Southern History Month 2019: Central Appalachia’s Extractive Economy

Editor’s Note: As I have explained, I have studied the history of the Southern economy for years.

The following excerpts about the rise of company towns in the New South come from The New Encyclopedia of Southern Culture: Agriculture & Industry:

“Most of the Appalachian coal mining around the turn of the century could be carried on as surface mining or by tunneling in short-term operations. When the mine played out, equipment, and often the buildings of a company town, were loaded on flat cars and moved to a new site. Appalachian coal mining thus tended to be a transient industry, worked by transients who followed the job from place to place, many of whom had themselves been displaced by timber- or coal-company land purchases. The emergence of large-scale timbering or coal mining displaced those persons who had engaged in the same industries on a small scale, either by squeezing them out of the market of by denying them access to natural resources they had previously exploited for their own profit, frequently as a complement to farming or some other activity. With no other source of income, these persons were either forced into subsistence farming or entered the labor market as transients. …

That most of the manufacturing centers in Appalachia, as well as the short-lived timber towns and almost all the coal towns, were company owned and controlled exacerbated this situation by making impossible the local mediation of labor and social conflict that occurred in other urban areas during the progressive era.”

Central Appalachia after 1900 is a classic example of the magic of the free-market creating an extractive economy that impoverishes and underdevelops an area over time.

It is easy to see how this happened: after the war, the aforementioned hucksters bought up the mineral and timber rights in Central Appalachia at firesale prices, which were then sold to Northern corporations, drove the people off the land and into the company towns, denied them access to their own natural resources, and exploited them as a proletariat as they moved from site to site, never investing much in any one area as the profits flowed northeast out of the region to Northern investors.

The company owned the rights to the land, the housing, and the company stores, which were the only locations where workers could buy goods with their wages paid in the company scrip. The schools, churches, police, judges, local government and state officials were all in the pocket of corporations. Even US Senate seats in Kentucky and West Virginia were bought and sold as commodities. Central Appalachia was a lolbertarian paradise of “free-enterprise” and capitalists practicing the “virtue” of avarice. In reality, Galt’s Gulch was somewhere in the vicinity of Blair Mountain.

The political and economic elite created by the free-market capitalist system – through monopoly control of the land, timber, coal, and private railroads – used their power to maintain “a good bidness climate.” By that they meant wrecking the environment, corrupting the political system, keeping out the unions, blocking worker safety regulations, bringing in blacks and immigrants to keep wages as low as possible and profits for Northern investors as high as possible to maximize extraction.

They blocked economic diversification, kept taxes low, and starved the region of the investment in infrastructure and education that generates long term economic growth. Thus, when new mining technology like strip mining reduced the need for a large workforce in the coal mines, the people who were left there had little choice but to migrate en masse to the Great Lakes region. Instead of using their natural resources to develop their own economy, the extractive economy created by Yankee imperialism and free-market capitalism used the profits to develop Ohio, Pennsylvania, New York, etc.

“Turn-of-the-century tendencies toward vertical consolidation within industries, exemplified by the establishment of the Standard Oil Company, were extended horizontally across industries in Appalachia, yielding a pattern in which single corporations routinely controlled several industries at once – land development, timber and coal operations, transportation and marketing, and frequently all services needed to support the several sectors of their economic activity as well as those needed by their workers. Finally, although industrial development elsewhere in the nation generally has enriched all strata of the local economies by generating markets for additional goods and services, industrial development in Appalachia has often enriched only the local elites and has left the local economies highly vulnerable to the vagaries of market conditions. Historian David L. Carleton concludes that, today, areas of Appalachia remain “economic basket cases,” still dealing with problems left over from their earlier development.”

There’s a lot more in this vein left to explore, but you get the picture: the idea that the free-market was the ideal development model for Central Appalachia is laughable, and one that is not taken seriously by anyone but conservatives and lolbertarians. In sucking the region dry of its economic lifeblood, the free-market created enduring poverty and underdevelopment in Central Appalachia.

I’ve repeatedly used the term “Central Appalachia” because the old coal mining region is distinctly poor in 2019. The rest of Appalachia, which wasn’t as burdened by extractive economic institutions, is far more developed. Huntsville, Asheville and Knoxville, for example, are quite wealthy. It is counterintuitive that West Virginia and eastern Kentucky should be so poor in light of their enormous mineral wealth, but when you understand how free-market capitalism wrecked the area after the War Between the States and retarded its economic development over time it makes sense.

Pittsburgh, which is the regional metropole and which once lorded it over Southern industry, was itself eventually wrecked by free-trade. That’s a story for another day though.

Note: In case this needs to be pointed out, the same people who settled Central Appalachia settled the entire region. Many of those who lived there later migrated to the Great Lakes region and the Sunbelt’s largest cities. Also, the video below illustrates the children who used to work in the coalfields in Central Appalachia before government intervention put an end to the practice.