George Fitzhugh on Laissez-Faire

By Hunter Wallace

The following excerpt comes from John Majewski’s fascinating book, Modernizing a Slave Economy: The Economic Vision of the Confederate Nation:

“Secessionists believed that state-supported agricultural research, government investment in railroads, and interventionist trade policies would strengthen slavery in the long run. Virginia political economist George Fitzhugh approvingly noted the propensity for southern-state action during the antebellum period. Southerners may have preached free-trade, laissez-faire, and “Let Alone” policies, he wrote in the Charleston Mercury in 1856, but in actual practice they supported state activism. “We build roads and canals, endow colleges, aid education, encourage commerce and manufactures, prohibit peddling, and, in a thousand ways, endeavor by interfering with, encouraging and controlling private pursuits, by State Legislation, to enhance State wealth, intelligence, and well being.” Southerners decisively rejected “laissez-faire” when it came to controlling their slaves, Fitzhugh argued, so it was hardly surprising that southerners would reject laissez-faire in other elements of their lives. Fitzhugh was hardly representative, but his observations captured an important element of the southern mindset.”

He continues:

“The secessionist focus on homogeneity of interests and the protection of slavery speaks to how Confederates could support a modern economy without supporting what scholars often label as “modernization.” Modernization theory sees economic growth creating distinct periods or phases of development in which “traditional” beliefs are cast aside in favor of modern notions of rationality, scientific thinking, and political liberalism. In contrast to modernization theory, secessionists saw a modern economy in concrete terms – more factories, more cities, more wealth, more political and military power – in a way that allowed them to reject the dichotomy between modernity and “traditional.” Even as they worked toward a more modern economy, secessionists often touted the conservative elements in their society , including slavery, evangelical religion, and (when convenient) various forms of agrarian republicanism.”

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13 Comments

  1. http://www.uncpress.unc.edu/browse/book_detail?title_id=1585

    What would separate Union and Confederate countries look like if the South had won the Civil War? In fact, this was something that southern secessionists actively debated. Imagining themselves as nation builders, they understood the importance of a plan for the economic structure of the Confederacy.

    The traditional view assumes that Confederate slave-based agrarianism went hand in hand with a natural hostility toward industry and commerce. Turning conventional wisdom on its head, John Majewski’s analysis finds that secessionists strongly believed in industrial development and state-led modernization. They blamed the South’s lack of development on Union policies of discriminatory taxes on southern commerce and unfair subsidies for northern industry.

    Majewski argues that Confederates’ opposition to a strong central government was politically tied to their struggle against northern legislative dominance. Once the Confederacy was formed, those who had advocated states’ rights in the national legislature in order to defend against northern political dominance quickly came to support centralized power and a strong executive for war making and nation building

  2. http://www.independent.org/publications/tir/article.asp?a=796

    The key to the book’s value is its portrayal of secessionists not as a group of free-trade, states’ rights libertarians, but rather as leaders who often had conditional views about free trade and states’ rights. Many, for example, did not want free trade; they wanted lower tariff rates in order to build Southern industry. To make matters even worse, some even wanted the tariff revenues to pay for publicworks projects, such as railroads. They did support states’ rights, but they also wanted a fugitive slave law in order to have the federal government capture runaway slaves.

    The South’s ideology was therefore much more Hamiltonian, as opposed to Jeffersonian, than I had previously thought. Thomas Jefferson himself promoted building a state university, made the Louisiana Purchase, and imposed a comprehensive embargo on the economy. The secessionists that Majewski focuses on would have cheered all of these nonlibertarian actions. He examines select secessionist leaders from South Carolina and Virginia. This sample may be biased because these two states supposedly had much to gain in an independent Confederacy. Virginia was poised to become the Confederacy’s industrial base, and Charleston, South Carolina, aspired to become the leading port for European trade.

    How strong was this Hamiltonian-secessionist view? Its proponents probably represented a strong minority. The best evidence in support of Majewski’s perspective is that these Hamiltonian secessionists succeeded in getting their way politically until 1865.

  3. Here’s the $64 question(s). Why should there have been a debate about how to organize the Southern economy? What was there to prevent private investment from industrializing the South?

    • I’m sure it had something to do with the North’s historical experience. In that case, high tariffs after the War of 1812 made British manufactured goods more expensive in the American market. The high tariffs were part of a conscious decision by policymakers to foster industrialization in the United States.

      Like the American trade representatives who explained to the Japanese after WW2 that their comparative advantage was in seafood, Adam Smith had argued that America’s comparative advantage was in agriculture. 19th century Americans rejected the advice of the leading European economists like Smith, Ricardo and Say.

  4. Were they fostering American industrialization or were the tariffs to benefit private interests? And what comparative advantages did GB have over the US when it came to manufactured good?

    • Absolutely.

      1.) That’s why the US developed a strong manufacturing industry and eclipsed Great Britain as the world’s leading industrialized nation in the late 19th century. After defeating the Confederacy, of course.

      2.) During the colonial era, Britain had banned manufacturing in the American colonies and the Navigation Acts had created the British monopoly in shipping on American trade. The idea was to firmly tie the economy of the colonies to the metropole.

      3.) By the 19th century, British manufactured goods were cheaper than their American counterparts due to overwhelming state intervention in the British economy to foster industrialization and shipping.

