In a patch of land that once held pine, spruce and oak trees, an auto-parts maker opened a modern-looking manufacturing plant here five years ago. Over on the east side of town, another company makes computer circuit boards on a former military base. And an hour and a half to the northwest, a telecommunications equipment factory sits in a field that produced cotton a decade ago.
With great fanfare, much of the southeastern US diversified its economic base over the last two decades, luring giant auto companies, sprouting new technology centers and raising hopes that the region would not just enjoy greater prosperity but also weather hard times better in the future than it had in the past.
PHOTO: NEW YORK TIMES
Instead, the opposite has happened. Even before Sept. 11, the interior south -- stretching from Alabama into Mississippi, Arkansas and Louisiana and up through Tennessee and Kentucky -- was mired in its worst downturn in almost two decades.
In the weeks since the attacks, the recession here has only deepened, as consumer spending has weakened and the manufacturing sector has been hit by another blow. With the country at war, some executives are even discussing whether they should begin to pursue military contracts for the first time in years.
Partly because of the region's efforts to diversify, and partly in spite of them, the old Bible Belt has become the nation's new Rust Belt, suffering first and worst from the nation's economic distress.
"The rural South is to this recession as Detroit was to the 1980s recession," said Mark Zandi, the chief economist at Economy.com, a West Chester, Pennsylvania consulting firm that closely follows regional trends.
Through early September, the six-state region had lost 36,000 jobs this year -- more than twice as many, per capita, as the rest of the country -- according to the government's most recent state-by-state employment figures.
As was the case in the Midwest in the mid-1980s and in the Northeast at the beginning of the 1990s, many people here are wondering whether the downturn in the South augurs years of struggle or will serve as a painful but necessary cure for today's ailments.
Silver lining
On the one hand, the economic decline could clear out some of the region's weaker businesses and force others to become stronger, much as US car companies emerged from the devastation of the 1980s in a better position to compete with the Japanese and Europeans.
"The economy of today is a transitional one," Governor Ronnie Musgrove of Mississippi said in an interview. Companies that have moved to Mexico and the Caribbean, seeking lower labor costs in the wake of the North American Free Trade Agreement, would have left the region eventually, he added, and now local officials and business leaders can focus on attracting better-paying jobs by improving the region's schools.
But many residents are worried that without the large corporate headquarters that nearby states like Georgia and Texas have, much of the region will soon lack both high-paying work for college graduates and solidly middle-class jobs that high school and community college graduates have long relied upon.
In Gadsden -- a small city that sits astride the Coosa River in the Appalachian foothills, 96km northeast of Birmingham -- college graduates say there are virtually none of the opportunities available in places like Atlanta or Houston. And many less-educated workers have struggled to find any job that can pay their bills since a large steel mill closed last year.
Since the spring of last year, Gadsden has lost about 2,000 jobs, or roughly 5 percent of the city's total. Since those numbers were compiled, the Goodyear Tire and Rubber Co, Gadsden's biggest employer, said it would eliminate about 200 of its 1,400 jobs.
Analysts blame the harshness of the region's downturn here on two fundamental causes, neither of which shows signs of letting up.
For one thing, globalization and freer trade have hastened the long decline of the South's old industries, like lumber, steel and textiles, by easing the move of businesses to countries with lower wages. The high value of the dollar, reflecting investors' continued long-term confidence in the US, has only added to that pressure by making foreign-made goods less expensive compared with American products.
Equally important, many of the South's newer industries sell their products not directly to consumers but to major companies, who have caused much of the national slowdown by sharply cutting back on business investment. The South's downturn, said Ferrel Guillory, the director of a regional studies program at the University of North Carolina, "is a combination of the collapse of the old economy accelerating and the new economy being shaken."
When Gulf States Steel filed for bankruptcy last year, citing overseas competition, it left 1,700 Gadsden-area residents without work at the same time that new local employers, like makers of auto parts and computer chips, had themselves begun cutting workers' hours and laying some off.
