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Full text of "Report on economic conditions of the South"

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JReport on 

ECONOMIC CONDITIONS 

OF THE SOUTH 

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Prepared for 
THE PRESIDENT 

by 
THE NATIONAL EMERGENCY COUNCIL 



Digitized by the Internet Archive 

in 2009 with funding from 

University of North Carolina at Chapel Hil 



http://www.archive.org/details/reportoneconomicOOnati 



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l^eport on 

ECONOMIC CONDITIONS 

OF THE SOUTH 

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Prepared for 
THE PRESIDENT 

THE NATIONAL EMERGENCY COUNCIL 



REQUEST FOR REPORT 

The White House, 
Washington, June 22, 1938. 

My Deak Me. Mellett: Discussions in Congress and 
elsewhere in connection with legislation affecting the eco- 
nomic welfare of the Nation have served to point out the 
differences in the problems and needs of the different sec- 
tions of the country and have indicated the advisability of 
a clear and concise statement of these needs and problems 
in a form readily available, not only to the Members of 
Congress, but to the public generally. 

Attention has recently been focused particularly upon 
the South in connection with the wages and hours bill, and 
I should like the National Emergency Council to under- 
take the preparation of such a statement of the problems 
and needs of the South. In preparing this statement I 
suggest that you call freely upon the various governmental 
departments and administrative agencies for information 
as to matters with which they are especially acquainted, 
and also that you request the assistance of southerners 
well known for their interest in the South and familiarity 
with its problems. 

The outcome of this undertaking may indicate the ad- 
visability of similar studies with reference to other sections 
of the country. 

Very sincerely, 

(Signed) FRANKLIN D. ROOSEVELT. 

Hon. Lowell Mellett, 
Executive Director, 

National Emergency Council. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 



THE PRESIDENT'S LETTER 

To the Members of the Conference on Economic Condi- 
tions in the South: 

No purpose is closer to my heart at this moment than 
that which caused me to call you to Washington. That 
purpose is to obtain a statement — or perhaps, I should say 
a restatement as of today — of the economic conditions of 
the South, a picture of the South in relation to the rest 
of the country, in order that we may do something about 
it ; in order that we may not only carry forward the work 
that has been begun toward the rehabilitation of the 
South, but that the program of such work may be expanded 
in the directions that this new presentation shall indicate. 

My intimate interest in all that concerns the South is, 
I believe, known to all of you ; but this interest is far more 
than a sentimental attachment born of a considerable 
residence in your section and of close personal friendship 
for so many of your people. It proceeds even more from 
my feeling of responsibility toward the whole Nation. It 
is my conviction that the South presents right now the 
Nation's No. 1 economic problem — the Nation's problem, 
not merely the South 's. For we have an economic unbal- 
ance in the Nation as a whole, due to this very condition 
of the South. 

It is an unbalance that can and must be righted, for the 
sake of the South and of the Nation. 

Without going into the long history of how this situation 

(1) 

84767°— 38 1 

600894 



came to be — the long and ironic history of the despoiling 
of this truly American section of the country's popula- 
tion — suffice it for the immediate purpose to get a clear 
perspective of the task that is presented to us. That task 
embraces the wasted or neglected resources of land and 
water, the abuses suffered by the soil, the need for cheap 
fertilizer and cheap power ; the problems presented by the 
population itself — a population still holding the great 
heritages of King's Mountain and Shiloh — the problems 
presented by the South 's capital resources and the absentee 
ownership of those resources, and problems growing out 
of the new industrial era and, again, of absentee ownership 
of the new industries. There is the problem of labor and 
employment in the South and the related problem of pro- 
tecting women and children in this field. There is the 
problem of farm ownership, of which farm tenantry is a 
part, and of farm income. There are questions of tax- 
ation, of education, of housing, and of health. 

More and more definitely in recent years those in the 
South who have sought selflessly to evaluate the elements 
constituting the general problem, have come to agree on 
certain basic factors. I have asked Mr. Mellett to present 
for your consideration a statement of these factors as pre- 
pared by various departments of the Government. I ask 
you to consider this statement critically, in the light of 
your own general or specific knowledge, in order that it 
may be made representative of the South 's own best 
thought and that it may be presented to Congress and the 
public as such. 

I had hoped to attend your meeting and listen to your 
discussions. Unhappily, other pressing work makes this 
impossible. Please accept my sincere regret that I camiot 
be with you, and be assured that I anticipate with deep 
interest the result of your labors. 

FRANKLIN D. ROOSEVELT. 

The White House, 

Washington, D. C, July 5, 1938. 

Southern Pamphlets 
Bare Book n-r-h 011 



LETTER OF TRANSMITTAL 

July 25, 1938. 
to the president: 

In response to your request of June 22, 1938, there is 
transmitted herewith a report on the economic problems of 
the South. 

The report presents in only a small degree the manifold 
assets and advantages possessed by the South, being con- 
cerned primarily not with what the South has, but with 
what the South needs. 

Preparation of the report was aided by the counsel of an 
advisory committee of southern citizens known for their 
interest in the region and their familiarity with its prob- 
lems. It is their expressed hope and belief that the South 
will benefit from a thorough examination of the factors 
that have produced the present economic unbalance, hurt- 
ful not only to their section but to the country as a whole. 
This committee included : 

Dr. B. F. Ashe, president, University of Miami, Miami, Fla. ; Governor 
Carl Bailey, Little Rock, Ark.; Barry Bingham, publisher, Louisville 
Courier Journal, Louisville, Ky. ; W. B. Bizzell, president, State University, 
Norman. Okla. ; Col. P. H. Callahan, president, Louisville Varnish Co. ; 
Louisville, Ky. ; L. O. Crosby, lumberman, Picayune, Miss. ; Judge Blanton 
Fortson, judge, superior court, Athens, Ga. ; Frank Graham, president, 
University of North Carolina, Chapel Hill, N. C. ; Attorney James Hammond, 
past president, Chamber of Commerce, Columbia, S. C. ; Col. Leroy Hodges, 
State comptroller, Richmond, Va. ; Miss Liicy Randolph Mason, C. I. O. 
representative, Atlanta, Ga. ; H. L. Mitchell, secretary-treasurer, Southern 
Tenant Farmers Union, Memphis, Tenn. ; Gen. John C. Persons, president. 
First National Bank, Birmingham, Ala. ; Prof. Chas. W. Pipkin, Louisiana 
State University, Baton Rouge, La. ; Paul Poynter, publisher, St. Petersburg 
Times, St. Petersburg, Fla. ; J. H. Reynolds, president, Hendricks College, 
Conway, Ark. ; Robert J. Smith, vice president, Braniff Airways, Dallas, 
Tex. ; "s. L. Smith, Peabody College, Nashville, Tenn. ; Alexander Speer, 
former president, Virginia Public Service Co., Alexandria, Va. ; Joseph 
G. Tillman, planter, Statesboro, Ga. ; J. Skottowe Wannamaker, president, 
American Cotton Association, St. Matthews, S. C. ; Carl White, A. F. of L., 
Port Arthur, Tex. 

The various departments and administrative agencies 
were called on for information. Factual statements were 
checked by the Central Statistical Board, and many men 
and women in the Government contributed their know- 
ledge and efforts. The actual drafting of the 15 sections 
of the report was the work of southerners, intimately ac- 
quainted with their own region and vitaUy concerned in 
its welfare. 

(3) 



As used in this report, the term ''the Southeast" in- 
cludes the States of Virginia, Kentucky, Tennessee, North 
Carolina, South Carolina, Georgia, Florida, Alabama, 
Mississippi, Louisiana and Arkansas; the "Southwest" 
means Oklahoma and Texas, and "The South" covers all 
the 13 States. 

Effort has been made to meet your desire for a concise 
statement. The report therefore does not attempt to be 
exhaustive. On any one of the 15 topics discussed much 
more extensive treatment can be found in official Govern- 
ment reports or in studies that have been made by educa- 
tional institutions and individuals. 

One thing appears to be made clear when the principal 
difficulties faced by the South are brought into perspective 
and when what the South has to offer the Nation is laid 
alongside what the South needs for its own people ; that 
is that the economic problems of the South are not beyond 
the power of men to solve. Another thing made clear, how- 
ever, is that there is no simple solution. The solution must 
be part political, with the Federal Government participat- 
ing along with State, county, city, town, and township gov- 
ernment. But there must be participation also by indus- 
try, business and schools — and by citizens, South and 
North. 

The example given by the men named above in lending 
their time and their patient consideration to the material 
condensed into this brief report seems to assure that the 
citizens of the South do not hesitate to face the facts of 
the present situation. This, in turn, would seem to as- 
sure — to use your own language — that something will be 
done about it. 

Lowell Mellett, 
The Executive Director, 
National Emergency Council. 

SECTIONS OF REPORT 



1. 


Economic resources. 


9. 


Labor. 


2. 


SoU. 


10. 


Women and children. 


3. 


Water. 


IL 


Ownership and use of land, 


4. 


Population. 


12. 


Credit. 


5. 


Private and public income. 


13. 


Use of natural resources. 


6. 


Education. 


14. 


Industry. 


7. 


Health. 


15. 


Purchasing power. 


8. 


Housing. 







REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 1 
ECONOMIC RESOURCES 

In the South, as elsewhere, the two most important eco- 
nomic endowments are its people and its physical re- 
sources. The 1937 census estimates showed that the 13 
Southern States had more than 36 million persons. While 
this population is descended from the peoples of virtually 
every country of the world, a larger percentage derives 
from early American stock than that of any other region 
in the United States; 97.8 percent, according to the last 
census, was native born ; 71 percent white, and 29 percent 
colored. 

The birth rate in the South exceeds that of any other 
region, and the excess of births over deaths makes the 
South the most fertile source for replenishing the popula- 
tion of the United States. At a time when the population 
of the country as a whole is becoming stationary, there is a 
continuous stream of people leaving the South to work in 
other parts of the Nation — greatly in excess of the corre- 
sponding migration to the South. 

The South is a huge crescent embracing 552 million acres 
in 13 States from Virginia on the east to Texas on the west. 
It has widely varying topographic conditions — vast 
prairies, wooded plains, fertile valleys, and the highest 
mountains in the eastern United States. 

The transportation facilities of the South are, for the 
most part, excellent. It is covered by rail lines which con- 
nect the interior with ports and give easy access to other 
regions. Both the Mississippi and the Ohio Rivers' navi- 
es) 



gation facilities serve the South. The Warrior-Tombigbee 
system taps the important industrial region around Birm- 
ingham, while the Tennessee River system, now being 
developed by the Tennessee Valley Authority, will bring 
water transportation to the very heart of the Southeast. 
The highways of the South are well advanced. Roads are 
built cheaply and are usable in all seasons. The region 
is well served by air lines. Bordered by both the Atlantic 
and the Gulf, the South has ideal harbors and many fine 
ports. Trade with Europe has been important for three 
centuries. Across the Gulf and Caribbean the South can 
expect further trade development. 

