The OC Voice is a portion of the OC Report newsletter where local residents may have a platform to talk about local issues they care about. Michael Walden is a William Neal Reynolds distinguished professor emeritus at North Carolina State University. He is an author, public speaker and economic consultant.
North Carolina has a long and dynamic economic history. When I arrived in the state in the 1970s, the “Big Three” industries of tobacco, textiles and furniture dominated the economy, accounting for almost one-quarter of all economic production.
Today, the Big Three accounts for less than 10 percent of the state’s aggregate economic production. In place of the Big Three is the new “Big Five” sectors of technology, pharmaceuticals, banking, food processing and vehicle parts.
The shift from the Big Three to the Big Five occurred in the span of less than half a century, which in historical time is the blink of an eye. How did it happen? There were five key causes: globalization, the rise of higher education, national banking, the transformation of agriculture and the movement of new companies and people to North Carolina.
Since the end of World War II, the world has been moving toward free and open trade between countries. But two trade agreements in the 1990s and 2000s, the North American Free Trade Agreement and the creation of the World Trade Organization, really put a capstone on globalization. The result was economic production gravitated to locations with the lowest costs.
For North Carolina, globalization meant large parts of the state’s manufacturing base in textiles, apparel and furniture departed to foreign countries. However, one upside was growth in the state’s vehicle parts industry supplying auto assembly factories operating in South Carolina.
As the economy shifted in the late 20th century from relying on “brawn power” to using “brain power,” higher education expanded everywhere. North Carolina had already developed a strong public university system to complement its high-profile private universities and colleges. Hence, the state was ready to expand its college training. One factor helping the state was the high level of state support for higher education, thereby allowing North Carolina to be among the states with the lowest public university tuitions and fees.
As early as the 1950s, farsighted state leaders in North Carolina recognized economic change was on the way. Efforts were made to attract new companies in technology and pharmaceuticals, the most prominent being developing Research Triangle Park (RTP), the first of its kind in the country. North Carolina combined this effort with growing numbers of college graduates, a relatively low cost of living, attractive natural amenities and a sunny climate to grow these sectors just at the time traditional manufacturing was waning.
In the 20th century, most states restricted banks to one location. Both North and South Carolina were exceptions, allowing banks to have branches across their states. Hence, when nationwide banking was approved by Congress in the 1990s, banks in the Carolinas had the experience to rapidly expand. The result was Charlotte — on the border of the two states — becoming the second-largest financial center in the country.
