How did the Southern states treatment of Blacks from 1866 to 1960’s affect the economics of the South?

Ask an Economist

I think the treatment of Blacks in the south, by restricting Blacks' jobs, low pay, restrictions of where to spend their money, and other negative economic measures, had to negatively affect the southern economy by -30 percent or more during the 100 years after the civil war. What would economists say?


Economists and economic historians in particular have been quite interested in the economic impacts of slavery and its aftermath, including the effects of race-based discrimination. There is by now an extremely large and extensive literature of journal articles and books considering aspects of this topic, and I cannot do justice to the breadth and depth of that scholarship here.

To begin though, let's distinguish between the effects of discrimination (unequal treatment) on Blacks and the impact of that discrimination on the overall economy.  Discrimination might simply redistribute economic gains from one group to another.  For example, if employers pay Blacks lower wages, they may be able to earn higher profits.  Employers' income goes up, but Black workers' income goes down.  The overall size of the economy might not change.  On the other hand, if discrimination limits access to education, Blacks may complete fewer years of schooling or learn less during the time they spend in school.  This reduces their "human capital" and lessens their productive capabilities.  This slows economic growth.

At the end of the Civil War, incomes in the former Slave states were on average lower than they were in other parts of the United States.  Some of this reflects the direct effects of the Civil War, but this was small relative to other factors.  Two explanations have been advanced.  One focuses on lower demand for the region's primary commercial crop: cotton.  The other notes that former slaves reduced the amount of labor effort they supplied, in large part because women and children were no longer obliged to work alongside men.  One does not have to choose, both may have been important.

After the war, the Southern economy grew as quickly as, or even faster than other parts of the country, as the gap with the rest of the United States closed.  This was especially true in the 1940s, 1950s and 1960s. Nonetheless, unequal access to schools, and a lack of investment in education for Blacks held back their economic progress.

If you would like to understand more about these developments I would encourage you to look at _Old South, New South_ by Gavin Wright (reprinted by LSU Press 1997).  It provides an insightful and non-technical account of Southern economic development.

Answered by:
Dr. Joshua Rosenbloom
Department Chair
Last updated on July 31, 2020