Industrial Opportunities S.
M. DERRICK
UNIVERSITY OF SOUTH CAROLINA, COLUMBIA, S. C.
During the past two and one half decades, industrialization has been more rapid in the South Atlantic States than in the nation as a whole. This is especially true of North Carolina, South Carolina, and Georgia. While some gains have been made in durable goods and nontraditional regional industries, manufacturers of the area remain predominantly nondurable, and the factory workers are still heavily concentrated in the textile, lumber, tobacco, food, and apparel industries. The major factors leading to industrial growth and development have been availability of raw materials, rapidly growing markets, and a good labor supply. Secondary factors include taxes, community services, and favorable attitudes of local leaders toward new industries. Future industrial opportunities will be based on these same major factors.
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T IS important to note t h a t economically the South Atlantic States do not constitute a homogeneous region. The states vary widely in composition and increase of population, in industrial structure and development, and in the level of income and income growth. For example, during the 1940-50 decade population increase ranged from a high of 46.1% in Florida to a low of 5.4% in West Virginia (12). From 1939 to 1952, production workers in manufacturing industries increased 84% in Delaware and 38% in North Carolina ( 1 1 ) . The textile industry accounts for 68% of the production workers in South Carolina and less than 5% in Maryland and West Virginia ( 1 1 ) . Per capita income is above the national average in Delaware and Maryland and appreciably below it in the other six states ( 1 ) . Manufacturing payrolls as a percentage of total income payments in 1952 ranged from 35% in Delaware to 8% in Florida ( 1 ) . Similar differences could be cited almost without limit! They indicate clearly the economic heterogeneity of the area-a condition which renders it difficult, if not impossible, to make general statements or draw general conclusions appropriate t o this discussion. On the other hand, the pronounced diversity in the economic structure and development of the area gives the bases for a wide range of industrial opportunities. I n over-all industrial growth the region has kept pace with the rest of t h e nation. By some standards of nieasurement and in some states the increase has been appreciably greater. From 1939 to 1952 industrial production workers in the United States increased 60%. I n the South Atlantic states they increased 50%, ranging from 3870 in North Carolina t o 84y0 in Delaware. I n 1052 the area had 11.6% of the manufacturing workers in the nation as compared with 12.3% in 1939 ( 1 1 ) . However in values added and in wages the progress of the area was somewhat
March 1955
greater than the national rate. The increase in the value added per worker in the nation was 175%. Only Virginia and North Carolina failed to surpass this level. The national increase in wages per worker was 198%. All of the states, with the exception of Maryland and West Virginia, exceeded this rate ( 1 1 ) . INDUSTRIAL STRUCTURE
In attempting to appraise t h e industrial opportunities for t h e chemical industries of this group of states it is obviously necessary to pay considerable attention to the general industrial structure and recent trends and the major contributing forces and factors. A careful analysis of the data indicates clearly t h a t manufacturing in the area is concentrated in a relatively few major industry groups. Textiles. First in importance is the textile industry. Slightly more than 40% of all textile workers in the nation are located in this section. And within thp area SOYo are in the three states of North Carolina, South Carolina, and Georgia. The industry accounts for 35y0 of all manufacturing employment in this group of states. I n Georgia it claims 37%; North Carolina, 55%; and South Carolina, 68%. Moreover, the data indicate t h a t the industry in this section is growing a t a rate approximately double that for the nation ( 1 1 ) . It is recognized t h a t the textile industry is not homogeneous and that it is becoming less and less so-in fibers used and products produced. To cotton have been added all the synthetic fibers and wool with an ever increasing variety and style of goods. Nevertheless, the factors t h a t determine t h e location and development of all lines of the industry are substantially the same. Lumber. From the standpoint of the volume of employment, lumber and lumber products follow textiles. Approximately 25% of the lumber industry in the United States is located in the South Atlantic region. Of the total industrial production workers in the area, 10% are in lumber. The industry accounts for 7% in Virginia, 9% in Korth Carolina, 12y0in South Carolina, 15% in Georgia, and 23% in Florida ( 1 1 ) . Tobacco. Another industry in which the South Atlantic group of states can claim a relatively large share is tobacco manufacturing. From 55 t o 60% of the total national employment is in this region. And moreover, the rate of increase is considerably greater than in the nation as a w h 0 l e - 5 8 ~ ~as ~ compared with 18% from 1939 to 1947. Here again within the region is heavy concentration in a few states, Virginia, North Carolina, and Florida together account for 95% of the industry (12). Wearing Apparel. While not yet constituting a n impressively high proportion of the national production, wearing apparel Kith its related products is growing in importance in this section and
