The South: A Colony at Home

Two of the most prominent research areas in the resurgent field of political economy have been the study of underdeveloped countries abroad and urban and regional problems at home. It is quite natural that some of us should look for similarities between the situation facing the Third World and the most highly exploited regions and peoples of the developed countries. This interest has led to applying colonial analogies to the study of both ghettos and underdeveloped regions. The “colonial ghetto” has been well discussed by Bill Tabb in The Political Economy of the Black Ghetto. The thesis of “regional colonialism” has been stated succinctly by Andre Gorz in a recent issue of Liberation. Gorz suggests that “the geographical concentration of the process of capitalist accumulation has necessarily gone hand-in-hand with the relative—or even absolute—impoverishment of other regions. These latter regions have been used by the industrial and financial centers as reservoirs of labor, or primary and agricultural material. Like the colonies of the great European empires, the “peripheral” regions have provided the metropolises with their savings, their labor-power, their men, without having a right to the local reinvestment of the capital accumulated through their activity.”

While obvious similarities between “internal” and “external” colonies can be noted in a casual manner, for analytical purposes it is important to clarify how far these analogies really extend. For many reasons, it may be relevant to stress differences as well as similarities between “colonialism at home and abroad.” In what follows, some aspects of the economic history of the South will be used to highlight the problems of the “regional colonialism” model.

The Civil War

On the eve of the Civil War, the South was a major source of one of the most important raw materials for industrial England and for the growing Northeast. Because of the political independence won by the American colonies, the South enjoyed a unique position in world trade. The primitive accumulation of money, of capital, through the exploitation of the soil and African slaves, had not in this case been completely siphoned off by metropolitan powers, but rather had led to the creation of a wealthy and independent agricultural ruling class. Given this position, the large American cotton producers had the potential of creating an independent center of economic power based on capitalistic agriculture. While the long run prospects of such an economy are open to serious doubt, the wealth and income generated by and retained in the ante-bellum South are more suggestive of Junker Prussia than of the colonies of Asia, Africa, and Latin America. As recent work by Stanley Engerman shows, the per capital income of the South was growing quite well in the twenty years before the war. Indeed, because of intra-regional mobility to the more fertile western lands, it would seem that the southern per capital income relatively had increased from 77% to 80% of the national average. Moreover, if only the free population is considered, the South by 1860 was very likely above, not below, the national average. Finally, Engerman does considerable damage to the view of the ante-bellum South as an abject debtor region by presenting evidence that southern banks held 38% of the $84 million worth of specie in the U.S.

It should be noted that in the few cases in which members of this class were able to break out of their dependent role, they tended to merge with the existing national financial interests, rather than to challenge them as champions of the South. This pattern is in sharp contrast to the contest between American and European Capital or Japanese and Western Capital.

As of 1860, the South was an independent nation. There is little historical logic for why its ruling class should not have desired such independence. The historical fights over the “causes” of the Civil War have often missed this important point. Union promised little for the South, while independence promised free trade and a better chance at westward expansion. Northern capital, however, could not tolerate this potential rival, hence the emerging industrial power fought a war for economic and political hegemony over the resources of the continent. The major result of this conflict were to destroy the economic base of an important competing class and to transform the slave population into a peasant class. In Reconstruction and Bourbon Restoration a new economic order was solidified through the creation of a system of agricultural credit which guaranteed that the economic surplus would no longer remain within the region.

The New Economic Order

The credit system affected both black and white agriculture in the South. The farmer had historically been financed by cotton factors and Southern banks. These sources of credit dried up after the war. In their place emerged the supply merchant, a small entrepreneur, dependent on the credit from northern wholesalers. This merchant-banker put a lien on the black tenant’s crop and in many ways took over the supervisory functions of the landlord. Throughout the Black Belt, this class first challenged and then merged with the older ruling class when the latter realized few alternatives were available.

