When The Needles Went To China

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Scissor blades

However you sort the politics of this, the lower price of foreign goods is only one factor affecting North Carolina's textile industry. Another sharp blade of what Conway calls the "scissor effect" has been the steady rise in U.S. labor costs. While wages in the textile industry grew at a lesser rate than those in other sectors of the economy, pay tended to track upward with inflation. Even as the industry was shrinking, employers competed for experienced workers with other mills because those workers had options.

To combat rising labor costs, textile mills did exactly what they've done for half a century: they adopted new technology. Over decades, the extensive hand work once required for sewing, and the manual labor involved in spinning, weaving, and knitting, steadily gave way to machines operated by people and then machines operated by computers. At each step the industry shed jobs. In fact, Conway found, to his surprise, that the U.S. textiles industry has been shedding jobs consistently since 1947. We didn't notice the job loss because the industry overall was growing, and a person who lost his or her job in one factory generally could find one in another. For decades, the strategy of replacing people with technology worked just fine for textile mills and for the economy of North Carolina. Then it didn't.

What happened? Conway's research details a series of shock waves that struck in the 1990s. The first of these was a financial crisis in Mexico in late 1994 and 1995 and the sudden revaluation of the peso, which slashed the price of Mexican goods and favored Mexican producers. Just as U.S. companies were adjusting, often by jobbing out some of their production to plants in Mexico, a financial crisis in Asia in 1997 devalued currencies and sent prices tumbling for goods from Thailand, Korea, the Philippines, Indonesia, and Malaysia. Asian products flooded into U.S. department stores and discount outlets.

"The executives I've interviewed invariably point to nineteen ninety-seven as the end of life as we know it," Conway says. "This was an earth-shaking event."

Recently, industry leaders have accused Asian nations of manipulating their currencies to invade U.S. markets. Connolly doesn't buy it. "I see no evidence of currency manipulation," he says. "Anybody who has a sense of history knows that this industry used to be in New England, and then it came here for lower input costs, and now it's going somewhere else."

Hanging by a thread

Even so, more of North Carolina's failing textile mills and apparel makers might have survived if not for the recession that began in 2000. With less money in their pockets, Americans shopped for bargains. Companies reacted to this trend in various ways, but the net result was fewer jobs for U.S. workers. Levi Strauss and Company, Conway explains, shrank its business, eliminating lines that could not compete on price and retaining those, such as Levis blue jeans, which could compete on quality and the reputation of the brand. By contrast, the Greensboro-based VF Company, which makes Wrangler jeans and other apparel, shipped its manufacturing abroad.

The recession hit North Carolina especially hard. Just as the state's traditional industries — textiles, tobacco, and furniture — were dropping jobs by the thousands, corporate losses, scandals, and a stock-market sell-off began capsizing the high-tech industries we'd counted on for a prosperous future: computers, telecommunications, and biotechnology. "Before the year two thousand, we were a state whose unemployment rate was below average," Conway says. "Within a few months, that rate was above average."

Laid-off workers were joining a very long queue at the unemployment office. Statewide, some one hundred thousand jobs were lost in the textile industry and seventy thousand in the apparel industry between 1997 and 2002. In Rutherford County alone, nineteen major textile layoffs since 1998 have dumped more than five thousand workers onto the unemployment rolls. And this time around, when workers lost their jobs, almost no one was hiring. Communities are showing the strain. In Rutherford County, for instance, illegal methamphetamine labs are springing up in rural areas. Retail businesses are posting new signs that say, "Sorry, no checks." And there has been a rash of thefts, especially of lawn mowers and weed cutters.

The economy has improved recently in some areas of North Carolina, but the storm isn't over, Conway says. He has developed a method for estimating the county-by-county risk of losing textile firms. Because modern firms tend to favor urban areas with an educated workforce, risk factors include, for example, the percentage of people who did not finish high school and the percentage of people living below the poverty line. From Conway's analysis, it is clear that some of North Carolina's remaining textile firms — old-style mills with low-skilled workers in rural areas — may be hanging by a thread.

So far, the big losers in this trend are towns like Spindale. "It's especially painful for the small towns in rural areas," Conway says, "because those are the areas where textiles and furniture traditionally have set up, and in many cases the town grew up around the mill. But the new enterprises that have come along may not want to set up in those same locations. That means the workers will face a tougher choice. They're going to drive farther and work, perhaps, for less."

Creative destruction

Are textiles and apparel industry in North Carolina a lost cause? No, Conway says. North Carolina still has almost as many textile plants as it did ten years ago (since 1975, the number has bounced up and down in the 1,000-to-1,200 range), and new textile plants continue to open. While the loss of protection would be a serious blow, Conway expects the state to retain a textiles industry. The survivors, he says, probably will be nimble, high-tech firms that can rapidly exploit niches in the marketplace for specialty products made to exacting specifications.

