Is the Southern Counterexample a Roadblock to Innovation?

We can see the effects of the conditions and policies that promote innovation even more clearly by looking at this variation within the United States. The innovative powerhouse of America was in the northern states. There, freedom, opportunity, and democracy were strong, in stark contrast to the southern states. Though politically and culturally tied to the rest of North America, the South had a far different experience when it came to innovation. Like parts of Latin America and the Caribbean, the southern United States lacked the conditions for that combination of democracy, equality, and opportunity that flourished in the North. It held on to its slave-based economy tenaciously, to the point of fighting a civil war to preserve it. The southern commitment to slavery reflected the fact that slave labor was highly profitable—for the owner. It was, in fact, a perfect example of an economic system that can produce wealth for the few but not for society as a whole.

At one time, before the American Revolution, the slave states were the wealthiest and seemingly most economically advanced part of North America, producing valuable global commodities—rice, tobacco, and eventually cotton. Slave-grown cotton made a small number of very large planter-slave owners quite rich, even as the southern states as a whole fell economically further and further behind the North. The reasons for this pattern are clear: The South lacked the pillars of innovation that were being erected in the North. Southern educational levels were far lower than in the North. The South did not make the investments in railroads and other transportation infrastructure to nearly the same degree as the North, usually content simply to build lines that moved cotton from interior to port. By contrast, the northern internal improvements strategy connected a vast internal market and provided the basis for the innovative spaces of a diversified economic geography. Not surprisingly, the South had far fewer patents per capita than the North, and the region lacked heavy industry or the machine specialists that the North was developing. These conditions all but guaranteed it would lose the Civil War that soon erupted.

Some southern promoters recognized that the South was falling behind and advocated indigenous industrialization, but slavery stood in their way. The small, elite slavocracy had enough power to restrict spending and investments to those things that enhanced its wealth and position, mainly based on the cotton economy. It was far less willing to provide for the general welfare that would have enhanced human capital across a broad sector of society. There was much less need to attract immigrants to take up land, given that slavery provided an abundant and mobile labor supply. Making the sorts of changes that promoted diversification, education, opportunity, and the like was seen by the slave-owners as potentially dangerous. Widespread education, if available to the enslaved, might just encourage them to run away or foment rebellion. A society predicated on the violent enslavement of people had to dedicate itself to repression, not innovation and change, for fear that the enslaved would one day rise up. These conditions worked against innovation, openness, entrepreneurship, and creative destruction that can be found in the most rapidly advancing economies.

There was finally one more price the South paid that cost it dearly when it came to innovation. A large swath of the southern population, the African American part, was given little opportunity to contribute its skills, talents, and creativity in the economy. In the North, immigrants may have come as indentured servants or as penniless workers, but nothing stopped the talented from moving beyond their immediate station in life. And even less stood in the way of their children. This was not true for the great part of the working class of southern slaves. However hard life was and however limited the opportunity in the North, it was all but nonexistent for the African population of the South.

How much innovation was lost due to slavery? We can never do a full accounting, but we do have some hints. We know, for example, that the first profitable crop in the South was rice, which came to the New World through the talents and efforts of Africans, who though enslaved still carried their knowledge of the crop from Africa where it had long been cultivated. They were the ones who adapted it to American soil conditions, another case of the small but crucial improvements and changes made by anonymous workers and craftspeople throughout history. All sorts of African cultural traditions have been woven into the fabric of America, from cuisine to music to crops, even if the people who carried these traditions were largely prevented from profiting from them. We also have a few tantalizing cases of innovation from Africans who, despite being enslaved, nonetheless were able to demonstrate their abilities in the marketplace.

Although many of those enslaved spent their lives confined to labor on large cotton plantations, that did not mean they lacked skills or creative abilities. Many were skilled at trades ranging from carpentry to blacksmithing, to boat building, fishing, hunting, and trapping. Others, often women, were able to grow food on small plots of land on the plantation—owners encouraged this as a way to cut down the cost of maintaining their human property—and sell the excess in lively vegetable markets run by the enslaved themselves. Others acquired money when allowed to “hire their own time.” When slaves had a valuable skill, at, say, carpentry or ship caulking, the owner might allow them to earn money by practicing their trade for wages, in exchange for a percentage of what they earned. Simply ordering them to work for others and confiscating all their wages would have undermined incentive to maximize earnings. So, better to split the income. Perhaps there is no clearer example of the American commitment to property rights and its value for innovation than this. Though a slave owner had almost absolute power over those he kept enslaved, down to the right to inflict serious punishment and even death, he could not simply take any property that the slave owned, including his wages from hiring his own time.

When given the chance, and the chances were few, African Americans were able to act as entrepreneurs and innovators just as other Americans. Consider the case of an enslaved man in Kentucky known only as Free Frank. We do not know much about him, including his full name because he was illiterate and was born into slavery. But neither his lack of formal education nor his lowly status stopped him from observing an opportunity, assessing the market conditions, and executing his plan. Hiring his own time, Free Frank used it to mine and sell saltpeter, the crucial ingredient of gunpowder. When the War of 1812 broke out, gunpowder was in fierce demand and the price of saltpeter rose rapidly. Free Frank was able to make enough money to begin the slow process of acquiring his freedom and buying the freedom of his wife and children. Once all the family was free, they moved to Illinois, where Free Frank, now free for sure, acquired land and laid out a new town. He called it New Philadelphia, after William Penn’s famous city—a new city of brotherly love for free African Americans, and anyone else, to move, settle, and buy one of the subdivided land parcels. He built a church, hotel, and, of course, a school just after the American fashion of real estate development and town building in the nineteenth century. Free Frank, in short, was a classic American entrepreneur of the era, taking advantage of abundant land, building institutions to attract settlers, subdividing raw land to turn a profit, just as so many of his white counterparts were doing.

This was an extraordinary case, to be sure, but we do not know how many other Free Franks were trapped in slavery and never had a chance to put their talents to full use. We do know that the South, and all slave societies, fell behind and remained behind the free and more democratic regions like the North. While the North went through the creative-destructive process of developing new industries and technologies, the Southern slave states were both less innovative and increasingly less wealthy, with such wealth as they had increasingly inequitable. Even after the end of slavery, the South remained the least industrial, least technologically sophisticated, least inventive, and poorest region of the United States, well into the twentieth century. Slavery, and its attendant social features of violence, inequality, and underdeveloped human capital, was both a moral blight and an economic drag on those places that practiced it.