The system of paying for stock on the instalment plan permitted the construction of many mills for which capital could not have been raised otherwise and had also certain distinct social consequences. According to this plan, the subscriptions to the stock were made payable in weekly instalments of 50 cents or $1.00 a share, thus requiring approximately two or four years to complete payment. Those having money in hand might pay in full, less six per cent discount for the average time. Since almost or quite a year was usually necessary to build the mill and the necessary tenements for the hands, the instalments more than paid this item of expense. The weekly receipts and the payments in full were kept in a local bank, which also expected future business and was therefore likely to be liberal when credit was demanded. Often the officers and directors of the bank were also personally interested in the new enterprise. The machinery manufacturers gave long credit and often took stock in the mill. Commission houses which sold yarns and cloth also took stock with the expectation of controlling the marketing of the product.
Many mills built on this plan were so profitable that they were able to pay for a considerable part of the machinery from the profits long before the last instalment was paid, and some even paid a dividend or two in addition. Such mills started operations with many things in their favor. The ownership was widely distributed, since it was not at all uncommon for a hundred thousand dollar mill to have a hundred or more stockholders, some of whom held only one or two shares. Further, since the amount of money paid in the immediate neighborhood for wages, fuel, and raw material was large, every one was disposed to aid the enterprise in every way possible. Town limits were often changed almost by common consent in order to throw a mill outside so that it would not be subject to town taxes. Where the state constitutions permitted, taxes on the mill were even remitted for a term of years. Where this could not be done, assessors were lenient and usually assessed mill property at much less than its real value.
Not only did some Northern corporations build branch mills in the South, but a considerable amount of Northern capital was invested in mills under the management of Southern men. It is of course impossible to discover the residence of every stockholder, but enough is known to support the assertion that the proportion of Northern capital is comparatively small. The greater part of the investment in Southern mills has come from the savings of Southern people or has been earned by the mills themselves. Lately several successful mills have been bought by large department stores and mail-order houses, in order to supply them with goods either for the counter directly or else for the manufacture of sheets, pillowcases, underwear, and the like. Marshall Field and Company of Chicago, for example, own several mills in North Carolina.
The mills of the South have continued to increase until they are now much more numerous than in the North. They are smaller in size, however, for in 1915 the number of spindles in the cotton-growing States was 12,711,000 compared with 19,396,000 in all other States. The consumption of cotton was nevertheless much greater in the South and amounted to 3,414,000 bales, compared with 2,770,000 bales in the other States. This difference is explained by the fact that Southern mills generally spin coarser yarn and may therefore easily consume twice or even three times as much cotton as mills of the same number of spindles engaged in spinning finer yarn. Some Southern mills, however, spin very fine yarn from either Egyptian or sea-island cotton, but time is required to educate a considerable body of operatives competent to do the more delicate tasks, while less skillful workers are able to produce the coarser numbers.
Southern mills have paid high dividends in the past and have also greatly enlarged their plants from their earnings. They had, years ago, several advantages, some of which persist to the present day. The cost of the raw material was less where a local supply of cotton could be obtained, since freight charges were saved by purchase in the neighborhood; land and buildings for plant and tenements cost less than in the North; fuel was cheaper; water power was often utilized, though sometimes this saving was offset by the cost of transportation; taxes were lower; the rate of wages was lower; there was little or no restriction of the conditions of employment; and there were comparatively few labor troubles.
With the great growth of the industry, however, some of these early advantages have disappeared. Many mills can no longer depend upon the local supply of cotton, and the freight charge from the Lower South is as high as the rate by water to New England or even higher; the transportation of the finished product to Northern markets is an additional expense; wages have risen with the growth of the industry and are approaching closely, if they have not reached, the rate per unit of product paid in other sections. The cost of fuel has increased, although in some localities the development of hydro-electric power has reduced this item. All the States have imposed restrictions upon the employment of women and children in the mills, particularly at night. On the other hand, taxes remain lower, the cost of building is less, and strikes and other forms of industrial friction are still uncommon. When well managed, the Southern mills are still extremely profitable, but margin for error in management has become less.
The Southern mills are chiefly to be found in four States, North Carolina, South Carolina, Georgia, and Alabama, and in the hill country of these States, though a few large mills are situated in the lowlands. North Carolina, with over three hundred mills, has more than any other State, North or South, and consumes more cotton than any other Southern State—over a million bales. South Carolina, however, has more spindles, the average size of its mills is larger, and it spins more fine yarn. North Carolina is second only to Massachusetts in the value of its cotton products, South Carolina comes third, Georgia fourth, and Alabama eighth. Virginia and Tennessee are lower on the list. In quantity of cotton consumed, the cotton growing States passed all others in 1905; and in 1916 the consumption was twenty-five per cent greater, in spite of the fact that New England had been increasing her spindles. Some Southern mills are built in cities, but usually they are in the smaller towns and in little villages which have grown up around the mills and owe their existence to them. There is some localization of industry: a very large number of mills, for instance, may be found in a radius of one hundred miles from Charlotte, North Carolina, and one North Carolina county has more than fifty mills, though the total number of spindles in that county is not much greater than in some single New England establishment.
In the allied knitting industry the production of the South is increasing in importance. North Carolina led the South in 1914, with Tennessee, Georgia, Virginia, following in the order named. Though most of the establishments are small, some are important and are establishing a wide reputation for their product. Generally they are situated in the towns where cotton mills have already been located.
The textile industry, though it is the most important, is not the only great industrial enterprise in the New South. Two others, both in a way the by-products of cotton, deserve attention. Only a few years ago cotton seed was considered a nuisance. A small quantity was fed to stock; a somewhat larger quantity was composted with stable manure and used for fertilizer; but the greater part was left to rot or was even dumped into the streams which ran the gins. Since the discovery of the value of cottonseed products, the industry has grown rapidly. The oil is now used in cooking, is mixed with olive oil, is sold pure for salad oil, and is an important constituent of oleomargarine, lard substitutes, and soap, to name only a few of the uses to which it is put. The cake, or meal from which the oil has been pressed, is rich in nitrogen and is therefore valuable as fertilizer; it is also a standard food for cattle, and tentative experiments with it have even been made as a food for human beings. The hulls have also considerable value as cattle food, and from them are obtained annually nearly a million bales of "linters," that is, short fibers of cotton which escaped the gin. Since the seed is bulky and the cost of transportation is correspondingly high, there are many small cottonseed oil mills rather than a few large ones. Texas is the leader in this industry, with Georgia next, though oil mills are to be found in all the cotton States, and the value of the seed adds considerably to the income of every cotton grower. In 1914 the value of cottonseed products was $212,000,000.
The industry of making fertilizer depends largely upon cottonseed meal. More than a hundred oil mills have fertilizer departments. The phosphate deposits of the South Atlantic States are also important, and the fertilizer industry is showing more and more a tendency to become sectional. Georgia easily leads, Maryland is second, and no Northern State ranks higher than seventh.