Prosperity's Broken Promise

For decades leaders in the rural South held onto the promise that they could bolster their economies by hitching their fortunes to basic manufacturing. Now those same industries are cutting jobs and moving offshore, and many communities are wondering whether they'll survive. For them, the promise of economic prosperity has been broken. To analyze who is, and who is not, sharing in the boom, business reporter Steven Beschloss of the Virginian-Pilot traveled more than 4,000 miles, conducted more than 150 interviews, and analyzed dozens of economic reports as well as unpublished federal data for 14 Southern states. He reported his findings of a historic economic restructuring in a seven-part, weekly series beginning January 1, 1987. 

 

The rural south, which is more dependent on manufacturing than any other region in the nation, is facing the end of an era. For decades rural leaders were convinced they could recruit low-wage industries and bolster their sagging farm economies — and many succeeded in replacing agriculture with manufacturing. But today, as businesses close and competition for new industry heats up, that old confidence is wearing away. 

The same region that witnessed the most massive exodus of people in American history between 1940 and 1960 now has become the victim of a national economic restructuring that is throwing its future into jeopardy. 

The South's trouble has gone relatively unnoticed, minimized by the scale of the closings in Northeastern and Midwestern cities and lost in the fanfare over the Sunbelt's explosive growth in population and employment. 

Yet the decline in such traditional industries as textiles, apparel, primary metals and coal, combined with the growth in services and high-tech industries, has hastened the growing economic disparity between Southern urban and rural areas and between Southern states. This shift comes at a time when the number of branch plants looking for U.S. locations is dwindling — the competition between recruiters has intensified — and many of the growth industries are choosing sites near cities. 

"We are becoming a metropolitan economy, and the places that don't fit in don't fit in," said Edward Bergman, University of North Carolina professor of City and Regional Planning. "Some of those places are not going to make it as the twentieth century promised them that they might." 

In fact, Florida, Texas and 11 urban concentrations — including Northern Virginia and Hampton Roads — accounted for nearly 90 percent of the region's net jobs gain in the first half of the 1980s. 

Bergman's prognosis is not good news for Martha Moore, the mayor of Welch, W. Va., a town that boomed with the coal industry in the mid-'70s and now is struggling to survive: "The highways we don't have. Sewers we're just starting to get. Water is in some areas. Those things are what we are told we need in order to grow. It's hard to ascertain how you get those things when you're on rock bottom — when the money is not there and the caring is not there." 

Moore and other local leaders in such hard-pressed areas as West Virginia and southwestern Virginia, where coal and textiles have been the lifeblood, concede that their populations are already being forced to leave to find work. Some say that the outward migration cannot be stopped and that their towns will be increasingly dominated by retirees and welfare recipients. 

As a result, cities may face growing pressure to absorb rural refugees seeking jobs and services. "It might not be so much of a virtue to be the places where the streets are paved with gold," said James Cobb, a University of Mississippi professor of history and Southern studies in Oxford. "I think we are going to see a lot of metropolitan areas getting more in-migrants than they can absorb." 

The closings and layoffs have not hit just the rural South, of course. Note Birmingham, Ala., where steel-makers have eliminated 7,000 jobs since 1980 and more than 11,000 since 1978. Yet Birmingham has the resources to make a transition: It has supplanted steel with medical services as the city's major employer today. Many of the smaller communities in Alabama and the region have neither the skills and education nor the four-lane roads and symphonies to attract needed jobs. 

Although some Birmingham residents are hoping to improve the city's Museum of Art, some people in Tchula, Miss., are wondering whether their homes will ever have running water and indoor toilets. 

And in farming communities already beset with declining land values and farm foreclosures, the loss of manufacturing intensifies the stress: More than a third of the region's farmers rely on at least 200 days of non-farm work to supplement their income, the U.S. Department of Agriculture reports. 

