Delaware proudly interrupts the passage of traffic along the arterial stretch of I-95 with the billboard announcement that it is a “Small Wonder.” And it is small: less than a million people call it home, placing it 45th among the 50 states in population, and its 2,500 square miles make it larger geographically than only Rhode Island.
But whether Delaware deserves to call itself a wonder is another question. For almost the last three decades, the state has been governed by one political party. Its governors, since 1993, have been Democrats; its state Senate has been majority-Democratic since 1973, and so has its lower House since 2009. One-party dominance never makes for political or economic health, as Delaware demonstrates.
On paper, Delaware is the ninth richest state in the Union, with per capita GDP of $66,419 (higher even than California). But this bloom in Delaware’s economic cheek is only because of the outsize concentration of wealth in New Castle County and the city of Wilmington, where median family incomes reach as high as $136,000, and where financial corporations have established headquarters under Delaware’s light-handed approach to financial regulation and usury laws. A credit-card company, for instance, can establish a headquarters in Delaware, become exempt from corporate income tax there and for operations anywhere else in the U.S., and enjoy “favorable legal process” in the Delaware Court of Chancery; this helps explain why Joe Biden—Delaware’s six-term U.S. senator, was often called the “senator from MBNA.”
Outside Wilmington, though, prospects are gloomy. In a farm community like Hartly, in central Delaware, the median family income is only $29,375; in Laurel, in Delaware’s southernmost county, it’s just $30,329. Even in a New Castle County town like Newport, which once housed a General Motors plant and a Du Pont chemicals facility, the median family income is only $41,771. More people in Delaware are living in poverty now than were after the recession of 2008. In fact, even after the national economic growth spurt of the last few years, Delaware was one of just two states where the poverty rate rose in 2018 (to 13.6 percent). Ironically, the worst poverty hot-spots are in wealthy New Castle County, where urban poverty reaches as high as 69 percent and the Wilmington neighborhoods on the west side of I-95 resemble a war zone. In 2009, a state task force unveiled recommendations to reduce child poverty by half by 2019; instead, child poverty rose, reaching 18.5 percent in 2019, even as the national child poverty rate declined by 2 percentage points from 20 percent to 18 percent.
Delaware is home to five four-year colleges, which should be engines of innovation and growth for the state, though the once-renowned University of Delaware has slipped in the national college rankings. When asked why fewer than 40 percent of his school’s students come from in-state, President Dennis Assanis answered, “I am not the one holding back the kids in Delaware. We need better-qualified students who come out of our K-12.” According to the National Assessment of Educational Progress (NAEP), Delaware middle-schoolers have shown a steady decline in math and reading proficiency over the past 18 years, so that just 31 percent of Delaware’s public school eighth graders are deemed “proficient” or “advanced” in reading, and just 29 percent in math. Overall, Delaware ranked a mediocre 29th in the nation in the NAEP. Black students’ average scores in 2019 in the NAEP were 25 points lower than their white classmates. This, even though Delaware’s teacher-student ratio of 13.9 is well below the national average of 16.1, and its spending per-pupil is among the highest in the nation.
Delaware, once a major center for chemical and mechanical engineering, now relies heavily on management, administration, and other service sectors to employ its residents. Financial operations generate over 28,000 jobs, from logisticians to credit and budget analysts. By contrast, there are only 1,060 pharmacists and 1,700 physicians, less than 2,000 carpenters, fewer than a thousand farmers, and just 350 bakers and 160 butchers.
The increasing imbalance of the Delaware economy, where a handful of well-paid technocrats preside over an economy of strugglers, can be seen in the decline of homeownership and household formation. Thirty percent of Delawareans are renters; 6.9 percent of those who do own homes have to spend more than 50 percent of their income on housing. Single-parent families now account for 39 percent of Delaware households, and in over 5,550 households grandparents are responsible for child raising. Though Delaware has no sales tax, and Delaware property owners pay only an average of $1,078 in property taxes every year (eighth lowest in the nation per capita), state income taxes are the 14th highest in the country. As the American Legislative Exchange Council explained in 2017, “The benefits of no sales tax and a mild property tax burden are outweighed by these other taxes; in fact, the remaining tax burden is the heaviest in the nation (nearly 5 percent of personal income).”
Not that anyone in Dover seems moved to take much action. In response to the Covid-19 crisis, Delaware’s small businesses were shut down by Governor John Carney’s executive order on March 24, and with only one day’s notice. By April, permanent closures had shot up from 22 percent to 37 percent, with arts, entertainment, and recreation businesses, where 78 percent closed, hit hardest. Even those small businesses that remained open were working at an average of just 61 percent of capacity. The federal Coronavirus Food Assistance Program (CFAP) originally allocated $16 billion to farming and agriculture nationwide, but because CFAP excluded poultry, little of it trickled down into the hands of Delaware farmers, who raise a lot of chickens. Nevertheless, when Carney finally convened a Pandemic Resurgence Advisory Committee on June 1 to deal with the second wave Covid-19 outbreak, its membership was top-heavy with state bureaucrats and corporate officers, and not a single farmer or small business owner.
While Dover dithers, Delaware is succumbing to what Joel Kotkin has called “feudalization,” a return of the medieval two-class society, divided now between a cadre of progressive technocrats and bureaucrats and a sea of service and marginalized workers, with little expectation of upward mobility. This process is already in play in California, where the middle class has shrunk, and the economic terrain is increasingly divided between “an entrenched ultra-wealthy class and a dependent poor class, working largely in the service industries,” as Kotkin describes it. As in California, Delaware has become a one-party fiefdom where the incumbent cadre behaves more like a syndicate than a political party.
Can this change? Perhaps. Delawareans could reject extravagant regulation, demand representation of small businesses on government boards and in government decision-making, and elect leaders with provable business acumen and executive competence. It needs less stifling regulation of mid-level entrepreneurship and more enterprise input, less of the cavalier progressive attitude that the poor exist merely to provide a voting bloc and more of the progress attitude that empowers the poor to take their own economic futures into their own hands.
Its citizens will have an uphill fight against Delaware’s power elite. But the state that prides itself on being a small wonder should be ready to battle with its local giants.
This piece originally appeared in the City Journal