The South has been richly endowed with physical re- 
sources. No other region offers such diversity of climate 
and soil. With a climate ranging from temperate to sub- 
tropical, nearly half of that part of the country where 
there is a f rostless growing season for more than 6 months 
of the year is in the South. Throughout almost the entire 
South there is ample annual rainfall and little artificial 
irrigation is required. 

The soils of the South are the most widely varied of the 
Nation. Alabama, a typical southern State, has 7 major 
types and almost 300 soil subtypes. These soils permit the 
growing of a wide variety of products: cotton, tobacco, 
grains, fruits, melons, vegetables, potatoes, hay, nuts, 
sugar cane, and hemp. The South leads the world in pro- 
duction of cotton and tobacco. 

Soil and climate combine to give it forests of many 
kinds. With 40 percent of the Nation's forests, the South 
has found its woodlands second only to cotton as a source 
of wealth. Approximately 30 percent of the land is still 
in forests. Desi3ite exploitation and abuse, forests still 
cover almost 200,000,000 acres, and more than half of the 
country's second-growth saw timber is in the South. 

The region leads the world in naval stores production. 
Because southern pine reseeds itself and grows rapidly, 
the South has great potentialities for the production of 
paper. 



The South lags, however, in the production of livestock, 
despite its wealth of grasslands. Its 20,000,000 cattle 
amount to less than a third of the total found on American 
farms ; and because of the poor quality of many of them, 
the value of the annual production of cattle is only one- 
sixth of the Nation's total. 

Fish and game are as plentiful as in any part of the 
country. Louisiana is our largest raw fur producer. 

The South has more than 300 different minerals : Asbes- 
tos, asphalt, barite, bauxite, clays, coal, diamonds, feldspar, 
fluorspar, gypsum, lead, limestone, marble, mercury, phos- 
phate rock, pyrites, salt, sand and gravel, silica, sulphur, 
zinc, and so on by the scores. 

With less than 2 percent of its seams so far tapped, the 
Southeast contains a fifth of the Nation's soft coal. It 
mines a full tenth of our iron ore annually, but it produces 
only slightly more than 7 percent of our pig iron. 

The South possesses approximately 27 percent of the 
Nation's instaUed hydroelectric generating capacity, 
although it produces only 21 percent of the electric power 
actually generated. The region contains 13 percent of the 
country's undeveloped hydroelectric power. 

Nearly two-thirds of the Nation's crude oil is produced 
in the South, and over two-thirds of our supply of natural 
gas comes from southern fields. In 1935 the South fur- 
nished about half of the country's marble output. Florida 
and Tennessee produce 97 percent of all our phosphates, 
and Texas and Louisiana supply over 99 percent of our 
sulphur. 

Commercial fisheries flourish on both the Atlantic and 
Gulf coasts. Shore fisheries engaged in taking oysters, 
clams, menhaden, mackerel, sponges, and shrimp are espe- 
cially important. 

In spite of this wealth of population and natural re- 
source, the South is poor in the machinery for converting 
this wealth to the uses of its people. With 28 percent of 
the Nation's population, it has only 16 percent of the 



tangible assets, including factories, machines, and the tools 
with which people make their living. With more than 
half the country's farmers, the South has less than a fifth 
of the farm implements. Despite its coal, oil, gas, and 
water power, the region uses only 15 percent of the 
Nation's factory horsepower. Its potentialities have been 
neglected and its opportunities unrealized. 

The paradox of the South is that while it is blessed by 
Nature with immense wealth, its people as a whole are the 
poorest in the country. Lacking industries of its own, the 
South has been forced to trade the richness of its soil, its 
minerals and forests, and the labor of its people for goods 
manufactured elsewhere. If the South received such goods 
in sufficient quantity to meet its needs, it might consider 
itself adequately paid. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 2 
SOIL 

Nature gave the South good soil. With less than a third 
of the Nation's area, the South contains more than a third 
of the Nation's good farming acreage. It has two-thirds 
of all the land in America receiving a 40-ineh annual rain- 
fall or better. It has nearly half of the land on which crops 
can grow for 6 months without danger of frost. 

This heritage has been sadly exploited. Sixty-one per- 
cent of all the Nation's land badly damaged by erosion is 
in the Southern States. An expanse of southern farm land 
as large as South Carolina has been gullied and washed 
away ; at least 22 million acres of once fertile soil has been 
ruined beyond repair. Another area the size of Oklahoma 
and Alabama combined has been seriously damaged by ero- 
sion. In addition, the sterile sand and gravel washed off 
this land has covered over a fertile valley acreage equal in 
size to Maryland. 

There are a number of reasons for this wastage : 

Much of the South 's land originally was so fertile that 
it produced crops for many years no matter how carelessly 
it was farmed. For generations thousands of southern 
farmers plowed their furrows up and down the slopes, so 
that each furrow served as a ditch to hasten the run-off of 
silt-laden water after every rain. While many farmers 
have now learned the importance of terracing their land 
or plowing it on the contours, thousands still follow the 
destructive practices of the past. 

(9) 



10 

Half of the South 's farmers are tenants, many of whom 
have little interest in preserving soil they do not own. 

The South 's chief crops are cotton, tobacco, and corn; 
all of these are inter-tilled crops — the soil is plowed be- 
tween the rows, so that it is left loose and bare of vege- 
tation. 

The top-soil washes away much more swiftly than from 
land planted to cover crops, such as clover, soybeans, and 
small grains. Moreover, cotton, tobacco, and corn leave 
few stalks and leaves to be plowed under in the fall; and 
as a result the soil constantly loses its humus and its capac- 
ity to absorb rainfall. 

Even after harvest, southern land is seldom planted to 
cover crops which would protect it from the winter rains. 
This increases erosion tenfold. 

Southeastern farms are the smallest in the Nation. The 
operating units average only 71 acres, and nearly one- 
fourth of them are smaller than 20 acres. A farmer with 
so little land is forced to plant every foot of it in cash 
crops ; he cannot spare an acre for soil restoring crops or 
pasture. Under the customary tenancy system, moreover, 
he has every incentive to plant all his land to crops which 
will bring in the largest possible immediate cash I'eturn. 
The landlord often encourages him in this destructive 
practice of cash-cropping. 

Training in better agricultural methods, such as plant- 
ing soil-restoring crops, terracing, contour-plowing, and 
rotation, has been spreading, but such training is still un- 
available to most southern farmers. Annually the South 
spends considerably more money for fertilizer than for 
agricultural training through its land-grant colleges, ex- 
periment stations, and extension workers. 

Forests are one of the best protections against erosion. 
Their foliage breaks the force of the rain ; their roots bind 
the soil so that it cannot wash away; their fallen leaves 
form a blanket of vegetable cover which soaks up the water 



11 

and checks run-off. Yet the South has cut away a large 
I)art of its forest, leaving acres of gullied, useless soil. 
There has been comparatively little effort at systematic 
reforestation. Overgrazing, too, has resulted in serious 
erosion throughout the Southwest. 

There is a close relationship between this erosion and 
floods, which recently have been causing a loss to the 
Nation estimated at about $35,000,000 annually. Rainfall 
runs off uncovered land much more rapidly than it does 
from land planted to cover crops or forest. Recent studies 
indicate that a single acre of typical corn land lost ap- 
proximately 127,000 more gallons of rainfall in a single 
year than a similar field planted to grass. Another experi- 
ment showed that land sodded in grass lost less than 1 per- 
cent of a heavy rain through immediate run-off, while 
nearby land planted to cotton lost 31 percent. In short, 
unprotected land not only is in danger of destruction; it 
also adds materially to the destructive power of the swollen 
streams into which it drains. 

These factors — each one reenf orcing all the others — are 
causing an unparalleled wastage of the South 's most valu- 
able asset, its soil. They are steadily cutting down its 
agricultural income, and steadily adding to its cost of 
production as compared with other areas of the world 
which raise the same crops. 

For example, it takes quantities of fertilizer to make 
worn-out, eroded land produce. The South, with only one- 
fifth of the Nation's income, pays three-fifths of the Na- 
tion's fertilizer bill. In 1929 it bought 5% million tons of 
commercial fertilizer at a cost of $161,000,000. And 
although fertilizer performs a valuable and necessary serv- 
ice, it does not restore the soil. For a year or two it may 
nourish a crop, but the land still produces meagerly and at 
high cost. 

Moreover, southern farmers cannot pile on fertilizer fast 
enough to put back the essential minerals which are wash- 
ing out of their land. Each year, about 27,500,000 tons of 



12 

nitrogen and phosphorus compounds are leached out of 
southern soil and sent down the rivers to the sea. 

The South is losing more than $300,000,000 worth of 
fertile topsoil through erosion every year. This is not 
merely a loss of income — it is a loss of irreplaceable 
capital. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 3 
WATER 

The water resources of the South are abundant. Except 
on its western fringe, it is generously supplied with waters 
for municipal use, for electric power, for navigation, and 
for crop production. Inefficient control or use of these 
waters has impaired their value in some areas, while in 
other areas their very superabundance has retarded eco- 
nomic development. 

Many communities need better systems of public water 
supply. In the coastal plain and in the States west of the 
Mississippi deep wells generally tap water of good quality. 
The quantity of such underground sources is ample for 
most commimities, but in a number of instances they have 
been depleted by overdraft and by waste. With the excep- 
tion of the seaports and older river ports, the larger south- 
ern cities and the industrial towns have grown up on the 
Piedmont and upland regions where groundwaters are 
more meager. Many are in headwater areas having only 
small stream-flow during the summer months. Pollution 
of such streams by cities and towns has impaired public 
health and has restricted their recreational and industrial 
use. In these and other areas insufficient provision has 
been made for waste disposal to keep the streams pure. 

In much of the South the combination of heavy rainfall, 
relatively large stream flow, and favorable topography has 
made possible great developments of water power. Hydro- 

(13) 



14 

electric plants with an installed capacity of approximately 
4 million horsepower have been constructed, and the result- 
ing power is of vital importance to the southern economy. 
In 1937, hydroelectric developments in the Carolinas, Geor- 
gia, and Alabama supplied about 85 percent of all power 
produced for public utilities in that area; whereas hydro- 
electric power contributed only 37 percent of the total 
power produced for public utilities in the United States 
as a whole. Even greater resources lie undeveloped. It is 
estimated that the potential output of feasible undeveloped 
power sites in the South would be five times the hydroelec- 
tric power actually produced in 1937. These power re- 
serves constitute a rich as^et to be utilized as the markets 
of the South grow. 

