By Sharon Nunn | Photographs by Seth Herald for The Wall Street Journal 

NATCHEZ, Miss. -- The American South spent much of the past century trying to overcome its position as the country's poorest and least-developed region, with considerable success: By the 2009 recession it had nearly caught up economically with its northern and western neighbors.

That trend has now reversed. Since 2009, the South's convergence has turned to divergence, as the region recorded the country's slowest growth in output and wages, the lowest labor-force participation rate and the highest unemployment rate.

Behind the reversal: The policies that drove the region's catch-up -- relatively low taxes and low wages that attracted factories and blue-collar jobs -- have proven inadequate in an expanding economy where the forces of globalization favor cities with concentrations of capital and educated workers.

"Those policies worked before, then they became fundamental constraints on the [South's] long-term growth," said Richard Florida, an urbanization expert at the University of Toronto.

Higher taxes and education spending aren't a cure-all, as many northern states now suffering population loss have found. Nor is the South alone in its economic troubles: Automation and globalization have wiped out millions of good-paying factory jobs around the country, especially in the Rust Belt.

But these trends have fallen especially hard on the South, which is more rural than the rest of the country and has fewer big cities. In part because of its legacy of racial segregation the region has, relative to others, underinvested in human capital. Thus the South, the only region to have enjoyed such a dramatic rise in the postwar period, is the only one to experience such a retreat in the past decade.

In the 1940s, per capita income in the states historians and economists generally refer to as the South -- Louisiana, Mississippi, Alabama, Georgia, the Carolinas, Virginia, West Virginia, Oklahoma, Arkansas, Tennessee and Kentucky -- equaled 66.3% of the national average, according to historical data reconstructed by University of Kent economist Alex Klein and The Wall Street Journal. By 2009, that had climbed to 88.9%. That was the high-water mark. By 2017 it fell back to 85.9%.

Against the Northeast, the country's wealthiest region, the South's decline began sooner and has been steeper. The South's per capita income peaked at 79.1% of the Northeast's level, and has since fallen to 71.6%.

(Those numbers would look slightly better under the U.S. Census Bureau's broader definition of the South, which adds in Texas, Florida, Maryland and Delaware, though the general trend remains the same.)

Rural Adams County in the southwest corner of Mississippi exemplifies the typical story of the South's rise and fall. It once attracted thousands of higher-paid factory jobs, particularly in the 1930s, when a big tire and rubber plant arrived. But the major factories began closing in the 2000s; the tire plant shut down in 2001. "Friends and family that have been here for 20 years...were packing up and leaving," says Chandler Russ, who grew up in Adams.

The income gains the county notched against the rest of the country from the 1950s to the 2000s have completely reversed.

The county population peaked in 1982 at 39,172, and has declined about 20% since. Factory jobs, 18.5% of the county's total in 1992, were just 5% in 2017. Per capita income is now 56.8% of the national average.

Today Mr. Russ runs its economic development office, working to attract better paying jobs. It's an uphill battle. A slim supply of college graduates makes it difficult to attract high-paying employers, which in turn gives the county's smartest students little reason to stay. "Our brightest and best that go to college and get a good education don't come back," said Glenn Green, a prominent local Realtor. He has sold fewer pricier homes in recent years as the engineers, plant managers, and other higher-paid workers who used to staff the big plants have left.

Within the South, individual cities and states have had widely diverging experiences. So-called Sunbelt cities like Charlotte and Atlanta have attracted both wealthier white-collar worker and retirees from richer regions, and less-educated workers from poorer, rural areas. Thanks to these cities, the entire region rebranded itself as the New South.

And neighboring states such as Texas, with its own unique economy, often got lumped in. But unlike the rest of the South, Texas is relatively urban, with five major metro centers. It has a thriving tech sector and ample reserves of oil and gas which have boomed in recent years thanks to the fracking revolution.

"The 'New South' is a narrative that is more applicable to the urban centers," says James Ziliak, an economist at the University of Kentucky specializing in poverty. Much of the region consists of smaller towns and rural communities whose fortunes rose, then often fell with that of a single local industry.

As the divide between rural and urban incomes widens nationwide, the South has been particularly affected, since a third of its population lives in rural areas, compared with under 20% for the overall U.S.

The South's economy was historically poorer because it was heavily dependent on agriculture, one legacy of the dominance of cotton and slavery. In 1880, about 90% of southern workers were employed in farming, compared with about 66% nationally, according to Sukkoo Kim of Washington University.