Meanwhile, the high price of cotton after the war attracted many marginal lands into production and encouraged the intensification of the cotton culture among the white yeoman farmers. Where before these farms had been largely self-sufficient, they now needed credit to finance the cash crop. Here too the supply merchant arose to fill the needs of the day.

In the short run this credit system obviously played an important role in reorganizing southern agriculture; however, in the longer run the cyclical and secular problems of the cotton crop made it clear that from the perspective of the southern farmer, the new system had over-expanded. But by this time the supply merchants were firmly established and not about to allow a return to more diversified agriculture. Their profits, large or small, were tied to cotton. With declining cotton prices the white farmers of the middling and poor classes found themselves increasingly dependent on their former benefactors. This dependence was further intensified by the need to continually replenish the poorer soils that had been called into cotton culture. The upshot of these events was to push the white farmer, as well as the black, into a state of tenancy. By 1910, 50% of all Southern farm operators were tenants, as compared to 35% in 1880. Hence, while no meaningful program of land distribution had taken place, the ruling class had been turned into a class of middlemen, much augmented by the new merchant. The agricultural dependence on cash crops had been intensified and the surplus was increasingly expropriated by northern capitalists.

Because of the new credit system and the tariff policies of the central government, the South had become dependent on the emerging northern industrial centers for its manufactured goods as well as its foodstuffs. This latter point was well made by Henry Grady, the Atlanta advocate for a New South, when he summarized the condition of the regional economy in his description of the southern farmer.

he gets up at the alarm of a Connecticut clock. Puts his Chicago suspenders on a pair of Detroit overalls. Washes his face with Cincinnati soap in a Philadelphia washpan. Works all day on a farm fenced with Pittsburgh wire and covered by an Ohio mortgage. Comes home at night and reads a Bible printed in Chicago and says a prayer written in Jerusalem. And when he dies … the South doesn’t furnish a thing meant for his funeral but the corpse and the hole in the ground.

The predicament of southern agriculture did not pass over the head of the mass of southern farmers. The Populist revolt represented, in a dramatic way, an attempt to reorient the policies and privileges which had led to this situation. As in many underdeveloped countries, it was defeated within the region by the combination of merchant and landholder, both of whom derived their incomes from the middleman’s role in the new system. Hence these former challengers of northern capitalism became its ally in a conservative alliance. These groups could only stand to lose in any Populist reform of the system of indirect rule, a system which under the guise of white supremacy, gave free reign to northern capital. At the national level, the Populists were no match for the industrial giants that had emerged since the Civil War.

The Favored Colony

If the South’s fate was now in the hands of northern capital, what was to be done with the region? The answer has been a slow but steady process of industrialization. Between 1900 and 1929, the share of agricultural workers in the southern labor force fell from 66% to 39%. More significantly, in the latter year only 22% of the region’s personal income originated in famring while 16% was already coming directly from manufacturing. Between 1900 and 1929 value added in manufacturing in the South grew at a rate of over 4% per annum, somewhat higher than the national rate of about 3.5%. After 1929 this gap widened, with the South’s value added growing at about 5%. By 1960, the South accounted for 215 of the U.S. value added in manufacturing, and only 10% of its labor force was engaged in agriculture. By that year southern per capita income had grown to $1,691 or 73% of the country’s. 

The history of southern economic development strongly suggests that the South has benefited in a way which sharply differentiates it from the stagnation typical of many external colonies. Why was this internal colony so favored? To answer this question it is important to resurrect a major aspect of Marxist theory that has been lost in many discussions of colonialism. In particular the emergence of finance or monopoly capitalism is associated with a shift in developed countries from the export of consumer goods toward the export of money capital and capital goods. Ernest Mandel describes this process as follows: “Among the imperialist bourgeoisie the interests of those who see the industrialization of the underdeveloped countries as the strengthening of a potential competitor come into conflict with the interests of those who see it above all as the emergence of potential clients. Usually these conflicts tend to be settled in favor of the second group, which is that of the big monopolies based mainly on the production of capital goods.”

