The Stagnant South

In 1835 Alexis de Tocqueville pronounced the South a society “gone to sleep.” As he steamed down the Ohio River, Tocqueville heard from the free, right, bank the “confused hum” of men at work, while from the left shore came the silence of loitering slaves and idle white men. Slavery cursed southern whites by degrading work and glorifying idleness, Tocqueville argued in Democracy in America. Whites shunned work because it suggested the double debasement of slavery and blackness. In the North men hungered for wealth and worked passionately to get it; in the South people were drawn to the pleasures of the hunt, bottle, and bed. Inevitably, Tocqueville predicted, the North would accumulate the nation’s wealth, leaving the South burdened with problems of slavery and race for which no happy solutions existed.

Tocqueville’s observations posed a paradox he failed to note: How did the sleepy South produce most of the world’s cotton, the basic raw material for English industrialization? By the 1850s critics like Frederick Law Olmsted and Hinton Rowan Helper took southern productivity for granted and posed a different paradox: Why was such a productive society so poor? Both Olmsted and Helper agreed with Tocqueville that slavery had caused the South to slip the traces that, in the North, harnessed productivity to prosperity. Lazy, productive, and poor, the slave South strayed from the northern path to capitalist industrialization.

When the Civil War ended slavery, the South quickly resumed production of phenomenal quantities of cotton. Poverty endured, however, and became worse. Southerners of both races found the go-ahead spirit of free enterprise nearly as alien as the carpetbaggers. In the half-century between Reconstruction and World War I, promoters of the “New South” sponsored a drive for home-grown industrialization. They preached the virtues of textile mills and the economics of lifting the region out of poverty through its own efforts. The factories arrived and stayed, but the economy generally did not improve.

In the midst of the Great Depression, a century after Tocqueville’s visit, James Agee and Walker Evans went to Alabama to live with the Gudgers, a family of white sharecroppers. Evans’s photographs and Agee’s text of Let Us Now Praise Famous Men portrayed a South of ceaseless work, destitution, and exhaustion. Southerners like the Gudgers enjoyed neither the profits of work nor the pleasures of idleness. Seventy years after the end of slavery, the South of the 1930s seemed trapped in a hopeless cycle of work, low productivity, and poverty.

Almost miraculously, however, within the generation since World War II southern economic growth has outpaced the rest of the nation’s. The Sunbelt attracted capital, jobs, and whites from the North, while millions of blacks were displaced from rural jobs and moved to northern cities. Across the South bulldozers tumbled cropper shanties, mechanical pickers harvested crops, factory workers assembled pickups and TVs, expressways circled cities, air conditioners were installed, and modern architects filled the southern skylines with office buildings and hotels. What happened? Had, as many economists and businessmen claimed, the opening of free markets finally liberated the South from the restrictions that had hobbled the southern economy for more than a century?

Not at all, Gavin Wright answers in Old South, New South. Markets played an important part, but they were seldom free and on the whole they retarded rather than liberated the southern economy. Wright, a professor of economics at Stanford University, brings to his comprehensive account of the South’s economic history since the Civil War a mastery of economic theory combined with a healthy respect for the historical, political, and cultural influences that shape all human behavior, including markets.

In his previous book, The Political Economy of the Cotton South (1978), Wright demonstrated the limitations of neoclassical economics in explaining who grew cotton and why during the antebellum years. Theorists of pure markets argued that large plantations dominated cotton production because of efficiencies of scale and because small farmers were poor managers. Instead, Wright concluded, small farmers’ limited supply of family labor forced them to choose to plant either cotton or corn. Most small farmers adopted a safety-first strategy and planted corn rather than cotton, thereby protecting their families’ food supply and refusing to risk their land-ownership by entering the unpredictable cotton market. Plantation owners had the luxury of devoting themselves to cotton with minimum risk to their security because their slaves gave them a flexible and expandable labor force. Slaves allowed planters to avoid the small farmers’ dilemma and grow both cotton and corn. Planters and small farmers responded very differently to the same cotton market, each group for its own reasons. Slavery, Wright made clear, was responsible for the South’s fabulous cotton production and neither small farmers nor planters were quite the slackers Tocqueville claimed.