To diversify and lure manufacturing, southern states, starting with Arkansas in 1947, began passing right-to-work laws that weakened unions and kept taxes lower than in the wealthier North. And they spent less, especially on education: an average of $1,869 per student in 2009 dollars, in 1960, compared with $2,741 nationwide, according to the Education Department. In part, this reflected the long shadow of slavery. In the Jim Crow era white taxpayers and politicians resisted spending that benefited blacks, according to historians.

Mississippi was an early adopter of this industrial push. In the 1930s, it passed the nation's first state-sponsored economic development plan to encourage northern industries to move south, using low taxes, low wages and other incentives. Manufacturers flooded in. By 2009, per capita income had climbed to 76.3% of the national average, from just 30.3% in 1932.

The plan was particularly successful in Adams County, where, by 1960, farm labor declined to one of the lowest percentages in the state. Armstrong Tire and Rubber, later known as Titan Tire, was one of the first manufacturers to respond to Mississippi's plan, opening a plant in Natchez in 1939. It became a linchpin in the community, the behemoth building's outline visible above the tops of homes and businesses in its neighborhood. It eventually employed more than 1,000 white workers, and by the 1960s began hiring blacks, including Jessie Winston, now 108 years old, who checked the quality of tires coming off conveyor belts, and his daughter Helen.

The streets surrounding the tire plant were busy with passing cars and families and lined with fully occupied, brightly painted homes, the Winstons recall.

But in the 1980s, globalization and automation began eliminating the sorts of lower-skilled manufacturing jobs that the South had been so successful at attracting. The tire plant closed permanently in 2001 largely due to regulatory lawsuits and union negotiations that turned sour. This threw Mr. Winston and his daughter out of work. Other factory closures happened around the same time, devastating the county's tax base.

"All of a sudden that [industry] money stops flowing through the economy, " Mr. Russ said. "It was alarming."

The neighborhood near Titan's gray and rusting plant is quieter now, there is less traffic, and empty homes with broken windows contrast with the well-kept lawns of the remaining residents and churches. The restaurants the Winstons used to frequent have closed. Mr. Winston continued a hair-cutting side gig and later worked at a bakery, making doughnuts and pastries. His daughter became a housekeeper for a local community college.

The federal government has tried ways to redress regional disparities. Huntsville, Ala. was a major recipient of federal missile and space research jobs and funding. President Donald Trump's tariffs are meant to bring factory jobs back to the U.S., including the South. After the Trump administration threatened 25% tariffs on auto imports, Toyota announced it was building a $1.6 billion assembly plant with Mazda Motor Corp. in Huntsville. But such moves have yet to eliminate the South's income gap.

Many economists say the most effective way for the South regain its momentum would be invest more in education, which would over time create a more skilled workforce to attract employers. But Mississippi State University economist Alan Barefield notes that is difficult to reconcile with southern states' historic desire to keep spending and taxes low.

As Adams County's industrial jobs fled over the past decade, they have been replaced by jobs in the lower-paid leisure, hospitality and food sectors, which are now about a fifth of the workforce. Natchez leaders have also tried to draw tourism dollars, emphasizing its deeply Southern roots and proximity to the Natchez Trace Parkway, a series of trails formerly used by Native Americans. Foreign tourists now meander down the city's waterfront path with an unobstructed view of the Louisiana coastline, and make their way through antebellum-style plantation homes with tall, imposing white columns.

But the dearth of college-educated workers has hampered its ability to attract high-paying white collar information and professional and business services jobs, which made up less than 8% of the workforce.

So city leaders are doing their best with what they have. They encouraged its local community college, Copiah-Lincoln, to adapt its offerings to what potential employers may need. This is showing signs of working. Great River Industries, which makes fabricated metal products like industrial-sized vessels that hold chemicals, moved to Natchez in 2013 after the city pushed the community college to redesign its welding curriculum. The firm currently employs almost 300 and plans to hire more. A couple of other smaller manufacturers have also set up shop.

But Mr. Russ acknowledged that the city can't depend on just a few manufacturers in a handful of product areas or it could go the way of the past again.

"There's no visions of grandeur" Mr. Russ said, and little hope of going back to the days of Titan Tire. "But what if we get 10 100-[person] plants that grow to 250 jobs over time?" he added. "You don't take the beating when you lose one."

--

Anthony DeBarros

in Washington contributed to this article.

(END) Dow Jones Newswires

June 09, 2019 13:48 ET (17:48 GMT)