If it is in the nature of capitalism to emerge in waves of innovative investment in the established centers of control, it is also in the nature of the beast to seek out lower cost locations for many activities once they have been regularized. Not only does the “market’ encourage such shifts, but the interests of capital goods producers and financial “intermediaries” are well served by them. The only condition, of course, is that the shift in economic activity not directly endanger major industrial and financial interests. Thus, the most obviously mobile industries are those which are quite competitive and/or involve relatively small amounts of fixed capital. On the other hand, more capital-intensive, oligopolistic industries can shift locations as their initial investments become obsolete.

The extent to which the colony may share in this “spin-off” process depends on several important economic and political factors. Many of these considerations are subsumed in the traditional matrix of decisions involved in locating manufacturing facilities. For example, in the past seventy years the South’s proximity to northern markets and its resource base made it a prime location to capture the textile, apparel, furniture, and other wage-sensitive operations.

A second factor, related to but often ignored by the traditional approach, is that an industrial labor force does not appear, but is made. Within the framework of economic institutions established after the Civil War, the technology and economic history of cotton in the twentieth century virtually guaranteed a potential pool of workers. The labor-intensive cotton crop could not possibly be replaced with any capitalistic agricultural activity which would have maintained the farm population. Thus there was a substantial push out of both white tenant and black plantation agriculture. While much of the movement off the farm was “voluntary,” it was accomplished against the backdrop of a declining one-crop economy.

The third and in many ways most important factor was the “safeness” of internal southern politics and its national usefulness. The non-democratic nature of southern politics has often been criticized by regional advocates of economic development. However, these critics seldom consider the probably fate of the region had the “democratic” Populists succeeded. More than likely the south would have found itself in the position of many of the more radical Third World governments, i.e., something short of socialism with little prospect of investment from the outside. Of course, as suggested above, the racial divisions in the labor force made an excellent tool for maintaining the “safeness” of the region. Equally important to these internal considerations was the role that southern politicians could play at a national level. The conservative elements of both the Democratic and Republican parties could hardly miss this point. While in the areas of the cotton belt dominated by black plantation agriculture and extreme racism there was little difficulty in assuring cooperation, the Piedmont, hills and piney woods were politically more flammable, as evidenced by the Populist revolt. If it was economically profitable to move the mills, it was politically profitable to man them with displaced white tenant farmers and have their owners praised by the New South advocates of Progress.

While the South had become “Uncle Sam’s Province,” the combined impact of these factors made it “Uncle Sam’s Favored Province.” The sharp discontinuity between the capital intensive extractive sector and the peasant agriculture of many colonies was in the South tempered by a considerable labor-intensive manufacturing sector that stood between these poles. 

The apparent willingness of investors to seek out profitable opportunities within the South raises the possibility that although heavily financed from the outside, the growth of this favored colony may not be much different from neoclassical models of trade and development. In many respects this has been the position of most regional economists viewing the convergence of regional income. They argue that the surplus labor of the South simply implies a high rate of investment. Moreover, they point to the fact that the internal position of the South allowed for the migration of labor out of the region. While this migration has obvious benefits for the metropolitan capitalist, it can hardly be denied that it also facilitates the important absorption of surplus labor in the region and raises the per capita income of the migrant. The record of southern migration conforms well to this picture.

The above perspective ignores some of the fundamental implications of the economic dependency of the favored colony. In the North, large urban markets, well established externalities and the availability of capital combined to produce successive waves of innovative, self-generated growth, a la the model of Schumpeter. In the South the lack of these factors left this favored colony as an economic beggar and guaranteed that its growth would be channeled into those industries in which it was narrowly efficient. More generally, the bourgeoisie of the favored colony fails to play that class’ historic role of economic innovator. Instead, it is pushed into the role of junior partner to outside exploitation.* In industry, much as in agriculture the southern bourgeoisie becomes little more than a middleman.