In his new book, Wright finds the explanation for the South’s postbellum economic miseries in the region’s peculiar labor market. The southern market’s peculiarity came from its separateness from the larger, national labor market. For three generations after the end of slavery southern wages stubbornly resisted following national trends. Until World War II the South remained a low-wage regional market embedded in a high-wage national economy. The isolation of the South’s labor market is the single most important fact about the region’s economic history, Wright contends. Old South, New South defends this argument with an analysis of the origin, workings, and ultimate demise of the separate southern labor market.

A separate labor market emerged during slavery. Labor moved from east to west in separate northern and southern streams, with little mixing along the Mason-Dixon line. Slavery discouraged immigration to the South less because of immigrants’ antipathy to blacks or desire to avoid low-status work associated with slaves (as Tocqueville thought) than because of the economic motives of slave-holders. The masters should be thought of as “laborlords,” or primarily as owners of labor, Wright says. Slave labor was their most valuable asset. Since the cash value of slave labor arose from the fact that slaves could be sold throughout the South, planters did not invest in local improvements like soil development and exploration for mineral resources. They did not encourage canals, railroads, industries, and towns that might have diverted cheap northern labor into southern markets. As labor lords, the planters were highly mobile, even footloose. They had weak ties to their local communities and strong regional loyalties, particularly to maintaining the market for slaves. During the antebellum years planters created and maintained a separate, regional labor market to preserve the high cash value of their chief asset, slave labor.

Emancipation transformed the labor lords into landlords. The transformation revolutionized the southern economy. It shifted the economic calculations of landlords away from defending the regional privilege of dealing in expensive, mobile slave labor and toward local developments using cheap labor to foster capital gains for the planters’ new chief asset, land.

Most of Old South, New South is a careful exploration of how these new landlords exploited the low-wage regional economy between 1870 and 1940. The major question Wright addresses is why the southern labor market stayed separate. Conventional economic wisdom predicts that workers will migrate from a low-wage to a high-wage region, thereby causing wages to become equivalent in different regions and creating a unified labor market. But for three quarters of a century after the Civil War, this simply did not happen. Instead, the gap between agricultural wages in the North and South grew larger. Wright shows how the labor market worked within the South in both agriculture and industry, yet failed to move gradually toward integration into the national market. His principal argument can be read as a well-documented attack on the currently fashionable view of the market as a benevolent, naturally progressive process. Instead, Wright implicitly defends the proposition that economic theory must take history and politics seriously.

The history of southern blacks provides Wright an especially revealing case study of the failure of the labor market to work benevolent magic. Free from bondage in 1865, former slaves possessed their labor power but little else. As an old slave commented after he heard the Emancipation Proclamation read aloud on his plantation, the Yankees “have taken off the bridle but left the halter.”¹ Restrained now by the market for agricultural labor, freed men and women negotiated labor contracts with landlords. By the 1870s the contracts had evolved from wage agreements into the familiar sharecropping system. Sharecropping did not represent labor coercion or repression, Wright insists. The croppers participated in a labor market, often moving from one landlord to another every few years. But this market was highly localized.

The need for credit kept the local labor market within a short radius. Croppers had to get credit from landlords or merchants to obtain supplies for growing crops and for their personal use. Their collateral was limited to their reputation, a commodity that did not travel well. A “good man” could get supplies at retail plus 10 percent; someone less reliable could expect 25 percent interest; and, as a Georgia merchant put it, if a man was “a hard case, we just take what he makes and quit.” The croppers’ need for credit, and their need to be known in order to get it, kept them within a labor market circumscribed by the limits of rural neighborhoods.

