Skip to content


July 12, 2015


Research for this Part II includes but is not limited to an excellent article in the Summer Edition of The American Prospect entitled “How the American South drives the Low-Wage Economy” by Harold Meyerson. He notes that for all of the Golden Age’s hooey of 1939’s Gone with the Wind the South through all of its incarnations has retained its status as a world apart from the rest of America.

I have had a similar response when asked about the potential for secession of Texas from the Union, noting that Texans cannot secede because in their hearts and minds they never joined irrespective of their agreement to be annexed in 1845, and I also think it is an open question whether “the South” ever in their hearts and minds intended to be a real part of the Union after Appomattox, or whether they thought then and still fantasize that Lee’s surrender was a mere armistice. However, such a discussion is for another day and beyond the scope of this essay, which is about how today’s economy of the South is successfully invading (as it were) the economy of the North via cheap wages and anti-union initiatives sponsored by the South-oriented Republican Party in league with Wall Street and others of the rich and corporate class. Let’s look at some of the reasons why the North and South developed diverse economies and where it has led us – with some help from economic history in which human beings held as slaves were subject to barter and securitization thanks to Northern and British banks.

Meyerson correctly notes that Southern exceptionalism has shown itself via its long absence from the development of the modern American economy. Nineteenth century capitalists considered the slavery-saddled South to be a quasi-feudal outlier in the early development of the modern American economy. During that century finance and factories rose north of the Mason-Dixon Line and railroads were built in the Northern states while the South was an island with few railroads, banks, factories, and was largely detached from the new world of industrial capitalism. The South’s economy was based upon agriculture. Ironically, its brutal slave economy spurred the development of the first factories of the industrial age with its cotton in such diverse locales as textile mills in Massachusetts and Manchester, England.

Indeed the Industrial Revolution which started in Britain (and its evils which gave rise to novels by Charles Dickens and a setting for the radical politics of Marx and Engels) first emerged from the cotton mills of Manchester, which depended almost entirely on the product of the slave South, and so the two economies – industrial and slave – rose simultaneously. “King” Cotton was properly named; by the eve of the Civil War the South produced two-thirds of all the cotton produced in the world and most of it was exported to the textile mills of Britain as Britain imported 88 percent of its cotton from the United States. On the eve of the war, cotton comprised 61 percent of all American exports, and in Britain one out of six British employees worked in cotton factories. It was at least a “King” if not an economic “God” in trade and industry of that time, both as an export from here and as an import by the British.

Many banks both here and in Britain got into the act with loans to owners of plantations since harvests of cotton are seasonal and slave-holding plantation owners needed interim financing for their activities pending harvest time, when such owners repaid their loans. The banks needed collateral for their loans, and plantation owners usually put up their slaves as collateral for such loans, such as on 88 percent of such loans to growers in Louisiana and 82 percent in South Carolina. When the (famous in economic lore) Panic of 1837 happened, thousands of plantation owners could not pay their loans and as a result banks located in the North and in Britain foreclosed on their loans and became owners of thousands of slaves and even plantations.

Brown Brothers, which was then on its way to becoming one of Wall Street’s leading investment banks (long before the Glass-Steagall Act separated commercial and investment banking), ended up owning 13 plantations and thousands of slaves. Major banks, such as Baring Brothers, even securitized slaves, much as banks today securitize home mortgages. They sold bonds to investors based on bundles of loans that slaveholders had taken out. Meyerson notes that whenever the economy soured or the price of cotton dropped, owners would sell their slaves, irrevocably tearing apart thousands of African-American families in an unimaginable show of brutal inhumanity, a horror which alone destroyed any vestige of claimed “southern nobility” and “southern charm” Margaret Mitchell portrayed in her book “Gone with the Wind.” Like today, bondholders must be kept happy (see German bondholders of Greek debt) whatever the consequences and without regard to the resulting human pain and suffering of those who did not make the debt but whose lives and futures are sacrificed on the altar of profit. Bondholders first!

Yankee and British banks of that day were more than complicit with the horrors of slavery, which they ignored (as today) in their pursuit of profit, since there is little difference in antebellum slavery in the American South and the sweatshops of Southeast Asia and elsewhere financed by banks these days for our multinational corporations who assemble components for Apple and other labor abusers under cover of “contracts” made with “labor contractors.” British and Northern banks made loans to slave-holding plantation owners – and  made loans to southern firms whose only business was slave trading!

With the background in economic history for this part largely confined to a pre-Civil War discussion of an industrial North vs. an agricultural South, slavery and banking outrages etc., Part III will more specifically consider how and why the South is becoming more industrialized today as factories in our North are not only going to China and Mexico, but to our South as well, joining there with factories that assemble Nissan, Volkswagen, Mercedes and soon (in South Carolina) Volvo cars, among others. The giant European Airbus, a Boeing equivalent, is planning a plant in Alabama as well, and others are en route.

The South is industrializing while the North is de-industrializing. Why? Meyerson answers that question in succinct fashion: “They come to sell to the American market and they come because the labor is cheap.” He is right, and Europeans do not deny it. They owe their shareholders a fiduciary duty to do whatever enhances their corporate bottom lines in the interest of paying out dividends and increasing stock values, so they chase the lower costs of labor here as our multinational corporations chase cheap labor in China and other low-cost venues (such opportunities to be increased if the TPP is approved).

Welcome to the new China and its underpaid workforce! Who are they? Look in the mirror and think wage inequality as policy in our prehistoric-minded Congress mired in economic mythology and dependence on campaign contributions. Stay tuned for Part III in which I will, among other things, discuss contrasting wage scales of Americans with those of the developed economies of Europe and the comparative advantage enjoyed by European producers when their products are assembled and sold in the same venue.   GERALD    E


From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: