Many factors contributed to the underdevelopment of the Southern economy: a low level of capital accumulation, the planters' high propensity to consume luxuries, a shortage of liquid capital aggravated by the steady drain of funds out of the region, the low productivity of slave labor, the need to concentrate on a few staples, the anti- industrial, anti-urban ideology of the dominant planters, and the reduction of Southern banking, industry, and commerce to the position of auxiliaries of the plantation economy. However, another factor in itself provides an adequate explanation for the South's inability to industrialize: the retardation of the home market for both industrial and agricultural commodities (Genovese 158).

In 1860 about 75 percent of the South's cotton crop was exported; during no antebellum year did the grain exports of the United States exceed 5 percent of the total crop. By 1840, cotton accounted for more than half of all U.S. exports. The cotton profits undoubtedly helped finance the economic growth of the United States. In contrast with the North, which relied primarily on its home market, the South depended on the export trade, and thus the South should have profited the most. However, it was the North's economy that was thriving during this period instead of the South's, indicating the North's exploitation of the exporting South (Genovese 159-160).

During this period, the vast majority of Southern imports and exports were routed through New York. Had the South imported from abroad as much as the North and West, there could have been no sensible reason for such a detour: Southern ships could trade directly to Europe. But direct trade with Europe was not possible. The greater part of goods imported into the South originated from the West, not from Europe. Although the South depended upon Europe as well as the North for manufactured goods, its imports from Europe were smaller in value than imports into the North and West and smaller in bulk than the staples it exported. Thus, if the ships carrying cotton had sailed from Southern ports direct to Europe and back, they would have had to return in ballast. New York and New England's domination of the Southern market was therefore not accidental (Genovese 160).

The South also had little hope of increasing European imports to balance the trade to make it possible to trade directly with Europe. The reason for the inability to raise imports is the same reason for the South's limited industry: restricted Southern demand. The Southern cotton, iron, paper, wool, and railroad industries struggled because there was a low level of Southern patronage: the opinion of the editor of the Southern Agriculturalist in 1828, that the South lacked sufficient customers to sustain a high level of manufacturing, echoed throughout the antebellum period. Small demand therefore not only crippled the South's economy by hindering manufacturing and industrialization, but also by forcing foreign trade to be conducted through the North because direct trade was rendered severely unprofitable (Genovese 160-1).

Contrary to the opinions of many historians, the low-level of Southern demand cannot be blamed primarily on plantation self-sufficiency, since manuscripts show that plantations frequently required outside services. The root of insufficient demand can be found in the South's population. The rural, poverty-stricken majority was composed of slaves, subsistence farmers, and poor whites. Also, the population of the South was very small compared to that of the North. If Maryland, in which slavery was declining, and Delaware, which was a slave state in name alone, are excluded, the median population per square mile in the slave states was 18, and Kentucky was high with 31. In comparison, Massachusetts had a population of 158 per square mile; Rhode Island, 138; Connecticut, 98; New York, 84; New Jersey 81; and so forth. In the West, Ohio had 59; Indiana, 40; and Illinois, 31 (Genovese 161-3).

However, from an economic point of view, a country that is sparsely settled may still have a high population density if its systems of transportation are well developed and integrated. But once again, the North had a substantially higher number of railroads than did the South. The Southern transportation system, which tied the staple- producing areas to the ports, is frequently credited as the best possible arrangements for the planters. This, however, was also the worst possible arrangement for Southern manufacturers and the Southern economy as a whole because without a fully developed railroad network tying the South into an economic unit, the absorption of non-staple producers into the market economy was impossible. Thus, the superiority of Northern transportation and economic integration, relative to those of the South, meant that the difference in the magnitude of the market greatly exceeded that suggested by population figures (Genovese 163-164).

In the slave South the home market consisted primarily of the plantations, which bought foodstuffs from the West and manufactured goods from the East. The planters needed increased Southern manufacturing only for certain purposes such as cheap slave clothing, cotton gins and a few crude agricultural implements, rope for cotton bagging, and other such items. This narrow market could not compare with the tremendous Western demand for industrial commodities of all kinds, especially for agricultural implements and machinery on the more capital-intensive Western farms. The Northeast had the capital and skilled labor for fairly large-scale production and had established its control over existing markets in the North and West. Southern manufacturers could not hope to compete with Northern manufacturers outside the South where, despite its costs of transportation, the North was successfully penetrating (Genovese 165).

