POST-BELLUM SOUTHERN INCOME: A RESPONSE TO RANSOM AND SUTCH

Mark Aldrich

It has recently been argued by Roger Ransom and Richard Sutch that the spectacular decline in southern per capita crop output following the Civil War can be virtually entirely explained by the effects of emancipation, as it reduced the black labor supply. Emancipation, they argue, reduced the labor supply by perhaps as much as one-third and resulted in a pro- portionate decline in the output of cotton and other crops) Calculations based on work by Peter Temin suggest that this output decline reduced southern income by about 22%, compared to what it otherwise might have been in 1880. z

Ransom and Sutch and Temin attempt to explain the decline in south- ern per capita output and income, but neither makes an explicit attempt to ascertain how the income decline was shared between landlords and the labor force .3 The question is of considerable interest. If emancipation did result in a considerable withdrawal of black labor, then one is tempted to conclude that however poor postemancipation Blacks may have been, on the margin at least, they preferred leisure or non-market activities to money income. It would seem to follow, therefore, that to some extent at least, southern black poverty was self-inflicted: had they wished to work more, in the aggregate, they could have earned more. But such a line of argument implicitly assumes that some, perhaps the major portion, of the income decline attendant upon emancipation was borne by the Blacks themselves, and this need not have been the case. If the elasticity of substitution was low enough, earnings per unit of labor time might have risen sufficiently to offset some or all of the effect of the decline of labor supply on Blacks' incomes. It is even possible that the decline in labor supply resulted in a rise in income! 4 If the withdrawal of black labor resulted in very modest declines in black incomes, or perhaps even raised them, then landlords bore the brunt of emancipation's diminution of southern incomes. If this was the case, it would not be possible to argue that black poverty was the result of Blacks' aggregate willingness to trade money incomes for leisure, for the money costs of leisure to them may have been very low, if indeed such a trade-off existed at all.

436 The Review of Black Political Economy

At least two methods exist of gaining evidence on the impact of eman- cipation on labor's share of agricultural income. One approach would be to estimate agricultural production functions for the pre- and post-Civil War periods and compare the coefficients. ~ This procedure is sufficiently ambitious and fraught with difficulties, however, that we leave it for others. An alternative is to look for any direct evidence which may bear on the issue. Below we present two such bits of evidence, taken from the work of Ransom and Sutch, which suggest that emancipation may have raised labor's share of agricultural income.

Direct calculations by Ransom and Sutch suggest that, in 1859, slaves actually received between 20% and 23% of the output of the southern farms on which they worked, whereas their share under competitive con- ditions would have ranged between 49% and 53%, depending on the size of the farm. By 1879, however, labor's share had risen dramatically. The end of slave exploitation implied that Blacks would now receive labor's competitive share of income. This alone would have raised their share from about 20% to roughly 50% of agricultural income. But labor's competitive share also rose, according to calculations by Ransom and Sutch, from 50% to more like 56% of agricultural income. To put the matter as planters must have seen it, the share of other factors declined from 80% to about 44% from 1860 to 1879. The six-percentage-point (12%) rise in labor's share helped insulate Blacks from the fall in agri- cultural income, which resulted from their reduction in labor supply fol- lowing emancipation. Temin's procedures imply that the decline in labor supply reduced agricultural income by about 22%. But the rise in labor's share meant that Blacks' incomes fell by much less than this, or more like 12%. 8

Another piece of evidence which is suggestive of changes in the in- come distribution is the behavior of land values. The first column of Table 1 contains information on the average decline in land values in each of six ex-Confederate states between 1860 and 1867. Clearly, the declines were immense, with the average for all six states being about 61%. Land values depend on earning capacity. Accordingly, these declines must reflect some combination of the following three factors: (1) the fall in gross agricultural income, (2) a decline in the share of income going to land, and (3) a substitution of land for other factors reducing income per acre, but not the share of income going to land.

