THE LEGACY OF SLAVERY

The Thirteenth Amendment to the Constitution freed all slaves; the Fourteenth Amendment ensured that no “state shall deprive any person of life, liberty or property, without due process of law” and guaranteed that “the right of citizens to vote shall not be abridged.” These amendments were passed soon after the war but were not sufficient to ensure sustained progress for blacks. The first effects of the new freedoms surely helped blacks dramatically. Just as surely, many southern whites suffered in the late 1860s. The redistribution and changing levels of income by race are shown in Figure 14.4. In addition, average wealth holdings of whites in the Deep South in 1860 had been $81,400 for plantation owners, $13,300 for slave-owning small farmers, and $2,400 for nonslaveowning farmers. In 1870, the average for all white farmers in the Deep South was $3,200. Resentment against Yankees and blacks reflected the whites’ slide in wealth and hatred of the northern occupation.

Land reform that broke up the plantations and gave the land to former slaves was pushed by Republicans in Congress. This might have set the South, and ultimately the whole country, on a different course. The House and Senate each passed a bill to give black heads of households 40 acres, but President Andrew Johnson vetoed it. Except in a few isolated areas such as the Sea Islands of Georgia and on the former plantation of Confederate President Jefferson Davis, where land reform proved to be a success in promoting stable farming communities, most of the land remained in the hands of the same people who had owned it before the war. Roger Ransom and Richard Sutch (1977, 79) show that the wealthiest fifth of the population still owned 73 percent of the land in 1870, a drop of only 2 percent from 1860. Moreover, the power of northern Republicans to ensure a solid political base in the South by protecting the civil rights of the former slaves was limited by economic conditions nationally and by an absence of effective local support in the South. When the courts upheld President Johnson’s executive order of total amnesty to anyone willing to take an oath of allegiance, the old Confederates began to take power—aided by violence, including that of the newly formed Ku Klux Klan. The Constitutional amendments protecting black rights were subverted, and blacks ultimately became disenfranchised.

FIGURE 14.4

Distribution of Agricultural Output per Capita by Race in the Deep South, 1857 and 1879

ECONOMIC INSIGHT 14.1

THE LABOR MARKET IN THE NORTH DURING THE CIVIL WAR

This figure shows why real wages would have declined in the North during the Civil War even if inflation had been held in check. S-1860 is the supply of labor before the war, and D-1860 is the demand.

The expansion of the armed forces reduced the supply of labor to S-1864. Other things being equal,

This would have raised real wages. But the demand for labor is derived from the demand for final products. Rising taxes on production (excise taxes) and rising costs of imported products reduced profits and the demand for labor from D-1860 to D-1864. The shift in demand was greater than the shift in supply and lowered equilibrium of real wages from W-1860 to W-1864.

Real

Wages

In the immediate aftermath of the war, there was considerable interstate migration of former slaves. Much of this movement can be explained by the efforts of former slaves to reunite families broken up during slavery. Perhaps also, many former slaves wanted to see more of the country in which they lived, a privilege denied to them by slavery. From 1870 to 1890, however, black migration within the South, as shown by Philip E. Graves, Robert L. Sexton, and Richard K. Vedder (1983), was reduced compared with migration during the antebellum period. While slaveowners would generally move or sell slaves whenever economic considerations dictated, the former slave could also weigh the costs of leaving behind family, friends, and familiar institutions (Economic Reasoning Propositions 1, scarcity forces us to make choices; and 2, choices impose costs). Black migration to the North did not become truly large until after 1910, when a combination of rising northern wages, rising expectations of a better life, and the information provided by earlier generations of migrants encouraged a mass exodus. This important wave of northern migration also opened new occupational opportunities for blacks and spurred their mobility into higher earnings categories (see Maloney 2001). Nevertheless, before 1910 most African Americans had to make their living in southern agriculture. Most were simply hired hands earning abysmally low wages. Many, however, worked the land as tenant farmers or in a small but surprising number as owners.

As shown in Figure 14.5 on page 257, blacks worked about 30 percent of the land in crops, and whites worked 70 percent. Blacks were close to 70 percent of the agricultural work force in 1880 but owned less than 10 percent of the land. (As can be seen in the figure, if 30 percent was occupied by blacks and 32 percent of that land was owned by blacks, then 0.3 x 0.32, or 9.6 percent, of all land was owned by blacks.) Given the resistance and hostility of white southerners and the absence of any federal redistribution

FIGURE 14.5

Ownership and Use of Farm Land in Crops in the Deep South by Race, 1880

Source: Adapted from Ransom and Sutch 1977, 84.

