View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

ALABAMA'S ROLE IN THE ECONOMY OF THE SOUTHEAST
An Address before the
Graduate School of Business
The University of Alabama
and
nibers of the Alabama State Legislature
Tuscaloosa, Alabama
December 16, 1970
by
Monroe Kimbrel, President
Federal Reserve Bank of Atlanta

economic growth of Alabama.

To do this, we must weigh the economic facts and figures

of Alabama against those of her neighboring southern states and against those of the
nation.
First, let us examine the progress of the South in recent years.

Mien I speak

of the South, I am talking specifically about the Southeast as defined by the
Department of Commerce.

This is the twelve-state area, which in addition to Alabama,

includes Virginia and West Virginia, the Carolinas, Georgia, Florida, Mississippi,
Louisiana, Arkansas, Kentucky, and Tennessee.

^

Forty years ago— that is, in 1930— the South, undoubtedly, was an extremely
different economic area.

Its per capita personal income was a little less than 50 per­

cent of what it was for the country as a whole.

Things have changed.

Last year, per

capita income in the Southeast was almost 80 percent of the national average.
Those of us who have witnessed these changes day by day and year by year may
not realize sometimes how great they have been.

To change from a per capita income

position that is approximately half as large as the nation's to a position where per
capita income is about four-fifths of the national average has required a ^] 0 wt6 r rs,to
T
of economic growth in the South than elsewhere.




During the last four decades, the

2

Southeast, in terms of per capita income5 has consistently been classified as a fast­
growing region.
One of the reasons for this rapid growth was that in the economic setting of
the period the South’s water, sunshine, and an ample labor supply gave the South a
comparative advantage in the production of certain goods for export to other regions.
These factors contributed to the development of the pulp and paper industry, chemicals,
apparel, textiles, and electrical machinery manufacturing industries.
In the process, the structure of the South’s economy undement substantial
changes.

As the Southeast shifted from agriculture as a chief source of income to

manufacturing and the provision of services, more people moved to cities.
became more urban.

The South

A growing income made it possible to improve the South's ability

to educate its children.

In the last twenty years, the median number of school years

completed came closer to equaling that of the rest of the nation.
During the last decade, several other factors have had economic importance.
(1)

For the first time since the 1870’s, the 1960’s showed more
people moving into the South than out of it.

(2)

The metropolitan population of the South increased, on the
average,

, twice the rate of

the North.
(3)

The proportion of people living in poverty in the South
declined from 35 percent in 1959 to 18 percent in 1969.

In a nutshell, the South in the Sixties became more like the rest of the nation
by growing at a faster-than-national rate in a period when the nation witnessed an un­
precedented, sustained, economic boom.




~

3 -

Alabama’s Recent Economic Growth
I do not have to tell you that Alabama is in the heart of the South.

Whatsis

the recent economic record for Alabama?
If I were to give the state of Alabama a report card on its recent economic
progress, ,the majority of the grades would not be "A's” and "B’s."

While Alabama has

made progress in some areas, relative to her recent past and relative to the United
States as a whole, she has lagged behind the growth of the South

And although I have

just sketched for you the shining economic growth record of the South, it must be remembered that the South^is still behind the national average and must continue to grow
at a significantly faster rate to bring itself up to the national average.
examine some specific economic facts about Alabama.
In the 1950’s, people left the farms of Alabama—
^ i g u ^ ^ - a t a much faster rate than in the South or in the nation as a whole.

During

the 1960's, they left the farms at the same rate as the South^or^-the—naUfern. ^Raxnr— i n - t h ^ ^ i r i i:t r i e s .

This movement out of the agricultural sector was mirrored by slight gains in
manufacturing employment during the Fifties and by much larger gains in the Sixties.
For Alabama, and for the South as a whole, manufacturing employment gains were approx­
imately twice the national average.
e slight gains in .manufacturing /employment/ in the /Fifties wereyspm
a gain in cobstruction employment,
we

ve'Urhe" Sou^thVg 'ga^n fpj the Sarnie period.

10




/! sZ)

ihe^national average and a gain
On the other hand, the increase in

expenditures for new plant space and equipment in Alabama during
r while
,

/

1960 to 1966

percent higher than the national average, was only two-thirds that of

- 4 -

the South’s increase.

Not surprisingly, construction employment in the Sixties,

while outpacing the U. S. gains during that period, fell well below the gains posted
by the South.
When we look at financial activity, we find a similar pattern emerging.

Mea­

suring deposits of all banks, we note that Alabama’s gains in the 1950’s and 1960’
s
were slightly less than gains in the South but more than gains in the nation.

In

the Sixties, we also find in the area of bank loans a gain posted which is greater
than the national average but less than the gains by the South.
A financial statistic about Alabama that is disquieting, however, is what is
called "bank debits," which are simply charges to checking accounts, or more simply,
the dollar value of checks written.
indicative of total spending.

