The South: New Deal, World War II, and the fifties
INTRODUCTION
The shift to the South from the last chapter’s concentration on Big City slum clearance/urban renewal is almost “other-worldly”. Gone are immigrant neighborhoods, Second Ghettos, CD housing reformers and decentralizing industrial Big Cities. The smaller cities of the South, with sharply contrasting political cultures, bore little resemblance to their northern counterparts. The Great Migration emptied blacks from the South, but also sent many into southern cities—along with rural Southern Diaspora whites. So the cities increased in size a bit in these years. Despite gains, industrialism had not, by a long shot, overturned agriculture as the South’s core economic sector. Northern hegemony continued, albeit mitigated by southern congressional committee chairs and the fragility of FDR’s New Deal electoral coalition. The divided mind of the South persisted, as did the popular view of the South as a northern colony.
There is little evidence southern politicians and state/local officials played any role in the formation of federal housing and urban redevelopment policy—except to oppose it. That didn’t prevent southern cities from participating in the slum clearance/public housing federal largesse, but arguably not in the way federal-level policy-makers/ advocates wanted. As we shall discover in this chapter, simultaneously with the slum clearance/urban renewal debate, an arguably equally important southern-related debate flourished concerning BAWI, the minimum wage, southern business attraction and the Industrial Revenue Bond. The South seemed more concerned with attraction/financing of northern branch firms than slum clearance, public housing or CBD redevelopment. Within the profession/policy area a regional “Robin Hood-like” schism/myth developed over this issue—except in this story Hood is the troublemaker, not King John.
Depression-era southern agriculture was deeply stressed: international prices for cotton collapsed, boll weevils ate crops; and the Southern Diaspora rendered the South the nation’s poorest region—ground zero for Depression-era misery and unemployment. Subsistence farming had to have been the worst-hit sector of the entire American economy. The Depression focused New Deal attention on the South, prompting the federal government to act as a regional change agent. The South in the New Deal/war years is a prime example of the American “big push” economics: first minimum wage, the Tennessee Valley Authority (TVA), then war production—followed by the Civil Rights Movement!
FDR did, in effect, what the New South Redeemers had been unable to do—he broke, at least partially, the low-wage southern agricultural economy and integrated it more closely with the overall American economy. To that extent the federal government broke some of the chains that had maintained the northern and midwestern hegemony. The New Deal never intended to destroy the 75-year Northeast/Midwest hegemony— but it did so anyway. Good intentions and all that! As far as the South was concerned, however, FDR led an unwanted economic revolution—and it generated one hell of a political pushback.
So welcome to the Land of Dixie during the Depression, the war years and the early 1950s.
BALANCE AGRICULTURE WITH INDUSTRY (BAWI)
If there is one historical episode most economic developers today are aware of, it is BAWI. BAWI, as the story goes, was the ED program that turned American economic development upside down or inside out. BAWI, in the minds of many, defined southern ED then—and today. Formally, the program started in 1937; but its real beginning, in cotton-town Columbia Mississippi (population 4000), occurred in 1929. BAWI was an “innovation” from the creativity of its newly elected mayor, former businessman and founder of the Marion County Chamber, Hugh Lawson White. Columbia was a small, rural, black belt, cotton belt, boll weevil-devastated community in the nation’s poorest state at the nadir of the Great Depression, in a region that considered itself a colonial dependency of the North, and suffering from one of the most severe population emigrations in US history. Columbia was ground zero of poverty and southern economic collapse.
As mayor in 1929, White fostered two startup manufacturers (textile and food processing). “White was not content” with a local startup strategy, so he traveled to Chicago where he hired—a “relocation engineer”, Felix Fantus by name.1 Fantus’s task was to find a manufacturing plant willing to locate in Columbus or Marion County. He cornered a shirt and pajama firm (Reliance Manufacturing) and patched together a deal that would bring 300, mostly female, jobs to Columbia. The deal required $85,000 to build a facility, stock it full of equipment and hire/train 300 workers. The company pledged to employ the 300 workers for ten years and pay $1 million for renting the facility and equipment. At the end of ten years (and payment of $1 million), the facility would become the property of the company (Cobb, 1993s, Chap. 3).
How White could get his hands on $85,000 in the midst of the Depression was no small problem. After pitching to local citizens in the movie theater, he raised the funds through resident loans that served as collateral for a bank loan (guaranteed by White personally). White and community leaders established a training school, got nearly 1500 women to fill out job applications and, using the company’s equipment, trained Reliance’s future workers. The company came, the facility built and the workers hired (wages grossly low). In essence, White, Fantus and Columbus “bought a payroll”. According to James Cobb, “the plant revitalized the area’s economy [and] stemmed the tide of emigration” (Cobb, 1993a, p. 10). With the Reliance success under his belt, White ran, and lost, the 1931 election for governor.
In 1935 our erstwhile Mayor White, pledging “the greatest industrialization … that this state has ever known,” won the governorship (he served two terms). With promotion and subsidies, now commonplace throughout the South, White needed an extra dimension to separate his state from its competitors. His Columbia promissory note and bank loan scheme were too clumsy and ad hoc to scale up across the state. The extra something was a state-sponsored municipal program. In late 1936 the Mississippi legislature, with difficulty and controversy, approved legislation. Aside from being “socialistic” in nature, White’s initiative threatened to be successful, stirring up fears that it would replace the primacy of agriculture, riling planter-Redeemers. White accordingly stressed that the Mississippi Act would “balance agriculture with industry”—hence, “BAWI”. The state Supreme Court endorsed the legislation in February 1937, bypassing Mississippi’s constitutional gifts provisions (Cobb, 1993, pp. 11–14).
In practical terms, the Mississippi Industrial Act permitted Mississippi counties and municipalities to “erect, build, purchase, rent or otherwise acquire industries, factories, manufacturing enterprises and buildings and business projects, and to conduct and manage these on behalf of the citizens of such counties and municipalities.” A second measure allowed its cities and counties to issue bonds to finance construction or purchase of these buildings and plants. These bonds would be backed by general revenue funds raised by taxation, and interest paid was federally tax exempt. A third piece of legislation approved expenditure of $100,000 to publicize “the agricultural and industrial possibilities of Mississippi.” The specifically created Mississippi Industrial Commission approved local applications to participate in the BAWI program, providing a measure of due diligence to the project. Due to the woeful capacity of small cotton towns participating in BAWI, the Mississippi Industrial Commission provided administrative capacity as well.
Prior to BAWI … grants and concessions had been issued by individual communities without, or sometimes in defiance of, legal constraint. By introducing a system wherein the state sanctioned and supervised the use of municipal bonds to finance plant construction, the BAWI program lifted the curtain on an era of more competitive subsidization and broader state and local government involvement in industrial development efforts. (Cobb, 1993a, p. 5)
The Mississippi Act gave birth to the modern state-empowered Industrial Development Bond (IDB). Mississippi was literally off to the races in promoting the state (often using the Fantus Locating Service) and its newly created ED tool, the institutional review board (IRB). By 1940, when the legislation’s sun set, 12 plants had been relocated. The employment impact of this minuscule number of plants, however, was enormous as most of these facilities expanded greatly during World War II. By 1942, admittedly starting from the nation’s lowest base, BAWI firms were responsible for 42 percent of the state’s increase in manufacturing employment and 47 percent growth in manufacturing wages. By April 1943 these factors multiplied employment by four times (Cobb, 1993, pp. 23, 27). By the end of World War II, BAWI was considered to be a real success. It remained in effect only between 1937 and 1940.
The only other state that used a BAWI-like program in the pre-1945 period was Tennessee. Despite a provision in its constitution clearly forbidding transactions similar to BAWI, the state and its courts simply ignored local issuances. In 1930 the Tennessee legislature unconstitutionally authorized its communities to make subsidies to firms. During this time communities issued patently illegal bonds similar to an IDB—without being challenged by anyone. Fifty-six firms relocated into Tennessee during those seven years between 1930 and 1937 (Cobb, 1993, p. 6). Mississippi drew the ire of the North, but Tennessee was the more egregious culprit.
THE NEW DEAL AND THE SECOND RECONSTRUCTION
The “Peculiar” Context of Southern Economic Development
FDR’s southern strategies were fundamental, even radical—focused on infrastructure and an agricultural “revolution”. Both threatened the traditional Redeemer policy nexus, plantation-based policy systems and low-wage cotton export economy. The South was the nation’s poorest region by far. Its export-based commodity economy created a boom or, since World War I, bust cyclicality that crushed consumer consumption, entrepreneurship and diversification of its economic base—and reduced its low-wage subsistence workers to gross economic deprivation.
Rates of southern industrial progress were rapid by historical standards, but nested … in a large agricultural economy with high fertility rates, and isolated from national migration (immigration) flows, southern industries could not … raise the basic agricultural wage. The persistence of backward technologies in agriculture and manufacturing is primarily traceable to the low southern wage … [T]he low incomes of American blacks had … to do with their place in the low-wage southern economy. (Wright, 1986, p. 12)
The interplay between low productivity and racial discrimination solidified a low-wage labor dualism in which whites’ desperately low wages were noticeably higher than black workers’ low wages. Despite noticeable industrial growth in the pre-Depression South, the dual workforce stopped any convergence with national wage rates, delinking the southern economy from northern prosperity. Reforms were needed to break these patterns—like transferring surplus agricultural labor to higher-paying jobs through productivity improvements of agriculture (mechanization).
The Great Migration/Southern Diaspora drained off some surplus labor, but mechanization of agricultural production was a tough slog because investment capital generated from marginal agricultural production was inadequate. Boll weevils, floods and the Depression made it evident even to plantation owners that their “peculiar” economic system was pretty much broken. But investment in machines and expanded acreage required capital. The southern financial system, a virtual subsidiary of Wall Street, could not deliver it. FDR did!
Breaking Apart the Plantation Economy
FDR’s early New Deal southern initiatives focused chiefly on agriculture and rural areas. Farmers in the 1930 South were 21 percent of the total employed: over 6 million farms and over 30 million farmers. Only 13 percent had access to electricity. A primary New Deal focus installed a modern power infrastructure and transportation access in rural areas. The Rural Electrification and Agricultural Adjustment Acts (AAA), despite their short tenure, commenced the reshaping of southern agriculture: “In just three years, the adjustment program (AAA) revolutionized the Cotton Belt and all of southern agriculture” (Schulman, 1994, p. 17).
