Not Just Another Recession
Why the Global Economy May Never Be the Same
AS the people of the Southern States look across the Atlantic toward a Europe prostrate under the hobnailed boots of storm troopers, their sympathies are almost solidly against the totalitarians. They are particularly distraught over the plight of Great Britain, which for so many of them is the European motherland. That country's resolute stand against the combined might of Hitler and Mussolini probably has evoked a more lively and enthusiastic response below the Potomac and the Ohio than in any other section of the United States.
The catastrophe in Europe has roused Americans of whatever latitude and longitude to a keen realization of their country's intimate relationship to the rest of the world. Almost everyone now realizes that this war will determine the fate of Europe and the British and French empires, and bring a settlement one way or the other of Japan's efforts to rivet her hegemony upon the vast riches of eastern and southeastern Asia. It will settle the question, too, as to what philosophy of government is to predominate not only in those regions, but in Africa and in other parts of Asia, and very likely in South America. But though all this is pretty generally agreed, there is disagreement as to the best policy for the United States to pursue in the crisis.
Geographically nearer to Central and South America than other sections, and also less isolationist by nature than the Mid-West and Far West, the Southeastern part of the United States is especially concerned over what is happening overseas. When I say the Southeast I include all the states below the Potomac and the Ohio, and east of the Mississippi (except West Virginia) together with Louisiana and Arkansas. These states, eleven in number, were found to be relatively homogeneous by Dr. Howard W. Odum in his comprehensive work, "Southern Regions of the United States." They comprise slightly more than seventeen percent of the nation's area and have a total population of approximately 28,500,000 (according to latest estimates) out of the entire country's 130,000,000. Less than one-third of this population is colored. It is this region that I have in mind when in this article I use the word "South."
Cotton and tobacco are still the predominant forms of agriculture, though dairy and poultry farming and cattle raising are forging ahead rapidly. It may come as a surprise to many that during 1939 the cash income from cotton and cottonseed in fourteen Southeastern and Southwestern states was only $598,000,000 as against $666,000,000 from live stock and live stock products. To those who have long sought to persuade the South to break the bondage of the one-crop economy, with its vicious and enslaving tenancy and credit systems, this is one of the most sensational and heartening advances ever made in the former Confederacy. It is partly the fruit of decades of hammering on the idea that the Southern farmer ought to diversify his farming and raise more of his own food, and thus strike off the shackles forged upon him by the sharecropping and "furnishing merchant" system -- a rank weed which sprouted from the wreckage of the Civil War. Nor should sight be lost of the important rôle played by the soil conservation, crop diversification and farm rehabilitation program of the New Deal.
In the realm of manufacture, the South has made marked advances in recent years; but a notable fact is that there has been a relative lack of diversification in its finished goods. The bulk of Southern manufactures is to be found in textiles, tobacco, paper, iron, steel, chemicals and furniture. Further, a distressingly large percentage of the region's major industries are controlled by "outside" capital. To this extent the South has a status resembling that of a colonial economy. Although it is an overwhelmingly rural region, with few large cities and none with as much as 500,000 inhabitants, the value of its manufactured products is two-and-one-half times that of its agricultural products. The magazine Fortune asserted late in 1938, on the basis of an exhaustive survey, that the South is "the nation's Number One economic opportunity" viewed from the standpoint of its industrial potentialities. Viewed from other standpoints, it admittedly is the nation's Economic Problem Number One.
Southern agriculture has long been dependent upon exports for its prosperity. From fifty to sixty percent of the South's cotton and forty percent of its tobacco have normally been exported. So have more than half of its rosin and turpentine, as well as substantial percentages of its fruit and other farm products. Hitler's admission that Nazi Germany must "export or die" is equally applicable to the South under existing conditions. Cotton and tobacco, crops around which a major share of the entire Southern economy is woven, already have lost a considerable part of their foreign markets as a result of the war. Both of them, particularly cotton, had already suffered severely in the foreign field before the present war. The Hawley-Smoot tariff began the process of restricting American exports of nearly all kinds, by sharply reducing imports and thus provoking other nations in the early 1930's to raise similar barriers against American goods. The AAA, with its price-pegging policies, gave a fillip to the restrictive tendencies already under way. Other countries began raising cotton in large quantities. For example, between 1931 and 1936, Brazil's exports of raw cotton increased tenfold.