Its chief value is that it is thought to be

In the 1950’s, Alabama’s increase in this area slightly

led the nation’s and the South’s increase by about 10 percent.
^

In the Sixties, however,

Alabama’s increase was only two-thirds of the South's increase and less than one-half
of the nation’ increase.
s

Economists in the area of economic development would frown

when looking at this statistic because it most likely indicates a slower rate of growth
of economic activity.
Two other areas we might look at are per capita income and population growth.
In the Fifties, Alabama's increase in per capita income made great strides:

it rose

at twice the national rate of increase and at a rate almost 50 percent greater than
the South.

However, in the Sixties Alabama slipped behind the average increase of

the South as a whole but stayed slightly ahead of the nation's rate of increase.

An

increase, no matter how small, is certainly commendable, but when we compare Alabama’s
per capita income in 1969 with the South’s and the nation’s, we find that it is only
70 percent of the national average and




88

percent of the southern average.

5

Another economic area we might examine is population growth.
population in the U. S. grew more than 13 percent.
place.

During the 1960's,

In the South, great gains took

As I mentioned earlier, for the first time since the 1870's, more people,

during the last decade, moved into the South than moved out of it.
Population in the typical southern state in the Sixties grew at a higher rate
than 10 percent.

Georgia grew at 16 percent; Louisiana, at 12 percent; and Tennessee,

at 10 percent.

Alabama's increase j^as only a little more than 5 percent. Since this
V
fact surprised me, I immediately had one of the Bank's economists investigate the
reason for Alabama's low rate of population increase.

Although all the latest Census

figures have not yet been tabulated, a population expert in the field gave him a oneword reply, "Outmigration.”
I must stress that population growth in itself is not an end.

However, given

the net inmigration to the South in the past decade, outmigration may be a point for
concern.

This is particularly true if it results in a scarcity of labor needed for

development.

Furthermore, less population means less representation in our nation's

capital.
In two areas during the 1960's, Alabama has shown great strides— namely, manufacturing and education^/Alabama's increase in value added by manufacture during this
period equaled that of the South's large increase— a rate exceeding the national
average.

Alabama also lowered the pupil-teacher ratio in its schools from -29 . - students
9

per teacher in 1960 to ^FrL in 1969, a figure now in line with the southern and
national average.
Let us, then, sum up Alabama's recent economic progress.

Positive increases

have taken place in education and manufacturing, and in a few other instances the in­
creases in Alabama have been relatively faster than in the nation.




However, in terms

6 -

of income and in some areas of finance, Alabama’s growth has been below the average
growth rate in the South.

And we must remember, before we pat ourselves on the back

for the latter, that the South, to draw even with the nation, will have, to continue
to grow for a good period of time at a rate faster than the nation’s.

What is the Future of the Southern Economy?
I recently had the opportunity to study and evaluate the prospects for Southern
economic growth in the next decade.

During the course of this investigation, I was

struck by how much, in the recent past, the southern economy has become like the
national economy.
recessions.

The South has shared in the economic expansions and also in the

Economically speaking, in the last decade, it has grown at a more rapid

pace than the nation as a whole.

Current projections, based largely on past statisti­

cal trends, project this faster-than-average growth to continue.

What are the prospects

for the nation’s economic growth?
average U. S. family income could rise from $8,600 today to $15,000 in 1985, measured
in dollars of constant purchasing power.

It would certainly be tempting to say, that

the South would automatically share in such growth and even, perhaps, continue to
maintain an economic growth rate greater than the national average.
However, these prospects for economic growth must be evaluated in light of the
existing economic facts and institutions which have prevailed and are likely to pre­
vail.

What assumptions can we make in these areas?
As I said at the outset, the South’s water, sunshine, and abundant labor have

placed it in a position of competitive advantage to produce goods and services the
nation demanded.
have in the past?




Can we be sure these advantages will hold for the future as they
All of us also have noticed lately that undesirable things have

7

been happening to our water and that we are having more and more trouble seeing the
sun through man-made clouds of pollution *
We can no longer assume that we can attract a major industry to our region on
the basis that it can locate on one of our rivers, draw pure water upstream, and dump
its industrial wastes below.
available.

For one thing, fewer and fewer such plant sites are

In addition, the requirements we shall inevitably impose to control pollu­

tion are going to be costly.

We can apply the same sort of reasoning to our other

natural resources.
^ ^ W i l l the South continue to have a competitive advantage based on an abundant
labor supply?

In the past we could almost always assure a new industry— 'wherever it

might locate— that an adequate labor supply would be available.

This was partly so

because we could count on drawing on what seemed to be an inexhaustible supply of
workers from our rural areas where the reduced need for f$rm labor was freeing them
from other work.
In the process of shifting from farm work to nonfarm work, the productivity of
southern labor increased enormously.

We are getting closer to the time, however, when

this source of labor supply may dry up.

Then the task of raising worker productivity

will have to be concentrated on improving the productivity of nonfarm workers, rather
than shifting from farm to nonfarm jobs.
task.

This may prove to be an extremely difficult

The South’s greatest potential lies in improving the quality of its labor force,

and that requires even greater educational and training efforts .
We are just now facing some of the kinds of problems of urban congestion that
have plagued other areas in the past.
to provide us with firm estimates of the future size of the Southeast’ population.
s
However, it seems reasonable and consistent with the projections that have been




-

8 -

released for the United States that by 1985 there will be between 50

and 55

million persons living in the South, compared with about 43 million in 1970.
If present trends are any indication, most of these additional people will be
found in southern cities.
in the 1960’s.