 

What emerges from an assessment of the region's shifting economy is a picture of progress and poverty existing side by side — and a widening gap between the winners and losers. Consider these Findings: 

♦ The South recorded a net loss of 300,000 jobs in just seven industries — textiles, apparel, primary metals, chemicals, coal mining, basic steel and leather products. The South is still the most rural region in the United States, and the rural South is the most highly industrialized part of the country. In fact, the rural South accounts for 366, or 54 percent, of the nation's counties that rely on manufacturing as the major source of income. So the decline of labor-intensive industries hits it especially hard. 

Experts agree that most of these industries will survive but that the employee ranks are unlikely to bulge. The $2.8 billion capital investment by the steel industry in the first half of this decade and the $8.1 billion investment nationwide by the textiles industry, for example, are geared to increasing levels of productivity, but with fewer workers. 

♦ Service jobs jumped by 1.3 million, more than one-third of the region's total growth. Florida's service sector, for example, grew by 322,000 jobs, a jump of 40 percent. Meanwhile six Southern states did not even reach the national average in creating new service-related jobs, the most active economic sector in the region and the nation. These include Alabama, Arkansas, Kentucky, Louisiana, Mississippi and West Virginia. 

♦ Nearly two million people migrated to the region. Yet Mississippi, Kentucky, Alabama and West Virginia all witnessed a net loss of residents. Each of these states experienced a net increase in the 1970s. 

♦ The South added three million jobs, more than half of the nation's total. But nearly 55 percent of that growth, nearly 1.7 million jobs, was concentrated in Texas and Florida. Add the growth in 11 urban areas, another one million jobs, and that represents 88 percent of all the employment growth in the region. 

At the same time, the whole state of Mississippi grew by only 8,500 jobs, and West Virginia lost 50,000. In Virginia, Northern Virginia and Hampton Roads accounted for 80 percent of the state's growth. 

♦ Although per capita income overall had risen to 85 percent of the national average by the late 1970s, it has stalled since then. Five states — Alabama, Arkansas, Kentucky, Mississippi and South Carolina — had not regained their 1975 levels of per capita income by 1985. 

♦ Per capita income in the rural South is only three-fourths of the national average. Black per capita income in the rural South is less than half of the national average, a mere $3,203 in 1980, the most recent Census Bureau figure available. In addition, the South checks in with the lowest levels of educational achievement and per-pupil expenditures. As basic industry continues to automate and move overseas, the need for better educated workers increases. 

"Roads, water and sewer are all things you can deal with relatively quickly," said Malcolm Portera, director of external affairs at the University of Alabama in Tuscaloosa and organizer of the university's program to aid troubled communities. "Public school education is something that takes a long time — and if you have a problem there, it takes a long time to overcome." 

 

Out-migration and a breakdown of the rural economy is not new to the South in this century. More than four million workers and their families — most of them black — headed to the industrial North between 1940 and 1960 as farm owners invested in labor-saving machinery and eliminated the need for many of their farmhands. 

That wrenching disruption of family and community life continued during the 1960s as farm employment fell from more than one-third of the region's total employment in 1940 to less than five percent in 1970, a drop of more than 3.3 million jobs. 

But throughout this period and into the 1970s, Southern recruiters sought industry to replace the vanishing farm work. They opened their doors to Northern manufacturers, offering them tax breaks, free buildings and other incentives to locate in their communities. Northern employers looking for a reprieve from union wages and union aggression had their pick of small towns willing to work for low wages and minimal benefits. 

By the 1980s, manufacturing had replaced agriculture as the major source of economic activity. The rural South was the most highly industrialized region of the country, with manufacturing jobs accounting for 25.6 percent of the total, compared with 19.1 percent for the United States overall. 

In the process, the South, which has always been the nation's poorest region, had begun to close the income gap. Between 1969 and 1979, for example, manufacturing wages and salaries in the rural South rose nearly 23 percent, compared with only a four percent increase nationwide. 

Still, overall, that convergence did not dramatically transform the fortunes of the region's residents who relied on jobs in manufacturing. Although North Carolina is more dependent on manufacturing than any other state in the country, for example, it has the nation's lowest manufacturing wage levels. 