The program of reciprocal trade pacts inaugurated in 1934 under the leadership of Secretary of State Cordell Hull tended definitely to widen the foreign markets for Southern cotton and tobacco, as well as other products. It had made good progress when the German invasion of Poland in September 1939 set in motion destructive forces which have well-nigh nullified its beneficent effects. As matters stand today, the trade pacts may still become extremely important elements in the reconstruction of the postwar world; but as wider and wider areas fall beneath the blight of totalitarianism they have relatively little current significance.
Some Southern industrialists have desired protection. But as a whole the South has always suffered from high American tariffs which have forced it to buy in a protected domestic market but to sell most of its products in an unprotected foreign market. Peter Molyneaux of Texas discussed the region's historic attitude on the tariff a few years ago in the following cogent language:
The leaders of the Old South were right when they concluded, more than a century ago, that the high-tariff policy meant the ruin of the cotton states. When sixty-four of the sixty-seven representatives of the Southern states then in Congress voted against the tariff of 1824, and all but two Southern Senators did likewise, they acted in recognition of the fact that the measure was "utterly destructive" of the South's interests. It is well-nigh forgotten today, but the first talk of secession in the South, the first proposal by a Southerner that the time had come to "calculate the value of the Union," was occasioned by a realization that the high-tariff policy, which the Federal Congress had forced upon the South, condemned the cotton states to economic decline and perpetual economic inferiority; and this happened more than thirty years before the Civil War. It is not remarkable that during the more than one hundred years that have elapsed since then the people of the South have stubbornly opposed that policy. . . .
This Southern opposition had little effect, except at rare intervals, until the enactment of the Hull reciprocal trade program. Two years ago Dr. Gallup found that 92 percent of the Southern people favored the general principles of trade underlying the Hull program, but that half of them had never even heard of Mr. Hull's efforts to put them into effect. Some of those who had heard of them didn't understand them. On the whole, as it became understood the program seems to have met with overwhelming favor in the South. There was a protest from Louisiana and Florida sugar producers against the method of fixing Cuba's quota in the agreement signed with that country; but the fundamental desirability of such agreements was not called into question. If the program had not made all the headway which some had hoped for by the time the present war broke out, it nevertheless had established itself in Southern favor and may yet become a major factor in the South's economic rehabilitation.
Although the National Cotton Council of America, under the leadership of Oscar Johnston, has launched an intensive drive to increase the use of cotton products, and to discover new uses for the South's great staple, there still remains the need for less cotton farming in the South and more farming of other kinds. Domestic consumption is now almost at its all-time high. Not only is the foreign trade situation as a whole growing increasingly acute as a result of the war, but the foreign market for American cotton may never come all the way back, or anywhere near it. As noted above, too many other countries are expanding production.
The Japanese situation is one which will definitely bear watching. Japan has been one of the largest buyers of Southern products, and in particular has been the region's best cotton market. The normal Japanese importation of 1,650,000 bales of cotton a year provides employment for 350,000 Southerners, with approximately 1,400,000 dependents, or a total of 1,750,000 of the 11,000,000 persons in the Southeast and Southwest who are dependent upon cotton for a livelihood. But Japanese importations of American cotton have been dropping sharply since 1937, owing to the fact that Japan has been using more and more of her foreign exchange to buy essential war materials.[i] Apparently the market for American cotton in Japan is destined to shrink still further, for it is reported that Tokyo plans to increase cotton production in conquered North China by forcing Chinese labor to raise it at from three to four cents per pound. Similar plans are understood to be under way with respect to the growing of American-type leaf tobacco.