Due to the problems in transportation and the low population density, the South's market was too small to sustain industry on a scale large enough to compete with outsiders who could draw upon wider markets. Only one-fifth of the manufacturing establishments of the United States operated in the South, and their average capitalization was well below that of those in the free states. Even in an industry of such importance to the South as the cotton textile industry, New England had almost three times as many cotton factories in 1860, and yet the average capitalization was almost twice as great. Also, data reveals that Southern manufacturers concentrated upon the production of the cheapest and coarsest kind of cloth to be used in the making of slave clothing, a market in which the manufacturers also received heavy competition from the North. Producers of better cotton goods had little hope of making a living in the South.

Although occasionally a William Gregg could penetrate Northern markets successfully, Southern demand for such goods remained too small to have much effect on the industry generally (Genovese 165-6).

Apart from slavery, the most noteworthy feature of the South, which influenced both its structure and the pattern of internal migration of productive factors from East to West, was the enormous comparative advantage of cotton. This comparative advantage varied with changes in the price of cotton, the costs of cotton production, and the prices of goods which represented an alternative use of resources. It was only for a brief period in the 1840's that the price of cotton was so low as to suggest that the Southerner might profitably shift his capital and labor to other employment. But even in the dark days of 1843-45, with six or seven cent cotton, the planter viewed the price depression as temporary (North 258).

It was not simply that cotton production was the most efficient use of resources. The reason for cotton's profitability was that alternative uses of resources in the South, even in the Old South were limited. Rice was always a profitable crop in the limited coastal areas of South Carolina and Georgia, but even there it was in competition with long staple cotton. Sugar could only be planted in a very limited area. When tobacco ceased expanding, Virginia and North Carolina found no satisfactory alternative use of resources (North 260).

The costs of cotton production varied widely, even among planters in the same district. While there can be no doubt of the profitability of ten cent cotton, eight cent cotton (on the plantation) was considered marginal in some areas and five cent cotton was profitable in the Southwest. Yields in the Southwest were greater and production costs substantially lower than in the Old South because in the Southwest, the size and the number of plantations were much greater (North 261).

Many planters used cottonseed, which was most effective in the cornfields, as fertilizer in the 1850's, but the cotton fields had to depend largely on barnyard manure. The problem was that planters did not keep sufficient livestock and did not feed their animals well enough to produce the amounts of manure needed. Even in such live-stock states as Kentucky, the accumulation of sufficient manure proved difficult. Barnyard manure cost about two dollars per ton in Kentucky in the 1850's and about four hundred tons were needed to restore one exhausted acre. An increase in cattle raising in order to produce more manure would not have solved the problem either because, as the state geologist of Mississippi pointed out, it was ridiculous to think that animals could be profitably kept for manure alone, and half the slave force alone would have been required for manure. Also, to be of any use, barnyard manure requires the considerable care in storage and application which slaves cannot or will not provide, and even overseers or planters themselves lacked that vigilance (Genovese 90-1).

The difficulties of barnyard manure spurred an interest in other types of fertilizers, particularly marl and guano. Properly marled land was claimed to increase in value by 200 percent, but studies demonstrate that much of the improvement in Virginia and Maryland should be credited to guano. Yet by 1860 few used either guano or marl. In more time these fertilizers might have been used, but not many planters could afford the cost of transporting enough marl for their huge estates, much less the cost of buying and transporting enough of the Peruvian-imported guano. Both of these fertilizers still required adequate care in application (Genovese 91-2).

The alternative to fertilizers was crop rotation. Rotation of staple crops with alfalfa, clover, and other legumes might have protected and restored Southern soils because it helps counteract the effects of leaching and erosion, and green manure, although less useful than barnyard manure increases the supply of nitrogen in the soil. Examples of planters who rotated their crops with clover show that crop rotation worked. Edmund Ruffin, one of the period's greatest agricultural reformers, was a major advocate for crop rotation. Colonel Tulley, a Virginian planter, rotated his wheat with clover and got excellent results. Still, most planters, especially in the Cotton Belt, were unwilling and economically unable to take land away from their cash crop. The only rotation practiced on a large scale was that of corn and cotton, a sequence that does not return enough elements to prevent a steady decline of fertility (Genovese 95-7).

