Southern History Series: Review: Alabama In The Twentieth Century (Economy)

Editor’s Note: This is a work in progress.

Wayne Flynt, Alabama In The Twentieth Century

Wayne Flint’s Alabama In The Twentieth Century paints an incredibly dismal picture of Alabama’s economy. At the dawn of the Jim Crow era around 1901, Alabama’s economy was in ragged shape: in most areas, it was a world that was rural and agricultural, still practicing the cotton monoculture of the 19th century, except that by then population growth, lack of credit and farming on plots of ever more marginal land had trapped the bulk of both White and black farmers in a world of tenancy, debt peonage and sharecropping.

In much of Alabama, the textile and apparel industry had established itself across the state. In many but not all cases, Eastern firms had outsourced the most low value aspects of textile and apparel production to Alabama to take advantage of child labor, low-wages and the lack of a maximum work week here. Eventually, the same factors that brought the textile and apparel industry here in the first place would drive the industry overseas into the Third World.

In Birmingham and the Appalachian region, the iron and steel industries and coal mining employed thousands of Alabamians. Unfortunately, TCI fell under the control of J.P. Morgan’s US Steel during the Panic of 1907. Although it was cheaper to produce steel in Birmingham than Pittsburgh, TCI fell under the control of Northern outside investors and absentee owners in Pittsburgh who imposed a discriminatory pricing formula known as “Pittsburgh Plus” on rail shipments out of Alabama. By reducing TCI to a subsidiary of US Steel, Pittsburgh strangled its competition which was limited to its home market.

In far South Alabama, the lumber industry exploited the longleaf pine forests of the Gulf Coastal Plain as lumber camps moved from site to site. Unlike textiles, coal mining, or iron and steel, most of the capital in the lumber industry was local, but whether it was cotton, lumber, coal, iron or steel, Alabama in the early twentieth century was heavily dependent on extractive, low-wage industries.

A series of outside shocks finally destabilized the “New South” economy which had lingered on from the late 19th century:

• The boll weevil invaded Alabama in 1911 and inflicted a fatal blow on the Cotton Kingdom.
• The First World War led to the creation of federal military bases in Alabama which began to alter the local economy.
• The Great Depression was such a devastating blow to Alabama’s industry and agriculture that it ended decades of Republican domination over the federal government.
• The New Deal led to massive federal intervention in Alabama’s economy which completely transformed the state: the AAA cut checks to landowners which allowed them to purchase the machines (tractors and mechanical cotton pickers) that mechanized agriculture and put an end to decades of sharecropping and farm tenancy.
• The TVA and Rural Electrification Act brought cheap electricity to much of rural Alabama that lacked power. The CCC built much of the infrastructure which has been maintained to the present day. The era of crop subsidies began in order to discourage the overproduction of cotton and the low prices that resulted from it.
• The Second World War was a massive stimulus to Alabama’s economy and federal military spending in Birmingham, Mobile and Montgomery dramatically increased the size of those cities by spurring industrialization and shipbuilding along the Gulf Coast.
• The Cold War, particularly the Space Race, led to fifty years of elevated military spending in Alabama. Huntsville was the most affected and was transformed from a textile town into a thriving aerospace hub. The Rocket City has since developed a more diversified economy after this boost from Germany’s rocket scientists brought their way of doing things to the area. The Interstate transportation system was a massive Cold War era internal improvement project that transformed commerce.
• The Civil Rights Movement led to upheaval and drastic change in the Black Belt and Birmingham. Montgomery and Mobile were also affected although to a lesser degree.
• Starting after the Second World War, globalization began to reshape Alabama’s economy by gradually wiping out the textile and steel and iron industries.

There were many other changes in Alabama’s economy in the twentieth century. The automobile and air conditioner spurred the development of Baldwin County’s beaches which had more in common with Florida’s economic development than the rest of the state. Likewise, offshore oil and gas deposits in the Gulf of Mexico and Mobile Bay mirrored Louisiana’s economic development in the Mobile area.

