Southern Credit

[mobile_96]

In the 1850's we read of southern plantation owners complaining about losing up to 40% of their cotton profits to the Yankee cotton buyers, Northern banks and shippers.
Was it always like this?
If not, what happened, and when, to bring about this situation. And who did supply their credit?

 

[leftyhunter]

In the 1850's we read of southern plantation owners complaining about losing up to 40% of their cotton profits to the Yankee cotton buyers, Northern banks and shippers.
Was it always like this?
If not, what happened, and when, to bring about this situation. And who did supply their credit?

I am no expert on the subject. I do remember from the book "Jefferson Davis American by Cooper that Davis had a"Factor" a business man that supplied Davis with credit and brokered cotton deals. Davis had at least two different antebellum era factors. After the Civil War he sold his plantation to a former slave who couldn't make the mortgage payments so Davis took a loss on the next buyer. I imagine a cotton factor is like a garment industry factor back when we had garment factories.
Why would Northern buyers be a major issue for Southern cotton plantation owners? The plantation owners were free to deal with foreign cotton brokers. Foreign ships could freely dock at Southern ports conveniently located next to Southern cotton plantations.
I would not be surprised if their were foreign cotton brokers or factors.
Leftyhunter

 

[jgoodguy]

In the 1850's we read of southern plantation owners complaining about losing up to 40% of their cotton profits to the Yankee cotton buyers, Northern banks and shippers.
Was it always like this?
If not, what happened, and when, to bring about this situation. And who did supply their credit?

Off the top of my head.
Antebellum
It was interest on loans-money advanced at planting for seeds and equipment.
Interest on the purchase of slaves.
Rather than incur the expense of shipping cotton to a port, the planter sold it to broker or buyer. AKA factor.
And got to pay the shipping companies to get the cotton to any buyers.

Southern banks did not lend to planters so it was mostly Northern money.
In the absence of Southern control of its finances, the Yankees stepped in.
Normally in a agricultural society capital is accumulated by the local population and the financial functions are taken from outsiders. However in the South, cotton was so profitable that capital was invested in cotton instead.

 

[mobile_96]

Southern banks did not lend to planters so it was mostly Northern money.

So the question is, Why wasn't it Southern money? Was this the case earlier, it being Only Northern money, like in the 30's-50's?

 

[jgoodguy]

So the question is, Why wasn't it Southern money? Was this the case earlier, it being Only Northern money, like in the 30's-50's?

I answered that. Southern money went into growing cotton, not capital for lending.

 

[John Winn]

I am no expert on the subject. I do remember from the book "Jefferson Davis American by Cooper that Davis had a"Factor" a business man that supplied Davis with credit and brokered cotton deals. Davis had at least two different antebellum era factors. After the Civil War he sold his plantation to a former slave who couldn't make the mortgage payments so Davis took a loss on the next buyer. I imagine a cotton factor is like a garment industry factor back when we had garment factories.
Why would Northern buyers be a major issue for Southern cotton plantation owners? The plantation owners were free to deal with foreign cotton brokers. Foreign ships could freely dock at Southern ports conveniently located next to Southern cotton plantations.
I would not be surprised if their were foreign cotton brokers or factors.
Leftyhunter

I'll try to add to what @jgoodguy has said. Most southern ports weren't very deep, couldn't accommodate many ocean-going vessels, and definitely didn't have the facilities to deal with international shipping so the bulk had to go to places like New York and Boston, be warehoused, and parceled out by factors to the ships that carried it to Europe. Southern ports mostly dealt with smaller vessels that ran up and down the coastline carrying "stuff" to and from the large northern ports. Also, large banking houses and insurance companies didn't exist in the south and those were necessary for international trade. Dealing directly with foreign buyers was just not practical.

It's the subject of a different thread but in reality the profit from plantation agriculture and it's slave labor was close to equally shared by northerners and southerners before the war. If you've not read it I recommend: Farrow, Anne, Joel Lang, and Jefifer Frank (2005). Complicity: How the North Promoted, Prolonged, and Profited from Slavery. It discusses some of these things. Port depths and facilities are also discussed in: Wise, Stephen R. (1988). Lifeline of the Confederacy: Blockade Running During the Civil War.

 

[leftyhunter]

I'll try to add to what @jgoodguy has said. Most southern ports weren't very deep, couldn't accommodate many ocean-going vessels, and definitely didn't have the facilities to deal with international shipping so the bulk had to go to places like New York and Boston, be warehoused, and parceled out by factors to the ships that carried it to Europe. Southern ports mostly dealt with smaller vessels that ran up and down the coastline carrying "stuff" to and from the large northern ports. Also, large banking houses and insurance companies didn't exist in the south and those were necessary for international trade. Dealing directly with foreign buyers was just not practical.

It's the subject of a different thread but in reality the profit from plantation agriculture and it's slave labor was close to equally shared by northerners and southerners before the war. If you've not read it I recommend: Farrow, Anne, Joel Lang, and Jefifer Frank (2005). Complicity: How the North Promoted, Prolonged, and Profited from Slavery. It discusses some of these things. Port depths and facilities are also discussed in: Wise, Stephen R. (1988). Lifeline of the Confederacy: Blockade Running During the Civil War.