The old Southeast has a far less promising future with respect to cotton culture than the newer Southwest. Its relatively wornout and eroded lands, its smaller farms, contrast unfavorably with the huge mechanized plantations on the rich plains of Texas and Oklahoma. Cotton can be raised there in bulk much more cheaply. In addition, the Southeast is the home of the entire American bright leaf tobacco crop, and the present plight of the foreign markets for this crop is serious. North Carolina is by far the primary bright leaf state, but the bright leaf belt covers parts of all the seaboard states from Virginia to Florida.
From two-thirds to three-fourths of the whole American tobacco export market is either lost or threatened as a result of wars in Europe and Asia. The once substantial shipments to China and Great Britain, to Scandinavia, the Low Countries and France, have practically disappeared. Drastic readjustments have, of course, become necessary. Southern growers voted in late July by a 7-to-1 majority for a three-year control program, designed to salvage as much as possible from the wreckage. The crisis in the bright leaf market had come in the fall of 1939, when the British companies found it necessary to withdraw as a result of British governmental restrictions put into effect to conserve foreign exchange to meet urgent war needs. These companies had been buying one-third of the American crop annually and paying the American tobacco farmer half the total money he received. To the rescue of the Southern tobacco farmers came the Commodity Credit Corporation. It bought 175,000,000 pounds of tobacco for the British concerns, and is now holding it for them. Whether the corporation will buy a portion of this year's crop for the same companies has not been decided at this writing. But in any event the Southern tobacco planter must look forward to some far-reaching adjustments in his way of life. The recent referendum fixing his total production at 618,000,000 pounds for each of the next three years, compares with 676,000,000 for this year, under the control program voted last fall after the first debacle; 1,100,000,000 for 1939 when control was voted down; 786,000,000 for 1938; and 866,000,000 for 1937 (both control years). The three-year acreage limitation just inaugurated enables the United States Department of Agriculture to plan for a self-sufficiency program in the tobacco belt, whereby farmers would add vegetable gardens, chickens, a cow and pigs to the one-crop economy which now too commonly prevails. As in the case of cotton, this reorientation is long overdue. There consequently is no occasion for unmitigated lamentations, even though the crop of bright leaf for the next three years will not bring the prices it has often brought in the past, and though the volume will also be slashed.
Southern agriculture has been hit harder than Southern industry by the loss of foreign markets incident to the war. Accurate and up-to-date statistics on the industrial exports are extremely hard to come by. But it would appear that whereas exports from Southern factories of such products as steel, textiles, machinery, chemicals and paper to the countries of Latin America have increased in the past year, there has been a net loss in such exports, owing to decreases in shipments to Europe and the Far East.
This will be compensated for in part by the work which the manufacturing plants of the South are to play in the nation's gigantic defense effort. Abundant power, both in TVA territory and elsewhere, and many essential raw materials, are to be found in the region. The great Birmingham steel industry is to have an important part in the defense program. The development of aircraft manufacturing is expected to bring additional factories to the South. At Nashville, for example, the largest plant of this kind in the United States has just been completed. The great textile industry in the Piedmont region from Virginia to Alabama can also be geared to the country's defense requirements.
A number of the "strategic," "critical" and "essential" raw materials for defense are found in large quantities in the territory we are considering. It contains more than half of the country's bauxite deposits, from which aluminum is made, chiefly in Arkansas, Alabama and Georgia. The last-named is also a leading state in manganese reserves, essential in the manufacture of armor plate for battleships and hard steel used in tanks. Tennessee, Virginia and Alabama likewise have considerable deposits of this strategic mineral. Alabama's plant at Anniston for converting low-grade manganese ore is considered particularly significant, for whereas the country is deficient in high-grade manganese, the South has large deposits in the lower grades. North Carolina's great mica supply is important, as are the quantities of titanium in Virginia. In Louisiana, the Standard Oil Company is erecting a "buna" synthetic rubber plant, to which the state's vast petroleum and natural gas deposits are essential. And this is only a partial list; many others might be named.
