The Dakotas Economic Model

Charts and tables don’t always tell you important things about the economy. But sometimes they do. And the other day I ran across three tables suggesting where our national country might be heading—and indeed should be heading.

These tables showed on a state-by-state basis delinquency rates on auto loans, mortgages, and credit cards during the first quarter of this year. On all three tables North and South Dakota had the lowest rates of delinquency. It must be emphasized here that these tables showed percentages of state populations late in their payments, so the fact that both Dakotas have small populations didn’t skew their place on these tables.

What do these numbers suggest when it comes to a model for the entire American economy? First, that places where primary economic activity involves things genuinely needed for life may be better able to weather a downturn than those producing ephemeral goods and services. Agriculture-based economies like those of both Dakota, of course, are notoriously susceptible to market fluctuations. But when push comes to shove people will still always choose food over massage therapy, a new plasma screen TV, or a fling on Wall Street.

Some other delinquency specific elements also jump out from these tables. Auto loan numbers, for example. Both Dakotas have very cold winters and very hot summers, and distances between here and there in these states are generally greater than in most other parts of the country. Vehicles thus tend to be purchased more with an eye toward durability than looks, tend to be more four-wheel tough than five-on-the-floor-with-a-rag-top showy. With far fewer public transportation options, they also tend to be kept up no matter what and require less frequent replacements. Hence, fewer auto delinquencies.

When it comes to mortgage delinquencies, housing prices didn’t rise as much in these two states as in looking glass states such as California, Nevada and Florida. So not as many opportunities existed to overpay for properties that have since developed an unsustainable upkeep.

When it comes to credit card delinquencies, another factor came into play. The Dakotas in all sorts of ways are conservative places. Places where people still expect their neighbors and themselves to service the debts they incur. One reason credit card delinquencies are lower here is thus a cultural aversion to not repaying what you borrow, and borrowing less in consequence.

Put it all together and what might America and Americans generally learn from the Dakotas economic model? Produce more things people really need and less of what they don’t; buy products and services that perform well and last longer; buy only what you can honestly afford.

That’s the Dakotas economic model. Works for me.