stable banking system, which could guarantee the movement of staple crops and the extension of credit to the planters. Southern banks were primarily designed to lend the planters money for outlays that were economically feasible and socially acceptable in a slave society: the movement of crops, the purchase of land and slaves, and little else.
Whenever Southerners pursued easy-credit policies, the damage done outweighed the advantages of increased production. This imbalance probably did not occur in the West, for easy credit made possible agricultural and industrial expansion of a diverse nature and, despite acute crises, established a firm basis for long-range prosperity. Easy credit in the South led to expansion of cotton production with concomitant overproduction and low prices; simultaneously, it increased the price of slaves.
Planters wanted their banks only to facilitate cotton shipments and maintain sound money. They purchased large quantities of foodstuffs from the West and, since they shipped little in return, had to pay in bank notes. For five years following the bank failures of 1837 the bank notes of New Orleans moved at a discount of from 10 to 25 per cent. This disaster could not be allowed to recur. Sound money and sound banking became the cries of the slaveholders as a class.
Southern banking tied the planters to the banks, but more important, tied the bankers to the plantations. The banks often found it necessary to add prominent planters to their boards of directors and were closely supervised by the planter-dominated state legislatures. In this relationship the bankers could not emerge as a middle-class counterweight to the planters but could merely serve as their auxiliaries.
The bankers of the free states also allied themselves closely with the dominant producers, but society and economy took on a bourgeois quality provided by the rising industrialists, the urban middle classes, and the farmers who increasingly depended on urban markets. The expansion of credit, which in the West financed manufacturing, mining, transportation, agricultural diversification, and the numerous branches of a capitalist economy, in the South bolstered the economic position of the planters, inhibited the rise of alternative industries, and guaranteed the extension and consolidation of the plantation system.
If for a moment we accept the designation of the planters as capitalists and the slave system as a form of capitalism, we are then confronted by a capitalist society that impeded the development of every normal feature of capitalism. The planters were not mere capitalists; they were precapitalist, quasi-aristocratic landowners who had to adjust their economy and ways of thinking to a capitalist world market. Their society, in its spirit and fundamental direction, represented the antithesis of capitalism, however many compromises it had to make. The fact of slave ownership is central to our problem. This seemingly formal question of whether the owners of the means of production command labor or purchase the labor power of free workers contains in itself the content of Southern life. The essential features of Southern particularity, as well as of Southern backwardness, can be traced to the relationship of master to slave.
If the planters were losing their economic and political cold war with Northern capitalism, the failure of the South to develop sufficient industry provided the most striking immediate cause. Its inability to develop adequate manufactures is usually attributed to the inefficiency of its labor force. No doubt slaves did not easily adjust to industrial employment, and the indirect effects of the slave system impeded the employment of whites.13 Slaves did work effectively in hemp, tobacco, iron, and cotton factories but only under socially dangerous conditions. They received a wide variety of privileges and approached an elite status. Planters generally appreciated the potentially subversive quality of these arrangements and looked askance at their extension.
Slavery concentrated economic and political power in the hands of a slaveholding class hostile to industrialism. The slaveholders feared a strong urban bourgeoisie, which might make common cause with its Northern counterpart. They feared a white urban working class of unpredictable social tendencies. In general, they distrusted the city and saw in it something incongruous with their local power and status arrangements.14 The small slaveholders, as well as the planters, resisted the assumption of a heavy tax burden to assist manufacturers, and as the South fell further behind the North in industrial development more state aid was required to help industry offset the Northern advantages of scale, efficiency, credit relations, and business reputation.
Slavery led to the rapid concentration of land and wealth and prevented the expansion of a Southern home market. Instead of providing a basis for industrial growth, the Southern countryside, economically dominated by a few large estates, provided only a limited market for industry. Data on the cotton textile factories almost always reveal that Southern producers aimed at supplying slaves with the cheapest and coarsest kind of cotton goods. Even so, local industry had to compete with Northern firms, which sometimes shipped direct and sometimes established Southern branches.
William Gregg, the South’s foremost industrialist, understood the modest proportions of the Southern market and warned manufacturers against trying to produce exclusively for their local areas. His own company at Graniteville, South Carolina, produced fine cotton goods that sold much better in the North than in the South. Gregg was an unusually able man, and his success in selling to the North was a personal triumph. When he had to evaluate the general position of Southern manufacturers, he asserted that he was willing to stake his reputation on their ability to compete with Northerners in the production of “coarse cotton fabrics.”15
Some Southern businessmen, especially those in the border states, did good business in the North. Louisville tobacco and hemp manufacturers sold much of their output in Ohio. Some producers of iron and agricultural implements sold in nearby Northern cities. This kind of market was precarious. As Northern competitors rose and the market shrank, Southern producers had to rely on the narrow and undependable Southern market.16 Well before 1840 iron-manufacturing establishments in the Northwest provided local farmers with excellent markets for grain, vegetables, molasses, and work animals. During the antebellum period and after, the grain growers of America found their market at home. America’s rapid industrial development offered farmers a magnificently expanding urban market, and not until much later did they come to depend to any important extent on exports.
To a small degree the South benefited in this way. By 1840 the tobacco-manufacturing industry began to absorb more tobacco than was being exported, and the South’s few industrial centers provided markets for local grain and vegetable growers. Since the South could not undertake a general industrialization, few urban centers rose to provide substantial markets for farmers and planters. Southern grain growers, except for those close to the cities of the free states, had to be content with the market offered by planters who preferred to specialize in cotton or sugar and buy foodstuffs. The restricted rations of the slaves limited this market, which inadequate transportation further narrowed. It did not pay the planters to appropriate state funds to build a transportation system into the back country, and any measure to increase the economic strength of the back-country farmers seemed politically dangerous to the aristocracy of the Black Belt. The farmers of the back country remained isolated, self-sufficient, and politically, economically, and socially backward. Those grain-growing farmers who could compete with producers in the Upper South and the Northwest for the plantation market lived within the Black Belt. Since the planters did not have to buy from these local producers, the economic relationship greatly strengthened the political hand of the planters.
The South’s greatest economic weakness was the low productivity of its labor force. The slaves worked indifferently. They could be made to work reasonably well under close supervision in the cotton fields, but the cost of supervising them in more than one or two operations at a time was prohibitive. Slavery prevented the significant technological progress that could have raised productivity substantially. Of greatest relevance, the impediments to technological progress damaged Southern agriculture, for improved implements and machines largely accounted for the big increases in crop yields per acre in the Northern states during the nineteenth century.