"It's rough," said Kelvin Huff, who had worked for the steel company for 13 years. On Huff's weekly pay of about US$600, he bought a house and expanded it. Now, while he takes classes on auto repair at a local college, he receives US$190 a week in unemployment insurance and has spent more than half of his US$40,000 in retirement savings.
"There aren't that many jobs in Gadsden that pay the kind of money Gulf States did," Huff said. "And there are a lot of things you can buy when you're making US$600 a week that you can't with US$190 a week."
The layoffs and factory shift reductions here have eliminated so much income that even service businesses, the last to suffer in a downturn, began to slump badly before Sept. 11. Since the attacks, the rest of the nation's economy has begun to follow the region's lead.
Huff, for example, no longer makes regular trips to a casino in Philadelphia, Mississippi A number of Gadsden restaurants have closed in the last year, including the Quincy's Family Steakhouse that has kept a "Happy Holidays" sign out front for months, reminding passing drivers of when it shut down.
Improved fortunes
Since the Depression, when then-president Franklin Roosevelt called the South "the nation's number one economic problem," the region has waged a mighty battle to improve its fortunes. In 1936, Mississippi began a program called Balance Agriculture with Industry, in which it tried to woo northern businesses by trumpeting the state's low wages, few labor unions and many available white workers, according to James Cobb, a University of Georgia historian.
Minus the racial aspect, the sales pitch has remained similar for the last 65 years. States have offered tax breaks and other financial incentives to lure companies to the South, and many corporations -- including in recent years DaimlerBenz, BMW and Honda from overseas -- have helped diversify the region's economy.
But outside of the biggest urban areas, the Southeast still depends disproportionately on the volatile manufacturing sector.
When an economy slows, more people reduce their spending on things like new appliances than on health care or food. Companies are also able to move factories to other countries in ways that are impossible for, say, hospitals or supermarkets.
"Over the last 30 years, there's been a massive convergence of the economy of the South and the economy of the nation," said Guillory, the regional expert at the University of North Carolina. "Yet there's still a disadvantageous industrial mix."
Mid-South Industries, the Gads-den company that has its headquarters on a former military base, is typical of the changes and the problems.
Founded in 1962 as a maker of tools and industrial equipment, the company became a government contractor within a couple years. By 1980, it was also making small appliances for well-known companies to sell under their brand names, like KitchenAid.
Mexican competition
Over the next decade, however, the major appliance brands turned to factories in Mexico to make many of their smaller products. By the mid-1990s, the government was cutting back its military spending, too.
The company responded by changing its product mix, making circuit boards; small electronics; and large metal parts, like doors for cars and ovens. Then, almost without warning, the slowdown of mid-2000 arrived. "It just kind of happened, all of a sudden," said Lina Stewart, Mid-South Industries' marketing director. "There weren't a lot of signs."
A telecommunications company canceled orders, and car companies needed fewer parts. The sprawling floor where a largely male work force pounds out metal parts became quieter as Mid-South Industries told some employees to stay home on Fridays. The brightly lit assembly lines where mostly women make circuit boards and telecommunications equipment slowed its output.
Mid-South Industries had laid off about 50 employees in Gadsden and forced its workers to take a week off in October. Those who could count it as vacation got paid, and those who had no vacation days did not, Stewart said. The company may take the same step again before the end of the year.
Company executives are also wondering whether they should try to capitalize on Mid-South Industries' experience as a past maker of grenade casings to bid for future military contracts. But even though the South is home to many military bases and contractors, the war in Afghanistan is unlikely to have more than a small effect on the regional economy, said Matthew Freedman, who follows the South at Economy.com.
Nobody seems to doubt Mid-South Industries is better off for having diversified its economic base.
Mid-South Industries, however, is in no position to hire the hundreds of former steel and tire workers who have lost their jobs. A Honda auto plant that is now opening 56km to the south, in Lincoln, should provide work for some residents, but not enough to pick up the slack.
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