In the Mississippi Valley, along the Gulf coast and much 
of the South Atlantic coast, the settlement of the country 
followed the numerous waterways. Although the signifi- 
cance of river transportation is not generally recognized, 
it is of growing importance along the Mississippi River, 
on the Warrior-Tombigbee system, and in the extensive 
improvements in progress in the Tennessee Basin. An 
intra-coastal waterway now provides a safe route for ves- 
sels of moderate draft along three-fourths of the southern 
coast. Channel deepening has provided free access for 
ocean shipping to such inland ports as Richmond, Jackson- 
ville, Beaumont, and Houston. 

Most sections receive adequate rainfall for crop produc- 
tion. Only 2,630,000 acres have been improved by irriga- 
tion. Of this acreage, some of the more prosperous part is 
used for vegetable, rice, and citrus-fruit production. In 
the semiarid western sections, except in the lower Rio 
Grande Valley, irrigation is in the developmental stage, 
and its economic possibilities have not been explored fully. 

Throughout most of the South an overabundance, not 
scarcity, of water limits the agricultural use of fertile 



15 

lands. By means of drainage more than 22,000,000 acres 
of wet land have been reclaimed. Some of these drained 
lands are the most fertile in the South, and they are capable 
of affording a refuge for farmers who have exhausted the 
eroding upland soils. Additional acreage can be brought 
to use as fast as the costs of drainage land-conditioning 
permit. However, a large part of the drained land now 
lies idle, and in some areas the drainage enterprises are 
poorly coordinated. 

The settlement of wet lands has been retarded in i^art by 
malaria. The ''fever" takes a heavy annual toll in human 
life and vitality. It is particularly widespread in those 
rural areas where drainage is inadequate. 

Uncontrolled flood waters likewise impose severe dam- 
ages on the South. Much of its fertile farming land and 
many of its important cities lie within reach of floods. 
Vast sections of the alluvial valley of the Mississippi — 
31,000 square miles of fertile land with a population of 
more than 2,000,000 — and numerous communities on other 
southern rivers, are within the danger zone. In the allu- 
vial valley alone three-quarters of a million people were 
driven from their homes by the flood of 1927. Property 
damage from this flood was $220,000,000. 

To consider another aspect of the South 's water re- 
sources the once rich fisheries are being depleted, on the 
one hand, and the wildlife and recreational facilities de- 
veloped only meagerly on the other. This is true notwith- 
standing that the shallow sounds along the coasts are im- 
portant wintering grounds for game varieties of waterfowl 
and that the sport fishing along the coasts and in the inner 
sounds is truly notable. 

In addition to their value as recreation grounds, these 
areas are also of tremendous importance as sources of sea 
food. But their value both as sources of food for the 
Nation and as a means of livelihood for those engaged in 
commercial fishing and shellfishing, is threatened by over- 
fishing and, in a few places, by water pollution. 



16 

The South is only now becoming aware of the fortune it 
has in its vast water resources — the value in transporta- 
tion, power, fish, and game, and in health and recreation. 
It has just begun to consider the problems involved in 
conserving this many-sided resource, in curbing the de- 
structive power of water and making it useful. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 4 
POPULATION 

The population of the South is growing more rapidly by 
natural increase than that of any other region. Its excess 
of births over deaths is 10 per thousand, as compared with 
the national average of 7 per thousand ; and already it has 
the most thickly populated rural area in the United States. 
Of the 108,600,000 native-born persons in the country in 
1930, 28,700,000 were born in the Southeast, all but 4,600,- 
000 in rural districts. 

These rural districts have exported one-fourth of their 
natural increase in sons and daughters. They have sup- 
plied their own growth, much of the growth of southern 
cities, and still have sent great numbers into other sections. 
Of these southerners born in rural areas, only 17,500,000 
live in the locality where they were born, and 3,800,000 
have left the South entirely. 

This migration has taken from the South many of its 
ablest people. Nearly half of the eminent scientists bom 
in the South are now living elsewhere. While some of 
these have been replaced by scientists from other sections 
of the country, the movement from the South has been 
much greater than this replacement. The search for wider 
opportunities than are available in the overcrowded, eco- 
nomically undeveloped southern communities drains away 
people from every walk of life. About one child of every 
eight born and educated in Alabama or Mississippi con- 
tributes his life's productivity to some other State. 

(17) 
84767°— 38 3 



18 

The expanding southern population likewise has a 
marked effect on the South 's economic standards. There 
are fewer productive adult workers and more dependents 
per capita than in other sections of the country. The ex- 
port of population reflects the failure of the South to pro- 
vide adequate opportunities for its people. 

The largely rural States of the South must support 
nearly one-third of their population in school, while the 
industrial States su^^port less than one-fourth. Moreover, 
in their search for jobs the i)roductive middle-age groups 
leave the South in the greatest numbers, tending to make 
the South a land of the very old and the very young. A 
study of one southern community in 1928 showed that 
about 30 percent of the households were headed by women 
past middle age. Since 1930 most of these women, for- 
merly able to live by odd jobs and gardening, have gone on 
relief. Relief studies in the eastern Cotton Belt have 
shown recently that 15 percent of the relief households 
were without a male over 16 years of age and 15 percent 
more, or 31 percent altogether, were without any employ- 
able male. Even if the southern workers were able, there- 
fore, to secure wages equal to those of the North on a per 
capita basis dollar for dollar, a great gap would still re- 
main between the living standards of southern families 
and those of other regions. 

Recent figures indicate a slowing down of the migration 
to cities. In general, too, the rural population has in- 
creased most rapidly in those sections where the land is 
poorest. Thus the Appalachian and Ozark areas have 
shown a rapid increase, while the old black-belt cotton 
counties and Mississippi Delta counties have shown little 
or no gains. This has brought about an intensification of 
the problem of earning a living in the South. 

Big families have been growing up on the average south- 
ern farm in recent generations. When the children reach 
maturity, either some of the older ones have to move away 



19 

and find jobs in industry or trade, or the family farm — 
already too small — must be cut into smaller farms. 

For many years after the War between the States, there 
was a general tendency to reduce the size of farms, but 
about 1910 a contrary movement began which partially off- 
set this tendency. Nevertheless, because of the decrease 
in tillable land, in the older Southern States east of Texas, 
the farm acreage was actually less in 1930 than in I860, 
though the rural population had nearly doubled. In 1930 
there were nearly twice as many southern farms less than 
20 acres in size as in 1880. These figures indicate serious 
maladjustment between the people and the land, and a 
consequent misuse of resources. 

In certain sections there has been a tendency to revert 
to large plantations worked by machinery on an industrial 
basis. Tractors and gang plows are substituted for men 
and mules. This method of cutting operating costs also 
cuts the number of people needed for a given area of land 
or amount of crop. Farm unemployment constitutes a 
large proportion of the South 's unemployment problem. 
This tendency is further disarranging the relationship be- 
tween the people and the land. No longer owners, tenants, 
or croppers, the workers in these agricultural factories are 
more nearly day laborers — unskilled workers who can be 
hired one day and fired the next. 

It has been estimated that nearly 3,000,000 young people 
matured into the 15-25 age group between 1930 and 1935 
in the rural districts of 11 southeast States. Barely half 
a million took places left open by death; about the same 
number stayed in school; and the increase in number of 
farms, mostly substistence farms, took care of about a 
quarter of a million. Eemaining are some 1,750,000 who 
stay in the farm home as casual laborers or as unemployed. 

Increasing competition for jobs has also upset the bal- 
ance of employment between white and Negro. Unem- 
ployment among white people has caused them to seek jobs 
which were traditionally filled only by Negroes in the 



20 

South. The field for the emplojTuent of Negroes has con- 
sequently been further constricted, causing greater migra- 
tion. The lack of opportunity and the resulting job com- 
petition has lowered the living standards of both white and 
Negro workers in the South. 

The population problems of the South — ^the dispropor- 
tion of adult workers to dependents, the displacement of 
agricultural workers by machines, the substitution of white 
workers in traditionally Negro occupations, the emigra- 
tion of skilled and educated productive workers — are the 
most pressing of any America must face. They are not 
local problems alone. With the South furnishing the basis 
for the population increase of the Nation, with southern 
workers coming into other sections of the country in quest 
of opportimi ty, with the South 's large potential market 
for the Nation's goods, these problems are national. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 5 
PRIVATE AND PUBLIC INCOME 

The wealth of natural resources in the South — its for- 
ests, minerals, and fertile soil — benefit the South only when 
they can be turned into goods and services which its peo- 
ple need. So far the South has enjoyed relatively little 
of these benefits, simply because it has not had the money 
or credit to develop and purchase them. 

Ever since the War between the States the South has been 
the poorest section of the Nation. The richest State in 
the South ranks lower in per capita income than the poor- 
est State outside the region. In 1937 the average income 
in the South was $314; in the rest of the country it was 
$604, or nearly twice as much. 

Even in ''prosperous" 1929 southern farm people re- 
ceived an average gross income of only $186 a year as com- 
pared with $528 for faraiers elsewhere. Out of that $186 
southern farmers had to pay all their operating expenses — 
tools, fertilizer, seed, taxes, and interest on debt — so that 
only a fraction of that smn was left for the purchase of 
food, clothes, and the decencies of life. It is hardly sur- 
prising, therefore, that such ordinary items as automo- 
biles, radios, and books are relatively rare in many south- 
ern country areas. 

For more than half of the South 's farm families — ^the 
53 percent who are tenants without land of their own — 
incomes are far lower. Many thousands of them are living 

(21) 



22 

in poverty comparable to that of the poorest peasants in 
Europe. A recent study of southern cotton plantations 
indicated that the average tenant family received an in- 
come of only $73 per i)erson for a year's work. Earnings 
of share croppers ranged from $38 to $87 per person, and 
an income of $38 annually means only a little more than 
10 cents a day. 

The South 's industrial wages, like its farm income, are 
the lowest in the United States. In 1937 common labor 
in 20 important industries got 16 cents an hour less than 
laborers in other sections received for the same kind of 
work. Moreover, less than 10 percent of the textile work- 
ers are paid more than 52.5" cents an hour, while in the rest 
of the Nation 25 percent rise above this level. A recent 
survey of the South disclosed that the average annual wage 
in industry was only $865 while in the remaining States it 
averaged $1,219. 

In income from dividends and interest the South is at a 
similar disadvantage. In 1937 the per capita income in the 
South from dividends and interest was only $17,55 as com- 
pared with $68.97 for the rest of the country. 

Since the South 's people live so close to the poverty Une, 
its many local political subdivisions have had great diffi- 
culty in providing the schools and other public services 
necessary in any civilized community. In 1935 the as- 
sessed value of taxable property in the South averaged 
only $463 per person, while in the nine Northeastern States 
it amounted to $1,370. In other words, the Northeastern 
States had three times as much property per person to 
support their schools and other institutions. 

Consequently, the South is not able to bring its schools 
and many other public services up to national standards, 
even though it tax the available wealth as heavily as any 
other section. In 1936 the State and local governments 
of the South collected only $28.88 per person while the 



States and local goveiiunents of the Nation as a whole 
collected $51,54 per person. 

