Although North Carolina encompasses many islands, our state is certainly not an island when it comes to economic growth and social development. We are part of a region, the Southeastern United States, that has been growing and developing for many decades.
I know this is hardly a profound insight. What’s next, will I observe that Hillary Clinton is deeply dishonest and Donald Trump is dangerously shallow? But while the regional dynamic to North Carolina’s recent past ought to be obvious, many of the state’s politicians, historians, and journalists have sought to deny it.
They offer a narrative I call “North Carolina Exceptionalism.” It goes something like this: even as the rest of the South remained mired in stagnation, racism, and backward thinking, North Carolina developed more rapidly because its leaders were more willing to tax their citizens in order to “invest” in public services such as infrastructure and universities.
The Exceptionalism narrative has several logical and empirical flaws. The most basic one is that North Carolina did not, in fact, develop more rapidly, by most standard economic measures. Take disposable income per person. North Carolina’s annual average growth rate in per-capita income from 1948 to 2010 was 5.9 percent. The average for the Southeast as a whole was 5.9 percent. Among neighboring states, the rate was 5.8 percent in Georgia, 5.9 percent in South Carolina, and 6 percent in Virginia and Tennessee.
This is not a case of our state beating the average at first and then taking a dive at the end. North Carolina either matched or lagged behind in the rest of the region in most of those 62 years. Our strongest period of relative growth was fairly recent, during the 1980s and 1990s.
It is certainly true that the Southeast as a whole grew faster than the national average. In fact, of the top 10 states in income growth after World War II, nine of them (including North Carolina) were Southern. Why? Theories abound.
One is called “conditional convergence.” This theory is based on the fact that capital — both financial and human — tends to flow to places where the potential return is greater. Investors want to buy low and sell high. People want to live in places where living costs are lower and jobs are more plentiful. All other things being equal (there’s the “conditional” in the convergence), these places will tend to grow faster than the national average as a result.
Other factors clearly facilitate the flow. Pro-growth public policies that keep taxes and regulations as low as possible, while providing necessary services, are linked to faster growth in most studies of the subject. In general, Southern (and Western) states have opted for this policy mix, at least when compared with the likes of New York, New Jersey, and Illinois. The South also became a more attractive place to live and do business as segregation receded, technology created a common national culture, and air conditioning because ubiquitous.
Because North Carolina has become a contested electoral prize, the causes and effects of state growth have become highly political questions. The statistic I cited earlier cannot answer them, yet. In the five full years since the Republicans won their first legislative majorities in 2010, North Carolina’s disposable personal income has grown slower than the Southeastern average during the first three and then faster than the average during the last two (from 2013 to 2015).
What all sides ought to understand and admit is that North Carolina politicians are not fully the masters of their ship of state. When the nation sinks into recession or climbs out of one, we go along for the ride whether we like it or not. And as part of the Southeast region, we have benefitted from long-term economic trends in our favor.
It’s still important that we get our state policy mix right. Even small differences in annual growth rates can add up over time. Indulging those who peddle the myth of North Carolina Exceptionalism, however, is not going to help.
John Locke Foundation chairman John Hood is the author of Catalyst: Jim Martin and the Rise of North Carolina Republicans.