Many rural counties lost population to the urban counties

In the ten Southeast metropolitan areas with populations over 500,000,

the population increase averaged 25 percent, while the region as a whole grew by 13
percent.
Although 10 of the 64 metropolitan areas in the United States with over 500,000
persons are found in the Southeast, they have not yet reached the size that seems to
create almost unmanageable social and economic problems.

None are among the 12 metro­

politan areas in the United States with over 2 million inhabitants.
It seems to me that the stage in which we find ourselves in respect to urbangrowth is extremely fortunate.

Furthermore, urban growth may be inevitable in the

South, but before we become too overcrowded, we still have time to adopt policies and
practices of a preventative nature.

We do not have to concentrate solely on remedial

measures to deal with the accumulated problems of the past.
How we handle the problems associated with urban growth in the South depends
upon human decisions.

Orderly growth of our urban centers is not going to occur unless

persons with influence recognize this growing problem, unless they understand the need
for forward planning at the local, state, and regional level, and unless they realize
that growing urbanization is going to create needs for more public services such as
transportation systems, educational facilities, hospitals, recreational areas, and
cultural centers.

They must be able to convince others as well as themselves in order

that thought will be followed by action.




If these human decisions are not made in

9

advance through coordinated planning, we may end up with a hopeless tangle of bureau­
cratic organizations.

Such organizations will be concentrating solely on remedial

means and will be slow to act or, if they do act, encroach into areas better handled
by the private sector.

Where>| DoLrs'^^^h^m^^lblb^-lnr?
Given what I have mentioned to you on the future of the South, and assuming a
continuation of the wise human decisions of people of the South t ) successfully deal
V
with problems, the region is in a favorable position to continue on a growth trend
in the 1970's.

We might recount among its assets the main fact that it is already

rapidly growing, for the most part, in an orderly fashion, with rising eduational
levels, and still manageable size cities.
What about Alabama?

Will it share in this growth?

It can, but there is no

guarantee.
As I mentioned before, there is ample evidence that Alabama is lagging in eco­
nomic growth, both relative to the South and to the nation.
stands low on the economic ladder.

In absolute terms, it

It ranks well below the nation in per capita

income, and a larger-than-average percentage of its citizens are living in poverty.
It appears to me, that Alabama, like many other states, has a two-fold program
that it must tackle simultaneously.

First, it will not be immune to the need for coor­

dinated regional, state, county, and local economic planning, which is becoming more
evident in the South and in the nation.

At the same time, it will have to take

positive steps to increase economic activity within its boundaries.
inescapable fact of economic development.

There is one

Economic growth tends to feed on itself.

Fast growing economic regions have little trouble in attracting outside capital and




- 10

talent.

We have seen recently evidence that Alabama is losing some of its most

valuable resources, labor, through outmigration.

There is also evidence that its

growth of financial capital is lagging behind the rest of the South.
0

*

^ ^ i ' Alabama is blessed with rich natural resources.
t.
p rs-

It is one of the largest

/

states east of the Mississippi.

Its population density, one of the lowest in the

South, and in the East for that matter, would seem to indicate attractive land prices
for firms wishing to relocate.

It possesses the same mild climate of the South, and

its^location is almosh —as— eenbral- to the South as—my home sLate^l^ifenxga3 ^-4^i-eh
4 ^ a ^ ^ £oWTF>g=fh ^ i v ± s g ^ e ^ ^ ^ S ^ ^ o w e a ^ d
;e
^
f f - - uring —thsi

last twe a t}7 yaa-g-s .
i-

Alabama 's cities

are still of manageable size and it possesses a deep water port io-Jloc4u Zan*,
£nt/>C'sXsut 4

What then is the problem?

It is not a simple one, but one which does not seem

unsolvable, if correctly diagnosed.
-this^po^nt

jtd^Tl^^osC^ibh^th^s^jrechmi^^dat^^^*^^^

Alabama, in order to share in the projected southern and national economic ex­
pansion of the coming decade, must thoroughly study and assess its economic potential.
It should carry out studies by a coordinated effort of state and local political,
business, and civic leaders.

It should evaluate the economic data and the image of

Alabama as a place to live, work, and invest.
Where deficiencies are found, it would be well to admit they exist and take
steps to correct them.

If pollution is a problem in a major city, admit it and then

do something about it.

By using this approach, a state with the inherent economic

advantages of Alabama could only serve to improve its image to outside talent and in­
vestors .
Let me emphasize, however, that such progress will not be made unless the
citizens of Alabama perform the required organizational efforts to assess the state’s




/7

11

economic prospects.

Moreover, all the studies in the world will be of no value

unless plans and money are available to implement them.
There, will be many states competing for outside capital in the Seventies.
Alabama’s prospects for economic growth would be greatly enhanced by success in this
area,

Her natural resources, plus a concerted effort by her citizens to project

Alabama as an economically, socially, and environmentally progressive state, could
reap great economic rewards in the next decade.