MIKE WALDEN COLUMN: What made today’s North Carolina economy?
Published 5:19 pm Wednesday, September 15, 2021
During one of my recent early morning workouts at the local YMCA in Raleigh, I met an impressive young person. He is a senior at NCSU’s textile college. We talked about the textile industry and his occupational goal. I mentioned that the textiles industry was once one of the dominant economic sectors in the state for many decades. That statement surprised him.
I don’t blame my new friend for not knowing the history of textiles in North Carolina. Most of us focus on today and not the past. And if we do know about the past, it’s the past we’ve lived through. At age 70, I’ve lived through more time than my 20-year-old new friend.
When most people think about history, the focus is on big events like wars, elections and inventions. But equally important — at least in my opinion — is economic history, which tracks changes in industries, companies and occupations.
North Carolina has a long and dynamic economic history. When I arrived in the state in the 1970s, the “Big Three” industries of tobacco, textiles and furniture dominated the economy, accounting for almost one-quarter of all economic production.
Today, the Big Three accounts for less than 10 percent of the state’s aggregate economic production. In place of the Big Three is the new “Big Five” sectors of technology, pharmaceuticals, banking, food processing and vehicle parts.
The shift from the Big Three to the Big Five occurred in the span of less than half a century, which in historical time is the blink of an eye. How did it happen? There were five key causes: globalization, the rise of higher education, national banking, the transformation of agriculture and the movement of new companies and people to North Carolina.
Since the end of World War II, the world has been moving toward free and open trade between countries. But two trade agreements in the 1990s and 2000s, NAFTA (North American Free Trade Agreement) and the WTO (World Trade Organization), really put a capstone on globalization. The result was economic production gravitated to locations with the lowest costs.
For North Carolina, globalization meant large parts of the state’s manufacturing base in textiles, apparel and furniture departed to foreign countries. However, one upside was growth in the state’s vehicle parts industry supplying auto assembly factories operating in South Carolina.
As the economy shifted in the late 20th century from relying on “brawn power” to using “brain power,” higher education expanded everywhere. North Carolina had already developed a strong public university system to complement its high-profile private universities and colleges. Hence, the state was ready to expand its college training. One factor helping the state was the high level of state support for higher education, thereby allowing North Carolina to be among the states with the lowest public university tuitions and fees.
As early as the 1950s, farsighted state leaders in North Carolina recognized economic change was on the way. Efforts were made to attract new companies in technology and pharmaceuticals, the most prominent being developing Research Triangle Park (RTP), the first of its kind in the country. North Carolina combined this effort with growing numbers of college graduates, a relatively low cost-of-living, attractive natural amenities and a sunny climate to grow these sectors just at the time traditional manufacturing was waning.
In the 20th century, most states restricted banks to one location. Both North and South Carolina were exceptions, allowing banks to have branches across their states. Hence, when nationwide banking was approved by Congress in the 1990s, banks in the Carolinas had the experience to rapidly expand. The result was Charlotte — on the border of the two states — became the second largest financial center in the country.
As tobacco’s importance in North Carolina declined, farmers looked for substitutes. One alternative was meat — specifically hogs — which led to rapid expansion in the state’s food processing sector.
Last, as the nation became more economically and culturally linked in the late 20th and early 21st centuries, the relocation of both businesses and households increased. North Carolina has consistently been on the positive side of these relocations, with many more companies and people moving to the state than moving out. These movers have come from the two ends of the age spectrum — retirees enjoying their golden years and young people beginning their careers.
These five forces have remade North Carolina — economically, socially and culturally — within the span of five decades. This demonstrates the lesson that change can occur rapidly. Some futurists believe the pandemic has put us at the beginning of another set of forces creating widespread change in the upcoming decades.
Are they correct?
What kind of changes will occur?
And do we have the ability to mold the changes so they provide the most benefit to the largest number of people?
Dr. Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.