Desperate southern planters realized that limiting production was necessary to raise the price of cotton—the Acts ploughed up nearly 25 percent of 1933 cotton production in return for federal subsidy. The AAA’s principal effect drastically reduced the number of sharecroppers and increased the number of agricultural wage earners (day laborers), thereby throwing hordes of agricultural sharecroppers (both black and white) out of their homes. Gunnar Myrdal labeled the AAA as “America’s enclosure movement” (in Wright, 1986, p. 238). Unable to find work, dispossessed agricultural workers hit the roads and joined the Southern Diaspora or moved to southern cities looking for industrial jobs.
Between 1933 and 1939, three New Deal programs—the Federal Emergency Relief Administration, the Public Works Administration and the Works Progress Administration—sent nearly $2 billion dollars to the South, most of it to the region’s cities. Temporary jobs were created, but urban public infrastructure was vastly improved. Sewers, parks, playgrounds and all sorts of public buildings dotted southern cities of all sizes. For example, $361 million was poured into Birmingham. The city’s first street improvement program was funded with federal funds. Tampa built its municipal airport and improved its major thoroughfare (Bayshore Boulevard); Richmond got a bridge over the James River, as well as a library, high school and a hospital (Goldfield, 1982, pp. 181–3).
The National Industrial Recovery Act (NIRA) directly attacked the root southern problem by requiring increases in hourly wage rates. NIRA was emergency legislation without any regional strategy, but it didn’t take long to realize that increases in manufacturing pay rates directly assaulted the South’s low-wage economy. Southern manufacturers resisted; NIRA wages increases were developed incrementally, sector by sector, through semi-negotiated agreements. Unfortunately, one of the first sectors negotiated (July 1933) was cotton/textile manufacturing.
NIRA increased average southern textile-mill wages over 70 percent. Almost twice as many southern mill employees were affected than northern workers (Schulman, 1994, p. 22). Southern textile manufacturers thought the North had restarted the textile war—and they reacted accordingly. Southern industrialists reasoned that NIRA “threatened a crusade against the region’s labor system, and southern industrialists determined to resist it”. The Southern States Industrial Council quickly formed, its “purpose to “protect the South against discrimination”:
Southern leaders saw low wages as their region’s ticket to prosperity. Low wages would attract industrial plants … [and] free the region from the shackles of a colonial extractive economy … [In the North NIRA provided] the opportunity … to reform the South and to lift it to a higher economical level, and incidentally destroy its competitive power. (Schulman, 1994, pp. 22–3)
Southern industrialists negotiated regional differentials to only 60 percent of national wage rates. The North was outraged. In 1936, however, the Supreme Court declared the AAA and NIRA unconstitutional. By that time the federal government, as the instigator, of change, had become the enemy. NIRA, unintentionally, crystallized what had been a pervasive but informal low-wage business attraction strategy into a formal economic development strategy—a regional business climate strategy. NIRA functioned as the starting block for an economic development regional war.
The Tennessee Valley Authority
While NIRA stumbled into a direct regional confrontation, another first-term New Deal initiative matured into an economic development victory. The Tennessee Valley Authority (TVA), legacy of Republican Nebraska Progressive George Norris (a key supporter of rural electrification), was approved in 1933. The TVA included most of Tennessee, large portions of Alabama, Mississippi and Kentucky, and small sections of Georgia, North Carolina and Virginia. These states were among the hardest-hit Depression geographies and the very poorest regions of the South. Similar to the Rural Electrification Act, the TVA provided an electrical infrastructure to poor, underserved rural southern geographies. The TVA was intended to be a regional ED agency from its outset—not just a provider of power and electrical infrastructure. Its roots lay deep in the regional planning movement and carried with it the Trojan horse “socialist” image. The early years of the TVA were a disappointment.
The TVA’s initial inability to live up to optimistic expectations was embedded in a distinctive—and ultimately effective—approach to regional economic development. Upon its creation a choice had to be made between a federal agency inducing Washington-determined change from above or involving jurisdictions in consensual local decision-making. To secure votes necessary for its passage, the latter was chosen. The TVA’s board of directors, composed mostly of state officials, defined/pursued economic development along lines congruent with local preferences and priorities—not what FDR had in mind. So in early TVA years, southern fears that manufacturing would displace agriculture limited TVA electricity to mostly agricultural-related firms. TVA initiatives instead concentrated on improving river navigation and producing low-cost fertilizer—helpful to enhancing the agricultural economy (Schulman, 1994, p. 35). Over the long haul, however, a trusted TVA became an accepted, promanufacturing component of southern economic development.
After the publication of FDR’s report (below) and the ascension by David Lilienthal to its chair, the TVA aggressively pressed for southern industrialization: “Under Lilienthal the TVA abandoned the so-called ‘phosphate philosophy’ of economic growth”. Taking advantage of defense war production by bringing in more manufacturing, the TVA joined in promotional initiatives, identified and prepared sites, and was not averse to using electricity as an incentive. Lilienthal and Harry Hopkins joined forces behind a “plan” to build wartime military production facilities within the TVA’s boundaries. Lilienthal advocated policies directly opposed to BAWI, and TVA during the war years became arguably the leading advocate in southern industrialization and relocation of manufacturing to the South (Schulman, 1994, pp. 91–4).
The Nation’s Economic Problem Number One
FDR’s 1936 victory carried a few southern Progressives on his coattails, opening the opportunity for a second-term southern ED strategy. Working with these stalwart but isolated southern New Deal democrats, FDR launched his “second Reconstruction”—an expression embraced by New Deal southern Democrats such as Florida’s Claude Pepper (Schulman, 1994, pp. 46–8). That the first Reconstruction did not elicit fond memories for most southerners, FDR had cast the die and crossed his Rubicon. What he had in mind was a direct assault on the southern regional low-wage economy and, in particular, the use of a low-wage business climate to attract industry. He wanted the South to industrialize, but not with low-wage manufacturing. FDR, using contemporary jargon, wanted the South to focus on higher-wage, advanced manufacturing. He launched his attack with vigor, saying:
In Gainesville, Georgia Roosevelt asserted that the South remained a feudal economy … there is little difference between the feudal system and the Fascist system. Georgia and the lower South may just as well face facts—simple facts presented in the lower South by the President of the United States. The purchasing power of millions of Americans in this whole area is far too low. On the present scale of wages and therefore the present scale of buying power, the South cannot and will not succeed in establishing successful new industries. (Schulman, 1994, p. 48)
Compared to Roosevelt’s more lukewarm urban agenda, the southern economic development strategy constituted genuine Roosevelt commitment. FDR was perfectly clear this second Reconstruction would be carried out by the federal government, through federal legislation: “Nationwide thinking, nationwide planning, and nationwide action are the three great essentials to prevent nationwide crises for future generations to struggle through” (Schulman, 1994, p. 48). As with Our Cities, Roosevelt formed a committee, composed of southerners, to produce a report outlining the South’s conditions. In a personal appeal, FDR asserted his “feeling that the South presents right now, the nation’s No. 1 economic problem—the nation’s problem, not merely the South’s. Southern underdevelopment had created an economic ‘unbalance’ in the nation, an unbalance that can and must be righted for the sake of the South and of the Nation” (Schulman, 1994, p. 50).
The final report, the Report on Economic Conditions of the South, set forth the New Deal southern “progressive” ED strategy. That strategy encouraged the industrialization of the South by improving the condition of its human resources, and above all by abandoning its reliance on low-wage jobs and improving education and the quality of public services—all of which involved active federal government involvement (Schulman, 1994, pp. 50–51).
Southern liberal Democrats, however, were too few in number to pass this bold legislation. So FDR turned to northern Democrats for support. Northern votes, however, were not motivated by an altruistic hope to improve the lives and prosperity of southerners through economic development. Two groups leaped on board FDR’s southern ED initiative: unions and New England/New York Democrats. The former wanted to build up their non-existent southern membership, and the latter saw a helpful weapon in the textile war against the Carolinas and Georgia. The strategy chosen by the coalition was a national manufacturing minimum wage. There were other solutions— most poverty victims were unemployed, and would not benefit from a minimum wage increase. The choice of a minimum wage reflected the diverse motivations of FDR’s legislative coalition.
FDR’s Second Reconstruction: National Minimum Wage and Unions
The legislation on which FDR’s strategy rested was the Fair Labor Standards Act (FLSA), which, among other things, established a national minimum wage in manufacturing. In 1937, to many Southerners the Act seemed little more than “a device to restructure southern industry … that Walter Lippmann would tag the final version ‘a sectional [regional] bill thinly disguised as a humanitarian reform’” (Schulman, 1994, p. 54). Schulman concluded that:
It is tempting to view the FLSA as a kind of regional tariff, a ploy by northern businesses to eliminate low wage competition and by northern politicians to stop runaway plants … The FSLA, after all, covered only manufacturing workers engaged in interstate commerce, that is, those competing with northern firms. (Schulman, 1994, pp. 59–60)
As an added delight, the FLSA also empowered union efforts to achieve collective bargaining in the South. FDR won a hotly contested legislative battle; the Act was passed in late 1938. Thus began a 15-year regional struggle against the FSLA minimum wage. Surprisingly, the FSLA did not apply to the iron, steel and cement industries (mostly northern-owned); but the 25 cents per hour minimum wage, no child labor, 44-hour work week did apply to low-wage manufacturing associated with food processing, sawmills, lumber, apparel and, of course, textiles. Nearly 15 percent of textile workers received below the 1938 minimum. Employment at southern plants dropped nearly 6 percent by 1940 and southern payrolls rose by ten times the rate of northern. In these low-wage sectors, noticeable mechanization (productivity) followed quickly (Schulman, 1994, pp. 66–8).
The law was implemented through tri-partite Industry Committees (management, labor and public). Through these committees unions were able to exert influence in non-union sectors and firms. The first three Industry Committees (textiles, tobacco and hosiery) struck at the heart of the alleged southern low-wage business climate advantage—confirming to many southern manufacturers the not-so-hidden agenda behind the legislation. Whatever doubt was removed when the FSLA administrator commented that “one of the declared objectives of the act was to bring to an end this migration of plants solely to obtain a source of cheap labor” (Schulman, 1994, p. 70). Roosevelt himself in 1939, commenting on a particular southern textile mill with cheap labor and obsolete equipment, said: “that type of factor ought not to be in existence” (Schulman, 1994, p. 72). The Industry Committees turned into battlefields as southern industries resisted.
