Ingalls Shipbuilding, part of Huntington Ingalls Industries, employs about 11,500 at its 800-acre plant in Pascagoula. The BAWI program brought the plant to Mississippi in 1938. Image courtesy of Huntington Ingalls Industries
A bidding process that ended with economic developers from New York and northern Virginia promising billions to a Seattle internet giant traces its roots to a tiny town in Mississippi.
A pioneering economic development scheme of awarding public subsidies to private companies originated in 1930s Columbia, Mississippi. Early in the Great Depression, Columbia's mayor and leading businessman closed his lumber operations. Hugh White's three sawmills, veneer plant, and box factory constituted the "economic basis" of the hamlet of 4,833 people, according to a 1944 report by Federal Reserve Bank of Atlanta senior economist Ernest Hopkins.
Hugh White, father of Mississippi's
pioneering Balance Agriculture with
Industry program
Reduced lumber demand and the depletion of south central Mississippi forests forced White out of business, Hopkins explains in a 65-page pamphlet, "Mississippi's Balance Agriculture With Industry Plan. An Experiment in Industrial Subsidization."
Stripped of its economic core, Columbia lost population. Houses and stores sat empty, and farms suffered. Columbia was typical, as Depression-era Mississippi lost more than half its industrial jobs and a quarter of its farms were sold for taxes, wrote Connie Lester, a historian at the University of Central Florida, in The Journal of Mississippi History.
"Feeling some responsibility for this developing distress, Mr. White took steps to remedy the situation," the Atlanta Fed's Hopkins reported.
Pajama plant saves the town
White recruited a garment factory from Indiana with the promise of $80,000—$1.3 million in 2018 dollars—in subsidies raised from local citizens, supplemented by a loan from a New Orleans bank. The money financed land and factory buildings, and probably the fees of a Chicago "location broker" who brought together the Columbia boosters and the apparel maker looking to set up a plant in the South, according to Hopkins.
White's timing was good. Numerous companies were on the move during the Depression, notably manufacturers seeking low labor costs. Thus, Reliance Manufacturing Company began producing pajamas in Columbia, eventually employing 700 workers and leading to the town's revival, noted Hopkins.
Columbia's subsidization was not the first such deal in Mississippi, but it was the best known. As a result, business groups across the state invited White to explain "the Columbia plan" so that their Depression-wracked towns might also lure payrolls from afar.
White even won Mississippi's governorship in 1935 on the strength of the Columbia plan. As governor, he inaugurated a statewide program to attract industry with public subsidies. The Balance Agriculture with Industry plan (commonly known thereafter as the BAWI plan) is generally considered the first broad, concerted program of publicly financed economic development incentives.
"From November 1936 to June 1940, Mississippi was engaged upon a unique experiment in the development of new industries by public subsidy," Hopkins wrote. Cities and counties issued bonds, on the approval of a two-thirds majority of votes in local initiatives. Municipalities used bond proceeds to build or buy manufacturing facilities and then leased them to private enterprises for as little as $1 a year.
A conflict between theory and practice
The BAWI program brought 12 companies to Mississippi (see the map). Historians generally consider the program a mixed bag. Though it generated badly needed payrolls, most of the factories BAWI landed were low-wage operations, and many were fleeing strong unions in other states, according to Lester.
Map from a 1944 Atlanta Fed report showing locations of the 12 companies the BAWI program brought to Mississippi.
Two exceptions were Armstrong Tire and Rubber Company, which operated in Natchez until 2001, and Ingalls Shipbuilding, which remains open in Pascagoula. The BAWI program clearly did not rescue Mississippi economically in a broad sense, as the state remains among the nation's poorest.
Hopkins noted that BAWI "provided the most centralized, systematic and financially potent form yet taken by community subsidization in the South and at the same time carried the state of Mississippi, on paper at least, a considerable distance in the direction of socialistic theory." This legacy, he concluded, represented a "conflict between theory and practice not infrequently found in economic life."
Charles Davidson
Staff writer for Economy Matters