How the Slavery Bubble Went Pop

Published:May 9, 2011 by Brendan Wolfe

Why did the South get left behind economically after the Civil War? On another blog, a history professor speculates:

Perhaps the most important factor in the South’s economic underdevelopment was the fact that emancipation, while a milestone in human freedom, was an economic calamity. There were approximately 4 million slaves, with an average value of $1,000. Emancipation meant the destruction of $4 billion of Southern capital. Slavery as a symbol of status had encouraged successful professionals and entrepreneurs to invest in slaves rather than industry. With the end of the war, that “investment” was rendered valueless, and that put severe limits on the available local capital for investment.

I sent this to the historian Henry Wiencek, an affiliate fellow at the Virginia Foundation for the Humanities. He responded:

A very interesting post from the Professor, but there’s a flaw in the formula—”There were approximately 4 million slaves, with an average value of $1,000. Emancipation meant the destruction of $4 billion of Southern capital.” Yes, every slave had a value, but most slaves had not been purchased, so there was no investment lost.

If you borrowed money to buy slaves in the 1850s, as many professionals (doctors, lawyers, businessmen) did because the slave trade was so lucrative, then you definitely lost your investment. But if you were a planter, large or small, the slaves created your wealth for you just by being born. Thus Jefferson made the calculation that he made a 4% profit per annum on the births of black babies. The planters called this “the increase.” A planter’s cost for housing and feeding a child was minimal; children soon became productive and thus profitable, and they became disposable assets at a very young age. I think Jefferson calculated that it cost him only $8 to $10 a year to support an adult slave. Peter Wilson Hairston owned 1,500 slaves in his lifetime—nearly all of whom came to him through inheritance and natural increase.

So at the end of the war he “lost” an enormous amount of value in slave property, but he hadn’t lost any “investment” because he never bought any slaves. In the case of the Hairstons, the enormous increase in their slave population in Virginia and North Carolina by the 1830s gave them a surplus labor force which they used to develop large tracts of new cotton land in Mississippi, which they got from the government for very little after the Choctaw had been driven from Mississippi to make way for white settlement.

IMAGE: Whitehall Street, Atlanta, 1864. This photo of a black Union soldier posted at a slave auction house in Atlanta is one of hundreds taken by George N. Barnard during Gen. Sherman’s occupation of the city in the fall of 1864. Many were destroyed in the conflagration that erupted upon Sherman’s firing of Confederate munitions stores when he departed on Nov. 15.


6 Comments on “How the Slavery Bubble Went Pop”

  1. Elizabeth McCullough

    Great post. And of course the enslaved people weren’t “destroyed” and neither was the value of the products of their labor. It was only a calamity in the sense that the privileged class became somewhat less privileged.

  2. Elizabeth McCullough

    Oh dear, that’s how my comment sounded, isn’t it? I didn’t mean it that way — I was sloppy. Clearly they didn’t reap the fruits. But the idea that capital was “destroyed” does seem to be coming from the point of view of the slave owners.

    Boy, is my face red.

  3. Brendan Wolfe Post author

    Thanks for the comment, Robin. I can’t speak about the whole South, but in Virginia, the economy began to diversify some after the Revolution, away from tobacco and toward wheat. But it was still largely agrarian and still heavily dependent on slavery. Maybe Henry will weigh in.

  4. Robin

    It was my impression that the foundation for the South’s economy had it’s roots in the aftermath of the American Revolution. Doing some research on my family’s history in Portsmouth and Norfolk (both in Virginia), I was surprised to learn that we had some Tories in the family tree. Reading up on this subject, I learned that a great many merchants from the port cities of the South never returned after the war; hence contributing to a diminished, less diverse economy.

  5. Henry Wiencek

    Robin — You may be right about there being an exodus of Loyalist merchants from Virginia after the Revolution, but I haven’t seen any information about it. You may want to take a look at Maya Jasanoff’s new book, “Liberty’s Exiles: American Loyalists in the Revolutionary World.” As Brendan said, the planters began to shift toward wheat and away from tobacco, but the roots of the southern economy in agriculture and slavery were firmly established before the Revolution.

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