War production made obsolete the FSLA. Inflation and 30 percent growth in southern manufacturing raised wages by 40 percent between 1939 and 1942. Worker shortages were not uncommon as soldiers headed off to war. The Industry Committees shifted gear to manage war production quotas. The National War Labor Board (NWLB) established by executive order to settle disputes between labor and industry acquired responsibility for the implementation of the FLSA. The NWSB established southern regional Wage Stabilization Boards which prosecuted a great number of cases to reverse southern company wage practices and standards. The NWLB continued the Second Reconstruction goals in the new environment. Southern unionization fought tooth and nail and gathered some momentum.
By war’s end union membership had doubled from 1939 levels. But anti-union feeling was pervasive (Schulman, 1994, pp. 76–81). Wages in the controversial textile and garment industries were raised to 65 cents per hour (Schulman, 1994, p. 86)—and became the lightning rod of southern industry minimum wage opposition, particularly in the textile, furniture, fertilizer and lumber industries: “The FLSA arrived to perpetuate the punitive program of the carpetbaggers under the guise of equalizing conditions” (Schulman, 1994, p. 68). During the war five southern states enacted anti-labor laws. Florida and Arkansas approved state constitutional provisions inhibiting labor union activities—but the NWLB countermanded these actions using wartime powers.
The Republican victory in the 1946 congressional elections, however, stripped momentum from further minimum wage increases. Republican conservatives became committee chairs and southern democrats joined with them to put the brakes on the Truman administration’s minimum wage policy, defeating any changes to it over the next two years. However, minimum wage and collective bargaining actions of the NWLB kept the issue alive, fueling the post-1947 flood of state “right to work” legislation.
Times did change, however. During the fifties many southern manufacturers adjusted to the national minimum wage—even the textile industry endorsed it by 1955. Newer manufacturing plants introduced by war years industry relocations neither required cheap labor nor particularly wanted it, because production was based on machinery operated by skilled workers (Schulman, 1994, pp. 86–7). By the end of the forties, the struggle between the regions over the minimum wage was tapering off, in large measure because the war years injected high-wage industrialization in many parts of the South. Wage disparity between North and South diminished considerably during the war years.
FDR’s southern economic development strategy was perceived and received with downright opposition by most southerners. In the minds of many, FDR’s reforms were imposed from above, by federal rule, regulated by a federal bureaucracy and approved by northern, midwestern and southern progressive-carpetbagger votes. FDR’s Second Reconstruction generated deep resentment and in the Second Reconstruction, however successful its goals, one sees the seeds of distinctive southern identity in economic development. If one wishes to see the power of non-rational factors such as culture, participative decision-making and identity in economic development the Second Reconstruction is an excellent example.
WAR PRODUCTION AND INDUSTRIAL DECENTRALIZATION
By mid-1938, events in Europe, Japan and China grabbed the attention of the leaders of Western democracies, including Roosevelt. Despite what he said publicly, he was well aware that the planet was on the threshold of a world war. FDR wanted no part of it for America; but, after WWI the American military establishment had been reduced to being a “virtual”, not real, military force. When the war started, we hoped France and England would stop Axis expansion, but it was equally clear they could do so only if we supplied them with military sustenance and equipment—sustenance and equipment we did not have for our own army, never mind theirs.
The Big Picture
As early as 1936, with the expiration of the Washington Naval Treaty, Roosevelt launched the nation’s first post-WWI ship-building program.
In 1938, the Army Air Corps got the biggest authorization for buying planes in its history … [yet] by 1939 the Army Air Corps … consisted of some seventeen hundred planes, all fighters and trainers, and fewer than 20,000 officers and enlisted men … From the fourth-biggest military force in the world in 1918, the United States Army shrank to number eighteen, just ahead of tiny Holland. (Herman, 2012, p. 7)
World War II began in September 1939 (in Europe) and still Roosevelt dithered, trying behind the scenes to somehow increase military production by ten times in one year. Little came of it. On May 28, 1940 Belgium surrendered and the British army was thrown into the sea at Dunkirk by German panzers. On the same day FDR met for the first time General Motors’ chief production executive, William Knudsen, whom he had picked to organize, plan and lead not only America’s war production effort but, for all practical purposes, British and later the Russian military production as well.
Corporate leaders were drafted to plan/reconvert/operate American privately owned factories to produce tanks, ships and the materiel needed to wage war. The volumes required were badly underestimated in these early days, but were staggering relative to existing industrial capacity. Certain industrial sectors were “platform” sectors in that other sectors’ future outputs were reliant upon the formers’ outputs. Steel, machine tools and composites (basic materials such as rubber) and energy were especially critical to war production. An increase in production required constructing new facilities because existing facilities could not contain new machine tools, multiple assembly lines and new assembly line designs and physical layout.
Much of the nation’s war-related industrial facilities were located on vulnerable coastlines (Japan invaded the Aleutians and German subs positioned outside Atlantic ports). Policy-makers/generals knew quite well that most aircraft and naval facilities were lodged in Seattle, Los Angeles and San Diego on the west coast and in Baltimore, Charleston and suburban Long Island/Connecticut on the east coast. Starting virtually from scratch, the South and non-Pacific west coast would necessarily be winners as industrial decentralization was implemented. Not only was vulnerability a concern, but also the reasonable fear concentration of industry in a few centers would intensify worker shortages, housing and overtax logistical systems.
The most serious dislocation anticipated at the time was housing for new workers. New logistics (rail and truck) had to follow if new centers were to be integrated into the national logistical system. Staging facilities for overseas transshipment of millions of soldiers and tons of materiel required new facilities built from scratch. There was never any possibility that existing facilities, however expanded, could produce the scale needed to supply the Allies’ war needs. This was not the time for entrepreneurial startups; go with big firms, proven capacity, management and experience. Accordingly, the famous “six companies” that built the Hoover (and subsequent) dams were drafted to construct shipyards across the nation. In the process, Henry Kaiser (one of the six), founded a worker health company (Kaiser-Permanente), built worker housing and designed the merchant marine liberty ship. He also dramatically altered the local economic base of most Atlantic, Gulf of Mexico, Great Lakes and Pacific seaports.
Industrial Decentralization
The existence of several independent federal wartime production agencies2 and the astounding sums tossed into federal World War II budgets elevated federal investment to an unintended federal economic development strategy—which degenerated into a competitive, self-serving municipal/state “urban hierarchical” Hobbesian war “of all, against all”. Economic developers across the nation, usually chamber-based programs, embraced an aggressive ED strategy to capture war production facilities and attract almost any kid of federal investment.
Production efficiency, cost and established infrastructure, however, initially favored locations where industrial facilities already existed (North, Pacific Coast and Midwest). So, northern and midwestern cities were as intensely involved in intergovernmental economic development as their Sunbelt counterparts. Eastern municipal competitors fought for federal offices, highway spending, ports of embarkation status, contracts of every size and representation on federal boards and panels that dispensed these assets. Each party sought to curry favor with the armed services by praising the military and identifying their own cities with service branches. Cities advertised and lobbied through their congressional delegations and media, and even persuaded the navy to name ships they built and paid for.
New facilities generated higher industrial wages, increased urbanization and augmented the South’s purchasing power. Facilities and military bases increased local employment, and multiplier effects created an increased capacity for consumption which attracted investment from corporations. Both Ford and General Motors located facilities in the South for distribution and assembly in accordance with a new, decentralized “hub” business plan. Increased mechanization of southern agriculture through the war years (caused by FDR’s revolution from above) encouraged investment in new facilities by International Harvester and Allis-Chalmers. Southern industrial decentralization got its fair share and more: the B-24 manufactured in Dallas, the B-29 in Marietta Georgia; Ellington Air Force Base in Houston eventually became NASA’s Johnson Space Center.
Florida got over $1.5 billion (the largest sum any one state received), one-half of which went to shipbuilding operations in Jacksonville, Miami, Tampa and Panama City. Charleston’s population increased by one-third, Norfolk’s by two-thirds, while Hattiesburg Mississippi doubled. Mobile Alabama was reduced to chaos as its population doubled in two years—crushing inadequate infrastructure, housing and public services (Goldfield, 1982, pp. 182–3). The South built cutting-edge manufacturing facilities and moved into the twentieth century. Backwater municipalities became thriving military centers. Nearly every major city acquired an airport and was connected to rail and truck transport. The South captured more than its fair share of military bases. Industrial capacity in the South was increased by 40 percent and over $5 billion was invested in southern war-related plants. Per capita income tripled during the 1940s and the urban population expanded by 30 percent (Cobb, 1993a, p. 31)
Accounting for just 11.8 percent of the nation’s capital expenditures in manufacturing before the war, the region acquired 17.6 percent of the value of wartime manufacturing facilities expansions … housed 23 percent of new plants built for the war … bulldozers ploughing military bases out of the “Old Plantation.” The region received 36.5 percent of the total on-continent military facility awards … almost two-thirds of the domestic Army and Navy bases … war had closed the economic gap between regions. Southern per capita income improved from a pitiful 59 percent of the national average in 1940 to 69 percent at the close of hostilities … a new mechanized industrial economy was displacing the old labor-intensive South. (Schulman, 1994, pp. 85–7, 95)
Population Migration
People followed the jobs. Between 1940 and 1945, three times as many people flooded out of the South each year as had during the previous decade. From Pearl Harbor to V-E Day, 1.6 million southern civilians left the land of Dixie, while another 4.8 million migrated within the region. Sharecroppers and wage laborers departed for the cities of the North.3 Schulman (1994, p. 82) observed that southern migration, although a largely an increasingly black phenomenon during the 1940s, also exhibited a bias toward migration of its “most downtrodden” whites. Latinos in Texas also moved out (to California mostly) for the first time (Gregory, 2005, p. 34). Jobs were the attraction.
The wartime southern exodus came from different parts of the South than the pre-war Diaspora. Instead of Georgia and the Carolinas, mostly black southerners from Mississippi and Alabama went north. The South was no longer under the control of King Cotton, its plantation-based economy lay in shatters. Farm laborers replaced sharecroppers. Nearly a half-million African-Americans served in the military. Black emigration was more varied. Chicago, Detroit and the Great Lakes cities were still the principal destinations for Mississippi Delta sharecroppers, but black Texans moved west to California. Future founder of the Black Panther Party Bobby Seale moved to the San Francisco Bay area as a nine-year-old (Gregory, 2005, p. 34).
