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.