Alabamians need to conduct a serious debate during the next four months’ legislative session. We need to debate Alabama’s past, present condition and future prospects. Our political leaders have gotten us in a mess. So, I invite ordinary people to fill the void in leadership.
Let’s begin with transparency. I am a political independent who voted twice for Gov. Robert Bentley. I believe he is honest and well-meaning. I also believe that his analysis of our history, present condition and future course is flawed. In two installments, I offer first a rebuttal to his State of the State address and then an alternative vision forward.
Bentley argues correctly that the state has serious economic problems. To solve those problems, he proposes to deregulate business, rebate taxes currently funding education to companies, transfer money from the Education Trust Fund to the General Fund, and otherwise subsidize industry with new tax incentives.
The governor’s plan is not new. After a half-century (1819-1868) rejecting proposals for the state to spend public funds to foster industrialization, a biracial Reconstruction Republican-led Legislature changed course. Initially, public funds went to railroads. Despite waste and corruption to which both parties contributed, the result was the economic transformation they desired.
By the late-19th century, conservative, white Democrats had won political control without changing the prevailing development strategy. In a state whose population was overwhelmingly poor, rural and burdened by a staggering rate of illiteracy and horribly funded schools (compared to other states), these new political leaders reasoned that they would have to market the state aggressively.
They promised industry willing to relocate a free hand with Alabama’s land, labor and environment: no state regulation of harmful environmental consequences; no labor unions; low taxes, especially on property; various tax incentives. One byproduct of the strategy was poor funding for education, which, they reasoned, was not entirely a bad thing because better-educated laborers had a habit of leaving Alabama for better jobs elsewhere.
Both political parties followed this flawed economic model for 150 years. If the strategy had worked, we would surely know by now. Yet, Alabama’s per-capita and median family incomes, labor-force skills, educational attainments, health and various other quality-of-life measurements trail most states. Our brightest students continue to migrate out of state in significant numbers.
The low-wage, low-kill, unregulated industry we recruited over those decades has by now mostly departed for still lower-wage and less-regulated places such as China. During the 1930s, in addition to agriculture where most laborers were tenant farmers working land they did not own, four industries provided most jobs: mining; apparels and textiles; timber/pulp wooding; iron and steel. Twin blows of mechanization after 1940 and globalization after 1990 gutted them all. Apparels, for instance, peaked in the 1990s with 112,000 jobs. By the early 2000s, there were less than 60,000. The number of total manufacturing jobs fell from 330,000 in 2001 to 236,000 in 2010.
Buying industry doesn’t work long-term because corporations attracted by low-wage, low-skill, poorly educated labor will find new places even more hospitable to them as soon as the tax breaks and incentives expire. “Dumb” can be defined as doing the same thing repeatedly and expecting different results. When a state repeats the cycle for 150 years, “dumb” morphs into irrationality.
So, what does our economic future portend? In 2005, Alabama exports exceeded $10 billion annually for the first time. Since then they have risen. Our top exports include autos, chemicals, electronics, computers, machinery and transportation equipment. Poorly educated workers don’t make these products. Major markets include Canada, Japan, Mexico, South Korea and China.
While some industrialists cling to the old assumptions of the 19th century, most global corporations and high-tech companies long ago moved on. For them, what labor knows is more important than what labor costs. If unions consider themselves partners in creating highly efficient, productive plants, factories no longer have to be run like antebellum plantations. Unions, like corporations, have to think in new ways.
A quarter-century ago, a national poll of high tech CEO’s revealed that of 12 economic assets, the Southeast led in five (labor costs; tax climate; cost of living; regional regulatory practices; and energy costs). Yet the Southeast ranked only sixth of seven regions in recruiting high-tech industry.
How could this be true if our 150-year assumptions were correct? Because the Southeast ranked in sixth or seventh place in five critical categories: academic institutions; transportation; access to markets; cultural amenities; and access to raw materials. A November 2004 Birmingham News survey of Alabama business leaders made clear they understood all this. They identified their chief concerns as labor quality, followed by sales, insurance, regulations and taxes (in last place).
If Alabama’s economic future depends on global competition, higher-tech industry, more-skilled and better-educated workers, how do we move from where we are to where we need to be? Gov. Bentley offered no answer. Next time, I will offer my own.
Wayne Flynt is Distinguished University Professor Emeritus at Auburn University.
Part 2: A pathway to Alabama’s future