Efficient development of the cotton trade was accomplished with relatively minor amounts of capital because the South's internal transportation problems were solved by the abundance of rivers. The only requirements for efficient marketing of cotton were a few strategically located ports acting as export centers for the crop, import centers for the planter's consumption and capital goods, and a factorage system which linked him with outside sources of capital, ocean transportation, and insurance for the cotton in transit. Such ports included New Orleans, and Mobil (North 265).

Certain characteristics of water transportation affected the economic structure of the South. The first of these was the rapid fall in ocean freight rates on cotton to Liverpool which improved the comparative advantage of cotton. Second, the freight rate on the return voyage was extremely low because the transportation of cotton occupied far more shipping space than the return flow of manufactured goods. These transportation costs gave little protection for the development of local manufacturing, which was one of the causes of the South's lack of industry.

Third, Northern cities, especially New York, became the entrepôt for the South. Imports came into New York rather than directly to the South because they would be assured of more cargo on the westward voyage than by going to a southern port. United States coastwise ships carried the cargo, both imports and northeastern manufactures, to southern ports, and returned with cotton for shipment to Liverpool, Havre, or perhaps to the New England textile industry. This trade pattern tied the South still more to the services provided by the Northeast (North 265-67).

Slavery was initially an economic blessing to the South because it provided plentiful andinexpensive labor. The importation of cheap slave labor offset the scarcity of white labor. Slavery was truly a mixed blessing, however, because it posed many problems that tied the South to an economic backwardness which came not only from the slaves' poor work habits, but also from limitations imposed on the free work force, on technological development, and on the division of labor (Genovese 43).

The most significant flaw in the use of slave labor was the carelessness and wastefulness it evoked in the slaves. Slavery should theoretically increase productivity by providing a source of cheap labor. Ironically, slavery impeded the general level of productivity by forcing the slaves to give their labor grudgingly, thus instilling poor work habits that hindered social and economic advances that are necessary for increases of productivity (Genovese 43).

Ample evidence indicates that slaves worked well below their capabilities. For example, when cotton picking was carefully supervised in Mississippi, slaves picked two or three times their normal output. The records of the Barrow plantation in Louisiana also point towards inefficiency and negligence, which resulted in two-thirds of the punishments inflicted on slaves. But the slaves' contempt toward working was not the only cause of low productivity (Genovese 44).

Although the slaves worked below their capacity, the real obstructions that undermined their productivity were the limitations placed on that capacity. In particular, the slave diet is judged to be damaging: It is not a question of receiving enough to avoid hunger, but a question of dietary balance. Although he usually got enough cornmeal, pork, and molasses to eat, this starchy, high-energy diet produced dangerous deficiencies and forms of malnutrition. Vegetables and fruits were rarely provided. Lack of foods such as lean meat, milk, and eggs, caused slaves to be deficient in certain amino acids. This protein hunger alone reduces the ability of an organism to fight infectious diseases. Although the diet was enough to keep him going in the fields and despite his appearance of good health, it was not sufficient to ensure a sound body or the stamina necessary for sustained labor (Genovese 44-5).

Slavery's effects on productivity were also indirect. Slaveholding created contempt for manual labor. Although many argue that the southern yeoman was held in high esteem, since he had the right to vote, there was always an undercurrent of contempt for whites "who made Negroes of themselves" in the cotton and sugar fields. The problem became so widespread that public figures were forced to constantly assure that no one need be ashamed of manual labor (Genovese 47-8).

The negative attitude fell away from the poor farmers and was focused on the landless who had to work for others. Although the yeoman was free and white, superior to one who was slave and black, the difference was minimized when he had to work alongside a Negro for another man. The attitude toward labor was thus a contempt for work in general, mostly for labor performed for another, seriously lowering the level of productivity in the economy by impairing the productivity of those free workers who might have made important periodic contributions (Genovese 47).