Program, it is a wonder that blacks owned even this much land. Of the two-thirds of the land that was tenanted by blacks, two-thirds was sharecropped.

Instead of paying a fixed annual sum in dollars for the use of the land, the basic idea of sharecropping was for the sharecropper to split the crop with the land owner after the harvest. Standard yearly contracts gave a 50-50 split to owner and tenant. Economic historians have hotly debated the benefits and costs of sharecropping. To Ransom and Sutch (1977), tenant farming, sharecropping in particular, was a disaster that forced the former slaves into dependency on cotton, and in some cases into a condition similar to slavery known as “debt peonage.”

Others, however, have concluded that sharecropping offered a number of advantages, at least compared with the available alternatives. Former slaves and poor whites were provided independence from day-to-day bossing and given a chance to earn a living. The risk of a very bad year—due perhaps to poor growing conditions or unusually low prices—was shared with the owner. The sharecropping contract, moreover, as Joseph Reid (1973) has pointed out, also gave the owner an incentive to remain interested in the farm throughout the growing season and to share information such as changing crop prices with the tenant. On large plantations where such information sharing was difficult, renting predominated (Alston and Higgs 1982). Just as the sharecropper shared part of the risk of a bad harvest with the owner, he also shared part of any gain from his own hard work. Tenant farmers had an incentive to slight long-term investments. Competition among tenants and incentives built into rental contracts only partially offset the negative effects of renting on long-term investment.

Meanwhile, the credit system added to the cropper’s burden. The source of rural credit was the white-owned country store. Here the farmer bought most of his supplies, including food. Typically, two sets of prices were common in country stores, one for goods bought for cash and one for goods bought on time to be paid after the harvest. The markups were steep, often implying an interest rate of 40 to 70 percent per annum for buying on time. The cropper who could not pay his debts after harvest often had to mortgage the next year’s crop to receive continued credit. This transaction was made possible by “crop lien” laws passed in many states. The crop lien was a powerful means of control, and storekeepers (nearly 8,000 throughout the rural South) soon learned that by insisting on payment in cotton, they could maintain long-term control over their debtors. The tenant was thus “locked in” to cotton.72

AThe average of the high and low estimates.

Source: Ng and Virts 1989, 959.

High interest rates were the result of the high costs of credit to the storeowner, the risks faced by the storeowner, and the exploitation of local monopoly power possessed by the storeowner. The slow recovery of southern banking in rural areas after the Civil War contributed to the storeowner’s costs of doing business and protected his local monopoly. The National Banking Act had set a minimum capital requirement that made it hard to establish national banks in small towns and very hard to establish more than one.73 Banking legislation had also made it impossible for state-chartered banks to issue bank notes and directed the funds that national banks received by issuing notes into federal bonds rather than local loans. After the turn of the century, the development of deposit banking, along with the easing of state and federal banking regulations, helped align southern interest rates with those in other parts of the country. There is some dispute about how much of the storeowner’s high interest charges reflected his monopoly power and how much reflected his own high costs of supplying credit. In either case, the result for the farmer caught in the trap of debt peonage was extreme poverty and very little freedom of choice.

Table 14.5 shows estimates of the real income of slaves in 1859 and of sharecroppers in 1879. Evidently, in terms of real spendable income (available for food, clothing, shelter), emancipation was a moderate boon. Sharecroppers had more freedom to choose how they would spend their limited income, and between 1859 and 1879, blacks’ real disposable income increased at an average rate of 1.87 percent per year. The 1879 figures, moreover, apply to all black sharecroppers. For some of those caught most firmly in the vise of debt peonage, the gains were smaller. When an allowance is made for the monetary value of increased leisure time (the reduction in hours spent working multiplied by the wage of agricultural labor), however, the material gain from emancipation appears to be truly large.74

The problem of debt peonage was not endemic to the entire South. To recall the evidence from Table 14.3, such states as Virginia, West Virginia, Texas, and Florida showed remarkable recoveries and sustained advances following the war. Research by Price Fish-back (1989) has shown that Georgia sharecroppers, on average in the 1880s, were able to pay off their debts after the harvest and that their debt burdens were declining. Research by Robert Higgs (1982, 1984) and Robert Margo (1984) has shown that in some areas

Typical of many blacks in the postwar South, the couple in this photograph taken in 1875—12 years after emancipation—remained entrapped in poverty.