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especially so in some of the states. Since 1939 employment in the industry has doubled in Georgia and quadrupled in South Carolina. I n Maryland the industry has been of more than ordinary importance over a long period of years (111. Paper and Chemicals. TTO industries of particular significance in this discussion are showing increasing strength in the area. They are paper and allied products and chemical and allied products. Both have shown a greater rate of growth in the South Atlantic states than in the United States. The rate for the chemicals during the past decade and a half has doubled that for the nation. Slightly more than 10% of the production workers in paper and allied products and 20% in chemicals are located in this area. And what is of more than passing importance is that the two industries are diffused throughout thc area. The distribution is not equal to be sure, but every one of the eight states has sizable employment in t h e two industries (11).
A few other industries not looming largeinareaareofimportance in individual states. I n 1952, food and kindred products accounted for 11.5% of industrial employment in Delalvare, 12.3y0 in Maryland, and 13.7% in Florida. Primary metal product< claimed 13.4% of the workers in Maryland and 18.6% in West Virginia; stone, clay and glass products, 21.0% in West Virginia; and transportation equipment, 18.3% in Maryland ( I I ) . From this brief analysis it is obvious that industrial employment is heavily concentrated in a few industries and these are ones which have experienced the greatest growth and development in recent years. I n 1947 (the latest detailed comparative figures available) the four industry groups, textiles, lumber, food, and wearing apparel, accounted for 60% of the manufacturing workers in the area. If to these are added chemical, paper and pulp, and tobacco, the ratio is 73%. With the single exception of lumber, these industries have grown more rapidly in the South Btlantic States than in the nation as a whole. FACTORS CONTROLLING INDUSTRY LOCATION AND GROWTH S o w to a less factual and more speculative phase of the discussion: Why these industries and their growth in the South Atlantic states? And here we can not be dogmatic. The factors which determine industrial location are numerous and often interrelated and complex. Sometimes they are not PO rational. One student found that just recently a large electrical appliance plant was located in one of the Southeastern states because, after all other factors had been considered, a director’s wife preferred a particular city in the area (8). I n the case of textiles it appears evident that the determining factor is labor. Textile manufacturing processes require much labor not relatively of a high order of skills. The industry, therefore, is labor oriented. This means essentially that the success of textile manufacturing concerns depends on relatively low labor costs. And this condition is met in North Carolina, South Carolina, and Georgia. This is the definite conclusion of competent students of the subject (5-9). I t is true that the area has some advantages in materials, markets, and power, but these advantages-separately or together-have not been decisive influences. I n the development and growth of the apparel industry in the area three factors have been major influences. They are labor, markets, and materials. The proximity of the textile industry and its increased production of finished cloth have been measurable factors. At the same time the pronounced increase in per capita income and standards of living have created larger and larger markets. But materials and markets have been secondary factors. The all-important factor has been labor. The industry employs a high proportion of female worlrers. And these have been supplied by the small towns in the area in quantity and quality and a t attractive wage rates (5). The lumber industry, long important in the area, is oriented 424