"Mississippi got too many industrial facilities that were looking for the minimum wage sites, too many branch plants," former Governor William Winter added. "We deluded ourselves into believing that we could build a permanent industrial economy on that sort of base." 

Indeed, in the process of severing its dependence on agriculture, the South linked itself to another unreliable master. Between 1969 and 1976, 70 percent of the net jobs gain in corporate branch manufacturing plants was controlled by Northern companies, said David Birch, professor at the Massachusetts Institute of Technology. As easily as these companies could pick up from their Northern locations and head South, they could pick up again and head overseas. 

Today, even though state and local officials are hailing the opportunities in service-producing and high-tech industries, there is no guarantee that they will not increasingly bypass the South in a quest for cheap labor in Mexico or Southeast Asia. "The circuit board plant of the 1980s may well be on its way to becoming as footloose as the Southbound garment plant of the 1930s," historian Cobb wrote in a recent article. 

Note Unisys, the company formed by the merger of Burroughs Corp. and Sperry Corp., which last month decided to close its plant in Bristol, Va., and lay off 1,570 employees. The plant made circuit boards and manufactured and assembled other computer parts. Unisys corporate executives, who have been consolidating operations since the merger, complained of over capacity. But they also are planning to expand facilities in Mexico. 

For now, leaders in rural communities are attempting to define their assets and convince their state governments to pay some attention to them. They hope to stave off the kind of expression that the rising tension for jobs generated in Dunganon, Va., an unincorporated town with about 1,500 people living within a five-mile radius. 

At a public hearing, an environmental group proposed strengthening air pollution regulations before allowing Louisiana Pacific Co. to proceed with construction of a $14-million lumber plant. A few nights later, environmentalist Richard Austin found a nine-foot wooden cross burning in front of his farm. 

"When you are getting down to jobs, people are going to fight tooth and nail for them," said Nancy Robinson, executive director of the Dunganon Development Corp., referring to the cross-burning. "They are starving for them." 

 

SIDEBAR 

The Winners 

 

They come in busloads to hear the stories of success. How Huntsville has grown from a sleepy northern Alabama milltown into a major aerospace and industrial center in less than 30 years. How Huntsville has spawned dozens of engineering companies and snagged major manufacturers. How Huntsville opened a branch of the University of Alabama 17 years ago and recently beat out Birmingham, Tuscaloosa, and Montgomery to land the state's new $22 million supercomputer. 

Community leaders from around the state come to learn how this city of 160,000 has banked on the multi-billion-dollar presence of the Army's Missile Command and NASA's Marshall Space Flight Center and boosted employment by 29 percent in the first half of the 1980s. 

What Guy Nerren, who has been Huntsville's industrial recruiter since 1960, is reluctant to say is a truth that leaders in many smaller towns and counties are fearing. 

"Communities that don't have it aren't going to get it," said Nerren, executive director of the chamber of commerce. "I don't mean to downgrade any town. We just happen to have the things that companies are looking for." 

Indeed, throughout the South, recruiters are battling to add new names to their industrial guest list. But it is primarily recruiters in the urban South who are basking in the pleasure of success. 

As University of North Carolina sociologist John Karsada explained this development generally, the South has improved its accessibility to national markets with new highways, expanding airline hubs, a benign climate, upgraded schools, right-to-work laws, favorable wage rates, low taxes and land costs, and pro-growth attitudes. 

But it is Florida, Texas and a limited number of cities that have made the most of the region's investment potential. 

The South added 3 million jobs in the first half of the 1980s, 43 percent of the nation's total. Florida and Texas accounted for 55 percent of the increases. Add the job growth in 11 urban areas to the expansions in Florida and Texas and that represents nine of every 10 jobs gained in a 14-state Southern region during the first half of the decade. 

Further, not only has the South's overall expansion been highly concentrated, but the growth in individual states has thrived on the success of the cities. 

