How important is INNOVATION?

Drive through West Point, Georgia, and Lanette, Alabama, once mighty textile towns along the Ga/Ala border on the Chattahoochee River, once headquarters to West Point Pepperill, and notice the quiet of today’s moment. Mills everywhere. Absolutely none of them running. The scene is eerily like the shut down auto plants in Flynt, Michigan, except these textile mills were running just a couple of years ago.

What has happened? Production of sheets and towels has been taken over by China. It seems that this switch that is killing towns all over the textile South is just another link in a chain of events that we as Americans inflicted upon ourselves.

The mass textiles industry was born in England with the Industrial Revolution. As the U.S. developed, labor was chearper here, and the New England states began to take a larger and larger share of the English and European textile industry. By the 1800′s and first half of the 1900′s, the U.S. textile industry was headquartered in Massachussetts, Maine and other states nearby. But cheap labor in the South began to draw textile manufacturing to the Carolina’s, Georgia, and Alabama. The textile barons in the North including Joseph Kennedy who had invested heavily in textile companies decided that the best way to compete with the lower labor rates of the South was to convince Congress to pass a National Minimum Wage Law in 1938 similar to laws already enacted first in New Zealand and then in Austalia. Increase the legal minimum wage from $.25 in 1938 to $1.00 in 1956 and bring the wages in the South up to the level of wages in the North, and all their competitive problems would be solved.

But another innovation started about the same time in New England. The idea of Unionized Textile workers there took on fast, raised wages above the legal minimum wage, and brought exactly the opposite of its intended effect, a textile flight to the non-unionized South. Rather than follow suit, the southern workers who were still stinging from the indignities of losing the Civil War had no appetite to be told what to do by “Yankees.” They barricaded their towns against Union organizers funded by the northern industrialists. They literally fought with guns from the tops of their mills. The Unions prevailed in the North, and more and more share of the textile market shifted south.

By the 1960′s the South was one textile town after another. But innovation in worker benefits and worker wages together with eventual infiltration by the trade unions outpaced production innovation. Suddenly by the 1980′s, the South and the U.S. began to lose textile production to China with lower wages still.

This story is not unique. In textiles it happened to Europe when New England took over. In the U.S. it happened in the auto industry when Japan and Korea took over. Now in the textile South, China is taking over.

The lesson to every company and every industry is that with success comes higher labor costs, particularly when you force them with minimum wages and unions. If you don’t INNOVATE to lower production costs, the rising labor costs will raise your total costs and create a vacuum to filled by a less developed part of the World with workers willing and anxious to work for less.

Those who don’t study history are doomed to repeat it. How many times will we let this happen? Genuine INNOVATION is the only answer.

Oddly in this Georgia/Alabama border river valley, unemployed workers and management who grew and lost their careers in the now-empty shells of once mighty textile plants, today sit together and wait in anticipation for the 2009 completion of a new one and a half mile long production facility for automobiles from an innovative Korean company, Kia.