primarily to raw material. A large part of the section is in forest lands. As a result of climate, these forests have a high rate of growth. They are close to the major markets of the country. And they are in large part held by small operators and farmers and therefore available for purchase. Some parts of the food industry located in the area are oriented to their markets, but the main food processing developments are material based industries. This is true of dairy products, meat packing, poultry dressing and packing, processed citrus fruit, frozen foods, and vegetable oils. With the phenomenal growth of livestock, dairy, and poultry production and greater diversity in crops, materials in abundance and in constant supply have been furnished these industries. The bases for the chemical industries including pulp and paper manufacturing are markets and materials. The textile industry and a changed and progessive agriculture in the area have created great industrial markets. ilnd forests and streams have supplied the raw materials and industrial water. I have traveled a long way to come to grips specifically with the industrial opportunities in the chemical industries. Perhaps I have been too tedious. But the establishment and growth of a group of industries do not take place in a vacuum. They depend on the development of other industries and on agriculture, in fact, on the total economy. The textile industry in the South Atlantic states is a major market for the chemical industries. I n the growth and development of the textile induetrv labor will be of primary importance That the area will amply supply this factor is abundantly evident. The natural increase-the margin of births over deaths-is greater than t h a t for the nation as a whole. I n some of the states of the area-Xorth Carolina, South Carolina, and Georgia-it 19 decidedly higher ( 1 2 ) . But more important is the labor surplus on farms brought about by mechanization, increasing application of scientific knowledge, and the change from intensive to extensive agriculture. It is significant in this connection that during the 194040 decade the area experienced a net out-migration of population. This in spite of strong migrations to Prlaryland and Florida. I n the textile states of K‘orth Carolina, South Carolina, and Georgia the net loss was especially heavy. North Carolina lost 43% of its natural increase; South Carolina, 58%; and Georgia, 55% (12). A major problem in these states is supplying enough nonfarm jobs to take care of the surplus farm workers (9). Here then are the workers, and due t o the lack of competing opportunities, a t wage rates and work loads and conditions which give the textile industry favorable labor costs (6-9).
And labor is not an inconsequential factor in chemical industries, especial11 in synthetic fibers and pulp and paper. Next t o materials and markets, it is an important third factor. The evidence strongly suggests that in some of the more recent developments it was the deciding factor. It is highly probable that in the future it will become even more important. That the chemical industries are tied up with agriculture and its development is obvious, and this is a two way relationship. Agriculture is a market for a wide range of chemical products and a source, perhaps an increasing source, of raw materials. F7’hile the agricultural industry is declining relative to nonfarm activities it is a major industry in the states. I n employment it is second to manufacturing. I n some of the states the number of production workers exceeds those in manufacturing. Moreover, the industry is in the midst of a revolution throughout the area Kew processes, new methods, new products, better use of land, improved strains of livestock, poultry, and field crops, and more adaptable polver machinery are being developed almost daily in an ever increasing stream. What is known about business is beginning to be applied ruthlessly to agriculture. And a wider range of agricultural products a t lower per unit costs are being turned out. The results ale a more prosperous and stable agricultural economy.
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Resources I n this picture is a widening market for chemical products and a n increasing source of raw materials. The demand in the volume and varieties of insecticides, fungicides, weed killers, and a wide range of other chemicals has grown a t a fantastic rate, and the demand is being met with an adequate supply. Perhaps the chemists will save us from the animal and plant pests and diseases t h a t seem t o increasingly bedevil agriculture. More important is t h e increasing use of commercial fertilizers of improved quality. The volume consumed in the nation has more than doubled since 1940 (1%). There can be no doubt t h a t the increasing range of agricultural products a t advantageous costs in the area opens up valuable sources t h a t have strong possibilities of exploitation. And what is of high significance is t h a t these sources are relatively inexhaustible. Through programs of conserving and rebuilding soil, productivity not only can be maintained but also increased. Such programs are now in operation on a widespread scale in these South Atlantic States. The availability of pulpwood is the basis for the location of the pulp and paper industries. The South Atlantic States possess this raw material in adequate volume and the supply will be maintained and increased. As has been pointed out in another connection, more than two thirds of the area is in forest lands, and