That the fall in income per acre was not offset by a proportionate increase in acreage under cultivation is pretty clear. In fact, just the reverse occurred. Evidence cited by Ransom and Sutch from the ninth

POST-BELLUM SOUTHERN INCOME 437

TABLE 1 Changes in Land Values and Agricultural Income in Six Southern States,

1860 -1870

Percent ChanEe_in State Land V~Tu~s- -C~tton Income Other Agr. Income Total Agr. Inc.

Miss -65% -18% -53% -36yo

Ala -60 -24 -57 -#0

La -70 -22 -55 -59

Ga -55 +18 -52 -25

Ark -55 +18 -92 - 7

SC -60 +ii -56 -i!

Sources: Land Value data are for 1860-67 from U. b. Department of Agriculture for 1867 (Washinfton, D.C.: U~GPO, 1868), pp. 102-106.

Cotton production figu~'es for 1860 c~d 1870 from U.S. Bureau of the Census, Eighth Census of the U.~., 1860, i~griculture, p. xciv and Ninth Census of the U.L. Compendium, pp. 698-699. Cotton [)rices are from James L. Watkins, "Production and i'rice of Cotton for One hundred Years" (ULDA, Division of btatistics, Misc. Leries Bulletin 9, 1895), p. ii. These ~e New York prices but there is no reason to suppose the relation of farm prices to New York prices changed between 1860 and 1867.

Other Agricultural Income data are derived by assuming a 50/50 split between oth@r agricultural output and cotton output.

census indicates about a 20% decline in improved acreage in five cotton states between 1860 and 1870 "for the want of labor" to cultivate it. Such a sharp decline in cultivation clearly implies very limited possi- bilities for land/labor substitution, r In addition, for the South as a whole, average cotton output per acre rose steadily between 1866 and 1870, which is exactly what one might expect if acreage declined, but not if it had risen. We conclude therefore that the decline in income per acre reflected in the behavior of land values could not have been offset by an increase in acreage. Accordingly, it must reflect either a fall in total agricultural income, or its redistribution away from land, or both.

Table 1 also presents evidence on the behavior of agricultural income between 1860 and 1870 in six southern states) About half of all agricul- tural income in these states was earned in cotton, and about half in other products. While cotton production fell sharply in these states over this period, the impact on incomes was mitigated and sometimes entirely

438 The Review of Black Political Economy

offset by a sharp run-up in cotton prices. Actual changes in incomes from cotton production are contained in column two of Table 1. We assume that other agricultural output declined in the same proportion as cotton production, and, further, that the decline in income equalled the decline in production. 9 Our calculations of the decline in other agricultural in- come are in column three. Column four presents estimates of the total fall in agricultural income.

In each of these six states, the decline in land values was far greater than can be accounted for by the fall in income alone. While the average fall in land values for these states amounted to about 61%, the average fall in agricultural income was only 26%. However, the decline in income, when coupled with income redistribution away from nonlabor inputs, is approximately sufficient to explain the fall in land values) ~ As noted above, the actual share of income going to nonlabor inputs was about 77%-80% before the Civil War, and their share under competitive condi- tions would have been between 49% and 53%. Emancipation did away with slave exploitation. Had total agricultural income fallen by 26% and the competitive share going to nonlabor inputs remained unchanged at roughly 50%, income to nonlabor factors would have fallen by about 53%--the result of both the fall in agricultural incomes and the end of slavery) 1 As it was, not only did total income fall and slave exploitation end, but labor's competitive share also rose from about 50% to about 56% of the total. The total fall in nonlabor incomes was due to three factors then---the 26% overall decline in incomes, the end of slave exploitation, which reduced nonlabor income from 80% to about 50% of the total, and the rise in labor's competitive share, which further reduced nonlabor incomes to about 44% of the total. Together these sources imply about a 60% fall in nonlabor income, which is just about equal to the fall in land values.