Black sharecroppers had two possible escape routes: becoming either a landowner or an industrial laborer. During the last quarter of the nineteenth century a tiny minority of blacks succeeded in moving up the agricultural ladder from cropper to fixed-rent tenant to landowner. Even these successful blacks did not escape exploitation, Wright emphasizes. For their success to be tolerated they had to remain subservient to local whites.

Industrial labor provided blacks fewer opportunities and still fewer successes. The South suffered no shortage of industrial employment in the half-century after the Civil War. Landlords, seeking appreciation of their land—the main form of capital—encouraged towns, railroads, and factories. The real value of southern industrial products (less the value of materials used) grew in the fifty years after 1879 at an impressive annual rate of 6 percent. The growth in southern industrial productivity equalled or exceeded that in the nation during the same period, and was more rapid than that enjoyed by New England during the first American industrial revolution between 1820 and 1860. All this growth, however, failed to shift either blacks or the South as a whole toward prosperity. The reason, Wright argues, was that the industrial labor market, like that in agriculture, remained an isolated system of low wages.

Industrialization failed to erode the isolation of the southern labor market because the vast supply of unskilled agricultural labor kept industrial wages low. The lumber and timber industry provided more industrial jobs than any other until 1920, and blacks held most of them. This industry hired young black men from the local farm-labor market; once the timber was cut, however, sawmills folded and moved on, leaving behind deforestation and black workers who once again had to find work in the rural economy. The cotton textile mills, the South’s second major industrial employer, hired whites almost exclusively. Antebellum textile mills recruited white families to mill villages in order to avoid using expensive slave labor, and the pattern persisted after emancipation. The cheapest available labor from white families went to work in the mills—white women and children whose wages were even lower than the prevailing farm wage because, unlike white men and all blacks, they could not easily get jobs in the rural labor market. Blacks provided most of the labor for the postbellum tobacco industry, as they had in antebellum times; but wages stayed low, anchored (like textile wages for whites) to the wage for unskilled rural labor. Only the iron and steel industry, centered around Birmingham, Alabama, cracked open the door of industrial opportunity for blacks. As in other industries, unskilled iron and steel workers earned low wages, but hundreds of blacks were able to get skilled and semiskilled jobs that paid significantly better, though wages were still considerably below those for similar jobs in the North.

Far from mitigating racism, the labor market reinforced it, Wright shows. With industrial growth, many jobs became more specialized, just as economic theory predicts. But employers barred blacks from rising to skilled or supervisory positions outside the textile industry and from virtually all jobs in the textile mills themselves. Neoclassical economic theory holds that such racial discrimination is inefficient and will cause firms that practice it to slip behind in the competitive struggle. Wright emphasizes that, on the contrary, racial discrimination put southern employers at no competitive disadvantage whatever; the most lily-white industry—cotton textiles—was the region’s biggest success; the industry that erected the fewest barriers to blacks—iron and steel—was the region’s biggest disappointment. Industrialization fostered no benign convergence of black and white wages but a dramatic divergence. In Virginia, an 8 percent wage difference between blacks and whites in 1907 had grown by 1926 to 40 percent. Despite industrialization, blacks’ best chance for success—small though it was—lay in agriculture.

Compounding racial prejudice were blacks’ educational handicaps. Discrimination meant that whites not blacks had what opportunities there were for on-the-job training. Racial prejudice aside, a black man who had grown up with a hoe in his hands had difficulty competing for textile-mill jobs with a white man who had grown up “doffing bobbins” (replacing full with empty ones) in the spinning room. Black schools gave adults no substitute for job experience and were kept so short of funds that they could not offer adequate education to black children. As Jim Crow laws rigidified segregation at the turn of the century, southern legislatures cut funds for black schools even further. Southern industrialists and landlords supported this policy, Wright argues, because they knew ignorance was the natural ally of their low-wage economy.

