LOST CAUSE: THE CIVIL WAR IN RETROSPECT 2: Economic Aspects

1. Business and War
2. Slavery and the Economy
3. The Economic Infrastructure

1. Business and War

Conflict is a risk. Conventional wisdom states that somebody always wins in a war, and the arms industry surely doesn't count amongst the poor ones. Yet destruction is always counterproductive as it destroys the basic requirements for today's market structures - that's perhaps one of the more honest reasons why the Western world is at peace with itself right now.

The US at the time of dissension have been developing a market also. It was a time of industrialization, of railroads, of stock markets. The economic development of the country demanded for development everywhere, not only in the North. The first market to be developed is always the home market - for it is the closest and most easily accesible market. But a home market only works if the majority of people can afford buying the products offered. Thus the adoption of the Northern market model in the more agricultural South would have led to a strengthening of Southern Economy - and not to the opposite.

But the main obstacle in the way of the market was slavery, an institution which the secessionist movement had somehow declared the Southern icon. Yet slavery was part of the reason the South had fallen back in economic development in the first place.

2. Slavery and the Economy

Southern macro-economics was suffering tremendously from slavery, for a variety of reasons[1]. While the individual plantation owner could very well prosper and earn veritably high profits, the economy in general was hurt in the most extreme way. Apart from being morally wrong, slavery and production methods modeled to suit the availability of slave labor are also against sound macro-economic planning.

King Cotton succeeded to enrich plantation owners, and it was successful as the backbone of Southern economy. However, a monocultural approach constitutes a major danger not only to the economic infrastructure but also to a future economic development. A monoculture may succeed in producing profits over a short-term period. However, once a new competitor enters the market, it isn't only one branch of economy which gets challenged but the entire structure of production may break down. Relying only on one major export good is not a sign of strength but rather one of fundamental weaknesses.

Cotton production demanded for large plantations, which were found to be easier worked on by black slaves more resistant to Southern climate than the frail European colonists. Poor white immigrants have no place in such a culture, and small white farms are a lost cause in a society developing pseudo-aristocratic structures.

Slavery, slave labor, serfdom or any other kind of forced labor disturb this working equilibrium - they introduce a stable element into a formula which is fueled by instability, which is fueled by chaos. Forced labor and any kind of meta-plans originating from outside the economy create an environment which will become predictable and stable over the long term, which are both just euphemisms for stagnation. Economic upswing cannot be meticuously planned, it is a chaotic system. This system may cause some social friction on a short-term basis - for which the state has to supply solutions - but through constant re-invention and re-definition, fueled by competition, the economic system will be able to overcome stagnation - as a whole. This doesn't mean that individual firms or enterprises will be saved from extinction. They won't, and the best example for something like that is the termination of PAN AM Airlines. But the market isn't aimed at subsidizing each and every enterprise, it is order out of chaos. What rises, may fall down. What is down, may go up.

If the market is supposed to prosper, it has to be built upon two guiding principles: One is represented by the dichotomy of supplier/buyer, the other by the pair employer/employee.

Supply and demand can only work if free cash flow is available, if the market is allowed to regulate itself. Competition is essential to spur the market, but competition can only work if all participants in the market are free to make their own decisions - in accordance with the law. But what is supplied, has to be able to be demanded for. What is being demanded for, has to be supplied - again, in accordance with the law, with a law providing equal opportunities for all. Production is pointless if there is no market - and the first market available should always be the home market. But how is a home market supposed to be working without potent buyers? Excluding the workforce from the market by either denying them adequate and high wages or by enslaving them and thus depriving them of their ability to participate in the market - all of this will drastically impede the market over the long term.

Again, this does not mean that there won't be any profit in slavery. Slave owners may very well profit from this peculiar institution - but the overall economy of the country will stagnate as wealth is just created and consumed, not re-invested and re-entered by making it available to the general public and ignoring the immense possibilities a home market is providing for.

In addition to these rather abstract and long-term deliberations, slavery can also very visibly hurt the economic infrastructure of the country.

3. The Economic Infrastructure

Contemporary economic criticism often highlights the fact that a lot of companies do business in Third World countries today, employing workers at horrendously low wages, thus allegedly spawning unemployment and economic decay in the mother country as business is made elsewhere. But this is just one side of the picture. Third World workers may be cheaper, but they are usually less qualified and less motivated. Also missing is an infrastructure comparable to what can be found in the West. Thus business conditions are not necessarily better outside the Western mother countries, and outsourcing into such regions is much riskier than usually perceived. At the end, most profits can be made in the home country - where there are a functioning infrastructure, a more or less highly motivated workforce, workers with higher wages who are able to act as customers as well. The market in the US, in the EU, in Australia and Japan is a safer game. Outside investments may pay off, and they may not. It's always a risk.

The problem of a missing or defunct economic infrastructure was also haunting the South, mostly due to slavery. "Employing" slaves, be it as plantation workers or in the household, usually disallow a healthy employment situation to exist. The South became a seclusive society, an exclusive club relying on slave labor and thus discouraging normal wage labor either to prosper or to come into existence in the first place. The unhealthy ratio between masters and slaves in the population wasn't due to the climate any more, it was largely caused by the fact that there simply wasn't enough land nor work available for any white settler who would have wanted to start his own business. Why pay wages when you can make your profits from slave labor?

Business isn't just made between manufacturer and end user under strict B2C (business to customer) conditions. Money can also be made the B2B (business to business) way - several companies working together on a product, from production to refinement to marketing to selling to customer service and maintenance to recycling etc. Such a modern economic system, however, demands for an utterly complex network of larger and smaller enterprises to exist, it is also desperately in need of a well-trained, well-educated workforce - which slaves aren't usually meant to be.

Slavery may not be the root of all evil, it may also not be the only element to blame for the defeat of the Southern Confederacy. But it surely impeded sound economic politics from taking shape, and it hurt the South in such a way that it was only a matter of time for slavery, the peculiar institution, to disappear - or for the South to decline altogether. The military conflict only accelerated this process of necessary transition - and given time, the problem of slavery would have had to be dealt with anyway, even if solely out of pragmatic reasons.

October 9th-22nd, 2000

Endnotes - Part 2