Southern industrial development was very uneven. Arkansas, Georgia, Mississippi, North and South Carolina and Virginia had fewer manufacturing wage earners in 1945 than in 1939 (Schulman, 1994, p. 106, Table 4.5). In some instances southern states/municipalities resisted industrial decentralization, particularly if it tasted of unionism. North Carolina, for example, perceived industrial decentralization as a threat to its low-wage business climate strategy:
North Carolina’s heritage of catering to the low-paying, nonunion textile industry encouraged its publicly funded development organizations to accept the paradoxical mission of promoting progress by discouraging high-wage industries, particularly those that might bring unions with them. For a time the Raleigh Chamber of Commerce adhered to a rigid, written policy of non-recruitment of industries that would not promise to resist unionization. (Cobb, 1993b, p. 33) North Carolina enjoyed the fourth lowest ratio of war facilities to prewar manufacturing of all states (Schulman, 1994, p. 99). Increased urbanization brought new populations to cities that had long been dominated by an entrenched “old guard” that had determinedly maintained “progress and tradition”:
Wartime expansion of southern … cities and continued employment opportunities … brought to these areas many new voters who were not steeped in the traditions of deference. The sheer numbers of the in-migrants made difficult their enlistment in local political parties and organizations … Two types of newcomers demonstrate this growing independence from the old politics. (Bernard, 1993, p. 70)
Those newcomers are young native professionals and non-whites. The seeds of future change in southern municipal policy systems were sown by the opportunities created by industrial decentralization.
A short outline of Miami’s growth in this period is illustrative. Florida occupied a geography which was doomed to capture a good deal of military facilities. Clear weather meant it was prime ground for training, particularly air and naval training. Early in 1942 the US Army Air Corps (USAAC) practically took over Miami Beach, leasing more than 100 tourist hotels for fliers’ barracks. Facilities were built in Miami itself and surrounding communities (Opa-locka, Homestead and Coral Gables). The navy assumed control of Miami’s port. A major airport, Homestead Field, was located in Dade County. The war dampened tourism for sure, but troops, contractors and facilities provided year-round prosperity.
Dade County’s population increased to 450,000 by 1950—up 85 percent from 1940. The remarkable feature of this population boom was where folks lived:
The greatest growth during the forties took place in the suburban fringe [152 percent increase] and unincorporated areas [164 percent]. … The suburbs by 1945 were reported to be on the verge of “widespread new development”. Hialeah, Opa-locka and North Miami, reflecting real estate development and housing construction … rocketed upward. (Mohl, 1983, pp. 61–2)
Miami grew by increasing its population, not by relocating or developing its economic base. New residents moved directly into suburbs and unincorporated areas—never having lived in the central city. Miami’s share of the Dade County population declined from 1930 onward.
Sketches of Southern Cities War Production
Shipyards were built in Panama City, Savannah, New Orleans and Houston. Who would have guessed, however, that an entrepreneur from the South would build the most ships and be World War II’s most famous entrepreneur? Andrew Jackson Higgins, dubbed the “Henry Kaiser of the South”, started a pre-WWI business in Natchez Mississippi building low-draft boats to haul lumber out of swamps. Calling it the “Higgins Boat” (or Eureka Boat), Higgins pitched it to the federal government, without success, at the start of WWII. The British saw its potential, however, issuing a contract, and prompting Higgins to construct a facility in New Orleans. Higgins’s Eureka Boat designs were quickly modified to create the famous patrol torpedo (PT) boat and the landing ship tank (LST). Starting out with 400 workers in 1939 and $1 million in annual sales, by war’s end he had 8 plans, 20,000 workers and annual sales of $100m (Schulman, 1994, p. 97). Higgins constructed more boats than any other American shipbuilder. Most were produced on the Great Lakes, but the New Orleans facility built more LSTs than all other factories combined. Eisenhower proclaimed Higgins “the man who won the war for us”.
Birmingham’s Steve McCone and the Bechtel construction company won a federal contract in 1943 to build a 2-million square foot, 285-acre factory that introduced a new assembly process for aircraft construction, revolutionizing the aircraft industry. More than half its employees were women. The bomber they constructed (B-24s) won in May 1943 the “war of the Atlantic”. Frank Ix’s mill in Charlottesville Virginia made parachute cloth for every airborne division from 1942 to D-Day (Herman, 2012, pp. 242–4, 252).
The Dallas Chamber of Commerce and Citizens Council campaigned in Washington offices and corporate headquarters for a naval reserve aviation squadron base and a North American Aviation Company plant. By 1943, employment in the federally financed plant topped 40,000, and the Chamber of Commerce boasted Dallas was the ‘War Capital of the Southwest (Abbott, 1998, p. 7). In 1940 the Dallas Chamber and City Council granted 30 acres of municipal-owned Hensley Field and extended runways for the navy. Several years later the US Eighth Service Command moved from San Antonio to Dallas. By September of 1943 the federal government had built over $115 million in defense facilities in Dallas. Lockheed, Southern Aircraft and the gigantic North American Aviation complex (courted by the chamber since 1940) relocated facilities to Dallas. By 1944’s end, 13,000 worked at the North American complex alone. More than 25,000 families were moved into Dallas by the War Manpower Commission between January 1940 and September 1943 (Fairbanks, 1990, pp. 145–7).
Such growth necessitated a complete rebuilding of transportation infrastructure and new housing, outlined in its 1945 Master Plan. At war’s end, however, the huge North American complex was closed, making 17,000 workers redundant. Other aircraft plants were reconverted to other uses and downsized. The Dallas Chamber responded with an intensive attraction campaign. Once again the city expanded the Hensley Field runways on its own dime. Two major aircraft firms responded in 1947: TEMCO and Chance Vought Aircraft moved from Stratford Connecticut, bringing over 4500 jobs and 1500 supervisory personnel to Dallas (Fairbanks, 1990, p. 150).
If Dallas landed the aircraft industry, Houston—through efforts of its native son Jesse Jones (chief of FDR’s Reconstruction Finance Corporation)—convinced the federal government to build two pipelines allowing Texas gas and oil to reach into the northeast. Other federal contracts established Humble Oil (Exxon today) and Shell Oil, and relocated General Tire, Goodyear Tire and Sinclair Oil plants in the Houston metropolitan area:
Investment in the Houston chemical industry totaled $600 million during the war and $300 million immediately afterward. Houston’s Harris County led the United States in the value of industrial construction for 1945–1948 and emerged as … a great complex of petrochemical plants and pipelines stretching from Freeport to Port Arthur (Abbott, 1998, p. 11)
Texas garnered one-third of the entire South’s facility expansion awards (steel, petroleum and aircraft equaling $1 billion dollars). By 1945 Texas (temporarily) replaced North Carolina as the South’s leading industrial state.
Finally, entirely new cities were built for war production. The Atomic Energy Commission, starting in 1942, developed Oak Ridge Tennessee to manufacture key elements of Project Manhattan. Home to about 3000 residents in 1942, Oak Ridge housed nearly 75,000 by 1945. As of 2010, it was home to 29,000 plus residents. The Oak Ridge National Laboratory, originally the X-10 site where plutonium was made, followed and the Corps of Engineers built its own “planned community”—complete with a symphony hall. Most Oak Ridge residents were women (Kiernan, 2013). TVA facilitated construction of Oak Ridge, developing new processes for aluminum manufacturing research.
Planning and State-EDO Formation
War production was closely associated with expansion of state, regional and municipal planning. The National Planning Board (issuer of Our Cities), always controversial, never penetrated day-to-day New Deal decision-making, yet “hung around” under a variety of names (National Resources Board, National Resources Committee) during the 1930s. To coordinate war production, FDR in the 1939 Executive Reorganization Act lodged the now-called National Resources Planning Board (NRPB) in the Office of the Presidency. The intention was that the NRPB would play a valuable role in making America the “arsenal of democracy”. It didn’t. Instead, as an unintended by-product, it established the nucleus of a goodly number of state/regional economic development organizations at war’s end.
War production was pretty much dictated by the service branches, the Treasury and, of course, the National Defense Advisory Commission (and successor agencies). The NRPB ran 11 regional field divisions that worked with the various state-level planning organizations set up to satisfy federal legislation that such entities develop plans around which federal aid and projects could serve. In 1933 there were 14 state-level planning entities—by 1938, 47.4 State-level planning entities served as a magnet to attract economic development/agriculture-related functions, research, programs and staff: a 1938 annual report commented that state planning entities “engaged in a bewildering variety of activities”; and in many geographies, the Mississippi Delta being one, states had set up corresponding regional entities to deal with Cotton Belt decline. The TVA also fostered a number of regional “planning” entities. From hindsight, it is apparent these planning entities were not perfectly integrated into the politics and budgets of state governors and legislators. Such agencies were semi-regarded as agents or facilitators of the federal government; as one might suspect, southern states had their own ideas about these entities. Apparently, they were not popular in Congress either.
Congress abruptly terminated the NRPB in August 1943—specifying that its “functions exercised … shall not be transferred” (Scott, 1969, p. 409). It was a “don’t let the door hit you in the butt” kind of legislation. Planners and Progressives in general were less than thrilled; neither was Mel Scott. In any case, our story concerns what happened with the state-level entities after the NRPB’s termination:
Alabama, California, Georgia, Illinois, Indiana, Missouri abolished their state planning agencies and replaced them with postwar planning agencies specifically concerned with problems of employment and economic expansion … Arkansas, South Carolina and Washington … [created] economic organizations and abolishing their state planning boards … [and] in 1944 Nebraska, Kentucky and New Jersey established development commissions or departments … By the end of 1945 … there were forty-five or more of the newer agencies with titles denoting their legislative mandate to improve the state economy. (Scott, 1969, pp. 411–15)
State-level EDOs had arrived, in some form, on the national landscape.
The South had its own ideas regarding state-level development agencies. Several states in the twenties had already established state-level EDOs (Alabama, Florida, South and North Carolina, and Virginia) (Lepawsky, 1949, p. 8). When the NRPB was dissolved, only Virginia, Tennessee and Alabama retained planning agencies—two of which already had state-level EDOs. Georgia, Mississippi, Kentucky, Oklahoma, Louisiana, Florida, Arkansas, South Carolina and Texas had by 1945 scrapped state-level planning entirely or combined it with an EDO. Each southern state by war’s end had a multi-function state-level EDO (Cobb, 1993a, pp. 65–70, Table 2). Most southern state-level EDOs were led by gubernatorial appointees, and many included boards or commissions with private sector membership reflective of regional constituencies and were staff-driven (some more professional, others political). Emerging from the war, these new agencies played a crucial role in retaining war-time employment/ relocation gains—and provided incentives to assist their conversion to peacetime production (Cobb, 1993s, pp. 67–9).
In 1946 the Southern Economic Development Council (SEDC), led by W. Porter Grace’s Memphis Chamber Industrial Department, organized informally as the Southern Industrial Development Council (SIDC). Meeting each year, the organization grew in size and ambition. At Fort Worth in 1951, an invitation was “extended to all practitioners of industrial development in the southern region” and the council officially incorporated with, Porter Grace its first elected president. By 1958 the council had nearly 200 members. In 1961 the University of Oklahoma at Norman was approved as its “Institute” and a three-week course of “instruction in industrial development” commenced. AEDC later assumed responsibility for its operation. In 1981 the SEDC headquartered in Atlanta (where it remains today—with a short digression to Austin Texas). The SEDC in 2013 claimed 1000+ members from 30 states.
THE SELLING OF THE SOUTH
While housing, slum clearance and CBD redevelopment dominates Big City ED after 1930, it hardly touches the South. The South will be affected by NIRA, the Housing Act and certainly war production worker housing—and later urban renewal. But our task here is to demonstrate that southern postwar ED follows a different path from northern Big Cities. Largely on its own, the South through uncoordinated individual state programs pursues a region-wide “industry attraction” strategy with an anti-colonial bent, a strategy that started early in the 1920s and was subsequently delicately labeled “selling of the South”—a phrase coined by James A. Cobb.
The post-Civil War South always flirted, not without reason, with the “colonial” metaphor. Our ED history acceptance of a post-Civil War northern/midwestern economic–political hegemony is congruent with that metaphor. FDR’s Second Reconstruction, the Depression/war years reset of agricultural–export–plantation politics/ economy, and the turbulence of social and demographic change commencing with the Southern Diaspora, and by the mid-1950s including a Civil Rights Movement, suggest a region in considerable transition. Federal economic policy “did not ensure regional deliverance from the inequities and unbalanced development of [Redeemer-era] old industrial regime. Just as the vestiges of the biracial society cling like Spanish moss to the urban South, traditional industrial patterns based on a rural, colonial economy linger on” (Goldfield, 1982, p. 184).
The postwar realization that agriculture was its past meant an unrestrained southern commitment to industrialization by any means. Robbing firms from the colonial North was preferred, and logical—à la Willie Sutton, that’s where industry was located. As far as many in the South perceived, the Second War Between the States had already started: the North had launched the Second Reconstruction and the North brought unionization into the South. The South was going to “catch up”. However, modernization and industrialization would be on southern terms, incorporated in ways and to the degree that maximized traditional southern values and way of life. Bluntly, American economic development was evolving along regional lines, with each region defining economic development in its own terms and self-perceived context. Within that context, selling of the South was one, among several, southern economic development strategies pursued in the postwar era.
Cobb’s selling post-World War II paradigm encapsulates four distinct (yet interrelated) strategies:
- promotion and business climate;
- reaction to unionization;
- policy area capacity-building (improving education through integration); and
- critical infrastructure (highways, government administration and schools).
It is not Cobb’s fault that, over the years, the paradigm has been folded into the first of his strategies and has almost completely ignored the last two. The title of his book, The Selling of the South (Cobb, 1993a), may have unwittingly played into this.
Selling through Promotion and Business Climate
BAWI and the industrial development bond (IDB) approach captured headlines and congressional and Policy World attention, and it dominates the selling of the South paradigm. This is a bit misleading. As Cobb notes, many southern states (North Carolina, for example) did not approve an IDB; and, other than the East Central States (and Louisiana), most southern states did not base their attraction strategy on the IDB. Incentives and business climate, expressed chiefly through promotional materials and advertising, were their chief weapons. The latter strategy may have been the more disruptive. Non-southern states were taken aback by the systematic packaging of business climate, incentives, cost reductions and promotional materials shoved in resident firms’ faces by southern state recruitment drives. Recruiting expeditions by southern governors seemed as threatening as Lee’s 1863 northern invasion. Resentment and fear fed into BAWI.
[Southern] industrial development promotions of the late 1930s were of modest scope and debatable effect, but a major southern-initiated explosion of such programs came after World War II and especially after 1950. (Wright, 1986, p. 257)
The National Planning Association’s Committee of the South concurs, commenting:
a new wave of industrial expansion swept the entire nation after World War II … both new expansions and old plant facilities have been required. This has had special significance in the South for a new industrial region can attract a “new” plant when the total capacity in an industry is expanding. (McLaughlin and Robeck, 1949, p. 14)
Intensive southern promotion dates from after World War II and continues unabated through the 1960s: “By the mid-1960s five of the seven most active exemptors of taxes were in the South” (Morgan and Hackbart, 1974, pp. 200–205); the other two were Vermont and Rhode Island. Alabama, Mississippi and Louisiana led the way, offering ten-year exemptions on both state and local taxes. South Carolina and Kentucky followed with five-year moratoriums (Cobb, 1993a, p. 48).
By the 1960s Cobb suggests the initial recruitment/promotion programs had crystallized into professional, multi-faceted, hard-hitting, state-led attraction strategies widespread through the South. Northern states responded by developing their own professional attraction programs, but mostly by turning IDB-like initiatives into business-retention programs. The southern promotional invasion of the North produced a serious, simultaneous counter-reaction that institutionalized and raised the policy priority of northern economic development. The more importance afforded to a policy area, the more media attention it attracts.
Southern municipalities launched their own recruitment/attraction efforts with development corporations and chambers in the lead. Communities of all sizes, especially small and rural communities, were heavily involved. One study of the South’s 13 states identified nearly 1900 communities with at least one active EDO. Chambers were far and away the most common, but 450 communities were identified with local governmental development corporations. This is much less frequent in the North where chambers and redevelopment/housing agencies dominate. Cobb asserts that the larger cities did most of the corporate advertising (1993a, pp. 94–5).
Meaningful variations among the southern states were evident. The data, admittedly not normalized, suggest that:
+ Virginia, Louisiana and Mississippi had fewer municipal level corporations (i.e. state government was the preferred governmental EDO).
+ Alabama, Texas, Oklahoma, Florida, Louisiana. Mississippi, South Carolina and Kentucky relied almost entirely on chambers of commerce not local development corporations.
+ Arkansas, North Carolina and Virginia exhibited the highest rates of local development corporation use (Conway, 1966).
Cobb asserts that Arkansas had the most “plant hungry” communities (1993a, p. 82). The numerical predominance of chambers suggests they were the dominant players in postwar southern municipal-level economic development.
Southern attraction budgets increased and recruitment techniques moved from the amateurish to the sophisticated (rifled targeting often based on sector and industry analysis, case management, customized marketing/incentive offers, and direct business to business recruitment). Media placements were an important attraction tool. In 1964 a report of corporate advertising by 31 states found that southern states’ advertising expenditures were 170 percent of the national average; six southern states were in the top ten (Florida, Mississippi, Arkansas, North Carolina, Kentucky and Tennessee); and all southern states that reported were in the top 13.5 Entities similar to today’s site selectors were also common.
Southern states incorporated the governor directly into the attraction campaign. Indeed, it is likely that the rise in power and role of state governors may be an important reason for the increased southern attraction strategy. Many southern governors saw business attraction as a quite useful, even necessary, plank in their election platform, and seem very sensitive to the popularity a successful firm relocation could achieve (“industrial prospecting” it was called at the time). Also, working together in the newly formed Southern Governors’ Conference, southern governors coordinated joint activities to remove “impediments” to manufacturing relocation to the South. The South, minus Generals Lee and Jackson, was indeed invading the North.
Right to Work
For those living under a rock for the last 70-plus years, right to work laws prohibit union security agreements. A union security agreement, originally recognized by the NLRB (1935), is a collective bargaining agreement between employers and labor unions requiring all workers covered by the contract to be a member of the union before being hired by the company. Such agreements usually require the employer to collect union dues from the worker through paycheck deduction. Right to work legislation prohibits union security agreements, and has had the effect of seriously weakening union organizing and willingness of individuals to join a union. Prohibition of union security agreements permits “free riders”—i.e. workers who effectively enjoy the benefits obtained by a union without being a member of a union.
Right to work legislation can be thought of partly as a reaction to Roosevelt’s Second Reconstruction and associated union efforts to organize southern industry. Also, war production firms were, often as not, large union-organized plants that significantly increased rates of southern unionism. Texas, with a large war defense industry, developed an aggressive right to work movement. Also, the minimum wage war was still in full bloom and right to work legislation constituted another form of resistance to New Deal intrusions. Southern traditionalist and Privatist cultures, reacting to these perceived threats, created an amalgam composed of culture, anti-union, pro-business, anti-race, anti-federal government with more than a dash of anti-communism tossed in for good measure. The motivation behind 1940s’ right to work laws is arguably less economic than cultural, social and political. The roots supporting this legislation lie much deeper than simple microeconomic cost efficiencies and business climate.
Nevertheless, there is no disputing right to work laws played an important role and continue to exert a strong impact on state business climate.
The right to work “movement” commenced in 1943 Florida. By 1944 Florida and Arkansas had passed constitutional amendments prohibiting union security agreements, and they accordingly became the first two “right to work” states. These two constitutional amendments conflicted with federal law and their legality was always in doubt. They were tossed out by the courts and the NLRB. The Texan right to work movement, led by Vance Muse and his Christian American Association, was saturated with hardcore anti-race and anti-communist rhetoric. The Texas House of Representatives approved right to work legislation in 1945, but it was defeated in the State Senate.
In the spring of 1947, however, the dam burst; 11 additional states (Arizona, Texas, Georgia, Iowa, Nebraska, New Hampshire, North Carolina, North Dakota, South Dakota, Tennessee and Virginia) approved right to work legislation. The inspiration for this steroidal diffusion was the expected passage of the Taft–Hartley Act by the soon-to-be-seated 1948 Republican-led Congress. There is some disagreement whether early state approvals were the tail or the dog for the inclusion of Section 14b in the Taft–Hartley Act. In 1948 Congress approved the legislation. Section 14b of Taft– Hartley permits a state to pass legislation eliminating the union shop and union security agreements, thereby permitting states to become right to work states. In 1953 and 1954 Alabama, Mississippi and South Carolina adopted right to work legislation, thereby creating a “solid South” right to work region. In addition, Nevada (1951), Utah (1955), Kansas (1958), Wyoming (1963), Idaho (1986), Oklahoma (2001), Indiana (2012), Michigan (2013) and Wisconsin (2015) have passed right to work legislation. In 2016 there are 25 right to work states. No state has repealed its right to work legislation at the time of writing. Despite its southern and Taft–Hartley roots, right to work is now nationwide and integrated into the fabric of contemporary economic development practice and strategy.