The reluctance of southern leaders to invest in education helped keep the entire region isolated and backward. Northern capital did not make the South a colonial economy, in Wright’s view. In fact, most of the capital for southern industrialization came from within the region. The South’s genuinely colonial status came instead from its late start toward industrialization, its separate labor market, and its failure to develop appropriate technology for a low-wage economy that made intensive use of labor. Without the kind of investment in education that could have provided a regional technological community eager and able to adapt the latest innovations to local conditions (as happened in Japan), southern industry had to make do with machines and methods designed for the very different conditions in the North’s high-wage economy. For example, the most advanced steel-making processes in the late nineteenth century required an ore with higher phosphorus content than that found in the Birmingham district. Birmingham mills had to wait for this problem to be identified and solved by northern engineers before southern steel hearths could take advantage of the breakthrough. The South’s colonial status was self-imposed by its isolated labor market and self-maintained by the investment strategies and political preferences of southern industrialists and landlords.

Politics eventually wrenched the South out of its isolation. Although the southern labor market remained as isolated as ever in 1939, New Deal measures had by then undermined its reliance on low wages. In 1933 the National Industrial Recovery Act and the President’s Re-employment Agreement set minimum wages for 90 percent of the nation’s industrial workers. Renewed in 1938 by the Fair Labor Standards Act, federal minimum-wage legislation increased wages in southern industries between 20 and 70 percent and pulled the southern labor market toward the national pattern.

Not all southern industrial workers benefited, however. Black newspapers referred to the NRA as the Negro Removal Act. Over half a million blacks lost industrial jobs in 1934 alone as employers fired workers in order to meet minimum-wage standards. Southern industrialists failed to protect their low-wage economy because northern industrialists, who had more political influence in Washington, feared “unfair” competition from the South. During the 1920s, southern textile companies had done comparatively well while New England firms collapsed. During the Great Depression northern industrialists refused to stand idly by and let their southern competitors consolidate the advantages of paying low wages. Northerners supported minimum-wage legislation to undercut wage competition from the South and to protect their own high-wage plants.

The New Deal also deprived southern industrialists of their powerful political allies among southern planters. In effect, the Agricultural Adjustment Act of 1933 and its 1936 successor, the Soil Conservation and Domestic Allotment Act, put southern planters on the federal dole and shifted their political allegiances. In order to reduce crop harvests and bolster prices, New Deal programs made federal payments to farmers who took land out of production. This policy gave planters strong incentives to displace share-croppers, who had a (weak) claim to federal payments, and convert to wage laborers, who had no claim whatever. Planters wasted no time mobilizing what the Swedish sociologist Gunnar Myrdal termed the American enclosure movement. They hired farm laborers for the reduced acreage they cultivated and withdrew from production land that formerly had been farmed by sharecroppers, who now had no place in the rural economy.

During the 1940s the farm population of the South dropped by more than three million as migrants went north and west to jobs opened up by wartime production. The enclosure movement of the 1930s also prepared the way for mechanizing the southern harvest during the postwar decades. By 1950 machines harvested 5 percent of southern crops; by 1969, over 90 percent. Mechanization virtually eliminated tenant farmers of both races and forced them to look for work in a high-wage economy that had little use for them.

Within the postwar South a new high-wage economy began to grow. Employment declined in the older low-wage industries like textiles, tobacco, and lumber. But oil, chemical, and electrical-machinery industries moved south along with high-tech carpetbaggers from northern corporations. The new political sympathies of southern landlords in favor of high wages were reflected in aggressive campaigns to recruit northern plants to southern locations. Corporate tax rates in the South were 85 percent above the national average in 1950; by 1970 the quest for a friendly business climate had dropped them to 13 percent below the national level. Sunbelt boosters in polyester suits were the improbable vanguard of the New South’s economic revolution.