Industrial Dependency

The nature of the southern industrial bourgeoisie and its inability to challenge northern monopoly capitalism is well illustrated by the early history of two of the region’s industries—textiles and steel. Southerners have often pointed to the textile industry as a major example of the entrepreneurial talents of their own bourgeoisie. Indeed, the textile mills built in the late nineteenth and early twentieth century were predominantly owned by southern interests and represented little less than a crusade to bring southern capital to industry. However, as Broadus Mitchell early showed, these efforts most often depended on the willingness of northern machinery manufacturers and commission houses to take stock in the new companies in return for their equipment and services. While the machinery companies were quick to divest themselves of these holdings, the commission houses long maintained an exploitative relation to their clients. Where the textile industry was competitive to an extreme, the commission houses took on the common features of oligopolistic organization. It has been suggested that the mills were run for the commission houses and not vice versa. The owners of these southern mills thus stood in a position quite analogous to the supply merchants of cotton agriculture. While they extracted the surplus from their over-abundant work force, in turn they passed it on to northern financial interests.

The iron and steel industry is perhaps the only case in which southern entrepreneurs challenged the full might of northern capital. It is not surprising that they lost the battle. The original developers of the rich Alabama coal and iron fields were generally southerners. Most notably, Henry DeBardeleben who brought together a major coal and iron empire in the 1880’s, joined with John Inman of Atlanta and a group of Charleston investors in 1891 to merge the largest regional competitor, the Tennessee Coal, Iron and Railroad Company, into the DeBardeleben sphere. After an unsuccessful effort by DeBardeleben to consolidate control of the company through stock manipulation in the crash of 1895, a series of syndicates containing fewer and fewer southerners took over T.C.I. In 1906, James Duke of the tobacco fortune was the only important southern investor, surrounded by such financial giants as Hanna and Gates. In the meantime T.C.I., with the most sophisticated technology of the day, emerged as a major competitor of the newly organized U.S. Steel Company. In the final act the Morgan interests took over the company during the panic of 1907. While this was loudly labelled as a charity, it is interesting to note that the substantial new investment program of U.S. Steel (a Morgan-controlled company) was thus saved from an important source of competition. It is perhaps little wonder that having already pledged to major expansion in the North, U.S. Steel failed to develop the Alabama steel centers. 

These two examples of southern industry, while only anecdotal, highlight the major differences between economic growth in the region and in the North. Where in the North the high costs of transporting European products and the explicit policies of the central government led manufacturers and investors into a prolonged spree of capital accumulation and industrial innovation, in the South a narrow cost calculus was imposed by the economic and political power of northern interests. This relationship can be taken as a definition of a “favored colony.” The fact that the resulting growth of the South has been quite respectable when compared to underdeveloped countries does not in itself justify viewing southern growth as the simple equilibrium process often described in regional economics literature. Such a model has extreme difficult in explaining the relatively slow rate of convergence of regional incomes and the fact that in at least one period (1920-1930) the South actually diverged from the rest of the country. These factors are much better explained by a theory which assumes that a favored colony is in an excellent position to receive the spin-off of older industries from the metropolitan center, but not to generate or quickly partake in the dynamic phase of innovative cycles.

In the long run the prospects of a favored colony are open to doubt. On the one hand, it must expect substantial competition from favored colonies elsewhere in the world. As the textile industry moved from New England to the South, it can also move from the South to economically and politically profitable colonies in Asia. Indeed, this process, already underway, is to be expected. In this much slower than classical version of the trickle-down effects of development, however, it should also be expected that what is lost at one end will be gained at the other. Hence the recent development of durable goods industries in the South would suggest that tap has not been shut.

