good news here. The U.S. Department of Energy has provisionally selected Standard Lithium's project to receive up to $225 million as part of a federal program to develop a domestic supply chain for minerals critical to the national economy. At the state level, a program known as HIRED (Higher Industry Readiness through Educational Development) has awarded $325,000 to South Arkansas College to begin developing a lithium workforce, and $500,000 to Little Rock's Venture Center — an entrepreneurial-assistance organization — to support small businesses related to the lithium industry. Arkansas Tech University has begun modifying its geology curriculum to prepare students to work in the lithium industry. None of this may sound exceptional, but it represents a promising start for a region that could be on the cusp of an economic comeback.
TURNING HOPES INTO REALITY
The endgame of a coordinated approach to reducing rural poverty is a self-sustaining chain reaction in which opportunities for economic betterment exist and are actively sought out by people willing and able to pursue them at short-term sacrifice for long-term gain. As a reasonable goal, cutting the local poverty rate in half in a town like Waldo would put it below that of the state overall, which would be an undeniable accomplishment. But what would it look like on the ground?
I've observed the opposite of place-based poverty in the booming perimeters of Dallas. These are not your grandfather's suburbs. In Frisco/West Plano, for instance, there are single-family neighborhoods and a busy shopping mall, but also elegant high-rise towers and walkable mixed-use developments. The Dallas Cowboys, the Dallas Stars, and the Professional Golfers' Association of America all have their headquarters nearby. In the Legacy West district, where I worked for two years in a co-working space, I used to spend my lunch hours walking Windrose Avenue. People of every ethnicity, most of them smiling, coursed the trendy shops and ate and drank on restaurant patios. Cars I couldn't afford in my dreams rolled slowly down the street.
Heaven forbid rural southwest Arkansas could ever become that dense with concrete. But it would be nice if it could become a place where more people are arriving than leaving, where new housing goes up and a school is more likely to be built than to close — a place fertile with economic opportunities, as Alfred Marshall described in his iconic textbook, Principles of Economics:
The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas.
Success will have to start somewhere. To finish my research on lithium, I drove south from Lewisville along State Highway 29 to see where Standard Lithium's new plant will be built. From my youth, I remembered this road as the straightest, most desolate part of the multi-hour drive between Waldo and Houston, and it hadn't changed much. To my left stretched the fields and forests from which the energy companies plan to pump the valuable brine. Six miles out from Lewisville, an unpaved private road led into an expanse several football fields in size, interspersed with trees and waist-high weeds. Not a soul was around. Past a gate stood a portable toilet and a trailer with a plastic water tank and tubing. Nearby was a crawler carrier — a truck propelled on tracks like an army tank. Crickets sang in the weeds.
This stretch of ground is the epicenter of many hopes. But what it will become still exists between a plan and reality, between hope for a better future and the policies and investment it will take to get there. Maybe rural poverty will always be with us, as Jesus said of the poor. But lithium is giving us a chance to alleviate it in multiple parts of the United States. We shouldn't waste it.