Although the South has 28 percent of the country's 
population, its Federal income-tax collections in 1934 were 
less than 12 percent of the national total. These collections 
averaged only $1.28 per capita throughout the South, rang- 
ing from 24 cents in Mississippi to $3.53 in Florida. 

So much of the profit from southern industries goes to 
outside financiers, in the form of dividends and interest, 
that State income taxes would produce a meager yield in 
comparison with similar levies elsewhere. State taxation 
does not reach dividends which flow to corporation stock- 
holders and management in other States ; and, as a result, 
these people do not pay their share of the cost of southern 
schools and other institutions. 

Under these circumstances the South has piled its tax 
burden on the backs of those least able to pay, in the form 
of sales taxes. (The poll tax keeps the i^oorer citizens from 
voting in eight southern States ; thus they have no effective 
means of protesting against sales taxes.) In every south- 
ern State but one, 59 percent of the revenue is raised by 
sales taxes. In the northeast, on the other hand, not a 
single State gets more than 44 percent of its income from 
this source, and most of them get far less. 

The efforts of southern communities to increase their 
revenues and to spread the tax burden more fairly have 
been impeded by the vigorous opposition of interests out- 
side the region which control much of the South 's wealth. 
Moreover, tax revision efforts have been hampered in some 
sections by the fear that their industries would move to 
neighboring communities which would tax them more 
lightly — or even grant them tax exemption for long 
periods. 

The hope that industries would bring with them better 
living conditions and consequent higher tax revenues often 



24 

has been defeated by the competitive tactics of the com- 
munities themselves. Many southern towns have found 
that industries which are not willing to pay their fair 
share of the cost of public services likewise are not willing 
to pay fair wages, and so add little to the community's 
wealth. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 6 
EDUCATION 

Great numbers of Americans are continually moving 
from one region to another. This makes poor schooling 
in any region a matter of national concern. Illiteracy, 
poor training, lack of education, go along with those mi- 
grating people who have not had schools. The fact that 
the South is the source of a considerable part of the rest 
of the Nation's population makes the South 's difficulties 
in providing school facilities a national problem. 

In the United States as a whole it is more possible than 
ever before to supply training for children and young 
people. The child population has only doubled since 
1880, while the adult population has increased more than 
threefold. Too, the productive capacity per worker today 
is far in excess of what it was 50 years ago. In the South, 
however, owing to the higher birth rate and to the migra- 
tion of adult workers, the proportion of productive work- 
ers to school children is much lower than elsewhere in the 
country. A study of this condition in 1930 showed that 
there were 10 adults to 6 children as compared to 10 adults 
for 4 children in the North and West. 

In the rural regions of the South, particularly, there is a 
marked disparity between the number of children to be 
educated and the means for educating them. For example, 
in 1930 the rural inhabitants of the Southeast had to care 
for 4,250,000 children of school age of the coimtry's total, 
although they received an income of only about 2 per- 

(25) 



26 

cent of the Nation's total. In the nonfarm population 
of the Northeast, on the other hand, there were 8,500,000 
children in a group that received 42 percent of the total 
national income — 21 times as much income available to 
educate only twice as many children. 

This disparity in the educational load, which bears so 
heavily on the South, continues. In 1936 the rate *of 
natural increase in the population was greatest in the 
southeastern and southwestern sections of the United 
States, precisely where the lack of educational opportunity 
is already most pronounced. 

The southern regions are affected by population shifts 
more than other sections because the greatest proportion 
of movers originate there. In the 1920 's the States south 
of the Potomac and Ohio Rivers and east of the Mississippi 
lost about 1,700,000 persons through migration, about half 
of whom were between 15 and 35 years of age. These per- 
sons moved at the beginning of their productive life to 
regions which got this manpower almost free of cost, 
whereas the South, which had borne the expense of their 
care and education up to the time when they could start 
producing, suffered an almost complete loss of its invest- 
ment. The newcomers to the South did not, by any means, 
balance this loss. The cost of rearing and schooling the 
young people of the southern rural districts who moved 
to cities has been estimated to be approximately $250,000,- 
000 annually. 

The South must educate one-third of the Nation's chil- 
dren with one-sixth of the Nation's school revenues. Ac- 
cording to the most conservative estimates, the per capita 
ability of the richest State in the country to support edu- 
cation is six times as great as that of the poorest State. 

Although southern teachers compare favorably with 
teachers elsewhere, the average annual salary of teachers 
in Arkansas for 1933-34 was $465, compared to $2,361 for 
New York State for the same year, and in no one of the 
Southern States was the average salary of teachers equal 



27 

to the average of the Nation. In few places in the Nation, 
on the other hand, is the number of pupils per teacher 
higher than as in the South. Overcrowding of schools, 
particularly in rural areas, has lowered the standards of 
education, and the short school terms of southern rural 
schools further reduce their effectiveness. 

In the South only 16 percent of the children enrolled in 
school are in high school as compared with 24 percent in 
States outside the South. 

Higher education in the South has lagged far behind the 
rest of the Nation. The total endowments of the colleges 
and universities of the South are less than the combined 
endowments of Yale and Harvard. As for medical schools, 
the South does not have the facilities to educate sufficient 
doctors for its own needs. 

Since adequate schools and other means of public edu- 
cation are indispensable to the successful functioning of a 
democratic nation, the country as a whole is concerned 
with the South 's difficulty in meeting its problem of 
education. 

Illiteracy was higher in 1930 in the Southern States than 
in any other region, totaling 8.8 percent. The North Cen- 
tral States had a percentage of 1.9. New England and the 
Middle Atlantic States combined had a percentage of 3.5. 
In the South the percentages ranged from 2.8 in Oklahoma 
to 14.9 in South Carolina. Every State in the South ex- 
cept Oklahoma had a percentage higher than 6.5 percent. 

But the poor educational status of the South is not a 
result of lack of effort to support schools. The South col- 
lects in total taxes about half as much per person as 
the Nation as a whole. All Southern States fall below the 
national average in tax resources per child, although they 
devote a larger share of their tax income to schools. For 
the Southern States to spend the national average per 
pupil would require an additional quarter of a billion dol- 
lars of revenue. 



28 

Between 1933 and 1935 more than $21,000,000 of Federal 
funds were necessary to keep rural schools open, and more 
than 80 percent of this amount was needed in the South, 
where local and State goveriunents were unable to carry 
the burden. 

In 1936 the Southern States spent an average of $25.11 
per child in schools, or about half the average for the 
country as a whole, or a quarter of what was spent per 
child in New York State. In 1935-36 the average school 
child enrolled in Mississippi had $27.47 spent on his educa- 
tion. At the same time the average school child enrolled 
in New York State had $141.43 spent on his education, or 
more than five times as much as was spent on a child in 
Mississippi. There were actually 1,500 school centers in 
Mississippi without school buildings, requiring children 
to attend school in lodge halls, abandoned tenant houses, 
country churches, and, in some instances, even in cotton 
pens. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 7 
HEALTH 

For years evidence has been piling up that food, cloth- 
ing, and housing influence not only the sickness rate and 
death rate but even the height and weight of school chil- 
dren. In the South, where family incomes are exception- 
ally low, the sickness and death rates are unusually high. 
Wage differentials become in fact differentials in health 
and life ; poor health, in turn, affects wages. 

The low-income belt of the South is a belt of sickness, 
misery, and unnecessary death. Its large proportion of 
low-income citizens are more subject to disease than the 
people of any similar area. The climate cannot be 
blamed — the South is as healthful as any section for those 
who have the necessary care, diet, and freedom from 
occupational disease. 

Several years ago the United States Public Health Serv- 
ice conducted syphilis-control demonstrations in selected 
rural areas in the South. These studies revealed a much 
higher ratio of syphilis among Negroes than among whites, 
but showed further that this higher ratio was not due to 
physical differences between the races. It was found to 
be due to the greater poverty and lower living conditions 
of the Negroes. Similar studies of such diseases have 
shown that individual health cannot be separated from 
the health of the community as a whole. 

The presence of malaria, which infects annually more 
than 2,000,000 people, is estimated to have reduced the 

(29) 



30 

industrial output of the South one-third. One of the most 
striking examples of the effect of malaria on industry was 
revealed by the Public Health Service in studies among 
employees of a cotton mill in eastern North Carolina. Pre- 
vious to the attempts to control malaria, the records of the 
mill one month showed 66 looms were idle as a result of 
ill-health. After completion of control work, no looms 
were idle for that reason. Before control work, 238,046 
pounds of cloth were manufactured in one month. After 
completion of the work production rose to 316,804 pounds 
in one month — an increase of 33y3 percent. 

In reports obtained in 1935 from 9 lumber companies, 
owning 14 sawmill villages in 5 southern States, there was 
agreement that malaria was an important and increasing 
problem among the employees. During the year 7.6 per- 
cent of hospital admissions, 16.4 percent of physician calls, 
and 19.7 percent of dispensary drugs were for malaria. 
The average number of days off duty per case of malaria 
was 9, while days in the hospital for the same cause were 
5. Ten railroads in the South listed malaria as an eco- 
nomic problem and a costly liability. Four utility com- 
panies had full-time mosquito-fighting crews at work dur- 
ing the year. The average case admitted to a company hos- 
pital lasted 3 days and the average number of days off duty 
because of malaria was 11. Each case of malaria was said 
to cost the companies $40. 

If we attempt to place a monetary value on malaria by 
accepting the figure of $10,000 as the value of an average 
life and using the death rate of 3.943 for malaria reported 
by the census for 1936, the annual cost of deaths from this 
disease is $39,500,000. To this figure could be added the 
cost of illness, including days of work lost. 

The health-protection facilities of the South are limited. 
For example, there are only one-third as many doctors per 
capita in South Carolina as there are in California. The 
South is deficient in hospitals and clinics, as well as in 
health workers. Many counties have no facilities at all. 



31 

The South has only begun to look into its pressing indus- 
trial hygiene problems, although it has 26 percent of the 
male mine workers in the United States and 14 percent of 
the male factory workers. These are the workers with 
which modem industrial health protection is most 
concerned. 

The experience as to pneumonia and tuberculosis among 
employees of the Tennessee Coal, Iron & Railroad Co. and 
their dependents during the 11-year period from 1925 to 
1935 gives an indication of health conditions among miners 
in the South. The situation generally is probably worse 
than shown by the figures for this company, whose workers 
have relatively better protection against disease. For this 
period the number under observation averaged slightly 
more than 77,000 persons. There were 3,780 cases of pneu- 
monia, of which 739 terminated fatally. This resulted in 
an average frequency per 1,000 of approximately 4.9 pneu- 
monia cases per year among surface workers, 4.7 among 
coal miners, and 10.6 among ore miners. The rate of 4.2 
for dependents included also the pneumonia of childhood 
and infancy. A fatality rate of 30.7 deaths per 1,000 cases 
of pneumonia was found among surface workers, a rate of 
26.8 among coal miners, and 24.8 among ore miners. 
Deaths from tuberculosis occurred at an annual rate of 
1.467 per thousand workers among coal miners, 1.232 
among ore miners, and 0.566 among surface workers. 