In the 1960s, Huntsville landed IBM and major aerospace manufacturers such as Boeing, McDonnell Douglas Corp. and Pratt & Whitney who sought close contact with the space research at the National Aeronautics and Space Administration and the Army's Missile Command. "Huntsville was high-tech when high-tech wasn't cool," said David Harris, information director for Redstone Arsenal. 

In the process, the area began to build an infrastructure of schools, roads, airports, national companies, and industrial parks that has hastened their growth in the '80s. 

In the early '70s, engineers with doctorates were pumping gas and thousands of workers were looking for jobs after NASA cut back its activity and Boeing, General Electric, IBM and Teledyne- Brown Engineering cut employment by about 10,000. 

Such experiences stick with recruiter Nerren, who treats his occupation with the intensity of a military commander at war. He brushes off suggestions that Huntsville's growth is snowballing and that it is time to sit back and enjoy it. 

After the lean years in the early '70s, Huntsville began to bring new industries to the area. But Nerren and Harris recognize that the city is still intimately tied to the mood of Washington. Many of the new engineering companies that have sprouted up in the past year are hoping to procure some of the money earmarked for "Star Wars." 

Increasingly, Southern leaders have had reason to worry about the federal government pulling the plug. During World War II, more than $4 billion was injected into Southern military operations, about 36 percent of the national total. That flow continued after the war, boosting the region's fortunes and establishing the South as the prime location for military installations. 

By 1985, seven Southern states were still among the top 10 recipients of Department of Defense payroll money. Altogether that is $28.3 billion, including $7.7 billion in Virginia, exceeded only by California. 

Not only has that federal presence stimulated local business, but it also has influenced local leaders on occasions to take a hard look at their traditions. In the early '60s, Huntsville Army officers called for the integration of public places before the 1964 federal court order. Although small-town neighbors held tight to their traditions, Huntsville leaders were willing to throw aside old ways. 

"These people were businessmen first," Nerren said. "With the cotton economy, they were accustomed to fortune and famine. They were determined to be successful in economic development" 

"I remember at early meetings [about desegregation] where a few members said, 'By God, we are not going to let the niggers take over our community,"' Nerren recalled. "In not long they were saying, 'How do we get rid of separate facilities?' They were not going to interfere with the orderly growth of the community. Why? Because of dollars. Because of economics. Nothing else mattered. They still lived in their big homes. It didn't hurt them." 

Such attitudes have sustained Huntsville's continued growth. 

 

SIDEBAR 

The Losers 

 

In many ways, Sumter County, Ala., seems like a textbook example of a community right for economic development. It has a university. An interstate highway cuts through its borders. There is rail and water access. 

Yet Sumter County may never attract the industry and jobs it needs. Seventeen years after court-ordered desegregation there, the county's schools remain essentially segregated — and an obstacle to growth. 

Long after many of its urban neighbors have struggled to put their racial differences behind them, Sumter County is still fighting the war. 

"We have a lot of advantages, but who can get past the disadvantages?" asked Michael Handley, editor of the weekly Sumter County Journal. "Our internal problems are tearing us apart." 

Like other counties in western Alabama and the Mississippi Delta, Sumter has maintained public schools for blacks and private academies for whites — belying the widely held belief that one of the central institutions of racism has been eliminated. Even as the South has grown richer, more urban and better educated, vestiges of the Old South continue to obstruct economic and social progress. Racial tension, poverty and illiteracy remain a fact of life. 

"The vision of this racially cleansed South is about as true as this vision of the Sun Belt," said James Cobb, University of Mississippi professor of history and Southern studies in Oxford. 

Such observations discomfit state and local officials selling their healthy business climate — their low energy costs and tax rates, right-to-work laws, low wages, and able and available labor supply. The competition for investment dollars is intense these days, and state economic development directors promoting the lure of the Sun Belt particularly fear a tarnishing of its image. Most prefer to smooth over the upheavals of the past. As a result, perhaps no subject pricks the bubble like pointing to lingering racial hostility or the fact that dual waiting rooms with signs marked "White" and "Colored" were removed from the office of a Holmes County, Miss., physician only seven years ago. 

