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I personally think "The Lottery" takes place in the Corn Belt, because so much importance is attached to the corn crop. I believe the Corn Belt extends from the eastern part of Nebraska, through Iowa and into Illinois.The author Shirley Jackson lived in the cosmopolitan city of San Francisco, and the story was published in the New Yorker in 1948. The following quote from the eNotes Introduction to the story in the Study Guide seems significant.
After publishing the story, The New Yorker received hundreds of letters and telephone calls from readers expressing disgust, consternation, and curiosity, and Jackson herself received letters concerning ''The Lottery" until the time of her death.
Many people in the Midwest were outraged. They thought they were being intentionally portrayed as ignorant, superstitious, and backward. I think they were probably right. The New Yorker was published by and for New Yorkers in those days, and the editor, Harold Ross, probably enjoyed creating an uproar. (Harold Ross was an eccentric genius commemorated by James Thurber in his excellent memoir titled The Years with Ross.)
A famous New Yorker cover shows a New Yorker's impression of the United States west of the Hudson River. It has been sold in enlarged reproductions by the tens of thousands. The picture shows most of middle America as a wasteland, with a few tiny buildings on the West Coast representing Los Angeles and San Francisco. That cover, too, is an intentional insult to middle America. The situation has changed in recent years because Americans generally are becoming more sophisticated and because the New Yorker, for financial reasons, is trying very hard to cultivate a wider audience. In other words, they probably wouldn't publish a story like "The Lottery" today.
The Corn Belt states are characteristically ultra-conservative and vote Republican, while the big cities are characteristically liberal and vote Democratic. There has always been a certain amount of animosity between farmers and city folk. There is less of it today because, for one thing, so many former farmers are being forced by economic pressures to become city folk themselves. Corn planting, growing, harvesting, and processing, especially, are being radically mechanized by big agri-business.
An excellent picture of present-day Iowa is presented by Tom Drury in his novel The End of Vandalism. See the reference link below.
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