Southern labor was not only concentrated directly on agriculture. When looking at Southern laborers, the farmer, the slave, and the landless yeoman are easily recognizable. The employment of skilled artisans, however, is seldom recognized. Data from plantation manuscripts show that substantial money went to the services of artisans, and a very low level of home manufactures were done within the plantation (Genovese 51).

Household manufacturing survived longer in the slave states than in other parts of the country, yet slave labor was so inefficient at producing cloth, for example, that planters preferred not to bother. Household manufactures declined rapidly after the 1840's in those areas of the South in which slavery predominated. In the North, its disappearance resulted from the development of more advanced factory processes. In the South, it was a result of a general decline in skill and technique (Genovese 51).

The large plantations, although usually producing greater totals than the small farms, did so poorly in the production of home manufactures that most owners hired artisans. Southerners bought most of their shoes, for example, in the North. Judge Cameron of North Carolina, one of the bigger planters, owner of five plantations and 267 slaves in 1834, was forced to purchase more than half of the shoes needed for his slaves despite an expressed effort to make his large establishment self-sustaining. Most never tried to produce their own shoes and clothing and instead hired outsiders to do the work because, although household manufactures were simple to produce, the low level of productivity made them too costly relative to available Northern manufactures which were still relatively expensive due to transportation costs (Genovese 52-3).

Plantation account books also reveal that artisans were employed for a variety of tasks requiring skilled and unskilled labor. A Mississippi planter with 130 slaves paid an artisan $320 for labor and supplies for a forty-one-day job in 1849. Other accounts show that Governor Hammond spent $452 to have a road built in 1850; another planter spent $2,950 for the hire of artisans in 1856 on a plantation with more than 175 slaves. If buildings, chimneys, or slave cabins had to be built, planters generally hired free laborers (Genovese 53).

Blacksmiths's services were the highest in demand. A Panola, Mississippi, planter listed expenditures for the following in 1853: sharpening of plows, mending of shovels, and construction of plows, ox-chains, and other items. One South Carolina planter with forty-five slaves had an annual black-smith's account of about $35, and expenditures by other planters were often higher (Genovese 53).

But despite these few skilled artisans, there was very little division of labor in the South. The problem was that the South lacked sufficient shoe and clothing factories, a diversified agriculture, and enough industrial enterprises, all at the same time, forcing planters to depend on the Northern market. The low level of productivity caused by the inefficiency of the slaves and the general backwardness of the society, produced increasing specialization in staple-crop production (Genovese 54).

The argument between the use of either slaves or free white laborers in Southern factories went beyond the economic advantages of either. If it was an economic question, then the individual laborer's particular experience and efficiency could be used to settle the argument for each particular industry. A miscalculation of labor costs might have produced ruin for a few investors, but the effects of raising a class of either urban factory slaves or white proletarians could prove fatal for the Southern social system. The underlying dispute was that of the rural slaveholders trying to maintain their supremacy (Genovese 221).

Slave labors had hidden virtues. Manufacturers found it difficult to induce planters to invest liquid capital in factories but easier to induce them to lease slaves in exchange for shares of stock. This also appealed to slaveholders by offering a chance to deflect surplus slaves into industry and thereby improve their economic position. Governor Aaron V. Brown of Tennessee wrote to the New Orleans Railroad Convention, "I earnestly desire to see one-fourth of southern slave labor diverted from the production to the manufacture of cotton. One-fourth of such labor abstracted would give a steadiness and elevation of prices to the raw material, which would better justify its cultivation." Thus, using slave labor for manufacturing was, for some, a guarantee against a labor surplus (Genovese 223).

Dependence on slave labor also had its drawbacks. Rising slave prices might at any time dry up the sources of supply. Planters also found reasons for uneasiness: although they benefitted economically from industrial slave labor, they were weary at the social consequences. Planters' reactions were that of alarm upon learning that slaves in the tobacco-manufacturing towns selected their own employer, received money with which to obtain food and lodgings as they pleased, and expected bonuses for extra work. In the words of Kathleen Bruce, the slaves at the Tredegar Iron Works, ranked fourth among the nation's largest producers of iron products, "were pretty much on the basis of free labor" as long as they did their job. Giving the slaves incentives well beyond those available to field hands was the secret to making him into a good industrial worker, but planters warned that this tendency could not be permitted to go far enough to undermine plantation discipline (Genovese 224-5).

