Economics of Slavery and the Civil War

Overview

• The lost chance• Economics of slavery• Why fight?• How did the Civil War

change the economy?

The Lost Chance to Eliminate Slavery

• In the early days of the new nation, there were hopes that slavery would fade away.

• Many Americans regarded slavery as morally repugnant.

• Others defended it.

The Lost Chance to Eliminate Slavery

• Many thought that its inefficiencies and immoral nature would cause it to eventually collapse.

The Constitution: The Lost Opportunity

• The best opportunity to abolish slavery almost certainly occurred at the Constitutional Convention of 1787 when the delegates debated the issue.

George Mason on Slavery

“Every master of slaves is born a petty tyrant. [These masters] bring the judgment of heaven on a country. As nations cannot be rewarded or punished in the next world, they must be in this. By an inevitable chain of causes and effects, providence punishes national sins by national calamities”

Debates in the Federal Convention of 1787

Three Fifths Compromise

• Delegates who supported slavery wished to count all people, free and enslaved, for the purposes of representation.

Three Fifths Compromise

• They hoped that this approach to allocating representatives would strengthen the power of the slave states in Congress and thus make emancipation less likely.

Three Fifths Compromise

• Delegates who opposed slavery wished to count only free citizens.

• They hoped that this approach would weaken the power of the slave states in Congress and thus make emancipation more likely.

Three Fifths Compromise

• The Founders decided that enslaved individual would be counted as three fifths of a person.

• The delegates also voted to eliminate the external slave by 1808.

• But, they lost the chance to eliminate slavery itself.

Gradual Emancipation

• 1780, Pennsylvania adopted a plan for gradual emancipation.

• Other states took similar actions:– Rhode Island in 1784,– Connecticut in 1784,– New York in 1799– New Jersey in 1804

• The Constitution of Vermont prohibited slavery in 1777.

• In 1780, the Massachusetts Constitution stated that all men are free and equal by birth.

Gradual Emancipation

• Gradual emancipation meant that newborn African Americans would be declared free when they reached adulthood.

Gradual Emancipation

• Why would gradual emancipation work in the North and not in the South?

Economics of Slavery

• Owners had an incentive to provide enslaved individuals with basic necessities for survival such as food, shelter, and medical care.

• Before 1861, the market for enslaved individuals had increased. Fogel, Robert, and Stanley Engerman. Time on the Cross: The Economics of American Negro Slavery. Boston: Little Brown and Company, 1974

• The economy of the South was growing from 1840-1860.

• Slavery was profitable.• Enslaved workers were

more productive than wage and salary workers.

• Agricultural production was more efficient with slaves than without slaves.

Characteristics of a Market Economy

• Private property• Self interest• Competition• Profit motive• Voluntary exchange• Limited role of

government

Slavery and Markets

• Was slavery a market institution?

Productivity and Cotton

• Eli Whitney’s invention of the cotton gin in 1793 changed the economy of the South.

• Until that time, it required a great deal of time to pick the seeds out of cotton.

Cotton Gin

• Whitney was staying on the plantation of Catherine Greene where he worked as a tutor.

• After listening to the complaints of local farmers about how difficult it was to remove cotton seeds from the cotton itself, he designed a machine similar to the one pictured here.

Cotton Gin

• A person fed raw cotton into the machine by turning the crank. The cotton was moved through a cylinder with wire teeth.

• The cotton fiber was pulled along by the teeth, but the cotton seeds were left behind.

Cotton Gin

• Before the invention of the cotton gin, a person could clean about one pound of cotton per day.

• With his invention, Whitney made it possible to clean fifty pounds per day -- a huge increase in productivity.

Power Cotton Gin

• With the application of power to the gin, the amount of fiber that could be produced appeared almost limitless.

King Cotton

• Just before the Civil War, there could be no doubt that cotton was king.

• Douglass North remarked that it is difficult to exaggerate the role of cotton in American economic growth between 1800 to 1850.

