University:
California State University, Northridge
Course:
ECON 175 | Introduction to U.S. Economic History
Academic year:

2024
Views:

149

Pages:

43
Author:

Teagan Allison

Southern Agriculture After Civil War Effects of Emancipation • Emancipation was the most far reaching property right change in United States economic history, perhaps in world economic history – Serfdom in Western Europe disappeared gradually – Emancipation of serfs in Russian Empire only thing comparable Important Questions • What accounts for the slow growth of Southern Income relative to North? • No evidence for convergence before 1950s Per Capita Income 1860 1880 1900 1920 1940 US 100 100 100 100 100 NE 139 139 137 132 124 NC 68 68 103 100 103 SA 65 45 45 59 69 ESC 68 51 49 52 55 WSC 115 60 61 72 70 190 163 122 125 W • Immediate fall in Per capita GDP not hard to explain – Fall from $77 in 1859 to $46 in 1869 to $61.5 in 1879 – Decline in labor force participation of slaves – Loss of economies of scale of coercion – Loss of capital assets – 1859 was a above average year for cotton • What explains continual poor performance? Important Questions • What happened to Black standard of living as a result of Civil War? – How much better off were emancipated Blacks compared to slaves? • What accounts for slow growth of Black Income relative to White Income? Mean Male Income by Race 1940-1980 (1984 dollars) Census Year White Men 1980 $ 25,791 1970 $ 25,666 1960 $ 19,959 1950 $ 14,332 1940 $ 10,459 Black Men 18,723 $ $ 16,527 11,483 $ $ 7,912 $ 4,531 Ratio 73% 64% 58% 55% 43% • No census statistics available before 1940, but other work indicates Black income relative to white was about 37% in 1910 • Answering the first question does not necessarily answer the second. • Southern income could not have been as far below Northern income if the income of White Southerners had not been below White Northerners Important Questions • What happened to the organization of Southern Agriculture? – Were the same crops grown? – Did the plantations survive operated with wage labor? What happened to Southern Agriculture after the Civil War? • Cotton and Tobacco production does not decline – Big change is now Whites as well as Blacks are growing cotton • Decrease in both the rice and sugar production Farm size after Civil war • In 1860 Plantations with more than 50 slaves made up 4 % of the farms and produced 32 % of cotton • In 1880 Ransom and Sutch estimate that Farms with more the 200 acres dependent on wage labor made up less than 1% of farms Farming after Emancipation • Consider change in ownership of factors of production • Before the Civil War, plantation owner owned land, labor and capital. Finance was done through factors who loaned money based on the growing crop. Had a personal relation with planters • After Civil War, plantation owner owned land and capital, had to hire labor. • In order to pay wages needed credit, but factors are no longer willing or able to lend. • How do you pay labor? Share of crop (group share or squad) • Alternative would be to rent land out for fixed rent or share • Which is best? Consider Transaction costs Contractual Costs Share Fixed Rent Wage 1 2 2 Enforcement 1 Output Landowners 2 input Workers 2 input 1 highest 2 2 1 3 3 1 Negotiating • No type of contract is clearly the best, it depends on which input is most important or easiest to specify • Share looks like the highest • However share is most popular Tenure Choice in North and South year own rent share 1880 64 12 24 1890 62 14 25 1900 53 18 30 N 1880 81 6 13 1890 78 8 14 1900 75 9 16 South Looks different if you look at land area in tenant farms North South 1880 24 % 24% 1890 27 28 1900 30 31 1910 34 37 Differences • Farms are smaller in the South. • Census treats a rented farm in the South the same as North, but were they? • Tenant Plantations – 5 or more tenant farms owned and operated as one farms • Special Census of plantations taken at various times Data for Postbellum Period • Roger Ransom and Richard Sutch-One Kind of Freedom • Got a NSF grant and cross referenced the 1880 population and agricultural censuses. • Published Census records have two problems • Do not report separate data by race until 1900 • Do not recognize plantations • Ransom and Sutch sample has many farms with missing wage data • Using Ransom and Sutch sample if you keep farms with more than 200 acres with no labor variables, they produce 25% of cotton. If you delete the farms with no wage data they produce 1% What happened to Black Standard of living after emancipation? • What was standard of living under slavery? • Estimates by Vedder, Ransom and Sutch, Fogel and Engerman. • Marginal Revenue product (how much one more slave contributes to output of plantation) (some disagreement about labors share of output) $85.80 to 62.46 • Value of slave consumption ( $28.95-42.99) • Subtract value of slave consumption give us expropriated income Equals expropriated income (33.51 to 55.76) • Rate of expropriation is Expropriated income / Marginal Revenue product 65% to 50%. If you throw out the high and low estimates, its 54%-59% not much difference What is the value of Freedom? • To the extent that labor markets are competitive, no expropriation W=MRP • MRP could be higher or lower than under slavery • More leisure • Value to being able to choose consumption bundle Computing the Value of Freedom • Can estimate income by taking value of output and subtracting costs of production and then dividing by the number of people on farm. • Must adjust income estimates for the effect of increased leisure. – What happened to work hours? Ransom and Sutch estimate slaves worked 2,052 -1009 hours per year which dropped to 1503-994 hours in 1880 – What is value of leisure? – it’s the wage, but how do you find that? – Most black workers were not paid a fixed wage The Value of Freedom Black Income in 1859 Black Income in 1879 Value of Leisure Value of Freedom Increase in Income Ransom and Improved Direct Observation Residual Method Sutch of Wages $27.66 $27.66 $27.66 $35.59 $40.24 $40.24 $13.75-$21.00 $14.82-$23.44 $31.01-$36.78 $22.05-$29.01 $27.40-$36.02 $43.59-$49.36 78-105% 99-130% 158-178% Free blacks experienced a large annual increase in their material standard of living. Since emancipation was a once in a lifetime event, it is appropriate to measure effects over lifetime. In PV terms, blacks received a lump sum payment of 26 to 30 times average income-- about $500,000 in today’s dollars. Argument that blacks didn’t benefit from freedom is wrong i.e. Civil War wasn’t a waste of time. Emancipation did significantly increase black welfare. Back to the two big questions • Why was the South backward? • What explains Black/White Income levels Possible Explanations • Flawed institutions • Market Based – Tenure arrangements especially share cropping – Credit monopoly • Government imposed – Disenfranchisement – Segregation of public facilities and schools – Limits to mobility of labor Market based institutions • Why would Southerners deliberately adopt a set of institutions that made both Whites and Blacks worse off? • If large landowners were in a monopoly position why would they choose an inefficient tenure arrangement? Expect low wages, high rent. Sharecropping • Sharecropping is not exclusively a black institution • 1880 computed from Ransom and Sample, 1900 from Census. 1880 Owners Renters Share White 74 8 19 Black 32 25 43 1900 Owners Renters Share White 60 11 29 Black 22 38 41 1880 computed from Ransom and Sutch sample White Blacks Owners 84 16 Renters 36 64 Share Croppers 45 55 1900 Census of Agriculture White Blacks Owners 86 14 Renters 42 58 Share Croppers 64 36 • Blacks moving into renting, but not ownership – Suggests lack of protection of property rights • Number of white renters and sharecroppers are increasing Alternate explanations of Sharecropping • Combination of high cost of monitoring labor and owners providing an important input. – Managerial knowledge – High quality cotton • Evidence to support – Reduction in sharecropping with increase in mechanization – Persistence of Tenant Plantations Persistence of Plantation System State Alabama Georgia Louisiana Mississippi South Carolina Total Percent of Improved Acres, 1910 Percent of Crop Acres Harvested, 1945 (All Counties) Percent of Crop Acres Harvested, 1945 (Counties in 1910 and 1945 Census) 31 23 23 35 27 28 12 18 20 41 21 23 14 20 27 48 18 26 Sources: U.S. Bureau of the Census, Plantation Farming in the United States (Washington DC, 1916); U.S. Bureau of the Census, Special Report of Multiple Unit Operations in Selected Areas