THE BOOM: Surging to Prosperity

The pine coffin was imported from Cincinnati …The iron in the shovel that dug his grave was imported from Pittsburgh … They buried him in a New York coat and a Boston pair of shoes and a pair of breeches from Chicago and a shirt from Cincinnati. The South didn ‘t furnish a thing on earth for that funeral but the corpse and the hole in the ground.

That lament by Journalist Henry Grady summed up the glaring lack of industrial development in the South in 1889. For almost a century after the Civil War, the economy of the old Confederacy seemed suspended in a bygone age of mostly small-to medium-size farms, sleepy businesses, graciously slow-paced cities, limited educational and financial opportunities and, for a large segment of the population, hardscrabble poverty. Today, after decades of growth, the South is in the midst of an epic transformation into a diversified modern economy, with a mix of manufacturing and services, industry financed from the North or overseas, and home-grown businesses. Some samples:

> Sperry Rand will begin production in January of electronic components at a $6 million plant now going up on 80 acres near St. Petersburg, Fla. The operation will employ 1,000 people at first, ultimately perhaps 2,000.

> Volvo of Sweden, after scouting the U.S. for an assembly-plant site, chose Chesapeake, Va. The company will spend $150 million to build a factory that is scheduled to open in March 1977. Potential employment: 3,500.

> Michelin, the French tiremaker may eventually pump $1.5 billion into plants in South Carolina. The company has already sunk $300 million into three new factories. One that is being built in Spartanburg may well employ 1, 200 people by 1978.

> Northern Telecom Ltd. of Montreal, second in North America only to Western Electric in the manufacture of telecommunications equipment, has located three new plants in the South since 1974. To bring bosses where the workers are, the company in May moved its U.S. subsidiary headquarters from Waltham, Mass., to Nashville.

> McDonald & Little started in 1969 in Atlanta as a three-member (two principals and a secretary) advertising agency. As late as 1973 its billings were $6.3 million; this year they are expected to hit $30 million. In 1975 the agency picked up three Clios, the advertising equivalents of Hollywood Oscars. Last week it swiped Coca-Cola’s national Fresca account from New York-based Interpublic.

> Munford, Inc., which has its headquarters in Atlanta, expects to ring up sales as high as $350 million this year, v. $273 million last year. The company operates two chains of stores: the 1,400 MAJIK “convenience” stores (open late into the night) and 90 World Bazaar stores selling imported goods. Even so Munford ranks behind two other Southern-based firms in both major areas of its business. The biggest convenience-store chain is Southland (the 7-Eleven stores) based in Dallas; the biggest import chain is Pier 1 with head offices in Fort Worth.

These are not isolated examples. According to Economist Albert Niemi of the University of Georgia, between 1950 and 1975, the rate of economic expansion in the South averaged 4.4% annually, v. 3.4% for the U.S. as a whole. The main thrust at first came from an increase in manufacturing. Since 1970, however, service industries, such as banking, real estate and retail trade, have been the fastest growing. They now provide the region with 54% of its gross product, up from 44% in 1950.

Agriculture, on the other hand, has declined in importance. In 1960 it accounted for 6.2% of the area’s output of goods and services; now it is down to 2.8%. Unable to compete with large farms, many small growers have been driven off the land. Between 1940 and 1970, the number of farms in the region was halved, to 1.1 million. Abandoned farmhouses—porches fallen in, chimneys hidden by vines, bushes protruding from windows—are a not uncommon sight.

But even in agriculture there are now signs of a revival. As farms become larger and more efficient, agricultural experts expect the South’s contribution toward meeting U.S. food demand to grow faster than the rest of the nation’s. Cotton has declined in importance as a cash crop, but the slack has been taken up by other products: citrus fruit in Florida, sugar cane and rice in Louisiana. Southern soybean harvests are expected to account for 30% of the U.S. production in 1985, up from 27% in 1970. By 1985, Southern livestock farms will be producing nearly a third of all U.S beef cattle.

