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Wall Street History
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06/08/2001
The Business of America - Cotton, Part II
Last week we discussed the importance of Eli Whitney''s
invention of the cotton gin back in 1794, which allowed a worker
to produce 50 pounds of cotton a day, instead of just one.
Unfortunately, though, the labor used to harvest the cotton crop
was of a slave nature. And it''s because of this that cotton played
a paramount role in the genesis of the American Civil War.
By the early 1800s, Europe, particularly Britain, had a ravenous
appetite for cotton, and the American South was far and away the
leading exporter. In 1810, the South was supplying Britain with
48% of its needs. By 1830, that percentage would rise to 70%,
and hold that level up to 1860.
At the end of the War of 1812, annual cotton production in the
South was less than 150,000 bales. By 1860, that total would
rise to 3.8 million. Not only was cotton America''s largest export
(as it would remain until the 1930s), it was also the biggest single
source of the country''s growing wealth.
As I mentioned last week, cotton was an incredibly important
product, when you look at the humanitarian aspect and the kinds
of garments the people of planet Earth were previously
accustomed to wearing. And with improvements in harvesting
techniques, the price of cotton yarn was falling considerably, to
the benefit of all. Historian Paul Johnson notes that by the early
1860s, the price of cotton cloth was about one percent of what it
had been in 1784.
"There is no instance in world history of the price of a product in
potentially universal demand coming down so fast. As a result,
hundreds of millions of people, all over the world, were able to
dress comfortably and cleanly at last."
But, again, there was a price and it was the slaves who paid it.
Ironically, were it not for cotton, various religious movements
across the land may have swept the slave practice away. Cotton,
instead, turned slaveholding into a powerful political force.
And cotton also played a leading role in some of the financial
panics that afflicted America in the first half of the 19th century,
particularly the Panics of 1819 and 1837.
Regarding the former, the source of the turmoil was a sudden
collapse in cotton prices in the English market. In 1818,
American cotton had temporarily soared to 32.5 cents a pound.
The high price forced British textile manufacturers to turn away
from this source and look to cheaper ones from the East Indies,
so that by 1819 the price had fallen to 14 cents.
The Panic of 1837 was the result of falling British demand for
cotton, mostly due to existing stockpiles, which set off bank runs
in the U.S. Then in 1839, a bumper cotton crop led to a new
collapse in prices, setting off a depression.
[The price then fell to, and remained below, 10 cents a pound
through most of the 1840s and into the 1850s, when it finally
poked above that level in 1855, reaching 15 cents in 1857.]
By 1850 in America, the slave states had about 42% of the
population, but only 18% of the manufacturing capacity. And
the vast majority of any new immigration was finding its way to
the North. As for cotton, while 70% was exported, 5% stayed in
the South and the other 25% went to northern mills, where the
value added by manufacturers equaled the price that raw cotton
brought the South, which in turn imported two-thirds of its
clothing and other manufactured goods from the North or abroad.
And a final hook was that the very ships that carried cotton from
the South and returned with manufactured goods, were almost
exclusively owned by northern or British companies.
Nonetheless, with cotton prices firming after the plunge of the
late 1830s / 1840s, and with bumper crops, many planters began
to think twice about secession, as the movement gained ground.
But there was still this issue of manufacturing capacity. The
rallying cry in the South became, "Bring the spindles to the
cotton." Wrote one newspaper of the time, addressing the slave
issue, "Why should all our cotton make so long a journey to the
North, to be manufactured there, and come back to use at so high
a price? It is because all spare cash is sunk here in purchasing
Negroes." Because of slavery, a cotton plantation could be laid
out and in full production in two years, and it was even possible
to harvest a crop in one year.
In the census report of 1860, the government said, "The growth
of the culture and manufacture of cotton in the U.S. constitutes
the most striking feature of the industrial history of the last 50
years."
By 1860, while the image of the South''s economy was still poor,
in fact, the average per capita income of $103 was good as far as
the rest of the world was concerned, about the same as
Switzerland, and exceeded only by the North, Great Britain, and
Australia. And as the secessionist cries picked up in the slave
states, it was South Carolina Senator James Hammond who
proclaimed, "You dare not make war upon our cotton. No power
on earth dares make war on it. Cotton is King." King Cotton.
A Vicksburg newspaper editorialized in 1860, "(The South),
safely entrenched behind her cotton bags.can defy the world -
For the civilized world depends on the cotton of the South."
And it was largely for this reason that the South had the illusion
that "King Cotton" would lure military aid and political
sympathy around the world, especially from those like Britain
and France who appeared to be so dependent on the fiber. At
one point, before the war started, the Confederates imposed a
voluntary embargo on shipments, as a way of showing the
Europeans just how important the South was, but the overseas
textile manufacturers were able to subsist on the record crops of
1859 and 1860. The British manufacturers, in particular,
welcomed the opportunity to diversify away from America. So,
by the time they needed more cotton, it had become available
from new sources in Egypt, India, and elsewhere.
But after Jefferson Davis became president of the Confederate
States, he hued to the line that Europe could not survive without
the South and its exports. Plus, Davis just knew that when the
Europeans saw that northern oppression was endangering their
cotton supply, they would come running to the aid of the South.
Of course, you all know the rest of the story. Without cotton,
maybe there is no American Civil War.
Sources:
"Growth of the American Republic," Morison, Commager,
Leuchtenburg
"A Great Civil War," Russell Weigley
"A History of the American People," Paul Johnson
"America: A Narrative History," Tindall and Shi
"Battle Cry of Freedom," James McPherson
Brian Trumbore
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