A study of 149 nonmetropolitan Southern counties used data for 1973 and 1983 to examine the effects of rural industrialization in the region. Variables studied were population size, number of manufacturers, rate of family poverty, and percent of high school graduates. A comparison of white (75% or more whites in the population) and nonwhite (more than 25% nonwhite in the population) counties showed that nonwhite counties continue to lag behind white counties in the South. Data showed that absolute gains in industrialization (number of manufacturing establishments) and measures of income were greater in the white counties. However, the decline in the poverty rate and the increase in percentage of high school graduates were significantly greater in nonwhite counties. The rate of population growth and the original level of poverty in 1983 were the two significant factors influencing change in the rate of poverty over the decade. Industrialization had little or no effect on the reduction of poverty during this period. The study findings raise questions concerning many theories of economic change. For example, contrary to predictions of modernization theory, the study points to continuing racial differences in the "New South" with past racial discrimination continuing to influence the social structure. (JHZ)