"The biggest interest in the white community is to be superior to black people, and that's more important than economic development or getting into the 20th century," said Leroy Johnson, a black community organizer in Holmes County, the poorest county in Mississippi, the poorest state in the country. 

Most boosters of the region would rather concentrate on the net influx of more than a quarter of a million Northern blacks in the past 10 years, or the fact that there are 166 black mayors in the region today. 

Yet neither Sumter nor Holmes nor dozens of other counties throughout the region have succeeded in escaping the negative pressures of segregated schools and racial tension, lingering poverty and limited skills. Investors have often shied away from such communities, much as they have stayed away from those without adequate roads or flat land for development. 

In fact, a 1983 report by the U.S. Commission on Civil Rights concluded that industry has resisted locating in 16 western Alabama counties because of "neosegregation" and majority black populations. 

"There's no question that industries shy away from areas with black populations," historian Cobb said. "I think they are still concerned about social and political upheaval." 

Other observers say businesses worry that blacks are more susceptible than whites to being organized by unions. 

Whatever the reasons may be, at a time when industry is primarily choosing sites in and near cities, small towns and counties that resist change or are wrapped up in local power struggles risk being left behind. 

Nearly a generation ago, white parents in predominantly black Sumter and Holmes counties pulled out of the public schools and established private academies for their children. Still today in Sumter, less than one percent of the public school students are white. The numbers are even more striking in Holmes: Out of 4,300 public school students, four are white. 

"Those federal court decisions were intolerable," said William Brewer, an attorney, co-owner of a local newspaper and chairman of the industrial development board in Sumter County, one of Alabama's former strongholds of slavery. "After [federal Judge] Frank Johnson committed his ignoble act, we said to him: 'The hell with you. We'll set up our own school.'" 

In the process, Brewer and other parents set up an impediment to economic growth. Sumter and Holmes are two of the poorest counties in the nation, both with per capita income that is about half the national average, and they have had a tough time attracting industrial development. 

"Where are you gonna put your plant — where you've got a good public school or where you might pay $1,500 a year at a private academy?" asked Pierce Boyd, a Sumter County businessman. 

Parents with two children at Sumter Academy pay $1,881 annually, and those with three children pay $2,497. In a county where per capita income averages $5,780, such fees are harsh punishment for many white families. 

But few are willing to break the pattern and send their children to the black public schools. That's just the way it is, many say, while conceding that both school systems lack the financial resources to offer a quality education. 

Some parents — black and white — have responded by making arrangements to send their children to the integrated public schools in Meridian, Miss., about 35 miles away. But that does not resolve the problem for their county, where local funding for public schools is close to the bottom in Alabama. 

"If you want to talk about progress, real progress, being able to attract industry, you've got to talk about integrating the schools," newspaper editor Handley said. Yet few leaders in Sumter believe integration will take place any time soon. Many doubt it will take place in their lifetime. 

Fierce supporters of segregated schools, such as William Brewer, hold onto the conviction that the white academies are a necessity, contending that they give industry executives an alternative to the poor quality of the public schools. Rather than focusing on the issue of segregated schools, Brewer concentrates on pushing the county's hard-working labor supply and urging the exploitation of timber and other natural resources, including the recently opened Ten-Tom Waterway. 

However, at a time when basic industries are closing up shop or stripping their operations — and per capita income is falling relative to the national average — residents in Sumter and Holmes are feeding the weight of their racial separation especially keenly. 

"We will all die a slow death" without integration of the public schools, said Amette Lewis, president of the Rural Organizing Community Center in Holmes. 

"Even some of the more flagrant racists realize that unless there is some cooperation between blacks and whites there will be no economic progress," Handley said. "Most whites realize that. Whether they can stomach the change is another matter."