By the 21st century, over 3/4ths of Alabama was covered in forests (second in the nation only to Georgia), and nowhere more so than in the Black Belt, which reflects the rise of forestry and the decline of cotton. By the 1990s, the eradication of the boll weevil had started to reverse this trend. Poultry processing became Alabama’s new go to “crop” and now dwarfs all other commodities. Catfish farming also rose and fell in the Black Belt due to trade policy. This parallels recent developments in Arkansas, Mississippi and Georgia.

At the start of the 21st century, there were two Alabamas: a few islands of prosperity based on state universities (Auburn, Birmingham, Troy and Tuscaloosa), Huntsville with its aerospace industry, Mobile which is integrated into the I-10 coastal economy, Montgomery which has the state government, and the military base towns like Enterprise, Anniston and Phenix City. Then there is the Alabama beyond the interstates that was left behind in the Black Belt and Hill Country.

As a mere state, Alabama lacks most of the traditional tools that foreign countries have used to kickstart their economies. Instead, we have had to heavily rely on infrastructure projects, government grants, tax incentives, military spending and the long established beggar-thy-neighbor strategy. The State of Alabama has had great success in luring foreign corporations like Airbus, Hyundai and Mercedes-Benz to invest in Alabama by offering multimillion dollar incentive packages in every case. East Asian countries like Singapore and China have used a similar strategy to promote industrialization.

Aside from agriculture (most of it low-wage, low-value added) and industry (most of it now foreign owned), Alabama’s economy is built on a much larger services sector. Telecommunications, banking and health care are the most important parts of the service sector. Like the aerospace industry, both health care and education (and housing and construction) are heavily mixed with federal government spending.

If you look at the poorest, most backwards parts of Alabama outside of the Black Belt (where government intervention in the Civil Rights Movement was a disaster), they tend to be the areas where there has been the least government intervention: the fewest infrastructure projects, the lowest taxes, the lowest amounts spent on education, etc. Were it not for the federal welfare state, these areas would be even worse off than they are now. This is the norm across much of Appalachia.

This review only covers one chapter on Alabama’s economy, but it is sufficient to shed light on the free-market capitalist era before “big government” in the early 20th century – the Golden Age of polio, pellagra, malaria, yellow fever, pollution, hookworms, illiteracy, boll weevils, soil erosion and nutrient depletion, sharecropping, debt peonage, farm tenancy, child labor, textile villages and company towns that gave rise to most of the negative “Tobacco Road” stereotypes about the South. From an economic standpoint, it is not a world which anyone but a lolbertarian would desire to return.

Forgetful of our own history, I live in a state which loudly champions the laissez-faire, free-market, free-trade gospel as the sole route to prosperity while offering foreigners hundreds of millions of dollars in tax incentives to build factories here, accepting millions of dollars in crop subsidies and disaster relief funds, billions of dollars to subsidize health care, education and infrastructure and billions more in government contracts and military spending. Even the renaissance in Alabama’s cotton production since the 1990s is the fruit of a 80 year long government-led R&D crusade to eradicate the boll weevil.

The most “hi-tech” industries in Alabama – aerospace, biotechnology and nuclear power – are heavily linked to government spending and R&D in these sectors. OTOH, the Wal-Marts in every mid-size city in this state are the greatest symbol of free-trade. Your typical Alabama fan cheers for the Crimson Tide while following their football games on a Samsung flatscreen television completely unaware of the role the government played in developing radio, television, computers, semiconductors, commercial satellites as well as the internet and in many cases even the nuclear or hydroelectric electricity as well as the infrastructure that delivers it and powers those devices.

Yet not every twentieth century government program has worked out so well in Alabama: among other negatives, the use of kudzu to control soil erosion, open borders, abortion, desegregation and Prohibition are all on my short list, although Wayne Flynt strongly endorses civil rights. I think integration just polarized our politics. This has to be weighed against a long list of positives like agricultural and medical research at state universities and the revival of the wild turkey and whitetail deer.

In Alabama, the government has its fingerprints on almost every aspect of the economy: health care, education, energy, infrastructure and the environment, but also agriculture, telecommunications, labor relations and automobile manufacturing. Even in industries which have suffered a slide in the early 21st century like steel, textiles and catfish farming, monetary and trade policy is deeply involved.

The real world economy of Alabama doesn’t fit into either the libertarian or socialist paradigms. We’re not really playing “capitalism vs. socialism.”