RALEIGH — I saw two news events break on Wednesday that seemed unrelated but in reality point the way to how North Carolina politics will probably unfold over the next year.
First, the North Carolina textile giant Pillowtex confirmed rumors that it would close down virtually its entire operation. After a string of adverse business trends and a couple of bankruptcies, the venerable Piedmont institution that began life as the entrepreneurial creation of Charles Cannon presented the state’s economy with one of the single-largest blows it has ever received. Thousands are now out of work, with few immediate prospects for re-employment. Cabarrus and Rowan counties will be socked — economically, fiscally, even philanthropically.
It’s a mistake to view the entire textile industry in our state and beyond as a lost cause, by the way, as this interesting Associated Press story explains. In areas of fabric and yarn production in which North Carolina firms and workers have a comparative advantage, opportunities still abound. But if it comes to merely a comparison of unit labor costs for producing the same-quality good, production facilities located overseas are likely to retain and continue to gain market share.
So are established textile firms, and North Carolina’s firms in particular, merely the victims of flawed trade policies in Washington? Hardly. Comparative advantage is an economic fact of life, not something that can be wished away or legislated out of existence. There are, however, factors affecting the competitiveness of our domestic manufacturers that are very much under the control of policymakers, including elected officials in North Carolina. One such factor is our punitive tax on capital formation and investment returns (retooling the textile industry can’t proceed unless we have a comparative advantage vs. other jurisdictions in attracting profit-seeking investors). Another is state regulation that isn’t justified by health or safety benefits (the recent Clean Smokestacks Act being a good example). Still another is the lack of adequate highway access to some current or potential manufacturing sites (caused in part by frequent raids on our Highway Fund and Highway Trust Fund).
I’m not suggesting that getting North Carolina’s policy mix right would necessarily have saved Pillowtex, or any other single business enterprise. But we should be doing what we can to make our state the most-attractive place possible for investors, entrepreneurs, and professionals.
Which brings me to the other news story that caught my eye on Wednesday. Somewhat surprisingly, Sen. Jesse Helms has endorsed a candidate in the Republican primary for governor. His pick is Bill Cobey, who has had a long political and personal relationship with Helms. I note this not because the Helms endorsement somehow pushes Cobey into a leading role in the race, but instead because such an early and uncharacteristic endorsement by the former senator signifies, I think, the seriousness with which he and other Republicans are approaching the campaign to unseat Gov. Mike Easley. No doubt Senate Minority Leader Patrick Ballantine, who posted an impressive quarter of fundraising results a few days ago, and 2000 nominee Richard Vinroot, who didn’t but enjoys a large advantage in name recognition among GOP primary voters, would likely approach a general election the same way that Cobey would: contrast their program for economic rejuvenation with the economic record of Easley.
You can be sure that all three have campaign advisors right now thinking about and storing away the images coming from the Pillowtex story, images of distraught workers and frustrated local leaders. These are the images of a state that is in relative decline after decades of priding itself as a leader in the Sunbelt resurgence. These are the images of a state whose voters might well reject incumbents in the next election.
It would be grossly unfair to blame Easley for international trends and events over which he has had no control. Much of the pressure on manufacturing companies comes from these trends and events. No question. But there remains a powerful, and legitimate, political issue here about developing and implementing a coherent state agenda for economic growth. Easley’s agenda is centered around spending more money on education, spending more money on preschool, spending more money on college, spending more money resurfacing roads (good) and building choo-choo train tracks (bad), and generating the money for all this by raising taxes now and borrowing, which essentially raises taxes later.
Is this an agenda that most North Carolina voters can embrace? Will the Republicans offer a compelling alternative? We’ll know before too long.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.