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?
– No 40 acres and a mule
• 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?
• How is the answer to this question related to the first
two?
– Flawed Institutions?
– Government action or inaction?
– Outside factors?
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
3
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
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
Differences
• Farms are smaller in the South.
• Census treats a rented farm in the South the
same as North.
• Using Ransom and Sutch sample if you keep
farms with more than 200 acres with no labor
variables, they produce 25% of cotton
• Tenant Plantations
– 5 or more tenant farms owned and operated as
one farms
• Special Census of plantations taken at various
times
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 (Table 12.5 in text).
Black Standard of living under slavery
•
Basic Slave Conditions
– Diet.
• Use census of large plantations, business records, and instructions to overseers. Take amount
of food produced, subtract portion fed to animals, sold, etc. and assume residual used to feed
slaves.
• Basic diet consisted of corn and pork and contained sufficient calories to sustain high levels of
work.
• Basic slave ration contained 4100-4200 calories a day and contained high levels of protein, iron,
calcium, and vitamins-high enough to meet modern daily recommended requirements.
• Diet not that much different than that eaten by free whites, but slaves worked much harder.
– Housing and clothing.
• 5 adults lived in an 18x20 foot cabin, w/1 or 2 rooms, a plank floor, fireplace and shuttered
windows
• They each received 4 sets of cotton shirts and pants or dresses and 2 pairs of leather shoes
plus coats and blankets as needed.
What is rate of expropriation?
• Marginal Revenue product (how much one
more slave contributes to output of
plantation) (some disagreement about labor’s
share of output) $85.80 to 62.46
– In a competitive labor market W=MRP
• Subtract value of slave consumption give us
expropriated income ( $28.95-42.99)
• 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
• Indifference curve analysis
Measuring the Benefits to Freedom-An Indifference Curve Analysis
Free worker would rather be at A—
with less income and more leisure.
Income
Using the gang system, the slave
owner forced blacks to work more
(point C) where MRP =MC of coercing
the slave to produce and then
expropriated a portion of the slave’s
output (moving the slave from point C
to B).
At point C, the slave is
consuming a non-optimal bundle
of income and leisure.
Slavery
C
A
After
Expropriation
B
Income at point B can be estimated
using plantation and agricultural
census records.
I2
I3
I1
0
Leisure
Measuring the Benefits to Freedom-An Indifference Curve Analysis (2)
After emancipation, the gang system
was no longer viable.
Income
The opportunity cost of leisure was
reduced (purple dotted line).
The freed slave will reduce his work
effort moving to point D.
After
Expropriation
B
Freedom
D
I1
0
At point D, even though money
income is lower, the slave is better off
(higher indifference curve) because he
has increased the amount of leisure he
is consuming.
It is also possible that money income
would increase after emancipation but
the value of freedom, measured by
the increase in money income, would
still underestimate the value of being
freed.
I3
I
2
To truly measure the value of
freedom, must account for the value
of increased leisure of freed blacks.
Leisure
Computing the value of freedom
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
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. (D on graph)
• First problem, census gives information about the value of output for the
farm and the amount of various inputs used. Blacks who were not owners
didn’t keep all the profits of the farm.
– Must take into account 3 different arrangements depending on whether
blacks owned land, capital, or just provided labor.
– owners, sharecroppers, and sharerenters.
• 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
Methodology (Ng and Virts)


Y owners  Routput  Vhou sin g  dl   Vland   dc  Vcapital  Vother
Y share  Routput  Vhou sin g  Vshare
 Rrent received
(1)
( 2)


Y rent  Routput  Vhou sin g  Vrent  dc  Vcapital  Vother
where:
R output  value of output reported in the census
Vhousing  value of housing provided
Vland  value of land including buildings
dl = annual depreciation rate for land
dl1880 = average annual depreciation of land and buildings
dc = annual depreciation of implements
Vcapital  value of implements and workstock
Vshare  value of rent paid by share croppers
.5  ( Routput  Vgarden produce  V pork  Vother cos ts )
Vgarden produce  value of garden produce
cos ts
cos ts
(3)
Equations 1, 2, and 3 show how income is
measured for each class of tenancy.
If the estimate for each type of tenancy is
weighted by the relevancy of they type of
tenancy, and estimate of average income
per person can be computed.
The numbers are then adjusted for the age
distribution of the family.
Black families had more children so per
capita income is too low.
Vrent  value of rent paid by fixed renters
.25  value of corn+.30  value of cotton in the cotton producing states
or the average rent / value of output in other states
Vother costs  costs of fertilizer, hired labor, and animal feed
Vrent recieved  ((Vrent - ((dl  Vland ) - Vhousing )) + (Vshare - ((dl  Vland + dc  Vcapital )  Vhousing )) per owned farm
The Value of Freedom
Black Income in 1859
Black Income in 1879
Value of Leisure
Value of Freedom
Increase in Income
Ransom and
Sutch
$27.66
$35.59
$13.75-$21.00
$22.05-$29.01
78-105%
Improved
Direct Observation
Residual Method
of Wages
$27.66
$27.66
$40.24
$40.24
$14.82-$23.44
$31.01-$36.78
$27.40-$36.02
$43.59-$49.36
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.
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.
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
Not all sharecroppers part of large
units
Plantations after the Civil War
Role of Plantations?
• Literature both underemphasizes and
overemphasizes the importance of
plantations.
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
12
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
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.
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?