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How The South Is Rising Again



The transformation of the U.S. Southeast from an economic backwater to a job-creating juggernaut has been nothing short of astounding. Long dependent upon dirty, low-paying industries such as poultry, the region has become a magnet for foreign manufacturers seeking to establish beachheads in the U.S. With so many German companies in the Blue Ridge foothills of South Carolina, locals have begun calling one stretch of I-85 "the Autobahn."

The result: economies that are booming compared with many other regions. The New South's strategy for revitalizing itself holds lessons for America. While the Southeast's success is partly due to its historically cheap labor, low taxes, and few unions, major credit has to go to its homespun industrial policy. Innovative programs to train workers, adoption of advanced technologies, and heavy spending on basic infrastructure have all significantly boosted economic growth.

The key New South strategy has been to forge long-term relationships overseas. As far back as the 1950s, Southern leaders tirelessly dragged their trade missions around Europe and Asia where offices to promote exports were established. At first, this missionary work bore the smallest of fruit.

Southern political leaders persisted, however. They adopted a probusiness attitude that should appeal to every executive who has ever faced the indifferent--if not hostile--attitudes of typical government bureaucrats. Southern politicians offered manufacturers guarantees for their investments that were as close as possible to no-risk. They promised new employers that they would help recruit and train their entire work force for them at local schools. To streamline the process of applying for various business permits and licenses, states also set up one-stop offices.

Partly because of the dollar's decline, the Southeast's investment is now paying huge dividends. Even though wage levels are creeping toward the national average, erasing its cheap-labor advantage, foreign companies still flock to the region, inspired by the favorable word of mouth from other businessmen. BMW recently announced it is opening a $300 million plant. The 2,000 jobs it will bring to Spartanburg, S.C., are proof that the New South's business hospitality is working.

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