The actual effects of right to work on both southern industrialization and retarding union membership are likely to have been minimal, or at least not measurable—despite the equally stubborn reality that southern economic developers really believed they had a positive effect in their attraction efforts. It is not hard to find examples of definitive and well-constructed studies which prove either side. Right to work laws likely signify to mobile firms the presence of factors favorable to cost minimization. Cobb concludes, with some logic, that right to work “sent an unsubtle … message to new industry that the state in question offered a climate in which unionization of a new plant, if not impossible, was unlikely” (1993a, p. 102).
THE SHADOW WAR BEGINS: THE IDB DEBATE
In this BAWI and selling of the South context one of the most important disruptions in American economic development history develops: the tax-exempt industrial development/revenue bond. Today the IDB is a common, well-thought-of ED tool. It had, however, a very rough start. The IDB originated in the South and quickly became perceived as the cutting edge of a southern strategy for pirating northern “branch” manufacturing firms. The North (the Policy World and the public finance world also) reacted negatively, very negatively. The resulting several decade-long conflab is a “shadow war” for the Second War Between the States that erupted mid-1970s.
The Initial IDB Diffusion
BAWI was a time bomb, impacting decades after it was first introduced. Interrupted by World War II, postwar use of BAWI IDBs got off to a slow start in the late 1940s, growing incrementally during the fifties and flourishing in the sixties—culminating in 1968 federal legislation. The BAWI IDB rubbed raw exposed nerves caused by shifting tectonic plates of our Markusen profit cycle. An aggressive southern state attraction strategy meant the IDB innovation was a threat to northern economic bases. In reaction, many northern (and western states) adopted their form of IDB, less to attract southern industry than to offer a business-retention tool to their firms. Whether the IDB served as an attraction or retention strategy, the program offered a manufacturing firm municipal tax-exempt financing to construct and equip a manufacturing facility (Stinson, 1967, p. 6). There are several ways this could be accomplished, and “IDB-like” alternatives were developed. Firms sensitive to price competition and in need of lower-cost labor thought IDBs interesting—and the IDB from the early 1950s on became a matter of great importance to northern state and local officials.
By 1949 only three neighboring states had authorized a BAWI-like IDB: Mississippi (reauthorized 1943), Kentucky (1948) and Alabama (1949) (ACIR, 1963). BAWI IDB pioneers were cotton belt, boll weevil, Great Migration exodus states in the East South Central census division. Illinois and Tennessee approved IDBs in 1951, and Louisiana in 1953.These East Central states were neighbors, Illinois their target. The postwar BAWI IDB entailed municipal revenue bond and/or general obligation (GO) bond issuance. (General obligation bonds were secured by taxes, revenue bonds by private project revenues only.)
Between 1955 and 1957 New Mexico, Colorado, North Dakota, Vermont, Washington and Wisconsin joined the parade; in 1958-60 Arkansas, Georgia, Maryland and Missouri authorized IDBs. Between 1961 and 1965 other states joined in: Kansas, Nebraska, Oklahoma and Minnesota (1961); Maine and Virginia (1962); Iowa, Michigan, Arizona, West Virginia, Wyoming (1963); Hawaii and South Dakota (1964); Montana and Rhode Island (1965) and Oregon in 1966. Total IDBs issued between 1953 and 1962 were less than 1 percent of total municipal bond issuance (ACIR, 1963). BAWI IDBs were not flooding the municipal financial system. The ACIR report stated that cumulative IDB issuance through 1950-62 totaled only $461 million nationally. Moreover, only a few states were intensely using the financing tool.
Twelve states issued at least one IDB between 1950 and 1965; but $392+ million (85 percent of the national totals) were issued by Tennessee, Mississippi, Alabama and Kentucky—the four East South Central states—plus their neighbor, Arkansas. Non-southern states issued only $33.4 million (7 percent); Washington issued 0.5 percent, restricting IDB issuance to port authorities only. The only states that issued at least one BAWI IDB in this period were Mississippi, Tennessee, Alabama, Kentucky, Arkansas, Missouri, Oklahoma, Kansas, Nebraska, New Mexico, Washington and North Dakota. Twenty states authorized IDBs and didn’t use the tool at all during this period. Illinois, for instance, authorized IDBs in 1951, but 12 years later had not issued even one. Wisconsin approved IDB legislation in 1957 and by 1963 had issued no IDBs; Alaska, Vermont and Colorado also had not issued any IDBs. Virginia, Maine and Minnesota did not issue IDBs until a considerable time after formal authorization. In short:
+ Some states did not adopt the IDB at all.
+ The intensity/volume of IDB use by a state after adoption varies considerably.
+ The tool “mutates” due to political culture/state constitutional differences and different needs and time periods.
States behave like a herd, so each will have the “arrow in their quiver,” which guarantees that it is available to defend the state, if necessary. It may or may not be a meaningful element in the state/municipal ED strategy.
Post-BAWI IDBs were not similar. There were several varieties. The IDB disease had spread, but it had mutated as well. Many states caught the IDB disease, but did not get sick. Diffusion is only part of our story. The East South Central IDB “model”, the most virulent, was not the model adopted by the rest of the nation. Post-1950s’ IDB diffusion is yet another example of our awkward saying that “a rose is not necessarily identical to another rose”. An IDB adopted by one state is likely to be significantly different from an IDB adopted by another state. Variability of tool diffusion exposes the importance of states with their distinctive state/municipal politics, policy processes and political/legal culture.
The core problem is definitional—just what constitutes an IBD? Does an IDB necessarily have to follow the BAWI model? Massachusetts, for example, did not use an IDB in this period because the loans it made were not federally tax exempt. Massachusetts created its own version of an IDB, using state loans to conform to its constitutional gift and loan provisions. Massachusetts is not included in the above listing (neither is Pennsylvania). At that time, these states—Massachusetts the most active—had approved 407 loans ($33 million) and disbursed 292 loans ($20 million). In 1958 the Committee for Economic Development (CED) conducted a national survey on IDBs—totally ignoring the Mississippi and Pennsylvania models (because they were not accepted in “certain quarters”). The CED asserted that Maine (1949), New Hampshire (1951), Massachusetts, Connecticut and Rhode Island (1953), North Carolina and New York (1955) and New Jersey (1958) had at least authorized IDBs. Except for Maine, none were included in ACIR’s BAWI-based report. These states had devised non-BAWI models for IDB issuance. The BAWI model used general obligation bonds exclusively (postwar versions also permitted revenue bonds). Non-southern states overwhelmingly issued revenue bonds only—not following the East Central States and Louisiana, which chiefly used tax-backed general obligation bonds.6 Whether the taxpayer or the company has ultimate recourse for debt issuance is not a small matter.
A Rose is Not a Rose: State IDB Models
So, IDB diffusion resulted in several variants or models. Using a framework developed by Robert J. Tilden (1966, p. 9ff.) we summarize five pre-1968 IDB models.
+ Mississippi-BAWI model: (1) financed by government obligation and revenue bonds; (2) authorized municipal level jurisdictions (later counties) only; (3) state established standards and approval procedures (including certifying municipal eligibility, requiring referendum and certifying legislative compliance); (4) linked to tax abatements, facility construction and private ownership; and (5) includes federal income tax exemption (Mississippi, 1936).
+ Kentucky Plan: (1) financed by revenue bonds only; (2) state and sub-state governments can issue IDB; (3) formation of a jurisdictional EDO specifically empowered and configured to issues bonds; (4) shares with BAWI linkage with tax abatement, facility construction and federal tax exemption (Kentucky, 1948); most common (15 states including Vermont and Maine, 1962).
+ Pennsylvania Plan: (1) financed not by bonds but by state appropriation; (2) state control thru specialized state EDO, Pennsylvania Industrial Development Authority (PIDA); (3) requires sub-state jurisdictions to form specialized EDO which secures private first mortgage for a facility, supplemented by a 30 percent loan/second mortgage from PIDA and 20 percent sale of notes to private investors; (4) no federal income tax exemption—no bond issued, but usually linked to tax abatement and facility construction (Pennsylvania, 1954).
+ Oklahoma Plan: (1) financed by general obligation and revenue bonds; (2) state authority with power to make second mortgage loans (like Pennsylvania) to local EDOs whose financing is based on issuing general obligation bonds; (3) linked to tax abatements, facility construction and ownership, and includes federal income tax exemption. (Oklahoma, 1959), New York, Maryland and New Hampshire.
+ New England Plan: (variant of Pennsylvania) (1) attaches state guarantee to loans/mortgages made by specialized municipal-level EDOs; (2) to build, lease or sell industrial property to private parties; (3) state guarantee (90 percent) of such loans pledging credit of the state; (4) pioneered by Maine,7 later referred to as the Development Capital Corporation model (DCC) (Maine, 1965, Rhode Island, Vermont and Massachusetts).
The Pennsylvania model provides a fascinating case study as to how a state model developed. The Pennsylvania alternative evolved from the 1945 Scranton Plan. Scranton responded not to BAWI-fostered competition, but to post-World War II collapse of Scranton’s economic base. At war’s end Scranton’s economy imploded. While losing textile mills to BAWI IDB attraction was an issue, the anthracite coal industry collapse was the real catastrophe that threatened to make Scranton and northeast Pennsylvania into ghost towns. Under chamber leadership, with support of the city’s leaders, a network of EDOs was created (at least four handled aspects of the plan).8 Raising funds from citizens and the private sector, Scranton-area communities funded mortgages to acquire vacant properties which would be marketed by EDOs to firms outside the area. At the end of the lease the relocated firm would acquire the facility. This is the Scranton version of the BAWI program.
The Scranton Plan intended that relocated firms pay low rents, hire workers and create disposable income within the region. Some would say this is nothing but a BAWI “buy a payroll” endeavor, and they would be correct. After an initial firm was attracted to Scranton, the public–private partnership followed up with cookie-cutter, community fundraising injection of municipal capital to acquire new properties, build industrial parks, etc. After five years in operation (1950) 15 firms had been recruited, a number of business parks planned and built, and 16 additional firms had been also relocated without Scranton Plan involvement. Unlike the hated (and southern) BAWI, the Scranton Plan became a model for the state to emulate.
The Pennsylvania Plan improved the Scranton Plan. Approved in 1955–56, it created a state finance agency, the Pennsylvania Industrial Development Agency (PIDA), to financially participate in issuances of local development corporations. Local EDOs were specifically empowered by state legislation throughout the state. Under the Pennsylvania model, PIDA would make loans to local quasi-EDOs for (initially) 30 percent of construction costs for industrial plants and parks. The state IDC loan obtained a second mortgage as security. The remainder of the funds needed to complete the deal were raised by the community and firms involved. Tax abatement was not automatic and there was no authorization for a municipal IDB, either revenue or general obligation. PIDA received its funds through state appropriation. The role of PIDA, supplying 30 percent (later 40 percent), of the financing was critical. By 1967 the Pennsylvania model had been in operation for ten years; over $104 million had been loaned by PIDA to the LDCs; and nearly 84,000 workers, it was claimed, had been hired (Stinson, 1967, p. 9).
