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May 31, 1968

"NON-ECONOMIC DIVIDENDS FROM EDUCATION"

Summary of Remarks by
Monroe Kimbrel, President
Federal Reserve Bank of Atlanta
At the Symposium, "The South in the Next 20 Years"
1968 Annual Meeting of Southern Regional Education Board
Atlanta, Georgia
June 11, 1968

I am delighted to join with you in observing
the twentieth year of activation of the Southern Regional
Education Board for several reasons.

In the first place,

it is always a pleasure to get together with old friends
who have common interests and with whom one has worked
over the years.

In addition, as a person who was born

and bred and has spent his working life in the South,
I feel a great deal of satisfaction in taking part in
any affair that not only can point to some success in
bettering Southern conditions but also has the future as
its principal focus.
My being here today, however, gives me a chance
to emphasize how intimately the Federal Reserve Bank of
Atlanta, as a part of the Federal Reserve System, is
concerned with the welfare of the region it serves.

I

welcome the opportunity to point out once again that the
fundamental purpose of the Federal Reserve System is to




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promote the general welfare.

The Federal Reserve

System is able to promote the general welfare by
influencing the availability of money and credit.
This leaves a large part of our economy outside its
sphere of influence since the way our economy behaves
results from many nonmonetary as well as monetary
forces.

Nevertheless, the success of the Federal

Reserve System is ultimately measured by the extent
to which it contributes to economic growth and
maintaining stability in our monetary and economic
system.
The Federal Reserve Bank of Atlanta has
long been concerned with the problems of economic
and structural change within the six-state Southern
region it serves.

We know at the Bank that, although

money and monetary conditions are important, they
are not the sole— and sometimes not even the most
important— forces molding the shape of a region's
economic growth.

For this reason, we have long

recognized the important contribution education can
make to economic growth and welfare in the South.
To demonstrate this interest, I am going
to read to you a quotation from an issue of the
Monthly Review of the Federal Reserve Bank of
Atlanta published over twenty years ago.




In September

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1946, our Review contained an article entitled "Education
as an Investment in the Sixth District Economic Progress.
After discussing some of the relationships between the
level of education and economic conditions in the part
of the South served by the Bank and some of the
deficiencies in the educational establishment, the
author concluded with these words:

"Raising the

District's income to a national level is something that
will not happen in a year or two.

It is a long-term

problem....What the region's relative economic standing
will be twenty or thirty years hence, however, will be
governed greatly by the education the region gives its
children today."
This attention to education's possible
contribution to Southern advancement was, of course,
shared by many persons and organizations at that time.
However, as Professor Grantham has noted, it was not
until the first quarter of this century that there
began to develop a wider interest in education as a
public responsibility.

It is probably safe to say that

it was not until after World War II that this interest
became strong enough to result in the organization of
such a body as the Southern Regional Education Board.




I am sure that at the time the author of the

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study published in our Monthly Review made his prophecy
he considered twenty years a long way in the future.
Years pass rapidly, however, so that now we have the
opportunity to test some of the implications of that
prophecy.
Professors Grantham and Maddox in their papers
and in the comments they made today have a great deal
of information that we can use in forming the answer
to the question, "Does the South's economic standing
today reflect the kind of education we gave our children
twenty years ago?"

The ultimate answer must be made

by each one of us individually, however, on the basis
of our own personal judgment.

This morning, therefore,

I should like to discuss briefly with you what the
materials they have presented in their papers have
suggested to me.
Both Professors Maddox and Grantham document
the economic progress that the South has made in the
last twenty years.

Figures given in Professor Maddox's

paper show a growth in per capita income from $377 in
1940 to $1,727 in 1960, bringing the South's per capita
income from 63.4 percent of the national average to 78
percent.

How much did education contribute to this

economic growth?

How much more economic progress could

have been achieved had the South devoted even more of its
resources to improve education?




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It is, of course, impossible to answer
these questions with any degree of exactitude.

Part

of the economic growth, as Professor Maddox has
indicated, can be ascribed to the expansion of the
nation's economy; the South merely shared in that
growth.

But surely this cannot be the sole explanation,

since in this period the South not only grew economically
speaking but increased its share of the nation's
expanding economy.
During this period, Southerners had devoted
an increasing part of their resources to education
at all levels.

I am sure that the resulting improved

education was a major force in helping increase the
South's share of the national income if for no other
reason than it facilitated the process of change that
was basic to economic growth.

In 1940, Professor

Maddox tells us, employment in agriculture in the South
was 32.4 percent of total employment.
proportion had declined to 9.6 percent.

By 1960, the
Manufacturing

employment had increased from 15.9 percent to 21 percent;
in service-producing industries, from 42.7 percent to
56.2 percent.

This shift in employment was, of course—

as we all know— accompanied by a technical revolution in
agriculture.




It was accompanied by a shift of population

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from the country to urban areas, and it was accompanied
by a major change in industrialization.