Hi John Winn,
Interesting that out of all the major ports in the South none good accommodate deep draft vessels. Also interesting that although foreign cotton factories where dependent on American cotton their nationalbanks where not able to compete with American banks to finance foreign cotton sales. Also interesting that despite the high profits of exporting cotton the Southern business elite could not develop a bank corporation that could compete with the Northern banks and could be financed by selling shares of foreign stock exchanges.
leftyhunter

 

[John Winn]

Hi John Winn,
Interesting that out of all the major ports in the South none good accommodate deep draft vessels. Also interesting that although foreign cotton factories where dependent on American cotton their nationalbanks where not able to compete with American banks to finance foreign cotton sales. Also interesting that despite the high profits of exporting cotton the Southern business elite could not develop a bank corporation that could compete with the Northern banks and could be financed by selling shares of foreign stock exchanges.
leftyhunter

I agree that it's odd that southern states didn't develop at least a sophisticated banking and insurance industry that could compete with New York but they didn't although there were smaller commercial houses in places like New Orleans, Mobile, Savannah, and Charleston. I suppose they just went with what was easy and already available. It certainly would have been easier to communicate with places like New York than England or France so that's likely a major factor in why southern sellers didn't broker deals directly with foreign agents (but I admit that's somewhat of a guess).

As to the ports, some were deep enough to accommodate deep-sea vessels but were either not developed (e.g. Florida) or had other problems. For instance, Charleston was deep enough in most places but entrance to the harbor was difficult and only two of the four channels could accommodate large vessels. Similar problems plagued Wilmington, Savannah, New Orleans, and Galveston. Those port's successes had a lot more to do with connections to the interior such as rivers and railroads. None had the infrastructure on a scale sufficient to support large-scale foreign trade. So there was some foreign trade out of southern ports, just not much and nothing even close to New York or Boston.

The south just wasn't an industrial society and the infrastructure for major foreign trade simply hadn't been developed much. Running their products up the coast or a river to the large northern ports was, I guess, just easier and cheaper and it worked so that's what they did and that's the sort of trade their ports mostly dealt with. They didn't have much in the way of any industry really and that hurt them big time when the war broke out.

 

[jgoodguy]

The reason is politics. Up north farmers and factories AKA political elites needed roads, school, canals, harbors, banks and other infrastructure to exist and so public and private infrastructure followed.

Down South all the political elites needed was to get cotton to market.

 

[leftyhunter]

I agree that it's odd that southern states didn't develop at least a sophisticated banking and insurance industry that could compete with New York but they didn't although there were smaller commercial houses in places like New Orleans, Mobile, Savannah, and Charleston. I suppose they just went with what was easy and already available. It certainly would have been easier to communicate with places like New York than England or France so that's likely a major factor in why southern sellers didn't broker deals directly with foreign agents (but I admit that's somewhat of a guess).

As to the ports, some were deep enough to accommodate deep-sea vessels but were either not developed (e.g. Florida) or had other problems. For instance, Charleston was deep enough in most places but entrance to the harbor was difficult and only two of the four channels could accommodate large vessels. Similar problems plagued Wilmington, Savannah, New Orleans, and Galveston. Those port's successes had a lot more to do with connections to the interior such as rivers and railroads. None had the infrastructure on a scale sufficient to support large-scale foreign trade. So there was some foreign trade out of southern ports, just not much and nothing even close to New York or Boston.

The south just wasn't an industrial society and the infrastructure for major foreign trade simply hadn't been developed much. Running their products up the coast or a river to the large northern ports was, I guess, just easier and cheaper and it worked so that's what they did and that's the sort of trade their ports mostly dealt with. They didn't have much in the way of any industry really and that hurt them big time when the war broke out.

The reason is politics. Up north farmers and factories AKA political elites needed roads, school, canals, harbors, banks and other infrastructure to exist and so public and private infrastructure followed.

Down South all the political elites needed was to get cotton to market.

Hi John Winn,
Good post. The irony is that on the whole most ( John Bell being a major exception) popular Southern politicians were Democrats and the Democatic Party unlike the Whigs were not in favor of government subsidized transportation projects. Has John Winn indicated about lack of industrial development would prove to be an Achilles heel.
Leftyhunter

 

[jgoodguy]

Hi John Winn,
Good post. The irony is that on the whole most ( John Bell being a major exception) popular Southern politicians were Democrats and the Democatic Party unlike the Whigs were not in favor of government subsidized transportation projects. Has John Winn indicated about lack of industrial development would prove to be an Achilles heel.
Leftyhunter

As info

 

[AndyHall]

Agrarian and extractive economies are always at a disadvantage when dealing with industrial, high-capital economies.

 

[Reb]

Agrarian and extractive economies are always at a disadvantage when dealing with industrial, high-capital economies.