The Pushback against IDBs
There were several criticisms and concerns associated with the IDB. In effect, the IDB/IRB allowed a municipality to issue debt (with a lower municipal bond interest rate) on behalf of a private firm. Given state constitutions usually contain a “gifts prohibition”— i.e. the municipality cannot issue debt for private gain—the IDB could be viewed as a targeted loophole, a business climate opportunity, or a damnable abuse. The IDB inherently and intentionally blurs the public–private distinction. The IDB/IRB is a state-authorized debt instrument whose interest is exempt from federal income tax. The unintended federal income tax exemption on behalf of one state’s private firm which “cost” is shared by all states, including the state that may have had its firm “stolen”. Also, municipalities not wishing to issue IDBs might be compelled to counter the IDB advantages, and a 1950s’ fear that financial market distortions might result (they did not). Finally, IDBs might benefit companies who did not “need” the IDB incentives.
Though cumulative volume of IDB bond issuance was remarkably small and, in the grand scheme of things, relatively few firms used IDBs, northern (especially) and midwestern politicians were upset. They couldn’t stop southern state promotional activities or kick out southern governors visiting their industries. Northern state and local officials feared they would be drawn into a “race to the bottom” by cutting the wages and benefits (and taxes) in their economic base. So the “empire” struck back. Since the IDB ultimately rested upon the federal income tax exemption— disproportionately paid by northern/midwestern residents—it was patently unfair that southern states/communities garnered the benefits paid for by others.
As the IDB diffused across the nation during the fifties and sixties, it generated an ever-increasing dialogue from media, politicians and academics. In late 1962 the matter was referred to a federal research institute, the Advisory Commission on Intergovernmental Relations (ACIR), for investigation and comment.9 ACIR’s 1963 report and 1965 amendment (from which we have drawn much of our statistics and detail information) took a position against the IDB (to which Senator Muskie dissented). The report concurred that rage and IDB abuse were overstated and media driven—the numbers were just too small to account for any material change in the employment base of any city or state. Instead of impassable federal legislation, ACIR suggested a number of reforms that states and localities could adopt. The report focused on future reform efforts which culminated in federal legislation first in 1968, and later in the Reagan years.
The report asserted that there were logical reasons to employ the IDB, chiefly limited to access to financial markets for small rural communities. The problem was that other states and communities perceived the need to defend themselves. ACIR investigated the issue of “runaway plants”. It rejected the concern for runaway firms, asserting that firms moving across regions were doing so for cost and market advantages, and that tax incentives played a very minor role in any firm’s location decision:
Local industrial development bonds are alleged to appeal to the runaway and the footloose industry. Evidence does not support this in any substantial way. Runaway industries, like airplane accidents, occur relatively infrequently but make good copy. We have not been able to identify more than twenty firms that have moved lock, stock and barrel from the North or East into the industrial bond financed (i.e. BAWI model states) buildings in the South. (Stinson, 1967, pp. 70–71)
In 1968 the North struck back in the form of congressional legislation reforming IDBs. More and more research during the early and mid-sixties asserted the IDB was an incentive whose chief benefit was provided by the federal government through firm-avoided income taxes (Crepas and Stevenson, 1968, pp. 105–9). Many a grim confrontation occurred in Congress alleging abuse and demanding regulation reform (Senator John Kennedy was active in the fight). Unions also were heavily involved. So in 1968 Congress enacted the Revenue and Expenditure Control Act, which limited tax exemption to industrial development bond issues under $1 million. The legislation created two classes of IDB: exempt and small issue. Small issue, more useful to economic developers in attracting and retaining firms, lost much of their attractiveness to firms. Issuance of small issue IDBs plummeted after 1968 and did not significantly change until 1978 Congressional legislation undid some of the exemption limitations.
THE CIVIL RIGHTS ERA
Schools, Desegregation, Civil Rights
Economic development is understandably a highly valued policy area by state/local policy systems in the nation’s poorest region. Consequently, emphasis on other policy areas will be justified in terms of economic development impact, and ED strategies will value “upgrading” of other policy areas as legitimate ED strategies. Moreover, a counter-intuitive effect of the South’s attraction/promotion strategy was that southern states had to deal with what others thought of them if advertising was to be effective. Low wages was one thing—racial repression was another. If low taxes translated into poor services, incapable government and inadequate infrastructure, that mattered to firms considering relocation. There was a “flip side” to a strategy of selling the South.
The poor image of the South by outsiders strengthened “liberal” and Modernist elements within southern states and municipal policy systems. War production industry decentralization introduced northern firms into the decision-making fabric of southern policy systems, and resulted in a disproportionate prominence in municipal economic bases. The South was not as isolated as it once was, and the older Redeemer mentality, still strong, challenged in ways it had never previously been. In that context, economic development policy-making, almost necessarily, expanded into policy areas outside its “traditional” focus. Postwar southern race relations, nationally watched and in great flux after the mid-1950s, became a critical southern economic development concern. Race relations became a companion policy area in the selling of the South (Cobb, 1993a, p. 148).
Having observed this flip side of an attraction strategy, the actual link between industrial promotion and desegregation is “complicated”. What is not complicated is that in almost every southern state and major city the link between industrial promotion, segregation and racial violence figured prominently. Chambers and industrial development corporations, home ground for the southern promotional strategy, focused on the negative impact that racial change had on campaigns: “One lynching and we’ve wasted two hundred thousand dollars on magazine advertising” (Ashmore, 1958, p. 119). The motivation behind EDO involvement in desegregation was seldom moral or ethical, but much more practical. Winthrop Rockefeller, future governor but at the time head of Arkansas’s Industrial Development Commission, observed “the industrial prospect doesn’t give a hoot whether our schools are segregated or not, but he wants no part of disorder and violence” (Cobb, 1993a, p. 146) Ashmore summarizes the perspective of most southern industrial promoters during this period:
It is not that … the local Chambers … or … state Industrial Development Commissions are particularly concerned with race as a moral problem; on the contrary, many privately share the views of [segregationists] and the Klux. But they also recognize that sustained racial disorder would be fatal to their effort to lure new industries and new capital from the non-South, and that the existing level of tension isn’t doing their handsomely mounted promotional campaigns any good. (Ashmore, 1958, p. 118)
The impact on promotional campaigns flowed from the “Little Rock lesson”. In 1957
Governor Orval Faubus used National Guardsmen to block integration of Little Rock’s Central High School. “Torrid” rhetoric and violence followed, and Eisenhower sent in the 101st Airborne Division to enforce the 1954 (and 1955) Brown v. Board of Education decisions. Faubus closed the schools rather than desegregate. During the crisis, the chamber urged moderation and led a successful effort to oust segregationists from the School Board—stalemate followed, however. By the end of 1958, however, the impact of the crisis on industrial promotion was felt. In 1957 Little Rock attracted eight firms, but it failed to capture a single firm over the next four years. The state attracted 1400 fewer jobs in 1958 (Cobb, 1993a, p. 125). From 1959 on, the Little Rock Chamber led an integration initiative that resulted in the integration of six students, but sent representatives through the South counseling moderation and providing physical evidence from firms that rejected their offers.
Atlanta under Mayor William Hartsfield and his successor, Ivan Allen Jr., is a model of New South efforts to desegregate schools. Hartsdale had assembled over the course of his many years as mayor a loose but functional coalition of business, the chamber and key African-American leaders. The capstone of this Progressive coalition was not urban renewal. It was school desegregation. The coalition, with its last hurrah from Hartsfield, negotiated in the last years of the fifties a peaceful, gradual, school desegregation that became the “pacesetter” for the South and an enormous public image boost in an era of frightening civil rights confrontation. “It was Atlanta’s finest hour”. Hartsfield retired in 1961; he was replaced by the chamber president, Ivan Allen Jr., who supported school desegregation and, in 1961, proposed “an ambitious agenda of redevelopment” (Stone, 1989, p. 49) after defeating Lester Maddox for the office.
Atlanta provided a stiff spine for those chambers and cities that were so inclined. Charlotte, when facing its turn at the desegregation wheel in 1963, publicly debated how to respond; and the promotional record of the chamber, which had brought 50 firms into Charlotte in 1962, produced a consensus among business elites that “this was too good a town to have it ruined”. Joining with the chamber’s pro-desegregation position, they took pride in being called the South’s “little Atlanta”. Their efforts were well rewarded as they quickly attracted the Eastern Airlines computer center—Eastern’s VP publicly announced that the way Charlotte handled its race relations was instrumental in the company’s decision (Cobb, 1993a, pp. 130–31). The famous, should we say infamous, Dallas Citizens Council also successfully led the city’s desegregation effort—and violence and disorder did not characterize that city’s integration.
School desegregation intruded into Norfolk politics as well. The Norfolk City Council followed the Byrd machine’s direction and bitterly contested court orders to desegregate. They closed down the school system for part of a year (1959). The city council supported and participated actively in the resistance. Edward R. Murrow and CBS vividly reported on Norfolk’s belligerence. The Progressive business community came back to life. Taking an ad in the main newspaper, “one hundred leading business and professional men” opposed the city’s position and urged compromise to keep the schools open—and desegregated. The schools opened a week later, desegregated.
In local historiography the Committee of 100 is giving major credit for resolving the school crisis and pointing Norfolk back towards its primary goal of economic development. Certainly the men who recruited the signers of the advertisement represented the Norfolk establishment … director of the National Bank of Commerce … chairman of the Redevelopment and Housing Authority … publisher of the two major papers [and VP of radio and TV stations] … Lewis Powell [future US Supreme Court Justice] … [and president] of the Norfolk and Western Railroad … Most of the businesses represented on the Committee of 100 shared a chamber of commerce orientation toward Norfolk markets and the health of Norfolk real estate. (Abbott, 1981, pp. 130–31)
For every Atlanta, there were cities and governors who took the opposite tack. New Orleans was among the worst: its business community initially uninvolved with integration; its chamber fired its PR chief for supporting the Brown decision publicly; it rejected advice from the Little Rock chamber. After a year of tumult and disorder, the chamber finally backed a desegregation initiative. Mississippi and Alabama were bedrock segregationists—and aggressive BAWI-style prospectors. George C. Wallace (Alabama), an aggressive “prospector” for his state’s attraction program, best demonstrates the uncertain relationship of industrial promotion and desegregation. Birmingham earned a reputation early on for hard-line anti-integration—its economy dominated by Pittsburgh-based U.S. Steel, its chamber “built on its cluster” and aggressively recruited steel-related northern firms. On the verge of landing a major steel-related firm (1962), “Freedom Riders” arrived in town; riots, church bombings and brutality, all reported by the national media, broke the deal—and the firm accepted a more expensive site in Tennessee.