Since the Gulf states, as well as Georgia, have important Hispanic elements in their cultural backgrounds, and since there is also the factor of geographic proximity, they feel more closely drawn to Latin America than do other sections of the country. This interest is increased by the activities of the great port of New Orleans, with its network of shipping to all Latin America, and by the airplane services which radiate out to Central and South America from Miami. The Southern states also have long been interested in the project for a Nicaraguan canal. Numerous prominent Southerners were directors of the company which first undertook work on the canal three-score years ago. In the late nineteenth century, Southern business interests were active champions of a Nicaraguan canal, as opposed to the Panama route. Interest in it is still alive in the South, not only for the general reason that it would give the country the safeguard of an alternate route for the fleet in case the Panama Canal were put out of commission, but also because it would supply a shorter route from Gulf ports to our Pacific Coast and the Orient. The distance from New Orleans to San Francisco would be nearly 600 miles shorter via Nicaragua than it is via Panama.
Isolationist sentiment is probably weaker in the South than in any other section of the United States. The leading polls indicate that the region has the largest percentage of citizens who desire to render all possible aid to Britain and her allies, even at the cost of war. The fact that this region originally was so largely settled by the English, Scotch and Scotch-Irish, doubtless accounts, in part, for the strongly pro-British trend of thought among its people. Then too it has a much smaller percentage of foreign-born than any other region. It tends to be Anglo-Saxon in its political and cultural attitudes, except that in Louisiana the French influence is dominant while in all the Gulf states Spanish overtones are discernible. According to 1930 figures, only about 500,000 native whites of foreign or mixed parentage, and 200,000 of foreign-born white stock, were then living in the eleven Southeastern states. The largest single group of foreignborn, or of foreign-born or mixed parentage, were 180,000 Germans, with 95,000 Italians second. Obviously neither can carry much weight in a population of twenty-eight and a half million.
All over the country it is true that people today are better informed about European problems than their forebears were a generation ago. The improvement is particularly marked in the South, where the illiteracy rate has lately been brought down to fairly respectable levels. It was considerably higher a quarter of a century ago, and was positively appalling in certain areas among both whites and Negroes. As a result of the wider diffusion of knowledge which has followed the development of the public school system, the newspapers now have a bigger, better-educated and more articulate audience than they enjoyed from 1914 to 1918. In addition, the radio provides a new medium of public information which did not exist at the time of the First World War. Another factor in the general improvement has been the development of university extension courses.
The South is no clearer than any other part of the United States as to precisely what it has to fear from the Axis Powers; but it wants to be ready for anything. Careful observation of the methods and aims of the predatory tyrants operating across the Atlantic has convinced the average citizen in the area we are discussing that this is no time for taking chances. He doesn't anticipate direct invasion of the United States in the near future. But he does feel that this country is heading for an inevitable clash with the Axis Powers in Latin America, a clash which may call for fast and decisive action in that theatre by the armed forces of the United States. He intends to take no nonsense from Herr Hitler or Signor Mussolini below the Rio Grande.
For this reason sentiment in the South is overwhelmingly in favor of the fullest and most rapid rearmament program possible. It is also in favor of committing mayhem upon anyone who desires Uncle Sam to offer appeasement to Hitler and Mussolini. The Anglo-Saxon background of the region, to which I have already referred, is doubtless a partial explanation for its bellicose attitude toward the dictators. Another reason for its relative willingness to go to war against them may be found in the fact that its great heroes have usually been soldiers. The military tradition of the South has not only been kept alive in the sagas of its idols, but also in the training its youth receives at such schools as the Virginia Military Institute and the Citadel. Then, too, there is the fact that despite the Old South's development of a slave society, the new South is conscious of the Virginia parentage of George Mason's immortal Bill of Rights, a document completely incompatible with totalitarianism.
[i] The United States has supplied a very large percentage of those materials used by Japan in her war on China. Much of the scrap metal shipped to Japan from this country in 1937-38 left from Southern ports. Some of this business may be cut off shortly, under the new Federal requirement that licenses are necessary for shipments of certain types of scrap steel.