While neither of these bits of evidence is conclusive, both are sugges- tive, and together they imply that labor's competitive share may have risen by as much as six percentage points (12%) after the Civil War. Coupled with the end of slave exploitation, the result was a stunning redistribution of income away from the old southern ruling classes and a collapse in the value of their lands. This redistribution is far more impres- sive, and perhaps more important, for subsequent southern social and political developments than the roughly 25% decline in agricultural in- come attendant upon slave emancipation. The end of slave exploitation must have been bad enough, as landlords viewed matters. But worse, the ex-slaves sharply reduced the fraction of their time devoted to agricultural

POST-BELLUM SOUTHERN INCOME 439

labor. And yet, the ensuing income decline was disproportionately borne by their ex-masters! This implies that had Blacks responded to their poverty in the post-bellum decades by now increasing their labor supply, the benefits would have flowed preponderantly to property owners. No wonder the old ruling class railed so savagely at the "lazy niggers."

NOTES

1. Roger Ransom and Richard Sutch, One Kind of Freedom (New York: Cambridge, 1977), chapters 1-3 and Appendix C. Also see Ransom and Sutch, "The Impact of the Civil War and of Emancipation on Southern Agriculture," Explorations in Economic History 12 (January 1975), pp. 1-28.

2. Peter Temin, "The Post Bellum Recovery of the South and the Cost of the Civil War," Journal of Economic History 36 (December 1976), pp. 898-907.

3. Ransom and Sutch do compute factor shares, which I employ below. However, they never relate the change in factor shares to the decline in labor supply.

4. A decline in the supply of labor will raise labor's share of income if the elasticity of substitution is less than unity. It will raise labor's absolute income if the elasticity of substitution is less than the relative share of the other factor, in the two-factor case. See P. R. G. Layard and A. A. Walters, Microeconomic Theory (New York: McGraw Hill, 1978), pp. 270-271.

5. Separate production functions for southern agriculture have been estimated by Rob- eft Fogel and Stanley Engerman, Time on the Cross (Boston: Little-Brown, 1974), Vol. 2, pp. 135-143, and by Stephen Decanio, "Productivity and Income Distribution in the Post Bellum South," Journal of Economic History 34 (June 1974), pp. 422-446. However, the differences in the functions fitted makes comparison on their results difficult. Moreover, Fogel and Engerman compute labor's share to be 58% before the war, while Decanio finds it to be about 30% during the years 1880-1910. This indicates that labor's share fell by nearly 50% which would be an unheard of change and is thoroughly implausible in the bargain. Such a decline implies a very high elasticity of substitution, which is at variance with both the assumptions and evidence in Ransom and Sutch, "The Impact of the Civil War."

6. Figures on labor's competitive share are from Ransom and Sutcb, One Kind of Freedom, Appendix A. That Blacks' incomes fell by 12% can be shown as follows: if income is $100 and labor's share is 50%, then labor receives $50. A 22% decline reduces income to $78. If labor now receives 56% of income, this amounts to $44, which is 12% less than previously.

7. Ransom and Sutch, "The Impact of the Civil War," p. 16. They assume a zero elasticity of substitution.

8. These data for 1870 are taken from the ninth census, which, as is well-known, contains serious under-numerations, especially for the South. However, if 1870 cotton production was under-counted, then our data, which are designed to show that the decline in output and income was too little to account for the collapse in land values, may overstate that decline, if anything.

9. For a justification of this procedure, see Temin, "Post Bellum Recovery," p. 901. 10. This is true only if the increase in labor's share came entirely at the expense of

land.

440 The Review of Black Political Economy

11. An example may be helpful. Let gross agricultural income be $100 in 1860. The competitive shares of labor and nonlabor inputs are 50% ($50) each. However, due to slave exploitation, nonlabor inputs actually get 80% ($80) and the slaves receive only 20% ($20). In 1870, income has fallen by 26% to $74, and, with the end of slave exploitation, this is now shared 50-50. Nonlabor income then becomes $37, which is 53% less than it was in 1860.

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