Prior to 1936 only one State in the South gave consider- 
ation to industrial hygiene. Today, with the aid of Social 
Security funds, seven additional States have industrial- 
hygiene units, and approximately 7,000,000 of the 10,000,- 
000 gainful workers are receiving some type of industrial- 
hygiene service. However, these industrial-hygiene units 
have started their programs only recently, and it will be 
some time before adequate health services will be available. 
The funds now being spent for this activity in the eight 
States which have industrial-hygiene services do not meet 
the problem of protecting and improving the health of 



32 

these workers. Approximately $100,000 is now being bud- 
geted for this work, although it is known that the economic 
loss due to industrial injuries and illnesses among these 
workers is hundreds of millions of dollars. 

Reports of one of the largest life-insurance companies 
show that more people in the southern area than elsewhere 
die without medical aid. The same company reported in a 
recent year a rise of 7.3 percent in the death rate in the 
nine South Atlantic States, though in no other region had 
the death rate risen above 4.8 percent, and in some sections 
it had declined. 

The scourge of pellagra, that affects the South almost 
exclusively, is a disease chiefly due to inadequate diet; it 
responds to rather simple preventive measures, including 
suitable nourishing food. Even in southern cities from 60 
to 88 percent of the families of low incomes are spending 
for food less than enough to purchase an adequate diet. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 8 
HOUSING 

The effects of bad housing can be measured directly 
in the general welfare. It lessens industrial efficiency, 
encourages inferior citizenship, lowers the standard of 
family life, and deprives people of reasonable comfort. 
There are also direct relationships between poor housing 
and poor health, and between poor housing and crime. 

The type of slum most usual in southern towns consists 
of antiquated, poorly built rental quarters for working 
people. The rows of wooden houses without any modern 
improvements, without proper sanitary facilities, and often 
without running water, are usually in congested areas and 
in the least desirable locations. Often they are next to 
mills or mines where the tenants work, or on low swampy 
land subject to floods and no good for anything else. They 
are usually far removed from playgrounds and other rec- 
reation areas. The southern slum has often been built to 
be a slum. It is simply a convenient barracks for a supply 
of cheap labor. 

Lack of running water and impure water supplies are 
common in southern slums. Bathtubs, sinks, and laundry 
tubs are among the bare necessities that are often lacking 
in slum dwellings. Sometimes city water is supplied 

(33) 



34 

through a yard hydrant shared by several families. Sur- 
face wells are often contaminated on the farms and in 
the villages and small towns. Contaminated milk and con- 
taminated water, frequently found, cause typhoid fever, 
which is becoming a widespread rural disease in the South. 

Lack of sanitary flush toilets and sewer systems for 
waste disposal is characteristic not only of the great ma- 
jority of farm and rural homes, but of a large proportion 
of homes in small towns and a substantial number in the 
cities. Twenty-six percent of southern city or town house- 
holds are without indoor flush toilets as contrasted with 
13.1 percent for the city and town households of the country 
as a whole. In extensive rural districts there are not only 
no indoor flush toilets, but no outdoor privies even of the 
most primitive sort. Nearly a fifth of all southern farm 
homes have no toilets at all. It is in these regions that 
hookworm infection and consequent anemia have flourished 
as a result of soil pollution. 

There is also extensive overcrowding in the southern 
town areas. In one-eighth of the dwellings there are more 
than one and one-half persons per room. In the United 
States as a whole only one-fourteenth of town houses are 
so crowded. In 19 southern cities recently studied over 
40 percent of all dwellings rent for less than $15 a month 
or are valued at less than $1,500, as opposed to 24.6 per- 
cent for the 64 cities studied in the country as a whole. 
Only three of the southern cities had a smaller percentage 
of dilapidated houses than the national average. Five of 
the 8 cities with over a quarter of their houses in bad con- 
dition were in the South ; 1 of these had 4 out of 10 of its 
houses either in need of repairs or unfit for habitation. 

A study of blighted areas in New Orleans showed that 
their tuberculosis death rate was twice as high as the city's 



35 

average, that their number of criminal arrests was 40 per- 
cent higher than the average, and that syphilis and cancer 
rates were high. 

Houses in the rural South are the oldest, have the lowest 
value, and have the greatest need of repairs of any farm 
houses in the United States. 

That there are 21/2 million below-standard houses would 
be a conservative estimate. Of 3 million farm houses 
in 14 southern States, including West Virginia, surveyed 
in 1930 only 5.7 percent had water piped to the house and 
3.4 percent had water piped to the bathroom. More than 
half the farmhouses are unpainted. More than a third 
of southern farmhouses do not have screens to keep out 
mosquitoes and flies. 

If we consider below-standard all nonfarm dwellings 
in the 14 States renting for less than $10 a month, and 
all occupant-owned nonfarm dwellings valued at less than 
$1,500, we find 1% million below-standard houses. Recent 
studies by local housing authorities in many of the south- 
ern cities indicate that these assumptions are correct. In 
addition, many houses now renting between $10 and $15 
are definitely below standard. The average farmhouse 
in the South is worth about $650. The average farm 
renter's house is worth about $350, according to the Fed- 
eral census of 1930. 

Southern cities have one important advantage over 
northern cities in their approach to the housing problem. 
As a rule, they are not hampered by the excessive land 
valuations that have developed in the North with the rapid 
growth and centralization of industry. Although the 1930 
census shows that the rate of movement to cities and towns 
is greater in the South than in the North, the effect of 
this is not yet reflected in town and city land values and 



36 

is not likely to be wMle wages remain low. It is, how- 
ever, reflected in poorer living conditions, overcrowding, 
and greater danger of the spread of certain diseases. 

By the most conservative estimates, 4,000,000 southern 
families should be rehoused. This is one-half of aU fami- 
lies in the South. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 9 
LABOR 

The rapidly growing population of the South is faced 
with the problem of finding work that will provide a de- 
cent living. Neither on the farm nor in the factory is 
there the certainty of a continuing livelihood, and thou- 
sands of southerners shift each year from farm to mill or 
mine and back again to farm. 

The insecurity of work in southern agriculture, its 
changes in method, and its changes in location, make the 
labor problem of the South not simply an industrial labor 
problem. Neither the farm population nor the industrial 
workers can be treated separately, because both groups, 
as a whole, receive too little income to enable their mem- 
bers to accumulate the property that tends to keep people 
stable. Industrial labor in the South is to a great extent 
unskilled and, therefore, subject to the competition of 
recurring migrations from the farm — ^people who have 
lost in the gamble of one-crop share farming. On the other 
hand, the industrial workers, with low wages and long 
hours, are constantly tempted to return to the farm for 
another try. 

As industries requiring a large proportion of skilled 
workers have been slow in developing, the unskilled in- 
dustrial labor in the South is particularly hampered by 
the competition of unskilled workers from the farms who 
accept low wages in preference to destitution at home. 
Much of the South 's increase in industrial activity has 

(37) 



38 

been brought about by the removal of cotton goods manu- 
facturing plants to the Southeast from higher wage areas 
in New England. This backbone of southern industry 
ranks nationally as one of the low-wage manufacturing 
industries. In the South it pays even lower wages than 
elsewhere. According to 1937 figures, the pay for the most 
skilled work in this industry is about 12 cents an hour less 
in the South than the pay for the same work elsewhere. 
The figures for the cotton goods industry also show the 
large number of low-wage workers and the small number 
receiving high wages in the South. More than half of the 
workers in southern mills earn under 37.5 cents an hour, 
although in the rest of the country the industry employs 
less than 10 percent at such low rates. In the South less 
than one-tenth of the workers are paid more than 52.5 
cents an hour, although one-fourth of the workers in the 
rest of the Nation's cotton goods industry are paid above 
this rate. 

Similar differentials between the South and other re- 
gions are found in lumber, furniture, iron and steel, coal 
mining, and other industries generally. The influence of 
the farm population's competition is shown in the un- 
skilled occupations where these wage differentials are 
voidest. The average differential in rates for new labor 
between the South and the rest of the country in 20 of the 
country's important industries in 1937 amounted to 16 
cents an hour. 

In spite of longer working hours, the total annual wages 
show the same discrepancy. The average yearly pay per 
person in industry and business in the South in 1935 was 
$865.41 as compared with $1,219.31 for the rest of the 
country. 

Wage differentials are reflected in lower living stand- 
ards. Differences in costs of living between the southern 
cities and cities in the Nation as a whole are not great 
enough to justify the differentials in wages that exist. In 
1935 a study of costs of living showed that a minimum 



39 

emergency standard required a family income of $75.27 a 
month as an average for all the cities surveyed. The aver- 
age of costs in southern cities showed that $71.94 a month 
would furnish the minimum emergency standard. This 
would indicate a difference of less than 5 percent in living- 
costs. Industrial earnings for workers are often 30 to 50 
percent below national averages. 

Low wages and poverty are in great measure self -per- 
petuating. Labor organization has made slow and difficult 
progress among the low-paid workers, and they have had 
little collective bargaining power or organized influence on 
social legislation. Tax resources have been low because of 
low incomes in the commimities, and they have been in- 
adequate to provide for the type of education modern in- 
dustry requires. Malnutrition has had its influence on the 
efficiency of workers. Low living standards have forced 
other members of workers' families to seek employment to 
make ends meet. These additions to the labor market tend 
further to depress wages. 

Low wages have helped industry little in the South. Not 
only have they curtailed the purchasing power on which 
local industry is dependent, but they have made possible 
the occasional survival of inefficient concerns. The stand- 
ard of wages fixed by such plants and by agriculture has 
lowered the levels of unskilled and semiskilled workers, 
even in modern and well-managed establishments. While 
southern workers, when well trained and working under 
modern conditions, are thoroughly efficient producers, 
there is not enough such employment to bring the wage 
levels into line with the skill of the workers. 

Unemployment in the South has not resulted simply 
from the depression. Both in agriculture and industry, 
large numbers have for years been living only half-em- 
ployed or a quarter employed or scarcely employed at all. 
In the problem of unemployment in the South, the relation 
between agriculture and industry becomes notably clear. 
Over 30 percent of the persons employed on emergency 



40 

works programs are farmers and farm laborers, as com- 
pared to 15.3 percent for the country as a whole. The inse- 
curity of southern farmers is reflected in these figures. 
Seasonal wages in agriculture do not i)rovide incomes suf- 
ficient to tide workers over the slack seasons. Part-time 
industrial work does not provide security the year round. 
As long as the agricultural worker cannot gain assurance 
of a continuing existence on the farm, he remains a threat 
to the job, the wages, and the working conditions of the 
industrial worker. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 10 
WOMEN AND CHILDREN 

Child labor is more common in the South than in any 
other section of the Nation, and several Southern States 
are among those which have the largest proportion of their 
women in gainful work. Moreover, women and children 
work under fewer legal safeguards than women and chil- 
dren elsewhere in the Nation. 

