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Strategy Emerges for South in '90s

Faced with foreign competition, governors stress need for education, `growth from within'. REGIONAL ECONOMY

THE South is giving up its ``bargain basement'' strategy for attracting new business. For 50 years, Southern states have touted low taxes, moderate wages, and cheap land to lure new factories from other parts of the country.

It was a strategy that worked. Southern industry rapidly expanded.

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Now times have changed. As the United States moves into a global economy, Southern states find themselves competing with developing countries where wages are only one-tenth those in the US.

Governors from across the South are meeting here this week to look for new ways to stimulate the region's economy.

Delaware Gov. Michael Castle (R), chairman of the Southern Governors' Association (SGA), says it's time to move away from competition between the various states and regions for industry.

``Economic development ... for decades has meant (each state) going it alone, putting together the most competitive package to (attract) new businesses and new jobs,'' the governor says. But more may be needed now, according to Mr. Castle.

A new strategy for the 1990s is now emerging, an SGA survey of Southern leaders finds. In the future, the emphasis will be on growth from within.

The change has been forced on the South both by the emerging international competition, and by rapid technological change. The SGA report says:

``The emergence of a global division of labor means that a strategy of attracting low- and moderate-cost, and low- and moderate-skill firms is no longer the route to economic success it once was.

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``Regions following a low-cost strategy are finding themselves squeezed in the middle. On the one hand, developing nations can offer even lower wages (and) taxes. ... On the other hand, advanced, innovative regions can offer a more skilled work force ... and a richer environment for innovation and productivity.''

For half a century, the South kept costs to business low by holding down taxes. That meant lower investment by state and local government in education, roads, bridges, and other public works. That was all right - as long as the South had to compete only with Northern and Western states.

Now Southern officials say they must quickly move to a new strategy that emphasizes human skills, a strong infrastructure, and assistance to business.

According to a survey of Southern economic development officials, the No. 1 need in the South is improved education, particularly in primary and secondary schools. They say this is ``the most important ingredient for future economic growth.''

In the past, better schools were supported by some Southern officials, but improved quality meant higher taxes - and that collided with the previous strategy to attract business from other regions.

Now Southern leaders widely agree that growth must come ``from within,'' says Castle. Growth must be fostered by innovation from a steadily improving work force that includes more scientists, engineers, and technicians.

South Carolina has already moved ahead with one of the most noteworthy education programs in Dixie. The state is operating an incentive program that awards the best schools.

Cash and noncash prizes go to the South Carolina schools that show the greatest year-to-year improvement in test scores.

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