of Southern States (Washington, DC, 1947). Credit Market • How was crop financed? • Crop lien laws – Used the growing crop as security – Lots of opportunities for opportunistic behvaior • Few banks, mostly land owners and country store merchants – Lots of country stores – Entry easy – No rich owners • Interest rates are high (Cash price lower than credit prices • Lots of stores but may have local monopoly • Evidence suggests tenants move a lot • Not clear if this is due to monopoly or high risk Crop mix • Did country stores cause over specialization of cotton? • Not clear why they would force such a crop mix on farmers • Small farms were not self-sufficient before the Civil War, but Plantations were. Black/White income • Little evidence of discrimination • Labor income per worker is about the same for blacks as whites • Part of Black/White income gap is due to different levels of ownership of land and capital • Nationally Blacks are poorer than whites because most Blacks are in the South where income is lower than the national average. 1880-1900 • We would expect if markets work that Blacks would acquire land and capital (both physical and human) and move to areas where higher income could be earned • Does not seems to have happened Real Black and White Income in 1880 and 1900 Per Capita Income Per Worker Income 1880 Black White B/W Ratio 1900 Black White B/W Ratio 1880-1900 Black Growth Rate White 1880 Black White B/W Ratio 1900 Black White B/W Ratio 1880-1900 Black Growth Rate White Southern Rural Total Income $36.78 $62.49 0.59 $46.37 $91.23 0.51 1.17% 1.91% $65.93 $99.43 0.66 $81.31 $140.04 0.58 1.05% 1.73% Southern Total Income National Total Income $38.43 $79.44 0.48 $49.96 $117.87 0.42 1.32% 1.99% $68.90 $126.38 0.55 $87.61 $180.94 0.48 1.21% 1.81% $43.06 $142.64 0.3 $56.86 $206.70 0.28 1.40% 1.87% $77.20 $226.95 0.34 $99.72 $317.31 0.31 1.29% 1.69% In the period from 1880 to 1900, blacks increased their incomes in absolute terms. Relative to whites, blacks in the last portion of the 19th century did not match the progress of whites. Flawed Government Institutions • Period 1880-1900, was the period in which there were many adverse historical developments for blacks. – The segregated public school system was created. – Blacks were disenfranchised. – Black Codes were instituted. – Blacks’ property rights were imperfectly enforced. • Reduces incentive to acquire property What happened to blacks after emancipation-a summary • • • Emancipation had an enormous immediate positive effect on black material welfare. – Part of the increase in material welfare was enjoyed by blacks as in an increase in consumption of material goods (more income). – Just as important as the increase in material income was the increased consumption of leisure. – Using the prevailing wage rate to value leisure, the increased consumption of leisure was more important than the increased material income following emancipation. – Equivalent to a $500,000 lump sum payment in today’s dollars. Immediately following emancipation, blacks achieved a degree of equity with southern whites. – In the labor markets in which the majority of blacks participated, they earned incomes comparable with whites. • Any differences in income were probably due to skill differences resulting from recent emancipation. – The black/white income ratio in 1880 of .37 is attributable: • To blacks being emancipated in a poor region-the South. • Being emancipated in rural rather than urban areas. In the period from 1880- 1900, the legal and social environment of blacks deteriorated. – Segregated public schools, Jim Crow Laws, disenfranchisement, etc. – Without reliable income estimates, the question of whether these adverse historical developments adversely affected black welfare have been unanswered. – During this period, black continued to improve their material condition but not as fast as whites. Other Source of Southern Backwardness • Dependence on Cotton – Increase in supply outside of US – Stagnant Demand – Income elasticity low • Boll Weevil • Cotton is the last major US crop to mechanize harvesting – Technical difficulty or backwardness of producers? • Lack of funding for education for both blacks and whites.

Southern Agriculture After Civil War

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