Yes, that is until the economy tumbles, then an agrarian economy is the easiest way to get back on your feet. My family in Middle Tennessee raised mules. After the war, the area was very economically depressed. But with nothing more than man power and a little mule power, they got back on their feet. My grandfather, was still farming with mules in the 1930's. They had tractors but couldn't afford to keep them running during the depression. This is him in about 1929.

 

[jgoodguy]

Agrarian and extractive economies are always at a disadvantage when dealing with industrial, high-capital economies.

However most agrarian and extraction economies accumulate the capital from to move into industrial, high-capital economies. The North did it. The tragedy of the South was that it did not do that Antebellum. The reason was that returns on slave grown cotton were so high that it was immediately more profitable than anything else.

 

[jgoodguy]

Yes, that is until the economy tumbles, then an agrarian economy is the easiest way to get back on your feet. My family in Middle Tennessee raised mules. After the war, the area was very economically depressed. But with nothing more than man power and a little mule power, they got back on their feet. My grandfather, was still farming with mules in the 1930's. They had tractors but couldn't afford to keep them running during the depression. This is him in about 1929.View attachment 111585

I have never heard of that being true on a nation or regional level.

 

[Reb]

I have never heard of that being true on a nation or regional level.

During the fuel crisis in the 1970's there were people who went back to farming on a small scale with mules. I'm talking about one individual family, not a national economy.

 

[Suzanne A]

In the book Masters of the Big House, author William Kaufman Scarborough examines every aspect of the lives of the South's 400 largest slave owners. He discusses their need for financing as dictated initially by the seasonal nature of raising crops, there is a lot of expense before the money comes in once a year at harvest. But beyond that he notes that all but a few of these families were heavily in debt, secured by their slaves as collateral along with their land their land. These families were ruined by the Civil War and their fellow plantation owners who had been sensible enough to avoid or minimize debt acquired quite a bit of cheap land from the others after the War.
Part of the debt problem was the slave/plantation owners' careless sense of entitlement and need or desire to maintain a lavish lifestyle: expensive clothing, homes, horses, carriages, furnishings, summers in Newport and France, Harvard and Princeton educations for boys, finishing schools for girls, etc. With more and more slaves being born all the time, the well seemed bottomless.

And to be realistic , plantation ownership created an inherited aristocracy, one need not be smart or a practical business man to own a plantation, just a son of the right family. Many may have had no sense of where their money was going, of the cost of debt, or of their vulnerability because they carried so much debt.

Then there is the case of Thomas Jefferson, not one of the 400, but a plantation owner who died in overwhelming debt secured by his land and slaves, preventing him from freeing any but Sally Hemmings and their children, an accommodation made for him through the generosity of his creditors. The rest of the collateral was sold at auction. The availability of credit on this scale to this class enabled Jefferson to keep his head in the clouds, fortunately for us.

What I have not seen is any New York financiers who were ruined by the War, but there might have been some of that. However, in general, they financed the Southern planters with cool heads and hedged their bets with other ventures and clients. Many foresaw the threat to slavery and prepared for it while their clients did not. And if interest was high, backing plantation owners did prove to be risky business.

 

[Yankeedave]

Yes, that is until the economy tumbles, then an agrarian economy is the easiest way to get back on your feet. My family in Middle Tennessee raised mules. After the war, the area was very economically depressed. But with nothing more than man power and a little mule power, they got back on their feet. My grandfather, was still farming with mules in the 1930's. They had tractors but couldn't afford to keep them running during the depression. This is him in about 1929.View attachment 111585

And those nearest the land suffer the least in a melt down. They are closer to the land and steps ahead of where others want to be. Guard it well and band together somethin somethin...

 

[James_tiberous]

I'll try to add to what @jgoodguy has said. Most southern ports weren't very deep, couldn't accommodate many ocean-going vessels, and definitely didn't have the facilities to deal with international shipping so the bulk had to go to places like New York and Boston, be warehoused, and parceled out by factors to the ships that carried it to Europe. Southern ports mostly dealt with smaller vessels that ran up and down the coastline carrying "stuff" to and from the large northern ports. Also, large banking houses and insurance companies didn't exist in the south and those were necessary for international trade. Dealing directly with foreign buyers was just not practical.

It's the subject of a different thread but in reality the profit from plantation agriculture and it's slave labor was close to equally shared by northerners and southerners before the war. If you've not read it I recommend: Farrow, Anne, Joel Lang, and Jefifer Frank (2005). Complicity: How the North Promoted, Prolonged, and Profited from Slavery. It discusses some of these things. Port depths and facilities are also discussed in: Wise, Stephen R. (1988). Lifeline of the Confederacy: Blockade Running During the Civil War.

So interesting. The planters that had river transportation facilities dominated the shipping trade, also. They charged to allow their neighbors to ship goods, I believe. Wasn't the "tobacco road" the road to the plantation docks?

 

[John Winn]

So interesting. The planters that had river transportation facilities dominated the shipping trade, also. They charged to allow their neighbors to ship goods, I believe. Wasn't the "tobacco road" the road to the plantation docks?

Not sure - I only know it as the book about sharecroppers and the hit song. Certainly could be.