The tobacco industry: who needs it?

• Author: Bickers, Christopher E.
• Position: Harvest of Plenty: The Economic Impact of North Carolina's Tobacco Industry

North Carolina does. The ripple effect of tobacco dollars may well be reaching right into your pocket.

Tobacco, with its roots deep in North Carolina's history, continues to spread its golden leaf throughout the state's economy. It was the "money crop" of plantations and small farms that settled the colony that became this state; it provided the raw material for some of the first factories from which grew North Carolina's fabled manufacturing might.

Today, tobacco is a $14 billion industry, with an economic impact twice that -- 20 cents of every dollar generated in the state. And it begins with a farmer planting a seed.

"By the time the crop is harvested, cured and sold, a farmer will have spent $3,000 in production costs for every acre of tobacco he's produced," says Charles Harvey, executive vice president of the Raleigh-based Tobacco Growers Association of North Carolina. "A farmer with 50 acres puts $150,000 into his local economy before he ever starts thinking about what he will do with his personal profits."

For this reason, Harvey calls tobacco the most effective "job creator" in North Carolina agriculture. Leaf production, found in 89 of the state's 100 counties, is only one link in the tobacco chain. Once it is produced, it must be marketed in an auction warehouse, processed by either a dealer or the end user, then turned into cigarettes or other consumer products.

The value of all that added up to $14 billion in 1992, says Michael Walden, professor and extension economist at N.C. State University. "Sale of leaf tobacco in 1992 generated over $1 billion. The manufacture of tobacco products added over $12 billion, with another billion dollars coming at the wholesale and retail level.

"You can reasonably argue that because this is a basic industry its direct and indirect impact is probably double the actual dollar amount. That is, there is about $28 billion of economic impact that would not be here without tobacco."

How significant is that in the big picture of the North Carolina economy? "In 1992, the total of economic activity in the state was about $138 billion," Walden says. "That suggests that tobacco was responsible for 20% of every dollar of income generated in the state."

Some sense of how this translates into jobs can be gleaned from the work of Price Waterhouse, an independent accounting and consulting firm that periodically examines the impact of the tobacco industry on the nation's and the state's economy.

For 1990, Price Waterhouse estimated...