The post–World War II South, Wright emphasizes, has a genuinely new economy. It did not evolve gradually from the low-wage economy that lasted for three quarters of a century. Instead, a new alignment of political forces created by New Deal policies forced the South off the path of low-wage industrialization and onto the very different route of high-wage development in which the North—by no accident—had a head start. The political independence the South lost in 1865 ironically had imposed on the old Confederacy a debilitating, low-wage form of economic independence. As a result of the changes that created the Sunbelt industries after World War II, the South, one might say, was finally able to snatch a measure of victory from defeat.

Old South, New South makes this provocative argument in admirably clear, nontechnical prose. Virtually all its many tables, charts, and maps should be understandable to readers of the daily newspaper. While Gavin Wright’s case seems to me on the whole convincing, it raises three important questions.

First, the fundamental distinction he makes between labor lords and landlords is somewhat elusive. Slaves and productive land were concentrated in the same hands before the Civil War, as Wright’s first book demonstrated; similarly, postwar landlords made great efforts to defend their low-wage labor system. In both instances, land had little value without labor. The distinction between labor lords and landlords is mainly useful to account for the transformed investment strategies created by emancipation. Yet slave owners possessed people, not just labor. Slaves not only worked; they reproduced. Likewise, postwar landlords encouraged industrialization only so long as it did not threaten low farm wages. Without denying the revolutionary significance of emancipation, perhaps one could make a more convincing case for a distinction between an antebellum market in people, as opposed to a postbellum market in labor. Such a distinction would accept land as a constant and highlight the dramatic postwar change in market relations.

Second, Wright’s argument that the principal symptoms of southern economic backwardness arose from the isolation of its labor market seems an intellectual advance of the first magnitude. It reformulates in new and fruitful ways the old debate about what was wrong with the southern economy. However, Wright’s measure of the South’s isolation depends heavily on comparisons between agricultural wages in the South and North. But agricultural wages may obscure as much as they reveal about the separateness of the South. After the Civil War a wage-labor market engaged only a minority of agricultural workers in both South and North; family labor predominated in the North while sharecropping characterized the South, neither of them making use of wages. This basic difference between the wage system and the more common forms of agricultural labor in both regions suggests that the South’s distinctive low-wage industrialization was rooted less in low farm wages than in the non-wage sharecropping system. This provided an almost bottomless pool of unskilled workers who were part of the labor market but outside the wage economy.

Finally, Wright’s argument illuminates in fresh ways the much discussed themes of continuity and discontinuity in southern history. The most important continuity, the separate low-wage economy, was the enduring legacy of slavery. It arose from the first major discontinuity, emancipation, and lasted until a second emancipation during the New Deal liberated southern landlords from their sharecroppers and imposed higher, national wage levels on southern industrialists. Behind Wright’s argument for the long-lived isolation of the southern labor market and its unexpected demise after World War II lie the political calculations of southern landlords. They are the ones who made the decisions whose effects Wright traces. But evidence of markets, prices, production, and wages—present in abundance in Old South, New South—is not directly linked in Wright’s book to the political behavior of landlords. It may have made sense for southern landlords to have acted as they did for the economic reasons Wright identifies; whether they in reality acted for those reasons remains to be seen. Wright suggests that southern economic history displayed remarkable continuity from the 1850s to the 1980s in its acute sensitivity to the political will of large landowners; we need to know more about them and their politics.

Although the contemporary South has emerged from its colonial status in the national economy, Wright points out that it and the rest of the nation remain colonies in the larger international economy dominated by huge multinational corporations. For this reason if for no other, the South’s economic history since the Civil War holds important and not very encouraging lessons for the entire nation in the late 1980s. Since the boundaries of the economy and the nation no longer coincide, economic policy is determined not just by elected officials in Washington, but also by officers of multinational corporations whose political loyalties are limited to the corporations’—not the nation’s—bottom line. As C. Vann Woodward wrote more than thirty years ago on the eve of the South’s economic and racial revolutions, southerners know what northerners are just now beginning to learn, “that history has happened to their people in their part of the world.”² If you can read only one book about how history happened to the post–Civil War southern economy, read this one.