RALEIGH - The South has thrived over the past 25 years, but it also has left the poor behind: despite a booming economy the region suffers from big gaps in economic well-being, education and health for poor families.

Southern philanthropy also has been robust, yet the region's charitable foundations have focused mainly on relieving immediate needs and concentrated their giving in more affluent areas. For the South to thrive in an increasingly competitive global marketplace, its foundations must take the lead in driving the collaboration and investment needed to give the poor better access to good schools, good jobs and good health care.

Those are the sober and urgent conclusions of "State of the South 2007: Philanthropy as the South's 'Passing Gear'," a new report by Chapel Hill think-tank MDC Inc.

The numbers -- Fueled by an increase in jobs, to 40 million in 2000 from 25.4 million in 1980, the 12 states in the South are home to 74.1 million people, or one-fourth of the U.S. population.

Since 1980, the region's population has surged by more than 20 million people, or 40 percent, and is expected to grow another 20 percent by 2015.

The region also has moved from a biracial society to multiracial, with Hispanics, for example, accounting for 8 percent of the population in 2004, up from 2.5 percent in 1980.

Despite its growth, however, the South suffers the blot of "large swaths of rural destitution," MDC says, the legacy of racial segregation in an economy traditionally dependent on small farms and factories. Nearly one in five children in the region lives in a household below the poverty level. And poverty rates since 2000 have risen in nearly every state in the region because of the stagnating economy.

The problem -- Poverty abides in the South because neither government nor business has been willing to take on the cause of fighting social inequity. Government lacks vision, will and flexibility, and business keeps its eye on profits and market share.

While willing to adopt business-friendly policies like deregulation and economic-development tax incentives, government seems blind to the damage that poverty can have on economic growth. And despite research showing that socially responsible corporations are more attractive to customers, employees and investors, business generally has not made it its business to right social wrongs. Still, as MDC makes clear, social injustice is bad for business because we all sink or swim together.

The South's global competitiveness, in short, depends on our collective ability to change the way we do business.

So the job of eliminating social inequities falls to the charitable sector.

Yet while philanthropy in the South also has flourished over the past 25 years, it, too, has left poor communities behind, and has focused mainly on providing relief to immediate needs, not on tackling the roots of social problems.

The solution -- MDC concludes that foundations must be more strategic and collaborative, invest in change and work more closely with one another and with government and business to address the causes of social inequity.

The most effective philanthropy in the past has acted as a kind of "passing gear," MDC says, confronting critical problems and helping people and communities move ahead. In the South, for example, the Rockefeller Foundation invested in fighting hookworm disease and helping to create public-health departments, while the Ford Foundation in the 1960s invested in the North Carolina Fund, a statewide antipoverty effort that focused on developing the labor force, affordable housing and a network of community organizers.

Equipping the South to compete effectively in the global marketplace will require foundations in the region to move beyond charity and embrace social change.

The region is home to 11,500 foundations with nearly $56 billion in assets, up from 2,600 foundations with $2.2 billion in assets in 1975. While federal law requires that they "pay out" at least 5 percent of their assets each year, foundations can be more strategic about the other 95 percent, investing those assets in companies with business strategies that address social inequity.

To thrive, the South requires leadership. So with government and business not willing or able to lead, our future depends on foundations moving beyond business as usual and using their wealth, and the clout it gives them, to invest in change.

(Todd Cohen, a former business editor at The N&O, is editor and publisher of the Philanthropy Journal, an online newspaper at www.philanthropyjournal.org that is a publication of the A.J. Fletcher Foundation.)

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