Low industrial wages for men in the South frequently 
force upon their children as well as their wives a large 
part of the burden of family support. In agriculture, be- 
cause of poor land and equipment, entire families must 
work in order to make their living. 

The 1930 census, latest source of comprehensive infor- 
mation on child labor, showed that about three-fourths of 
all gainfully employed children from 10 to 15 years old 
worked in the Southern States, although these States con- 
tained less than one- third of the country's children between 
those ages. 

Child labor, itself due to low wages for adult workers, is 
also a source of cheap competing labor, and thus it tends 
to make wages even lower, hours even longer, and generally 
to break down labor standards. Child labor, therefore, 
affects not only the child itself, but it undermines security 
of adult workers, and thus reacts seriously on the whole 
community and, indeed, the whole Nation. 

The South leads the Nation in the employment of chil- 
dren in both farm and industrial work. One hundred 

(41) 



42 

eight out of every 1,000 children between 10 and 15 years 
old were employed in the South, compared to 47 out of 
every 1,000 children of these ages in the country as a whole. 
Only Oklahoma and Virginia, of all the Southern States, 
employ fewer child workers than the average for the coun- 
try. Child labor legislation in these 13 States, as in the 
United States in general, does not apply to agricultural 
work, but is directed primarily to industrial and commer- 
cial employment. In some instances the coverage of the 
law is restricted to a few types of industrial establish- 
ments, and in other instances the laws themselves contain 
exemptions which greatly weaken their effectiveness. 
Only North and South Carolina have established a basic 
minimum age of 16 years for employment. Texas has a 
15-year minimum age standard, but it applies only to fac- 
tory and related employment. The remaining 10 States 
have a minimum age of 14, but in 8 of the 10 States the 
laws contain exemptions permitting employment below 
this age. 

The effectiveness of child labor legislation depends upon 
the provisions for its enforcement. Employment certifi- 
cation and proper inspection are necessary to make such 
legislation effective. Three of the five States in the coun- 
try which have not made legal provision for employment 
certificates are Southern States. 

Employment of children affects school attendance. The 
proportion of children 10 to 15 years of age in the South- 
ern States attending school in 1930 was 90 percent, as 
compared with 94 percent for the United States as a whole. 
If consideration were given to the number of days of school 
attendance, the disparity would appear much greater ; the 
school term generally is shorter in the South than in other 
sections. 

The upper age for compulsory school attendance 
throughout the rest of the country is generally 16 to 18. 
However, two Southern States require attendance only to 
14, one to 15, and only in two States does the upper age 



43 

extend above 16 years. All permit exemptions which ma- 
terially lessen their effectiveness. 

In many parts of the South legislation to protect women 
workers and to establish proper working standards for 
them has not been well developed. This has had far- 
reaching effects on the health, the living conditions, and the 
general well-being of women and their families. 

In a region where workers generally are exploited, 
women are subjected to an even more intense form of 
exploitation. Many women work more than 50 hours a 
week in cotton and other textile mills, and in the shoe, bag, 
paper box, drug, and similar factories in certain Southern 
States. 

The South has two of the four states in the entire Nation 
that have enacted no laws whatever to fix maximum hours 
for women workers. Only one of the Southern States has 
established an 8-hour day for women in any industry. 
Only four of the Southern States have applied a week as 
short as 48 hours for women in any industry. 

Reports for a number of industries, including cotton 
manufacturing, have shown wage earners receiving wages 
well below those estimated by the Works Progress Admin- 
istration as the lowest which would maintain a worker's 
family. 

Women's wages ordinarily amount to less than men's. 
However, only two of the Southern States have enacted a 
law i3roviding a minimum wage for women, though sev- 
eral others are attempting to pass such legislation. Recent 
pay-roll figures show women textile workers in an impor- 
tant southern textile State receiving average wages 10 per- 
cent below the average outside the South. Other figures 
show that a week's wage of less than $10 was received by 
more than half the women in one State's cotton mills, and 
by a large part of the women in the seamless hosiery plants 
of three States and in the men's work-clothes factories of 
two States. 



44 

Many women, even though employed full time, must 
receive public aid because their wages are insufficient to 
care for themselves and their children. The community 
thus carries part of the burden of these low wages and, in 
effect, subsidizes the employer. 

One condition tending to lower women's wages is the 
system by which factories ''farm out" work to be done in 
homes. Women have been found at extremely low pay 
doing such work as making artificial flowers, sewing but- 
tons on cards, clocking hosiery, embroidering children's 
clothing, stuffing and stitching baseballs. Although this is 
a relatively recent tendency in the South, there are indi- 
cations that such work is increasing. Usually the pay is 
far below that paid in the factory. A study of industrial 
home work on infants' wear disclosed that the women 
worked much longer hours than in the factory, though half 
of them received less than $2.73 for their week's work. 

A low wage scale means low living standards, insufficient 
food for many, a great amount of illness, and, in general, 
unhealthful and undesirable conditions of life. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 11 
OWNERSHIP AND USE OF LAND 

The farming South depends on cotton and tobacco for 
two-thirds of its cash income. More than half of its farm- 
ers depend on cotton alone. They are one-crop farmers, 
subjected year after year to risks which would appall the 
average businessman. All their eggs are in one basket — 
a basket which can be upset, and often is, by the weather, 
the boll weevil, or the cotton market. 

The boll weevil can be conquered, and weather hazards 
tend to cancel themselves out as good seasons follow bad ; 
but the cotton market is a sheer gamble. On this gamble 
nearly 2,000,000 southern families stake their year's work 
and everything they own. Their only chance of making 
a living is tied up with the fluctuations of the world price 
of cotton. 

No other similar area in the world gambles its welfare 
and the destinies of so many people on a single crop market 
year after year. 

The gamble is not a good one. Few other crops are 
subject to such violent and unpredictable price variations 
as cotton. In 1927 cotton farmers got 20 cents a pound 
for their crop ; in 1929 they got 16 cents ; in 1931 they got 6 
cents ; in 1933 they got 10 cents. Only once during the last 
decade did the price of cotton change less than 10 percent 
between pickings. Three times in 5 years it jumped more 
than 40 percent — once up and twice down. 

(45) 



46 

Because cotton is the cornerstone of the economy of 
many parts of the South, the merchants, manufacturers, 
businessmen, and bankers share the hazards of the farmer. 
The men who finance cotton farming charge high interest 
rates because their money is subject to far more than the 
normal commercial risk. As a result, the mortgage debt 
of southern farm owners has been growing steadily for the 
last 20 years. A check-up on 46 scattered counties in the 
South in 1934 showed that one-tenth of the farm land was 
in the hands of corporations, mostly banks and insurance 
companies, which had been forced to foreclose their mort- 
gages. 

This process has forced more than half of the South 's 
farmers into the status of tenants, tilling land they do not 
own. Whites and Negroes have suffered alike. Of the 
1,831,000 tenant families in the region, about 66 percent 
are white. Approximately half of the sharecroppers are 
white, living under economic conditions almost identical 
with those of Negro sharecroppers. 

The pattern of southern tenancy was set at the end of 
the War between the States, which left thousands of for- 
mer slave owners with plenty of land but no capital or 
labor to work it. Hundreds of thousands of former slaves 
and impoverished whites were willing to work but had no 
land. The result was the crop-sharing system, under which 
the land was worked by men who paid for the privilege 
with a share of their harvest. It was natural under this 
system that landowners should prefer to have virtually 
all the land put in cotton or other cash crops from which 
they could easily get their money. Consequently, over 
wide areas of the South cash-cropping, one-crop farming, 
and tenant farming have come to mean practically the 
same thing. Diversification has been difficult, because the 
landlord and tenant usually have not been able to find a 
workable method of financing, producing, and sharing the 
return from such crops as garden truck, pigs, and dairy 
products. 



47 

Tenant families form the most unstable part of our pop- 
ulation. More than a third of them move every year, and 
only a small percentage stay on the same place long enough 
to carry out a 5-year crop rotation. Such frequent moves 
are primarily the result of the traditional tenure system, 
under which most renters hold the land by a mere spoken 
agreement, with no assurance that they will be on the same 
place next season. Less than 2 percent have written leases 
which give them security of tenure for more than one year. 

Under these circumstances the tenant has no incentive to 
protect the soil, plant cover crops, or keep buildings in 
repair. On the contrary, he has every reason to mine the 
soil for every possible penny of immediate cash return. 

The moving habit, moreover, is costly. Most renters 
merely swap farms every few years without gain to them- 
selves or anybody else. The bare cost of moving has been 
estimated at about $57 pei' family, or more than $25,000,000 
annually for the tenants of the South. Children are taken 
out of school in midyear, and usually fall behind with their 
studies. It is almost impossible for a family constantly 
on the move to take an active part in community affairs ; 
and, as a consequence, churches and other institutions suf- 
fer. For example, in one area of North Carolina where 
the percentage of tenancy is low, there were 257 churches, 
with 21,000 members. In a nearby area of high tenancy — 
with three and one-half times as many people — there were 
only 218 churches, with 17,000 members. 

While it is growing more cotton and tobacco than it can 
use or seU profitably, the South is failing to raise the things 
it needs. Southern farmers grow at home less than one- 
fifth of the things they use ; four-fifths of all they eat and 
wear is purchased. 

For example, the region has more than half of the 
Nation's farm people, yet it raises less than one-third of 
the Nation's pigs and cattle. Although it has more than a 
fourth of America's total population, it produces only one- 
fifth of the country's eggs, milk, and butter, one-seventh of 



48 

the hay, one-eighth of the potatoes, and one-twelfth of the 
oats. Consequently the South must either obtain these 
things from other regions and pay handling and freight 
charges or do without. 

Too many southern families have simply done without, 
and as a result they have suffered severely from malnutri- 
tion and dietary diseases. Many common vegetables are 
rarities in many southern farming communities, although 
both soil and climate are extremely favorable to their 
growth. Production of foodstuffs could be increased 
manyf old in the South without infringing on the markets 
of any other region; most of the increased outi)ut could, 
and should, be absorbed by the very farm families pro- 
ducing it. 

Because they have concentrated on cash crops, southern 
farmers have planted relatively little of their land in 
alfalfa, clover, field peas, and soybeans. These and similar 
legumes add fertility to the soil and at the same time pro- 
tect fields against washing and gullying. If widely used, 
they would help the farmer to protect his investment in 
his land and take a little of the gamble out of his business. 

