Think tank rues accuracy of its own grim prediction.

• Position: Economic Outlook

David L. Dodson is president of Chapel Hill-based MDC Inc., a private, nonprofit research group established in 1967 to help North Carolina make the transition from a segregated, agrarian economy to an industrial one with an integrated work force. In 1986, it published Shadows on the Sun Belt, which warned that the rural South was falling far behind the region's cities. It updated these findings in State of the South 2002. A Washington, D.C., native, Dodson earned a bachelor's in architecture and urban policy and master's degrees in divinity and management from Yale University. He joined MDC in 1987 and became president in 1999.

BNC: What are the big changes in North Carolina since the first report?

Dodson: The state has done a great deal with strategies and institutions. We revived investments in universities and community colleges, and when we've had the resources, we've invested in infrastructure to spread development into underdeveloped areas. We recognized we were in danger of becoming -- even more than we were -- two North Carolinas.

The bad?

The issues we identified 15 years ago and the pace of change have been more rapid, much more deep and much more challenging. They have outstripped some of the institutional and policy changes we put in place. The world is changing beneath our feet.

What about the shadows?

We predicted erosion would continue in traditional industries -- furniture, textiles, routine manufacturing. We didn't realize the magnitude and impact on rural communities would be so great. Sixty-nine percent of the textile layoffs in North Carolina in 2001 came in rural counties. We are in a negative sense, racing downhill at an ever faster rate, and the uphill struggle is requiring us to run faster and work smarter and run a different race.

How so?

The answer 16 years ago was to say we have a work force that's willing to work hard and, if we can just tweak it and make it somewhat more literate and competitive, the hard-work ethic will carry us forward. We were under the illusion that we could entice new manufacturing to the places old jobs had left. We now face the harsh reality that many of our rural places simply are not competitive, and the jobs are gone forever. We have not made our remote rural areas competitive for a new knowledge-based economy.

What happened in Hickory. which put so much stock in telecommunications manufacturing, an industry that's foundering?

Hickory was entrepreneurial enough to position itself for a...