due t o climate the forests have a high rate of growth. Through the abandonment of marginal lands for crop purposes this forest area will be increased. But of greater weight, t h e programs of reforestation, conservation, and protection will bring larger forest yields t o the land. Significantly in South Carolina and Georgia t h e production of pulpwood is becoming a major annual crop. Small farmers are using their woodlands with increasing success t o supplement farm income. Moreover, large bodies of forest lands are available for purchase t o enable the large mills to safeguard their investments by t h e ownership of sufficient timber reserves. Another resource definitely required in the same chemical and related industries is industrial water. It is an essential in pulp and paper, in wool and synthetics, and in some of t h e textile operations. Of this resource the area has a plentiful supply and in most cases of acceptable quality. With an annual rainfall of 50 inches or more in the piedmont and mountain area, with increasing forests and farm conservation practices t o provide reservoirs, and with numerous rivers and streams flowing from the mountains t o the sea, practically every section within the states has an ample supply of industrial water for some segment of the chemical or related industries. Reference has been made t o the growing consumer market in this group of states. From 1929 t o 1952 t h e area experienced a percentage increase in per capita income greater than t h a t for t h e nation as a whole. The increase was especially noteworthy in Virginia, North Carolina, South Carolina, and Georgia. Increase i n per Capita I n c o m e , 1929-52 ( 7 ) Virginia North Carolina South Carolina Georgia
March 1955
1929 $422 309 252 329
1952 $1322 1049 1099 1137
% 213 239 336 246
Starting from a low base and limited purchasing power the pronounced increase in income has brought a tremendous upsurge in consumer buying. And the trend continues. Here is a growing market not only for the chemical, but also for all manufacturing industries. There is one final basic factor of strategic importance t h a t is now in the making. The area is in t h e midst of a surging educational program of real meaning and vitality. By almost superhuman efforts i t is providing a pronounced increase in the quantity and quality of educational facilities from the kindergarten through the university. With this will come industrial skills and know-how and managerial abilities in greater abundance. Other factors favorable for growing industrial opportunities in the South Atlantic states exist. Secondary influences, such as conditions of living, tax burdens and tax structure, governmental services, labor mores, labor-management relations, community attitudes, and promotional programs, all have played and are playing their part in this moving industrial picture. It is no secret t h a t the states in the region welcome manufacturing industries-from within and from without. They honestly seek t o encourage industrial growth and development. That they have by various means taken undue advantage of competitive areas is not supported by the facts (9). Long dominated by an agricultural economy and an agrarian philosophy,, they simply seek to bring a better balance to their economic life through the fullest possible use of their primary resources of materials, markets, and manpower. T h a t they are succeeding is a source of pride to the area and of profit and strength to the nation. REFERENCES (1) Graham, Robert E., Jr., U. S. Dept. Comm., Washington 25, D. C., Survey of Current Business, 33,7-I5 (August 1953). (2) Kennedy, John F., The Atlantic, 193, 32-6 (January 1954). (3) Lepawshy, Albert, “State Planning and Economic Development (4) (5) (6)
(7)
in the South,” National Planning Association, Washington, D.C., 1949. Lester, Richard A., Southern Economic J.,Vol. XII, No. 3, pp. 238-62 (January 1946). MoLaughlin, Glenn E., and Robock, Stefan, “Why Industry Moves South,” National Planning Association, Washington, D. C., 1949. Morris, James A., J . of Industrial Economics, Vol. 11, No. 1, 6583 (November 1953). Morris, James A., “Woolen and Worsted Manufacturing in the Southern Piedmont,” Univ. S. C. Press, Columbia, 8. C.,
1952. (8) Paterson, Robert W., Univ. 8. C., Business and Economic Review, I, 1-4 (April 1 , 1954). (9) Robock, Stefan, Southern Economic J., XX, pp. 307-27 (April 1954). (10) Tomb, John O., Haruard Business Reuiew, 30, No. 5,83-90 (September-October 1953). (11) Univ. 5 . C., Bureau of Business and Economic Research, “Computations of Census Data on Manufacturing,” 1954. (12) U. S. Dept. Comm., Bur. Census, Statistical Abstract of the United States 1953. (13) Van Sickle, John V., “Regional Economic Adjustments: The Role of Geographical Wage Differentials,” Papers and Proc.
66th Annual Meeting of American Economic Association,
pp. 381-92, May 1954.
RECEIVED for review September 15, 1954.
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ACCEPTEDJanuary 13, 1955.
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