On the other hand, cotton, tobacco, and corn use up the 
natural richness of the land with great speed. Fields 
planted to them year after year wear out and wash away 
much more quickly than fields on which legumes are 
planted in rotation with cash crops. Yet 6 acres of south- 
ern crop land out of every 10 are planted one season after 
another in cotton, tobacco, and corn. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 12 
CREDIT 

There has never been enough capital and credit in the 
South to meet the needs of its farmers and its industry. 
Its people have been living so close to poverty that the 
South has found it almost impossible to scrape together 
enough capital to develop its natural resources for the 
benefit of its own citizens. 

Lacking capital of its own the South has been forced to 
borrow from outside financiers, who have reaped a rich 
harvest in the form of interest and dividends. At the 
same time it has had to hand over the control of much of 
its business and industry to investors from wealthier 
sections. 

A glance at the bank reports shows how difficult it has 
been for the southern people, whose average income is the 
lowest in the Nation, to build up savings of their own. 
Although the region contains 28 percent of the country's 
population, in July 1937, its banks held less than 11 per- 
cent of the Nation's bank deposits, or only $150 per capita, 
as compared with $471 per capita for the rest of the United 
States. Savings deposits were less than 6 percent of the 
national total. Of the 66 banks having deposits of $100,- 
000,000 or more only two are in the South, and they barely 
qualify. 

Even these figures do not fully disclose how small a 
share the South plays in the country's financial life. 

(49) 



50 

Southern investment banking firms managed only 0.07 per- 
cent of the security issues larger than $1,000,000 which 
were offered for sale between July 1, 1936, and June 1, 
1938 — and it is the investment bankers who find the money 
for virtually all important industries. 

Insurance company funds reflect the same story. South- 
ern companies hold only $756,000,000, or about 2.6 percent, 
of the $28,418,000,000 of assets held by the Nation's life- 
insurance companies. 

The scarcity of local credit sources results in high in- 
terest rates and lays a heavy burden both on individuals 
and local governments. The average interest paid on 
southern State, county, and municipal bonds is 4.4 per- 
cent, while the rest of the country pays only 3.98. The 
weighted average interest rates charged by banks in 27 
large southern and western cities in June 1938 was 4.14 
percent, while for New York City it was only 2.36 percent, 
and for 8 other northern and eastern cities only 3.38 
percent. 

State banks outside the Federal Reserve System, but in- 
sured by the Federal Deposit Insurance Corporation, 
charge average interest rates in the South ranging from 
6.5 percent in Virginia to 10.43 percent in Texas and 11.5 
percent in Oklahoma. In the New England and the Middle 
Atlantic States, on the other hand, it is 5.75 percent. In 
the Mountain States the highest average is 8.5 percent, 
which is lower than in 5 of the Southern States. 

Banking laws and regulations have contributed still 
further to the scarcity of southern credit. Ordinarily, 
banks can make credit available for capital purposes only 
by the purchase of readily marketable securities. This 
makes it almost necessary for a security to be listed on an 
exchange or to have an active over-the-comiter market. 
Locally owned southern industries are usually too small 
to meet these requirements. Recently these requirements 
have been liberalized, but it is too early to tell whether the 
change will be helpful. 



51 

Faced with these handicaps, the South has had to look 
beyond its boundaries for the financing of virtually all of 
its large industries and many of its small ones. This has 
turned policy-making powers over to outside managements 
whose other interests often lead them to exercise their 
authority against the South 's best advantage. For example, 
many such companies buy most of their goods outside of 
the South, and often their sales policies are dictated in the 
interest of allied corporations in other sections of the 
country. 

If the high cost of credit has hampered southern indus- 
try, its effect on farming might be illustrated by the re- 
mark of Louis XIV: ''Credit supports agriculture, as the 
rope supports the hanged." Almost the only sources of 
credit for small farmers — aside from Federal agencies — 
are (1) local banks, (2) landlords, and (3) merchants and 
dealers. 

The banks cannot meet all credit demands, because what- 
ever scant deposits they may have are largest in the fall 
and winter, after harvest, and smallest in the spring and 
summer, when the need for farm financing is greatest. 

As a result, the majority of southern tenant farmers 
must depend for credit on their landlords or the ''furnish 
merchant" who supplies seed, food, and fertilizer. Their 
advances, in fact, have largely replaced currency for a con- 
siderable part of the rural population. For security the 
landlord or merchant takes a Hen on the entire crop, which 
is to be turned over to him immediately after harvest in set- 
tlement of the debt. Usually he keeps the books and fixes 
the interest rate. Even if he is fair and does not charge 
excessive interest, the tenants often find themselves in debt 
at the end of the year. This is not necessarily a reflection 
on the planter-merchant ; very often he would like to im- 
prove the lot of his tenants but must exploit them in order 
that he himself may survive. 

The credit difficulties of the landlord are only a little less 
oppressive than those of his tenants. Because he ordi- 



62 

narily stakes everything on a single cash crop — cotton or 
tohacco — ^which is subject to wildly fluctuating markets, 
the landowner is a poor credit risk. Consequently he often 
must pay interest rates as high as 20 percent, making the 
rates for tenants range considerably higher. 

Attempts to find a remedy through credit unions have 
met with slight success, although such organizations are 
spreading. On January 1, 1938, there were 564 Federal 
credit unions in the South, with 80,530 members and assets 
totaling $2,851,500. The unions are not evenly distributed 
throughout the region, however, since Texas alone had 167 
while Kentucky had only 4. 

Some of the South 's credit difficulties have been slightly 
relieved in recent years by the extension of credit from 
Federal agencies — to the business man by the Reconstruc- 
tion Finance Corporation, to the farmer by the Farm Se- 
curity and Farm Credit Administrations, to municipalities 
by the Public Works Administration. Many other agen- 
cies, ranging from the Works Progress Administration to 
the Soil Conservation Service, have brought desperately 
needed funds into the South 

The fact remains, however, that the South has not yet 
been able to build up an adequate supply of credit — the 
basis of the present-day economic system. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 13 
USE OF NATURAL RESOURCES 

The great natural resources of the South have been 
exploited with the traditional American regard for cream 
and disregard for skimmed milk. Perhaps no worse than 
in the rest of the country, but with serious effect on the 
South, forests have been girdled, chopped, and burned 
without regard for their permanent value as timber or as 
conservers of the soil and rainfall. 

Ruthless measures have been used to obtain the best ore, 
oil, or gas with the least effort. Careless room-and-pillar 
mining has resulted in the abandomnent of untold tons 
of southern coal in deserted mines. In 1935 the Nation 
lost through wastage 479,826,000,000 cubic feet of natural 
gas, not including wastage at the wellheads. The Pan- 
handle section of Texas alone accounted for 67 percent of 
this extravagant loss. Other sections of the South, simi- 
larly guilty, failed to take advantage of inventions which 
would have saved and used much of their gas. 

Because of the poverty in which the South was left 
after the War between the States, and because of the high 
cost of credit since that time, a very large share of the 
natural resources of the South is owned in other regions. 
To the extent that this is true, the South is exposed to a 
double danger. On the one hand, it is possible for a mo- 
nopolistic corporation in another region of the country to 
purchase and leave unused resources in the South which 

(53) 



54 

otherwise might be developed in competition with the mo- 
nopoly. On the other hand, the large absentee ownership 
of the South 's natural resources and the South 's industry 
makes it possible for residents elsewhere to influence 
greatly the manner in which the South is developed and 
to subordinate that development to other interests outside 
the South. 

The public utilities in the South are almost completely 
controlled by outside interests. All the major railroad 
systems are owned and controlled elsewhere. Most of the 
great electric holding company systems, whose operating 
companies furnish the light, heat, and power for southern 
homes and industries, are directed, managed, and owned 
by outside interests. Likewise, the transmission and dis- 
tribution of natural gas, one of the South 's great assets, 
is almost completely in the hands of remote financial in- 
stitutions. The richest deposits of the iron ore, coal, and 
limestone that form the basis for the steel industry in 
Birmingham are owned or controlled outside of the region. 
Until recently, too, the Birmingham area was subordinated 
to the Pittsburgh area as a result of a system of pricing 
steel which placed it at a tremendous disadvantage. As a 
result of this disadvantage — that is, because it was more 
economical for them to be in the areas formerly favored 
by the artificial price system — the fabrication plants which 
use most of the steel were not constructed in the Birming- 
ham area. The fact that these fabrication plants are out- 
side of the South will make it hard for the South now to 
find a ready market for its steel, even though the pricing 
system has been changed. 

Most of the rich deposits of bauxite, from which alumi- 
num is made, are owned or controlled outside the region. 
Practically all important deposits of zinc ore in the South 
are owned elsewhere, and the principal zinc-mining com- 
pany in the Southwest is a subsidiary of a company com- 



55 

pletely owned and controlled outside of the area of its 
operation. The South 's resources of zinc ore and the 
South 's consumption of zinc paints and metalware are 
separated by a long northern detour, because absentee 
ownership and discriminatory freight rates make it 
cheaper to ship raw materials north for processing than 
to manufacture them at home. 

Over 99 percent of the sulphur produced in the United 
States comes from Texas and Louisiana. Two extraction 
companies control practically the entire output. Both are 
owned and controlled outside the South. One has 15 direc- 
tors and the other 9, but only 1 member of each board 
resides in the South. 

For mining its mineral wealth and shipping it away in 
a raw or semifinished form the South frequently receives 
nothing but the low wages of unskilled and semiskilled 
labor. The wages for manufacturing this natural wealth 
into finished products often do not go to southerners, but 
to workers in other areas ; and the profits likewise usually 
go to financial institutions in other regions. When a south- 
erner buys the finished product, on the other hand, the 
price he pays includes all the wasteful cross-hauling 
involved in the present system. 

In North Carolina and Tennessee is produced 36 percent 
of the total ground feldspar of the Nation; but one can 
look in vain in the South for any important tile, glass, 
enamel, insulator, or scouring soap industries using this 
product. Georgia produces 66 percent of the kaolin out- 
put of the country and South Carolina 20 percent ; but their 
industries use little of this clay. Kentucky is a ranking 
fluorspar producer, but practically its entire production is 
shipped out of the South. The processing of cotton into 
textiles is the major southern industry; but many of the 
largest mills are owned outside of the region. Other mills 
are only recent emigrants from northern locations to the 
South. 



56 

The manufacture of cellulose into artificial silk, or rayon, 
presents a striking example of absentee ownership. The 
American Bemberg Corporation, with large mills in Ten- 
nessee, uses patents and processes exclusively owned in 
Germany. Of the company's 14 directors, 5 are German, 
3 are Dutch, and 4 are American residents in New York. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 14 
INDUSTRY 

Since the War between the States industry has become 
in the minds of most Americans a symbol of profit and 
wealth. Certainly the wealthiest parts of our country are 
the most industrialized. There has long been a strong 
''New South" movement striving to achieve for the South 
the wealth that is supposed to come from industry. 

