Throughout the 20th century, economic activity in America was clustered around the traditional business hubs in the Northeast, the Midwest, and California. Southern states were a bit of a backwater.
Then a generation or so ago, things started to change. In the 1970s, Atlanta, Orlando, and Dallas expanded rapidly. In the 1980s, per capita incomes in a number of southern states started to catch up with other parts of the country. But overall, the South still lagged behind. Even as some of the more peripheral parts of the South began to thrive, the deeper south you went, as a general rule, the less growth and prosperity you were likely to find.
Not for much longer. The southern United States is now not only the most populous part of America. There is mounting evidence that the southern states are going to become America’s economic powerhouse.
According to a new report out this week by ALEC, the American Legislative Exchange Council, economic prospects are brighter in the South than in any other region of the country. With the exception of Louisiana, every southern state in the U.S. is now ranked in the top half of the country in terms of economic outlook. Even my own state, Mississippi, rose five places this year and is now ranked as having the 22nd-most-promising economic outlook in America.
It is the traditional business centers of California (45th), Illinois (46th), and New York (50th) that are the laggards in terms of economic outlook.
To be sure, ALEC’s ranking lists states on the basis of future economic prospects. It is not a measure of how things are, but rather of how the authors think things might be. Even so, it is remarkable that anyone should now rate the economic prospects of Mississippi or Alabama as brighter than California’s.
What explains America’s emerging southern success story? It has a great deal to do with low taxes, limited government, and liberty. California might have once been an easygoing state, with light regulation and an attractive environment for entrepreneurs. Today, it has an almost European zeal to make rules for everything. New York and Chicago are so hostile to businesses, they’ve suffered an exodus of talent and capital over the past decade.
Southern states, meanwhile, have become more business-friendly — and it is not just the giants, such as Texas and Florida, that have introduced free-market reforms. ALEC’s report shows that even states such as my own Mississippi have made themselves more business-friendly than some of the traditional big-business states.
In 2022, Mississippi’s Tax Freedom Act significantly cut the state income tax. That not only gave a massive tax break to hundreds of thousands of Mississippians. The reform also meant that we moved to a flat 5 percent state personal income tax right away, with the rate falling further to a flat 4 percent by 2026. This, perhaps as much as anything, helps explain why our state rose five places in ALEC’s rankings.
Second, Mississippi adopted a universal occupational-licensing law. This sounds very technocratic, but the law’s effect is straightforward: It removes a lot of red tape in the labor market, making it easier for outsiders to move to Mississippi and get certified here if they have been approved elsewhere.
Even more important in the longer term, enabling outsiders to get more easily certified creates pressure within Mississippi to eliminate unnecessarily onerous regulation that prevents Mississippians from being certified. Already, policy-makers are looking at how to eliminate a number of boards that frankly do little beyond restrict the number of people who can earn a living in a particular area of employment. It is probably too early for the impact of this to show up in any data, but the cumulative effect over time could be profound.
Third, Mississippi has gradually reduced the percentage of the workforce on the public payroll. Historically our state has tended to have a lot of people working for government. There are still, according to ALEC’s report, 606 public employees per 10,000 people in our state, but the numbers are now coming down. Shifting more people from employment in big government bureaucracies to the private sector is likely to increase future productivity.
ALEC’s report suggests that as free-market reforms have spread from one southern state to the next, with some southern states emulating their neighbors, growth and prosperity have started to spread.
If liberty keeps on winning across the South, America’s center of economic gravity is likely to shift.