Still, as Southerners well know, the region’s economic future lies in manufacturing and services. Change was discernible as far back as World War II, but the South’s surge toward industrialization did not become dramatically apparent until the mid-’60s. About that time a growing number of Northern manufacturers started building plants there to serve the huge buildup of relatively well-off consumers moving into Florida From 1970 to 1975, every industry except mining showed a faster growth rate in the South than nationally.

The most impressive aspect of this rapid industrialization is its variety. Huge textile mills and wood-products plants have long played a key role in the development of the region, and they still do. But recently a host of newcomers, including many well-known corporate giants and some leading foreign firms, have set up shop below the Mason-Dixon line. General Tire built a major tiremaking facility in Charlotte. N.C. Allis-Chalmers moved an electronic-components factory into the New Orleans area. The world’s biggest zipper maker, Japanese-owned Y.K.K., has given the Macon, Ga., economy a lift by building its first U.S-based integrated assembly plant there.

For all its gains, the South still has a long way to go to catch up with the rest of the nation (see charts). Says Donald Ratajczak, director of Georgia State University’s Economic Forecasting Project: “We are probably experiencing now what the great metropolitan areas of the North did in the 1920s. But the important thing is that we now have enough industrial resources to generate our own growth instead of needing outside stimulus to get going.”

The rise of the industrial South has been dependent on several key factors. Federal tax and spending policies, which generally favor less-developed areas, have persistently drained wealth from the Northeast and Midwest and diverted it to the Southern states. A recent study by the National Journal, an independent publication that analyzes federal policies, found that in fiscal 1975 the states of New York, New Jersey and Pennsylvania received $10 billion less from various Government spending programs than they paid out in taxes. The eleven states of the old Confederacy came out $8.7 billion ahead.

Equally important are the vigorous efforts by Southern states to lure businessmen fed up with high taxes, physical decay and demanding unions in the old urban centers of the North. Georgia, for example, working with information supplied by its Chamber of Commerce, zeroes in on “suspect companies,” which are feeling the pain of ever deeper tax bites in the North. Once a year about 35 executives are given a lavish “red carpet” tour of the state. Each tour brings an average of $50 million in capital investment and 1,000 new jobs.

Businessmen and workers are attracted to the South by its often gracious lifestyle, unspoiled surroundings and relatively abundant raw materials, including lightly taxed rural land. Moreover, since many of the nation’s oil and natural-gas wells gush in Texas and Louisiana, energy in much of the South is less costly than in the North.

Willing Workers. The strongest draw is the region’s willing workers, who, in general, still respect authority, and, out of fear or conviction, are loath to join unions (see story on page 75). Says Yardley President William Hunt, who moved the cosmetic firm’s headquarters from New Jersey to Atlanta in July: “Our employees here seem genuinely glad to have a job.”

The character and pace of the South’s development varies from state to state. Georgia’s gains are particularly impressive. Because of its unhurried tempo and central location, Atlanta, in the past six years, has helped to lure corporate or regional headquarters of 55 companies to the state.

The Carolinas, which have long been major textile centers, are also attracting diverse foreign firms. West German companies, led by Hoechst, the chemical giant, have more invested in South Carolina than anywhere else outside of Germany itself. Tennessee’s Nashville, along with its multimillion-dollar country-music industry, is fast becoming a mecca for financial services.

Progress always exacts a price. As is often the case in areas of rapid economic development, prices in the South last year rose a trifle faster than the national average, though they are still at a lower level than in the North. The switch from agriculture to industry has also made the region more sensitive to the twists and turns of the national economy. The recent recession, which had a devastating impact on two of the region’s main industries, textiles and construction, caused more suffering in the South than elsewhere. During 1975 total employment in the South fell 2.1%, v. .9% for the country.

The region is now well on the way to full recovery. Says Economist Ratajczak: “Next year half of the states in the South will have exceeded the 1974 peak in payroll employment from manufacturing, whereas most of the other states in the U.S. will still be behind.” Despite worry that the sweeping development of the region could eventually hurt the environment and the South’s unhurried style of living, the mood is optimistic. The feeling is that whatever problems the future holds, the region is finally moving out of the shadow of the North and into a bright new era of unparalleled prosperity.