The chamber reacted: “Let a carload of riffraff throw a stick of dynamite and— boom—we’re set back another five years”. Business leaders organized a reform campaign that replaced the old commission form of government with a mayor-council. A “moderate” segregationist defeated Sheriff “Bull” Conner—and Martin Luther King arrived in town. Police dogs and firehoses followed. Fifty businessmen met with King and the mayor and negotiated a phased desegregation plan accepted by all parties— except the mayor. The chamber, however, aggressively opposed desegregation, complaining: “these Yankee corporations [put] pressure on third-rate Babbitts in the [Chamber] to surrender to these Negroes”. Further violence ensued. In September, court-ordered desegregation at the University of Alabama involved Governor George Wallace, whose blocking the door to one black person put him, Alabama and Birmingham in the world’s spotlight (Cobb, 1993a, pp. 137–8).
Wallace was pressured by top Birmingham business elites who claimed they were segregationists, but they believed Wallace’s strategy would effectively close down their attraction programs. Wallace refused to change course, saying, among other things, that he envisioned “no major problem in bringing industry into the state of Alabama” (Cobb, 1993a, pp. 137–8). That proved optimistic, especially when Wallace ran in the 1964 presidential state primaries. The governor’s northern “prospecting” met with opposition and minimal success.
The matter came to a head in 1965 when the Hammermill Paper Company announced its decision to relocate to Selma, Alabama—one of the very worst scenes of racial conflict to that point. Civil rights groups pressured Hammermill not to move; so did Martin Luther King, and pickets showed up at their doors. The incentive package (Selma Industrial Development Board)—including a state-built bridge bond, 50 percent tax abatement and expedited code and plan regulation—sealed the deal and the move occurred. Hammermill, however, received national attention, and while successful from Alabama’s view, was probably a pyrrhic victory in these sense that other states, cities—and potential relocating firms—took note. Hammermill does, however, reveal the rather torturous relationship between selling the South attraction, civil rights and desegregation. Cobb concludes that while business and chamber involvement in desegregation often produced “token” integration at best, and was probably done for the “wrong” reasons, it “did help their communities and states take their all-important [positive] first steps” toward integration (Cobb, 1993a, p. 149).
Civic Improvements, Political Reform, and Education
Selling the South affected other policy areas such as advancement of civic improvements, political reform and recognition that education and human capital were assets that could no longer be ignored. The problem encountered by southern industrial promoters was both widespread and frequent. Site selectors and companies told recruiters companies were rejecting their site because “There is nothing wrong with your city that a good city government couldn’t cure” (Cobb, 1993a, p. 151). Once again, even as early as the 1950s, low costs, low taxes, low wages plus ample incentives were only part of an attraction strategy—image and community “capacity” also mattered greatly.
This was a bit of a shock to a region that had based its strategy purely on the former. In the postwar atmosphere, where industrial jobs required more than simple stamina and reliable work values, better-paying jobs required more education—and that became an important factor in recruitment programs (Cobb, 1993a, p. 161) More spending on public schools necessarily came at the expense of low taxes, and so there were limits to chamber spending advocacy. But getting behind better schools and adding weight to the local debate in favor of improved local education was common.
The most important, in my opinion, educational initiative associated with selling the South was “vocational education.” It is by no means clear who established the first vocational training institute, but it is very clear that southern states were the first to incorporate a state-supported vocational training program geared toward their industrial attraction programs. Through southern innovation specialized training intended for economic development became common in the South during the 1950s and was prevalent by the 1960s. Southern training programs developed curricula (welding, metal-working, draftsmanship and “factory-oriented pursuits”) beyond those associated with agricultural extension, and made them available for relocated firms during the postwar era. Florida is credited by Cobb as being the state that first recognized (mid-1950s) its potential in economic development—as a consequence of its climaterelated attraction of the early space/missile industries. Neighboring Georgia developed state-supported vocational training by 1960. After 1960 southern states afforded a high priority in education budgets to regional vocational schools to ensure their access to all areas within their states. Four-year colleges were also encouraged to provide vocation and training programs (Cobb, 1993a, pp. 163–6).
It was in this period that “customized training”, easily accessible and affordable, became a prime tool for southern attraction packages. Led by Governor Hollings of South Carolina, who aggressively pursued higher-wage jobs to replace the lost textile industry jobs, in 1961 a “quick-response training program [was] designed to respond to the needs of incoming industry through a system of special schools … The plan operated at state expense”. Companies like Firestone Steel, Smith-Corona, Marchant and Lockheed took advantage of it. Between 1961 and 1977 this program served 485 companies and trained over 59,000 workers (Cobb, 1993a, pp. 166–7, 169).
Physical improvements came more natural to chambers and industrial promoters. Many southern states, like Georgia, adopted community certification programs. Sponsored by the Georgia Power Company, the Georgia Municipal Association and the Georgia Institute of Technology’s Engineering Experiment Station, with industrial recruitment an acknowledged goal, a process was established by which a community could demonstrate its commitment “to win recognition as a superior location for industry and business”. Items on its list included physical attractiveness, fire protection, education, planning and recreation opportunities. Mississippi set up its “Measure Needs-Establish Priorities-Recruit Manpower-Initiate Action-To Build Tomorrow’s Community” (M-E-R-I-T) program, which attracted many communities, resulting in a laundry list of civic improvements on sewers, attractiveness and parks.
State-level industrial development agencies aggressively supported these efforts as well. The advantages of civic improvements were not restricted to the larger urban areas, but often were picked up on by small, rural communities as well. Local economic development initiatives reached into policies and initiatives not conventionally considered “economic development” (such as roadside clean-up, fire departments and recreation). As will be demonstrated in a future chapter, business leaders shifted southern urban renewal programs away from “people” focuses, (i.e. housing and neighborhood renewal) into commercial projects, CBD modernization and transportation access—what we shall label as 1950s’s City Beautiful.
Political reform, long a northern chamber favorite, became more common in the South as a consequence of its attraction strategy. Some reform initiatives, such as Augusta Georgia’s GI Revolt of 1946, were not linked to attraction directly; but old county court house gangs couldn’t cut it in the slowing emerging New South. Examples of really bad government, for example Huey Long’s Louisiana, vividly displayed to other southern states how bad government hurt economic development. Long had made a point in 1940 to reorganize and focus his Department of Commerce and Industry to bring in outside firms, and by the 1950s its failure was evident—ranking last in the nation during 1954-60 growth in manufacturing employment. Companies (such as Schlitz Brewing) publicly commented in choosing Texas over Louisiana that Louisiana’s state and local government was the key factor. In these years, the key was to reform state legislatures to break the hold of rural legislators on state governance. Southern political reform seldom lacked appeal to northern liberals, as southern reform “preached fiscal conservatism” but advocated services and other improvements that would appeal to investors and the middle class, yet avoided social welfare programs aimed at blacks or low-income whites.
“Selling the South” attraction strategy carried with it ancillary initiatives, even strategies, that significantly broadened the activities and interests of economic developers in the South. This observation may well be timeless in that attraction works best when the product advertised is of high quality and its advantages useful to the consumer. The South had issues in both regards, and that required southern economic developers to move into policy areas and initiatives that their northern counterparts were not involved in. Elements of southern economic development were indeed proceeding down a different path from the North—not only in strategies, but also in the definition of what economic development included.
NOTES
- Since 1919, Felix Fantus, a Chicago real estate salesman, provided services and information (including on taxes and local wages) based on his experience moving his own chair manufacturing firm from Indiana to Chicago. He provided info for free to clients until his son-in-law, Leonard Yaseen, told him he should charge for it. In 1934 Yaseen left Chicago for New York, starting the Fantus Factory Locating Service. After World War II Yaseen bought into his father-in-law’s original Chicago firm and converted it into a site-location firm. Fantus has since spun off many of the nation’s most successful site-location experts. Today it is a subsidiary of Deloitte & Touche. Greg LeRoy, the Great American Jobs Scam, Chapter 3.
- The War Production Board, Defense Plant Corporation, Industrial Mobilization Plan, Lend Lease Act, National Defense Advisory Commission, Office of Price Administration and Civilian Supply, Office of Production Management, Reconstruction Finance Corporation, Supplies Priorities and Allocation Board, War Industries Board, War Resources Board and numerous subsidiaries to implement specific ventures.
- “Labor in the South,” Bureau of Labor Statistics, Bulletin No. 898 (1947), pp. 16–26. See also Donald B. Dodd and Wynelle S. Dodd, Historical Statistics of the South 1780–1970 (University of Alabama Press, 1973); Jack Temple Kirby, “The Southern Exodus 1910–1960,” Journal of Southern History, vol. 49 (November 1983), pp. 585–600.
- planning.org/growingsmart/guidebook/four01.htm.
- “Corporate Advertising Picture of the 50 States’ Development Programs,” Public Relations Journal, vol. XX (October 1964), p. 28.
- By 1965 Mississippi, Alabama, Tennessee, Arkansas, Kentucky, Louisiana (GO only), Missouri, Oklahoma, Washington and North Dakota permitted both revenue and general obligation bonds. Kansas issued only one general obligation bond. Nebraska, Illinois, New Mexico, Colorado, Michigan, Wisconsin, Georgia, Virginia, New Hampshire and Maine permitted only revenue bonds.
- Maine adopted two separate IDB legislations. The first followed the Kentucky model and the second pioneered the New England model.
- The Scranton Chamber (including its subsidiary, Scranton Industrial Company) diversified its programmatic activities over the next 70 plus years to become a major multi-function EDO.
- ACIR was created by Congress in 1959 as a successor to the 1953 Kestenbaum Commission. ACIR was directed by a 26-member commission, included six Congressmen/Senators, four governors and sub-state and federal officials. President/Congress made most appointments. John Kincaid, “The U.S. Advisory Commission on Intergovernmental Relations: Unique Artifact of a Bygone Era,” Public Administration Review, vol. 71, no. 2 (2011) pp. 181–9.
Ron W. Coan 