"The new textile firm is not coming in with the same model as the old textile plant," Conway says. "The old textile plant was designed to employ relatively low-skilled workers and to use them to turn out large quantities of a high-quality product, and it was very well designed for that. The machines and everything about it was set up in such a way that you could bring in people with less than a high-school education, and those people would get the hang of it very quickly. But there's a whole different way of producing in the United States now, and it relies upon being able to produce small batches of textiles, to switch between products quickly, and to ensure tremendously high quality."

As Conway sees it, this is inescapable economic reality, part of the "creative destruction" that has always characterized the world's economy. Some industries decline and die while others rise to take their place. What's new, he says, is that computers, high-speed communications, and the speed of trading goods around the globe have accelerated the pace, kicking creative destruction into overdrive.

But if you're the one who lost a job — a job that fed your family — you may not be too keen on the concept of creative destruction. And you're not impressed to learn that when tariffs and quotas are lifted you could save nine dollars on a thirty-nine-dollar cotton shirt. You can't afford to buy food, much less a new shirt. You want your life back.

Conway is sympathetic, but he knows that most of those old-style mill jobs are gone forever. "There was a whole class of industries in North Carolina that relied on low-skilled labor," he says. "So you could drop out of high school and still get a job in a factory somewhere. Now we can't offer that option."

Moving day

Outside, in the glare of a June afternoon, James Cowan moves a garden hose from one newly planted tree to another. He leaves the water trickling to soak the roots, then lugs a computer from the back of a truck into his new headquarters, a compact old building of time-softened brick. Cowan remains the CEO of Stonecutter, Inc., but he is not in the textiles business anymore. The company operates a chain of building-supply stores and a new industrial park. So today he is moving out of the modern corporate offices he occupied in the mill, setting up shop at 400 Spindale Street, in one of the oldest buildings in town.

A portion of the plan for Spindale, rendered in 1920 by E. S. Draper, shows the original mills. The red arrow points to the building that is now Stonecutter's headquarters. Courtesy of James Cowan; Photoshop edit by Stacy E. Simmons, AIA. Click to enlarge.

Several generations ago, the captains of Spindale's textile industry shared office space here, on the top floor, while a hive of commerce buzzed around the bank and telegraph office below. The building, Cowan says, accommodated a kind of gentleman's club for men building fortunes as they also built a town. By many accounts, this gentleman's club was patriarchal. Long-time residents say that employers "looked after" their workers, repairing their houses, investing in the town and its services. Labor unions never gained a foothold, locals say, because the companies "treated people right."

Even so, the patriarchy of Spindale's mill owners wasn't always so benign. Old-timers tell stories about how, in the 1930s, armed thugs stood guard in some mills to ward off union organizers. And you can find, in aging newspapers, evidence that the club used its influence to discourage new industries that might have competed with textiles for labor. Spindale would be a mill town, pure and simple, and when those mills hit the skids, the town would have nowhere to turn.

But for several generations beginning in the 1920s, Spindale was an island of progress for dirt-poor farmers who had battled starvation, raising families in cramped log cabins in isolated mountain coves. A family coming down from the hills could live warm in a sawn-wood house with indoor plumbing, and the children could go to school. If you had a knack for running a loom or a spinning machine, you could put food on the table every single day. Families prized their mill jobs and handed them down like birthrights. "Children would bring a lunch pail to a man on his shift and run the loom while he ate," Cowan says, "so the knowledge would pass from one generation to the next."

Life revolved around the mill, around company picnics and baseball games between rival company teams. Even now, years after the closing, people in Spindale still reminisce about the mills. Once in a while, an old timer will reach into his pocket and pull out one of the thousands of silver dollars Stonecutter paid to its employees on the company's silver anniversary in 1970.

Today, on moving day, Cowan stands under the stout pine beams that shoulder the load of the roof. He can tell you about the men who worked here — his father among them. Ivy Cowan began as a clerk in 1921, then rose to become the company's CEO. When James Cowan opens an old pay ledger from the 1920s, he finds his father's careful script. But James has in many ways fashioned himself into different kind of a business man, a man unlike his father and the other members of the Spindale gentleman's club. Despite the countrified guise of his bow tie and seersucker suit, he is a decidedly modern CEO, with a degree in math from Carolina and management training from the Kenan-Flagler Business School. He is fluent on the topics of technology, politics, science, and global economics. But for all his progressive notions, he stands at the end of a line.

He is haunted, he admits, by the closing of Stonecutter mill, and what it has done to the town. He says it's been tough to walk away from something he'd worked hard to build. But the decision, he says, was inevitable. "The reality is that goods will trade for what they're worth, and they will move around the world. This is evolution, and there's no way to stop it. No way at all."

Research by Conway, Connolly, and Field on the textile industry has been funded in part by the Alfred P. Sloan Foundation. Tim Barth, town manager of Spindale; Michael Gavin, managing editor of the Daily Courier in Forest City, N.C.; and Jim Stickford provided background information for this story.

Coming in the Winter 2004 issue of Endeavors: What is the future of North Carolina's textile industry? What can be done to help workers, industries, and communities adapt to change?

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