The behavior of urban Negroes gave planters more than enough reason for concern. In New Orleans, for example, witnesses attest that "It was not unusual for slaves to gather on street corners at night, for example, where they challenged whites to attempt to pass, hurled taunts at white women, and kept whole neighborhoods disturbed by shouts and curses. Nor was it safe to accost them, as many went armed with knives and pistols. . ." (Genovese 225-6).

The use of free whites did not guarantee a better work force than did the use of Negroes, for the South lacked disciplined free workers. As S. Mims, friend of Daniel Pratt, wrote in the History of Prattville: "Hands had to be trained . . . many of them had no sort of training to any kind of labor. . . and in learning, many mistakes and blunders were made fatal to success."

The main argument of the advocates of white labor became the social one: a responsibility to do something for the poor. Arguments were made by William Gregg, a contemporary who led the appeal on behalf of the poor whites, that industry would absorb the landless poor while simultaneously widening the home market, and helping to raise the economic and cultural level of society. Gregg went on to found Graniteville, which became a company town with lumber mills, textile mills, gristmills, and a machine shop (Genovese 227-8).

There were still others who argued the reverse, such as Cristopher G. Memminger, the confederacy's future treasurer, who wrote that a white proletariat would represent the greatest possible threat to the planters' regime. His fears were fueled to an extent at the sufficiently rebellious urban working class, although docile relative to its Northern counterpart. Labor organizations, although few, appeared with sufficient force and regularity to cause alarm. During the 1850's, unions in Baltimore, St. Louis, and Louisville conducted strikes. Throughout the 1850's, when strikes and working-class demonstrations broke out, employers resorted to slaves. Thus, as organized Southern labor progressed, its leaders demonstrated increasing hostility to the slave regime, kindling the fears of slaveholders (Genovese 231-3).

In many industries, the problem remained unsolved. For example, instead of fueling a Southern ship-building industry, Southern timber had to be sent to Northern yards instead because labor costs were prohibitive. In the end, progress towards industrialization could not be made without endangering the existence of rural slaveholders as the upperclass (Genovese 227).

Although slaves were the major capital resource, planters also made investments in a few other much less significant resources, particularly farm equipment:

The most obvious obstacle to the employment of better equipment was the slave himself. Slaves gave the equipment harsh treatment and neglect. The reality is that planters could not afford enough overseers to prevent the slaves' carelessness, and the only other option was a very small labor force, which decreases the advantages of large-scale production (Genovese 54-5).

Another reason for the South's limited profitability from technology was the low quality of the implements. Local blacksmiths made low-grade goods, and those made in the North especially for the Southern market fell below national standards. In 1857, the former editor of an agricultural journal remarked that the plows made by Southern manufactures were of poor indifferent quality, no more advanced than when James Small of Berwickshire had left the plow in 1740. On a visit to Northern factories, the editor of the Southern cabinet, J. D. Legare, noticed the materials and workmanship for those goods sent to the South did not approach standards for goods destined for Northern markets. The reason for the double standard was, of course, that planters demanded cheap goods to easily replace those mistreated by slaves (Genovese 55-6).

The farm implements included a wide variety. The most popular plow was the shovel plow, well into the 1840's, which merely stirred the surface of the soil to a depth of two to three inches. In the 1850's, this plow slowly gave way to many light mold board plows that also helped to control weeds. When cast-iron plows finally entered the South, they were rarely used because they required the services of expert blacksmiths. The cultivator, which was standard equipment in the North, was rarely used in the South because they were so light that few planters would trust them to their slaves. Modified grain grills called cotton planters, which could do the work of four men and two mules, were also rarely used. These innovations would have also increased the number of surplus slaves, and since slaveholding carried prestige and status, planters showed little interest (Genovese 57-8).

Sources:

North, Douglass C. The Economic Growth of the United States. W. W. Norton &  Company, Inc. 1966. 122-134.

Genovese, Eugene. The Political Economy of Slavery. Rev. Ed. Hanover: Wesleyan University Press, 1989.