In addition to this general point, several factors are at work in the U.S., which mitigate the colonial position of the South. One important advantage of this internal colony is the political leverage its bourgeoisie retain at the national level. It is hardly surprising that so much of the energy of this class in the South has been directed into the realm of politics. This activity takes on special importance in the peculiar form of military Keynesianism adopted in the U.S. since World War II. The South has been quite successful in capturing a sizable share of this largesse (see Southern Exposure, Spring, 1973). While the principle is the same—southern workers and northern owners—the region’s political power has guaranteed that the military like textiles would be drawn South.

A second important factor is the growing importance of state and local governments as economic centers of power. This trend in the South has at least the potential of breaking the political hold of outside corporations. Rather than being a market place for special favors, state and local governments are now economic powers in their own right. It remains to be proven that a populist revival in the South can capture this power or use it in a successful bid for regional autonomy. However, the success of implementing a corporate tax in Florida and the return to populist rhetoric throughout the South perhaps argues well for political activity oriented towards a new division of the region’s surplus.

Prospects for Further Research

The above argument is more suggestive of a plan of research than of a finished theory. In particular, it argues that if much of the capital and resources in an area is owned or controlled by outsiders, this is likely to have important consequences for development, but that in itself this fact does not imply a deterministic course of events. Most importantly, outside control does not always forestall “economic growth.” In analyzing the alternative outcomes, it is important to consider both the balance of power in the home economy and the political relations between the dependent area and its masters. It must also be kept in mind that many activities are continually being spun-off from the center of the economy. In general this approach argues strongly for the emergence of favored colonies. The forms of economic exploitation available to international capital are multiple. This applies not only among different elements of the working and middle classes of the developed nations, but also among dependent nations and regions in the world at large. A simple classificatory system which lumps areas in either the “developed” or “colonial” column is hardly useful as an analytical starting point. Rather we must develop a theory which seeks to explain the entire spectrum of exploitation as it has emerged in the twentieth century.

Several points are worth making before closing: First there is the question of choosing a broad and heterogeneous region like the South for consideration of the regional colonial thesis. It might well be argued that had the Mississippi Delta or the Appalachian Highlands been chosen, a much stronger case might have been made for the tightness of the analogy between internal and external colonies. Still, in light of recent government programs, it would seem that these are as too are moving into the status of favored colonies. The “plan” is for spin-off activities and migration without self-generated development. On the other hand, a consideration of the economic growth of Texas would suggest that it is quite possible for leading classes of a dependent province to capture much of its surplus and generate independent growth. The details of Texas’ rise to some independence within the national economy must also be fitted into any general model. 

A note should also be made concerning the usefulness to organizers of distinguishing among forms of colonialism. It might be argued that such a proliferation of academese can only serve to confuse the underlying similarities between the guises of this basic condition. I think, however, criticism is better leveled at those who would draw a sharp line between geographic centers of economic power and their colonial dependents. In such a system, it is easy to forget that the dual realities of exploitation and alienation are ubiquitous in modern industrial systems. The destiny of New York City is just as rightfully the responsibility of the people of New York as the destiny of the South is the responsibility of this region. This right and freedom, however, cannot be secured without national and probably international cooperation of all those people who currently work and do not rule. In achieving such a goal, it is important to understand the varieties of exploitative systems and the historical laws that govern their development. If colonialism is to become a generic term for any form of exploitation which involves geographic and/or ethnic components, we cannot afford to lose sight of the numerous trees for the forest. Especially at the level of organizing, simplistic analogies which only fuel the flames of regionalism, separatism or nationalism must be considered exceedingly dangerous. It is not enough to show people that their economy is owned by New York bankers, they must also find out what the bribe they have been given consists of, and how they share in the exploitation of others. The people themselves must weigh these in the balance before a progressive movement can achieve long-run success.

*It should be noted that in the few cases in which members of this class were able to break out of their dependent role, they tended to merge with the existing national financial interests, rather than to challenge them as champions of the South. This pattern is in sharp contrast to the contest between American and European capital or Japanese and Western capital.