With respect to the manufacture of cotton textiles, the 
South has come from a subordinate position in 1860 to a 
dominating position today. It is natural that the South 's 
most outstanding accomplishment in industry should be 
the processing of its greatest agricultural crop. The cotton 
manufacturing industry started in the latter part of the 
nineteenth century with small subscriptions of stock pro- 
vided, for the most part, by southerners ; but when these 
mills began to compete successfully with the New England 
mills northern capital was introduced, and later a great 
many northern mills were shifted to the South. 

Earnings on the investment in the southern mills, as in- 
dicated by figures for 1933-34, are considerably higher 
than those in the North, but the wages paid as reported 
from 1919 to 1933 are considerably less. 

During the year 1933 the percentage of the wages to the 
value added by manufacture was 60.8 percent in five States 
in New England, as against 55.5 percent in five Southern 
States. 

(57) 



58 

The development in recent years of the manufacture of 
cottonseed products has proved valuable to the South. In 
1929 the value of these products reached $265,247,000, 
about half of which was for cottonseed oil. The further 
development of cottonseed oil for oleomargarine and kin- 
dred products has been hampered by taxes, licenses, and 
other restrictive legislation not only by States outside the 
region but also by the Federal Government. 

The manufacture of cigarettes has become important in 
North Carolina and Virginia. The iron and coal indus- 
tries are important in Alabama. The use of the southern 
forests for many purposes has constantly grown. In Jan- 
uary 1938 the South had 38 pulp mills built or being built, 
with a total investment estimated at some $200,000,000. 
Many new uses have been found for this pulp, such as the 
manufacture of building boards, rayon staple fiber, wrap- 
ping paper, and quite recently newsprint paper. As the 
United States is the largest consumer of wood pulp in the 
world, the development of this industry in the South is 
significant. 

Meager facilities exist in the South for research that 
might lead to the development of new industries especially 
adapted to the South 's resources. Some new industries 
have been developing in the South, but others have dis- 
appeared. 

In addition to absentee ownership and the high cost of 
credit, the major problem which faces almost all industry 
in the South is that of freight rate differentials. The 
present interterritorial freight rates which apply on move- 
ments into other areas of many southern manufactured and 
semifinished goods, and some agTicultural products and 
raw materials, handicap the development of industry in 
the South. This disadvantage works a hardship particu- 
larly with regard to shipments into the important north- 
eastern territory. This region, containing 51 percent of 
the Nation's population, is the greatest consuming area. 
The southeastern manufacturer sending goods across the 



59 

boundary into this region is at a relative disadvantage of 
approximately 39 percent in the charges which he has to 
pay as compared with the rates for similar shipments en- 
tirely within the eastern rate territory. The southwestern 
manufacturer, with a 75 percent relative disadvantage, is 
even worse off. Such a disadvantage applies to the south- 
em shipper even when, distance considered, he is entirely 
justified on economic groimds in competing with producers 
within the eastern territory. 

In effect, this difference in freight rates creates a man- 
made wall to replace the natural barrier long since over- 
come by modern railroad engineering. Both actual and 
potential southern manufacturers are hampered because 
attractive markets are restricted by the existence of a 
barrier that is now completely artificial. The southern 
producer, attempting to build up a large-scale production 
on the decreasing cost principle, finds his goods barred 
from the wider markets in the Nation's most populous 
area. In marketing his products over the wall he is forced 
to absorb the differences in freight charges. 

Two chief reasons for higher freight rates have disap- 
peared. One was the greater expense of railroading in 
the South, due to physical difficulties. This has been mini- 
mized by modern engineering. Another was the compara- 
tive lack of traffic that prevented the spreading of the cost. 
This no longer is the case, since many important southern 
roads have as great a traffic density as those above the Ohio 
River. The operating costs of southern lines today are 
lower than those in the eastern territory. 

The artificial rate structure handicaps the South in its 
efforts to expand and diversify its industry. For example, 
under present conditions it is cheaper to concentrate and 
ship the South 's zinc ore to the North, where it is made into 
metallic zinc, used to coat northern steel, and shipped back 
to the South for its *Hin" roofs and other galvanized iron- 
ware, than it is to convert this zinc ore in the South with- 
out the economic loss of cross hauling. 



60 

An equally serious deterrent to the South 's economic de- 
velopment has been the Nation's traditional high tariff 
policy. The South has been forced for generations to sell 
its agricultural products in an unprotected world market, 
and to buy its manufactured goods at prices supported by 
high tariffs. The South, in fact, has been caught in a vise 
that has kept it from moving along with the main stream of 
American economic life. On the one hand, the freight 
rates have hampered its industry; on the other hand, our 
high tariff has subsidized industry in other sections of the 
country at the expense of the South. Penalized for being 
rural, and handicapped in its efforts to industrialize, the 
economic life of the South has been squeezed to a point 
where the purchasing power of the southern people does 
not provide an adequate market for its own industries nor 
an attractive market for those of the rest of the country. 

Moreover, by curtailing imports, the tariff has reduced 
the ability of foreign countries to buy American cotton and 
other agricultural exports. America's trade restrictions, 
without sufficient expansion of our domestic markets for 
southern products, have hurt the South more than any 
other region. 



REPORT TO THE PRESIDENT 

ON 

THE ECONOMIC CONDITIONS OF 
THE SOUTH 

Section 15 
PURCHASING POWER 

The South is the Nation's greatest untapped market and 
the market in which American business can expand most 
easily. The cost of '* selling" the South modern conven- 
iences is already being borne, to large extent, since the 
methods that now sell the rest of the Nation reach the 
South with little or no extra cost. Radio, movies, periodi- 
cals, and other instruments of national scope for acquaint- 
ing the public with new things have *'sold" southerners as 
they have sold other Americans. There are no language 
barriers, no geographical obstacles, no tariff walls, no 
psychological difficulties to be overcome. The people of 
the South need to buy, they want to buy, and they would 
buy — ^if they had the money. 

The South has an abundance of the things the Nation 
needs. Its vast stores of raw materials — forest, mineral, 
and agricultural; its extensive power resources — ^water 
coal, oil, and natural gas ; its ample transportation facili- 
ties — ^rail, water, and air — and its varied climate, could 
make the South a tremendous trader with the rest of the 
Nation. Its growing population, with vast needs and de- 
sires, now largely unfilled, could keep a large part of the 
rest of the country busy supplying them. Such a relation- 
ship would help the South and the rest of the Nation. 
Both have lost because this relationship does not exist. 

The South 's people want and need houses, radios, butter, 
beef, vegetables, milk, eggs, dresses, shirts, shoes. They 

(61) 



62 

want and could use the many thousands of things, little 
and big, that men and machines make to bring health and 
good living to people. The average southerner with a total 
income of $315 could spend, without help, twice that 
amount for the things he needs and needs badly. 

A study of southern farm-operating white families not 
receiving relief or other assistance showed that those whose 
income averaged $390 spent annually only $49 on the food 
they bought, $31 on clothing, $12 on medical care, $1 on 
recreation, $1 on reading, $2 on education. A similar stuv?y 
of southern white village residents showed that those whose 
incomes were under $750 a year spent 75 cents or more out 
of every dollar for food, clothing, housing, heating, light- 
ing, and running the house. Only one in four of these 
families owned an automobile of any description. 

Southern people need food. The all too common diet 
in the rural South of fatback, corn bread, and molasses, 
with its resulting pellagra and other dietary diseases, is 
not dictated by taste alone. There is a deficiency in the 
consumption of necessary foods even among employed, 
wage-earning families in the cities of the South. The aver- 
age per capita butter consiunption in cities in this region 
was found to be about half of that in eastern cities and a 
quarter of that in cities on the Pacific coast. Studies of 
gainfully employed nonrelief white workers in ten of the 
largest cities of the South show^ed that less than two-thirds 
spent enough money to buy an '* adequate diet at minimum 
cost," as calculated by the Bureau of Home Economics. 
This same study gives further evidence of underconsump- 
tion by wage earners and lower salaried clerical workers. 
No relief families were studied. 

The fact that the families who could spend annually $500 
or over per person consmned well over half again as much 
meat, poultry, fish, and eggs, about four times as much 
cheese, twice as many tomatoes, 30 percent more bread, and 
well over twice as much fruit of all kinds as the families 
who could spend $300 annually per person reveals the pos- 



63 

sibility of a vastly increased market for foodstuffs of all 
kinds. The extent of the South 's underconsumption of 
these basic foodstuffs can be estimated from the fact that 
half of the people of the South have an income of less than 
$300 a year. 

Southern people need clothes. Farm families in Missis- 
sippi and Georgia with annual incomes below $250 spent 
between $19 and $41 for clothing per year. In villages hus- 
band-and-wife families not on relief, with incomes of less 
than $500 a year, spent $14 for the husband's and $15 for 
the wife's clothing; of these amounts, they spent $3 for 
shoes and shoe repairs, $1 for coats and other wraps, $1 for 
hats and caps. Farm families having similar incomes 
spent $15 for the husband's wardrobe, $12 for the wife's. 

One-half of the southern people, and an even larger per- 
cent of rural southerners, need new houses. More than 90 
percent of the rural families need water piped into their 
houses; even more need water in their bathrooms; over 
one-half of their houses need paint, one-third of them need 
screen on their windows, one-fifth do not even have privies. 
More than a fourth of the urban households need toilets, 
many of them need more bedrooms, over one-fifth of the 
houses are in need of repainting. 

Of white nonrelief families in four southern cities 
with incomes less than $500, over one-third had no indoor 
running water, almost one-half had no kitchen sink with 
drain, none had gas or electricity for cooking, none had 
central heating. Among southern farm families of the 
same income group, less than 1 percent had an indoor water 
supply, less than 3 percent had kitchen sinks with drains, 
1 percent had indoor toilets, none had electric or gas cook- 
ing facilities, and less than 2 percent electric lights. 

They need these improvements and they need household 
equipment. In 33 villages in the Southeast recently sur- 
veyed, a smaller percentage of families owned washing, 
ironing, and sewing machines and vacuum cleaners than 
families in any of the four other regions studied. Only 2 



64 

percent of the white families and 0.3 percent of the Kegro 
families of these southern villages owned washing ma- 
chines, as compared with 81.2 percent in the Pennsylvania, 
Ohio, Michigan, Wisconsin, and Illinois villages that were 
surveyed, and 77.3 percent in a similar group of California, 
Oregon, and Washington villages. While about the same 
proportion of southern white villagers had refrigerators as 
New Englanders, only half as many southern Negro vil- 
lagers were as fortunate. There was an even greater dis- 
parity in these household equipment items between south- 
ern farm families and farmers elsewhere in the country. 
And southern farmers need equipment. They need imple- 
ments, fencing, and fertilizer. 

Northern producers and distributors are losing profits 
and northern workers are losing work because the South 
cannot afford to buy their goods. 

O 



. S. GOVERNMENT PRINTING