Economics of the Civil War

Why Fight a War When…

Why Fight a War When…

• Economists say that individuals act irrationally if they deliberately act against their own interests.

• Using this definition, was the Confederacy’s decision to secede irrational?

• Or, did it represent a miscalculation of the costs and the benefits?

Alterative 1: Continue to Compromise

• Resolving the slavery question had been postponed for almost 100 years.

• Was further compromise possible?

• The Missouri Compromise of 1820 admitted Missouri and Maine to the Union. Missouri was a slave state and Maine was a free state.

• This dual admission - - one slave and one free state - - allowed the nation to preserve the existing balance between slave states and free states.

Alterative 1: Continue to Compromise

• The Kansas-Nebraska Act of 1854 overrode the Missouri Compromise.– It authorized voters in

portions of the Louisiana Purchase to decide whether or not to permit slavery.

• In the case of Dred Scott v. Sanford (1857), the U.S. Supreme Court ruled that Congress could not prohibit slavery in any U.S. territories.

Alternative 2: Free the Slaves

• Free the slaves, but provide taxpayer financed compensation to slave owners.

• By 1860, there were 4 million slaves.

• They were worth close to $3 billion.

• Would this work?

Alternative 3: Fight

• The Union was right to assume that it had enormous economic advantages.

• President Lincoln hoped for a quick capture of the Confederate capital on Richmond.

• Optimism was high.

Alternative 3: Fight

• The CSA was right to believe it had advantages.

• The South had strong military tradition of providing strong leaders - - General Robert E. Lee.

• The South was only fighting a defensive war.

• Only a few victories would demonstrate to the North that it was futile to fight.

Did Both Sides Miscalculate the Costs and Benefits?

• The leaders of the CSA thought the benefits of preserving slavery and states rights were worth the costs.

• They expected a short and decisive war.

• That didn’t happen.

Did Both Sides Miscalculate the Costs and Benefits

• The leaders of the Union thought the only feasible way to end slavery and preserve the Union was to fight.

• They expected a short and decisive war.

• That didn’t happen.

Economic Analysis of the Civil War

A High Price

• Preserving the Union and ending slavery came at a high price.

• About 620,000 deaths.• The South bore most of the

destruction.• Loss of human capital.• Loss of physical capital.

African Americans After the War

• The emancipation of African Americans destroyed the plantation system.

• Something else needed to be worked out.

• By 1880, about 20% of African Americans owned farms.

• About 26% rented farm land.

• A few became homesteaders.

• What would happen to everyone else?

Economics of Share CroppingAdvantages to African Americans• Sharecropping provided

basic necessities African Americans needed - - land, equipment, housing.

• It provided a steady source of employment.

• About 54% of freed African Americans participated.

Disadvantages to African Americans• It prolonged dependence on

cash crops such as tobacco and cotton.

• Sharecroppers became dependent on landlords and merchants.

• Many were pushed into heavy debt.

• The cashless transactions made it hard to seek other opportunities.

Economics of Share Cropping

Advantages to Landlords• Landlords had a steady and

dependable source of labor.• Risks for crop failures were

shared by both sides.

Disadvantages to landlors• Landlords were locked into

cash crops as much as the sharecroppers were.

• The whole system discouraged innovation and diversification.

• The cashless transactions made it hard to seek other opportunities.

Did the Civil War Change the Direction of the Economy?

• The Beard-Hacker Thesis states that the Civil War was “Second American Revolution.”

• By this they meant that the Civil War shifted the balance of power from Southern planters in favor or Northern manufacturers.

• The Civil War propelled the economy toward industrialization.

The Civil War Slowed Economic Growth

• The war caused tremendous loss of human and physical capital.

• Without the war, most people would have been employed in the private sector where they would have produced more goods and services.

• Without the Civil War, investment would have gone into the private sector.

• The Civil War came at a high opportunity cost.

Direct Costs of the Civil War

Questions