Old South, New South: Economic History of the Southern Economy
Old South, New South
Economic history view: Southern economy evolved with its own history and regional labor market, not as a simple part of a national or international race.
Key puzzle: Why did the Old South’s backwardness persist, and what drove the postwar rise (the New South)? The book answers by reframing the South as a distinct regional economy tied to national/international markets in specific epochs.
Core idea: There was a Southern economy, but its identity came from interaction with broader economies rather than geography alone.
Searching for the Historical Southern Economy
Challenge to the idea that regions are self-contained economies; regions may have unique economic identities based on history, institutions, and markets.
A region’s resources matter only in social context; value arises from demand, knowledge, and market organization, not just physical endowments.
A distinctive Southern people (culture, attitudes) contributed to a labor market that was regional, not fully mobile across the United States.
The Southern labor market was not a universal “free market”: it was largely insulated from national and international labor markets, especially before World War I.
The concept of a regional labor market helps explain wage patterns, migration, and the pace of industrialization in the South.
The Southern Labor Market
Before WWI, the South was a low-wage region within a high-wage country; wages in unskilled labor were notably lower than in the North, while skilled wages varied more.
A true unskilled wage market existed within the South and did partly equilibrate whites and blacks at similar unskilled levels, but did not converge to Northern norms.
Migration patterns showed a strong intra-Southern and Atlantic dimension: long-distance migration from South to North and West was limited by regional labor-market separations and credit constraints.
Immigrant flows in the Atlantic economy linked to Northern industrial growth, while the South remained relatively isolated from these flows.
The South relied on a regional labor market that originated in slavery and persisted in diverse sectors (agriculture, mining, early industry).
Wages in unskilled southern sectors were often close between black and white workers, while skilled positions showed larger gap and limited opportunities for advancement for Black workers.
Land, Labor, and Cotton Demand
Agricultural pattern: cotton dominated the Southern agricultural economy; other crops had regional limits (tobacco, rice, sugar).
Cotton demand largely determined Southern farm income, more so than productivity, due to world demand elasticity close to unity: ext{elasticity} \, \approx \, 1.0
Cotton’s world demand drove the tempo of agricultural prosperity; regional diversification was limited by crop suitability and market structure.
Plantation and tenancy persisted, but postwar incentives shifted toward land ownership and more localized capital/ labor markets.
Population growth in the South remained high, contributing to pressure on land and reinforcing the regional labor market’s characteristics.
The Pace of Industrial Progress
Southern manufacturing grew rapidly by historical standards (real value-added in manufacturing rose year after year), though it remained labor-intensive and often below national productivity norms.
Industrial productivity growth in the South exceeded some early industrial benchmarks: ext{productivity growth} \, \approx \, 2\%\text{/year} in some periods, higher than early northern benchmarks in certain eras.
The South lacked a strong indigenous technological community; capital inflows were less influential in creating a Southern technological frontier, reinforcing a quasi-colonial status in industry.
Despite limitations, the South’s industrial growth helped move the region toward the national economy, but major shifts depended on policy changes and outside investment.
The Plantation, Farm, and Farm Labor in the South
Postwar survival of plantations hinged on landholding continuity, not just crop efficiency; planters fought to retain land and resist redistribution.
Sharecropping emerged as the dominant postwar labor arrangement, blending wage labor, tenancy, and debt-credit relations.
The labor market split: wage labor was long-distance and centralized around plans for seasonal demand; tenants and sharecroppers operated in local markets with credit, cropping liens, and debt.
Decentralization from gangs to squads occurred by the 1870s, giving households more autonomy but maintaining a system that tied tenants and croppers to local credit networks.
The new labor regime was a market equilibrium shaped by postwar credit shortages, the collapse of formal wage payment, and reliance on crop liens.
The “cropper” status (laborer with fixed or share of crop) was legally distinct from tenancy, with laborers often lacking strong protections and facing lien-based credit constraints.
The Rise of Sharecropping in the Plantation Regions
Postwar market disequilibrium was resolved through a gradual move toward share tenancy and wage systems, with credit constraints shaping outcomes.
The sharecropping system tied labor to land via credit and crop liens, creating a risk-sharing arrangement that often benefited planters but constrained labor mobility and wealth accumulation for tenants.
Decentralization allowed families to control parts of the land and labor, reinforcing kinship-based labor organization and shaping the labor market’s structure.
The system also imposed long-term constraints on Black wealth accumulation and land ownership, due to credit controls and legal priorities that favored landowners.
By 1880s-1900s, many tenants (both Black and White) operated within a ladder of tenure, from tenancy with limited assets to fixed-rent arrangements, with wealth/assets determining access to higher tenure rungs.
The Agricultural Ladder
The ladder of tenancy linked farm ownership, credit access, and wealth accumulation; those with assets could move toward fixed-rent tenancy or ownership.
Wealth and collateral were critical for creditworthiness; Black tenants faced additional barriers due to racial discrimination and social constraints.
The ladder included stages such as croppers, tenants with mules, fixed-rent tenants, and eventual landowners; ownership rates rose slowly but steadily for both races, yet remained unequal.
The price of key farming assets (notably mules) rose sharply in the late 19th and early 20th centuries, influencing tenancy choices and the pace of accumulation: ext{price of mules}\uparrow (late 1890s–1910s).
The income distribution from farm output remained unequal, with Black proprietorships growing but remaining small in scale; overall, Black economic progress depended on local acceptability and access to credit.
The Nonplantation Areas and the Small White Farmers
White smallholders broadened cotton production beyond plantation belts, aided by railroads, interior stores, credit systems, and cheap fertilizer.
Self-sufficiency in food declined as regions shifted toward cash crops; cotton became a dominant money crop due to credit structures and market demand.
Credit markets remained local and fragile; interest rates were high and collateral often limited, tying farmers to merchants and local lenders.
By 1900, many white farmers turned to tenancy (cash or share) as a pathway to economic advancement, even as overall tenancy rates rose.
The shift toward cash crops and dependence on credit shaped the South’s agricultural geography and class structure.
Education, Disfranchisement, and the Political Economy
1890s–1910s: Southern states disenfranchised Black voters, concentrating political power in white plantation districts and limiting investment in Black education.
Per-pupil expenditures show stark racial disparities: examples include Alabama (1890 White 3.14; Black 3.10; 1910 White 10.07; Black 2.69), illustrating growing white-dominated funding and persistent racial inequities: ratio roughly rac{10.07}{2.69} \approx 3.74 in 1910 for some states.
The reduction in Black political power and schooling had long-term effects on Black wealth accumulation and mobility, reinforcing the social and economic constraints of the era.
Jim Crow policies and disfranchisement had lasting economic repercussions beyond voting rights, shaping education, labor markets, and regional development through the mid-20th century.
Implications for the South
The New South arose after the destruction of the isolated low-wage labor market; new energy sectors, retirement and vacation destinations, and federal programs helped reconfigure the regional economy.
The “colonial economy” label captured the South’s dependence on outside capital and markets while lacking a strong indigenous technology base; this gradually changed with policy shifts and capital flows.
The transition was rapid in some respects (mechanization, wage policy changes in the 1930s) but rooted in a long history of regional labor market separation and debt-credit institutions.
The South’s rise cannot be reduced to simple convergence with the national economy; it reflects the relocation of the regional economy from a distinct labor-market configuration to integration with broader capital and labor markets, catalyzed by policy changes and outside investment.