Blacks, despite the enormous difficulties they faced, were able to move up the agricultural ladder and become owners of their own farms.

A variety of factors gradually weakened the grip of debt peonage and helped transform southern agriculture. The boll weevil, an insect that attacked cotton and hit southern cotton in the last decade of the nineteenth century, spread for decades and brought utter ruin to impacted regions. to very recent work by Lange, Olmstead, and Rhodes (2009), data are now available at the local county level revealing declines in yields, acres planted in cotton, attempts to reallocate production to other crops, the uprooting of individuals and families, and local losses of population.

Improved roads and the automobile also eroded the monopoly power of the local storeowner (lenders). And the growth of the great mail-order houses in Chicago provided increased competition in the supply of certain kinds of merchandise. To look at things from the other direction, being a sharecropper was not necessarily the lowest rung on the agricultural ladder. In the Mississippi Delta, as James R. Irwin and Anthony Patrick O’Brien (2001) have shown, moving from agricultural laborer to tenant was a source of considerable economic progress. That it was indicates how low wages were in this region.

More important than these factors, however, were increasing urbanization and industrialization throughout the nation, which provided alternatives to agriculture. Southern industrialization was the goal of the “New South” movement proclaimed by southern politicians, newspapermen, and church leaders. There were some successes—a steel industry developed in Birmingham, the cigarette industry developed in North Carolina, and the cotton textile industry moved to the South—but the southern effort to industrialize progressed slowly. Ultimately, it was northern industrialization and its growing

The Monument to the BoH Weevil. When the boH weevil destroyed their cotton, farmers near Enterprise, Alabama, turned to peanuts, which proved profitable. The partly ironic plaque reads as follows: “In profound appreciation of the boll weevil and what it has done as the herald of Prosperity, this monument is erected by the citizens of Enterprise, Coffee County, Alabama, Dec. 11, 1919.”

Demand for labor that allowed many southern blacks to escape from tenant farming (see Bateman and Weiss 1981).

Despite a modest exodus of labor and limited advance of industrialization, the southern economy, especially that of the Deep South, remained a distinctive low-wage economy until the 1940s. Gavin Wright’s book Old South, New South (1986) explains the slow pace of progress toward regional parity. In Wright’s view, the South remained a separate labor market. Many people left, and few came in, but rapid natural increase kept labor abundant (see Vedder, Gallaway, Graves, and Sexton 1986). Cotton became increasingly labor intensive as farm sizes fell. By the late nineteenth century, most southern farms were smaller than northern farms, the reverse of the situation during the antebellum years. Mechanization was slowed, and wages and earnings kept low.

Southern whites attempted to protect their position by pushing African Americans even lower on the economic ladder. By the turn of the century, “black codes” and “Jim Crow” laws segregated blacks and maintained their impoverishment. Such laws

Determined where blacks could work, live, eat and drink, ride on public transport, and go to school. Northerners, as Wright emphasizes, shunned investments in the South. The result was that a striking wage gap remained between the North and South (for the importance of these initial institutions on twentieth-century developments, see Alston and Ferrie 1998). A considerable part of the South’s relative backwardness can surely be attributed to its educational system. Public expenditures per pupil remained a mere fraction of those in the North. Wealthy southerners argued that educating the poor, especially blacks, merely encouraged their migration north in pursuit of higher wages. The Supreme Court held in Plessy v. Fergusson (1896) that separate education for blacks was constitutional as long as it was equal. “Separate” was adhered to religiously, but “equal” was not. As Robert Margo (1990) shows in his Race and Schooling in the South, far more money was spent on white students than on black students. Margo found, for example, that in 1910, spending on black pupils relative to white pupils ranged from 17 percent in Louisiana to 75 percent in Delaware.

Part of this discrepancy can be explained by discrimination against black school teachers; but other measures of the quality of schooling, such as class size, show similar differentials. Lack of spending on education may have served the interest of some wealthy southerners, but the result was a labor force ill prepared to participate in modern economic growth.