The process,

as Professor Maddox has pointed out, increased the
productivity of Southern workers.
Now, I am sure that a better educated pop­
ulation had more ability to make these changes than
one with lesser educational preparation.

A better

education furnished some of the entrepreneurial
background needed to take advantage of the economic
opportunities and to profitably use the South's
human and natural resources.

Undoubtedly, increased

skills, higher literacy, and adaptability resulting
from better education all contributed to income growth.
Even though we cannot put an exact figure on them,
we are reaping the dividends today in the form of
higher incomes for Southerners from the investment we
have made previously in education.
I think we need to remind ourselves, however,
that we should expect far more from education than
economic growth.

Sometimes we need to remind ourselves

that America's devotion to education originated not so
much to improve the economic status of its citizens
as to prepare its citizens to take an active and
intelligent part in our democratic process.




Its purpose

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was to create the well-informed and thoughtful
citizenry that is essential for the operation
of a governmental and economic system such as ours.
I should, therefore, think it is a mistake to measure
the dividend from the investment we have made in
education solely in economic terms.
Thus, perhaps we should find satisfaction
enough from our investment in education even if
there had been no improvement in the relative
standing of the South in terms of per capita income
at all if at the same time Southerners had learned
to live better with what they had, to improve their
political structures, to reduce social unrest, and to
widen opportunities for individual development.
Both economic development and social
improvements are inevitably tied together, of course.
This is evident from the two papers that have been
prepared for this session.

Professor Grantham,

writing from the point of view of an historian,
could not avoid stressing economic factors in his
essay in contemporary history.

On the other hand,

Professor Maddox, an economist, could not avoid
discussing both as a background and currently some
of the noneconomic highlights of Southern history.




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Would we be better off today— measured both
in terms of income growth and social adjustments— if
in the past we had devoted more of our resources to
education?

Both Professors Maddox and Grantham point

out that, despite the progress made in the South, there
is still some way to go before the South can provide
its people with the level of income enjoyed in many
other parts of the country.

And we have only to look

around to see that the South has many social problems
to solve.

Would more education have speeded up the

process of change, eliminated some of the frictions,
and brought us a little further along toward solving
our economic and social problems?
We cannot be sure, of course, that, had
change been more rapid, the South could have absorbed
the changes without crippling frictions.

As Professor

Grantham has noted, in the past twenty years there had
been a conflict between change and continuity in
Southern life that has carried with it at times bitter­
ness and frustrations.

In the process, there have been

changes in the attitudes of race relations and political
and urban-rural relationships.

But, despite these

changes in Southern attitudes, he also notes the South's
environment, including industrialization and urbanization,
has changed far more than the attitudes of its people.




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I think it would be too much to have expected that
merely devoting more resources to education would
have eliminated all of these problems and tensions.
I cannot help but wonder, however, if it might not
have been worth trying.
But it is to the future that this symposium
is directed, and both Professors Maddox and Grantham
ask about the same question.

Professor Grantham asks:

"Will the dynamic pace of Southern economic development
since 1940 continue during the next generation and
narrow further the long-time disparities of income
and standard of living between the South and other
regions?"

Professor Maddox asks:

"Is the Southern

economy likely to continue to change in the same
direction and at approximately the same rates between
1940 and 1960, or have foundations been laid for more
rapid rates of growth in the future?"
Both professors reply, "It depends."

May

I add that I hope the realizations are fulfilled.
Professor Maddox stresses that the South's
position relative to the rest of the nation depends
greatly upon its competitive position.

He sees an

improvement in this competitive position, and on that
basis he is optimistic about the South's future.




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Among the improvements, he lists the better quality of
Southern education.

Professor Grantham sees that at

least the momentum developed during the last twenty-five
years should carry the South's economic development
forward.

"The South is going to change whether or not

its people find change desirable," he states.

How painful

or how constructive this change will be, he points out,
depends upon the response of its leaders in politics,
business, religion, education, and other fields.

The

need for developing effective leadership is echoed by
Professor Maddox.
Developing the kind of leaders that the South
will need or, in fact, needs now I firmly believe
should be of prime concern in developing educational plans
for the future, especially in plans for higher education.
I am convinced that the future of the South will depend
just as much upon the kinds of leaders it develops
as upon its ability to train scientists,

engineers,

and

technicians.
I believe that we have, as a result of the
changes that have already taken place, certain advantages
that help us face the future as the authors of the two
papers point out.
to change.

For one thing, we have become accustomed

Perhaps at one time when we were confronted

with any change, our immediate reaction was to say to




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ourselves:

"This really can't be," or "How can we stop

it?"
Perhaps we have learned to recognize that
some changes are eminently desirable.
recognized that some are inevitable.

Perhaps we have
Perhaps we have

learned that we need to adapt to change or, indeed,
need to institute changes ourselves.
that this is the case.

Let us hope

If it is, we should not only

help promote Southern progress but we shall find
life much easier.

This is what I hope education

will do for the South.