Today we are living in the “connected age” — technologically connected, that is. That’s the idea Michael Walden, William Neal Reynolds Distinguished Professor and Extension Economist at North Carolina State University, explores in the recent book North Carolina in the Connected Age: Challenges and Opportunities in the Globalizing Economy. He discussed the book’s key themes with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: You mentioned right off the bat that this connected age transformed the North Carolina economy. What are we talking about with the connected age and how has it transformed our economy?
Walden: I think you’ve summarized it rather well. People know about the advances in both transportation, or particularly in communication. And what that has done has led to, again, the cliché word everyone knows – globalization – where now we’re no longer competing, for example here in North Carolina, against companies and people in other states, but we’re competing worldwide. I think the main thing this did to North Carolina was it changed the focus of our state from a state that – and this may sound negative but it was just a reality – in the 19th and 20th centuries we really competed on the basis of having cheap labor. The textile industry, for example, came here to the South and North Carolina from New England because labor was cheaper; [the] furniture industry the same way. Many manufacturing companies came to the South and North Carolina because wages were lower.
Well, in the connected age, if you want cheap labor, you don’t even stay in the U.S. You go to China, you go to Southeast Asia, you go to Eastern Europe. So this really fundamentally changed the whole economic reason-for-being of North Carolina. We had to find new industries and we had to change our labor force in order to compete in this new era, and so my book traces those changes. Besides technology and communication, I look at some other forces that have affected our economy like more global trade, trade deals, the advances in education, and show how that has changed the composition of our economy in North Carolina.
We’ve gone from the so-called Big Three of tobacco, textiles and furniture, to now what I call the Big Five of technology, financial services, pharmaceuticals, food processing, and vehicle parts. And then I look at the impacts of those changes on people, places, and policies. And one theme that runs through the book is [that] overall, it looks like these changes have really benefited North Carolina. In the last three decades we’ve been one of the leading states in terms of economic growth. People still want to move here. That’s created some issues regarding infrastructure when people want to move here. But, if you go beneath the surface, you see that not every demographic group and income group, and not every region of the state, has benefited. So we have some divisions in our state, which I explore.
Kokai: You mentioned a topic that we definitely wanted to touch on – which is whether change has been good or bad. It sounds like for the most part, good, but not for everyone. What do you think it is about North Carolina that it continued to attract people even as we were in this transition period?
Walden: I think, number one, we were in the South. And one of the changes that I talk about in the book that we’re still dealing with now, is higher energy costs. And really, that started in the 1970s. In the 1970s we had our first shock – energy shock – in terms of higher energy prices. One of the fundamental things that did in our country is, it made businesses more aware of the importance of energy prices, and they looked around the economic landscape in the nation and said, “Where can we go where energy is cheaper?” And the South was the logical place because one thing – we have milder winters so you don’t have those high energy costs in the winter. And then, plus, our energy prices were very competitive.
So I think that’s one thing that happened. I think another thing, quite frankly, that happened, was due to some national legislation in the 1960s – civil rights legislation – which sort of removed the stigma that the South had lived with for many decades regarding civil rights. We were no longer viewed as kind of an outcast – we the South. So industries began to look anew at the South and North Carolina. Retirees, for example. We’ve had a major influx of retirees that have come to North Carolina. They became more footloose; they began to look at North Carolina. So we were able to attract new industries as well as new people here, and I think that propelled our economic growth.
Kokai: Another factor that we often hear about in terms of North Carolina’s attractiveness to businesses and entrepreneurs in other parts of the country is the fact that it’s a right-to-work state. Have you seen major impact from that?
Walden: Yes. One of the things I do in the book, but I relegate this to the appendix, is a lot of fancy statistical analysis which I won’t bore [everyone] with, but I do have that in the book, and that does turn out. Even though we are no longer a state that relies on cheap labor, we still are able to compete on the basis of wage rates. And for one reason – that we are a right-to-work state, meaning we have low unionization rates.
On average, we look at our wages and they are lower, especially compared to Midwestern and northern states. So that has been a continuing factor – it’s kind of a holdover of our attractiveness in the 19th and 20th century – that’s a holdover to today, even though we’re now just not basing that on low-skill labor, we’re basing it also on high-skill labor.
Kokai: Based on what we’ve seen in recent decades in this transition to the connected age, what do you see happening now in the future?
Walden: Well, I don’t consider myself a futurist. People often look at economists and say, “Well tell me what the stock market’s going to be next year, or next month.” I’ve been at this game now over three decades, the economics game, and I think as I’ve aged and been in more situations, I realize that it’s really humbling to try to make forecasts. So I don’t lay out any grandiose outlooks in my book – in terms of, here are the exact number of jobs there will be in different industries and different occupations – but I do think the basic trends that we have seen recently will likely continue.
I think globalization is here to stay. Outsourcing will become an issue, will still be an issue, probably for more workers rather than fewer workers, although we have the reverse also occurring – insourcing – where foreign companies are setting up businesses here, and North Carolina has benefited from that.
I think education is clearly – that was probably the single most dramatic public policy initiative in North Carolina in the last 30 years – it has put renewed emphasis on education, particularly higher education. The state has supported higher education at very high levels. Although tuition rates have gone up for students, our tuition rates for public university students is nowhere near the national average. So I think that will continue. I think there will be an effort to try to expand education to more students. Of course there are big issues about how you do that, how you do that in a cost-effective way.
I think we’re going to be under pressure in terms of our infrastructure – roads, water and sewer, school buildings – big questions. How do you pay for that? Do you perhaps try some privatization routes? Or do you still go with the public sector? I think issues regarding energy – of course this is a national issue – but even though we look good in terms of our energy cost, we’re all in an international energy environment, so energy is going to continue to be important. I think businesses that can solve that energy problem – that can be more energy efficient – will be successful businesses. So I think these are some of the directions we’re going with, and I think also some of the challenges.