  5. 1) Did the US (i.e. The FedGov) develop a strong manufacturing industry or was it private investment?

    2) I don’t doubt that the British empire banned manufacturing in the colonies. But this should also negate that Adam Smith (died 1790) insisted that America’s only comparative advantage was in agriculture. He may have insisted that the US had a comparative advantage in agriculture (manufacturing was prohibited in the US for most of his life) but agriculture isn’t the only comparative advantage America had. The same can be said of post war Japan. They have a comparative advantage in seafood but it isn’t their only advantage. A manufacturing plant can be constructed just about anywhere. What’s needed is land, fuel, and a generous supply of water. What would put Japan at a disadvantage is the lack of fuel and raw materials and some fuels (excluding electricity). The US always had land, water, fuel, and raw materials. Therefore, the US has always been well suited for manufacturing.

    3. What types of state interventions made British manufacturerd goods cheaper? Were there direct subsidies or cheap financing for capital investment?

  6. 1.) Oddly enough, it was Jefferson who started the ball rolling with the Embargo Act of 1807 and Madison who kept the North’s economy moving in that direction with the War of 1812. By the Monroe administration, American policymakers had come to appreciate the value of a protective tariff on British manufactured goods.

    No, it wasn’t merely private investment. The state deliberately created trade barriers to foster industrialization in the United States. It was a case of “big government” picking winners and losers.

    2.) Neither the US or Japan followed the laissez-faire, free-market, free-trade doctrine of the classical liberal economists – Smith, Ricardo, Jean-Baptiste Say – which was gaining ground in Britain at the time and which triumphed there in the 1840s starting with the repeal of the Corn Laws and protection of West Indian sugar.

    If Americans had followed that model, our history would have been very different. Then as now, lots of nations concluded it wasn’t in their interest to play by the rules of the free-market system.

    3.) Specifically, the Royal Navy and the Navigation Acts which built up Britain’s foreign trade, centuries of mercantilism dating back to Henry VII, and colonialism all over the world. Just as the American colonies were prevented from developing manufacturing industries or directly trading with Britain’s rivals, India’s superior textile industry was destroyed and the country was made into a captive market for British exports.

    4.) Adam Smith was arguing against the system that led to the Industrial Revolution in Britain and which had made his country the greatest power in the world at the time. Finally, Smith made those arguments about free-trade after the US had won its independence from Britain.

  7. No, it wasn’t merely private investment. The state deliberately created trade barriers to foster industrialization in the United States. It was a case of “big government” picking winners and losers.

    And what objective means are there for the government to pick winners and losers? I can almost assure you that it isn’t solely on merit. Politics plays a huge role. And the tariffs, which are taxes on consumers, were not enacted to benefit the good of the country (when has anyone and anywhere enacted a law that’s to serve the common good?) but to benefit private interest.

    2 and 3 are examples of government using its muscle to benefit private interests. The British Empire put a boot on the neck of their colonies to enrich private interests. In Major General Smedley Butler’s essay War is a Racket he explained how he was the muscle for American capitalist (see below). The history of the US and the South isn’t about the failure of libertarianism and Laissez-Faire. It’s about perpetual competition for political power. The Holy Founding Fathers of America were not motivated by altruism when they declared independence from the British Empire. They were largely motivated by their own personal interests. The same can be said of the South. They would have gladly had a federal system that they could control. For the question of whether modernization/industrialization of the South could exist alongside the plantation system, was the concern really about the political impacts? There is no reason why a cotton plantation and a garment factory cannot coexist. In fact, it would make a lot of sense to have raw materials sourced in the South to be used for making finished products in the South. There is no logical reason why a factory built in the North could not also be built in the South. And because of the slavery system, there should have been adequate labor in the South to run a factory. Were plantation owner’s major concern about their political influence in the South being diminished by the success of owners of industrial capital?

    • 1.) Among other tools, there were tariffs, state subsidies, internal improvements and land lotteries. The plan was to fund the government and spur industrialization by taxing foreign imports.

      2.) Yes, I know that tariffs are taxes on consumers, but American policymakers thought after the American Revolution and especially the War of 1812 that maintaining America’s independence by fostering domestic industry and long term prosperity through economic diversification was a greater priority than cheap consumer goods.

      3.) Sure it is.

      The Confederacy was too weak to sustain its independence and that was due to the nature of the Southern economy in the antebellum era. The simple formula of investing in ever more land and slaves lead to an economy that was too dependent on foreign trade and ultimately too dependent on foreign intervention to secure its independence.

      4.) There were plenty of textile mills in the Jim Crow South. New England’s textile industry eventually migrated to the Carolina and Georgia Piedmont. The demise of slavery and the lessons learned in the war broke the resistance to Southern industrialization.

      5.) For cultural, political and economic reasons, planters were typically suspicious, if not hostile, to industrialization and urbanization. This was not true in all cases. Many were pro-business Whigs or grew sugarcane. In particular, Southern Nationalists as a whole were more inclined to support Southern cultural and economic independence.

  8. Government is composed of the leading men in society. These naturally use it to secure their interests. This works well as long as they balance the interests of all society with their own. If they favor themselves, conflict arises.

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