IN TERMS OF its economy, there is a New South. Stanford University economist Gavin Wright explains how it happened. His sophisticated analysis offers fresh insights for understanding an economic transformation that is interwoven with and matches in scope the region's social and political change since World War II.

New Deal farm policies and minimum wage legislation started a process that ultimately undermined the South's economic separation from the rest of the country. The New Deal also set an example for government intervention that Southern governors adopted to actively recruit new industry by developing such lures for selling the South as tax incentives, revenue bonds, and ultimately the training of a work force.

As late as 1940, cotton remained the principal cash crop, as it had been for more than a century, and almost one southerner in two earned his livelihood from agriculture -- a rate more than 50 percent higher than the rest of the United States. Most did not own the land they worked. Manufacturing centered around textiles and other industry marked by cheap and relatively unskilled labor.

"By the 1980s," Wright says, "a new southern economy prevailed, located in the same geographical space as the old one, but encompassing a very different package of labor, capital, natural resources, and entrepreneurship: not an advanced version of the old economy, but a new economy."

After the Civil War, the legacy of slavery and wartime defeat and devastation left the South isolated and separated, an undemocratic society in which large portions of its population were denied access to the political process and other fundamental human rights. The failure to distribute land or other compensation to the freedmen led to sharecropping, which mired the mass of rural black southerners in poverty from which they could not escape. The relatively few who did acquire land and become independent farmers, says Wright, had to know their place, "to be acceptable, nonthreatening, well behaved. They had to compromise their autonomy in order to gain it."

The sharecropping system developed as a compromise. It gave the freedman an "escape from the oppressive overseers, work routine, and discipline of slavery and gang labor." It gave the landowner a work force based on the family unit, with the cropper's share amounting to an annual payment of subsistence wages for growing a crop of cotton that could be converted to cash. In subsequent generations, hundreds of thousands of poor whites also sank into sharecropper and tenant farmer status.

The successful efforts to disenfranchise blacks and many poor whites between 1890 and 1910 coincided with the Supreme Court's approval of racial segregation -- reflecting a national policy of indifference that sowed the seeds for social problems that exist today. Throughout the South, per pupil school expenditures for blacks and whites moved in different directions. For example, Alabama spent almost the same for blacks and whites in 1890, but by 1910 was spending $2.69 per black pupil and $10.07 for whites.

Deprived of equal educational opportunities as a class, blacks also were excluded from the region's dominant textile industry, in which slaves had worked effectively before the Civil War. New Deal farm policies encouraged farm mechanization, and minimum wage legislation discouraged growth in the South's low wage industries. In some industries, such as tobacco, a predominantly black work force became predominantly white.

Between 1940 and 1970, more than 4.5 million blacks migrated out of the South. Although many found employment, by the 1950s many others were going to places where they had friends and relatives, but where jobs for the unskilled no longer were available.

Where blacks were employed in the South, they remained at the bottom. "In a nutshell," says Wright, "the typical white unskilled worker could expect to move up over time, the typical black could expect to go nowhere." Thus, blacks were deprived of acquiring skills or useful experience learned on the job.

Wright recognizes that in the South, it was the federal courts and their enforcement of the Civil Rights Act of 1964 that forced changes in southern hiring practices. Judge John Minor Wisdom of the Fifth Circuit Court of Appeals provided the rationale for affirmative action when he wrote, "The Constitution is color conscious to prevent discrimination being perpetuated and to undo the effects of past discrimination." BUT EVEN SO keen an observer as Wright misses an essential point in the South's economic trasformation. The success of the civil rights movement in removing racial barriers, especially barriers to jobs and training and educational opportunities, would enlarge the labor supply and create and expand markets for goods and services. This helped lift the overall economy of the region. Southern politicians, once liberated from the demands of defending segregation, began to focus their energy on economic development and to confront neglected social problems. Today, the center of the reform movement in public education can be found in the South, where it is linked to economic growth.

Simultaneously with the outflow of jobless blacks and whites, as well as many of the best-educated young whites looking for greater freedom as well as opportunity, well-educated northern white professionals and managers began moving into the South after World War II. As early as 1960, 35 percent of all southern men with five years or more of college were born outside the region. Meanwhile, the development of air-conditioning provided a technological breakthrough to the South's development that perhaps matches the impact of the cotton gin.

Although many remnants of the old order exist -- such as low-wage, single-industry towns -- and real problems remain, "they are not southern regional problems any longer." In its economy, the South no longer is distinct.

Jack Bass is the author of "Unlikely Heroes," a study of southern federal judges and civil rights, and other books about the south.