A House Dividing: Economic Development in Pennsylvania and Virginia before the Civil War (Studies in Economic History and Policy)

Studies in Economic History and Policy

by John D. Majewski

Professor Majewski compares Virginia and Pennsylvania to explain how slavery undermined the development of the southern economy. In the beginning of the nineteenth century, residents in each state financed transportation improvements to raise land values and spur commercial growth. However, by the 1830s, Philadelphia capitalists began financing Pennsylvania's railroad network, building integrated systems that reached the Midwest. Virginia's railroads remained a collection of lines without western connections. The lack of a major city that could provide capital and traffic for large-scale railroads was the weakness of Virginia's slave economy.

Paperback

First published June 19, 2000

About the author

John Majewski is professor of history at the University of California, Santa Barbara.

Reviews

[Frank Stein · Rating 4 out of 5]

This is an original and interesting study that compares economic development in Albemarle County in Virginia (containing Charlottesville) and Cumberland County in Pennsylvania (containing Carlisle). The author's main point is that slavery in Virginia inhibited free population densities, which in turn inhibited the growth of a dense consumer market, which inhibited the growth of large urban areas (Philadelphia, PA's biggest city, had about 550,000 people in 1860, while Richmond had only about 40,000), which consequently inhibited investment in "development corporations" like canals, turnpikes, and railroads. This last part is his true original contribution.

He contrasts his argument with Eugene Genovese's, who argued that slavery (and its corollary, a scattered free population) merely inhibited "economies of scale" in manufacturing. The author points out that economies of scale were minimal in antebellum manufacturing (most "factories" had only a few dozen people and had little division of labor), and that free society's main advantage was its "economies of agglomeration" in large cities, which were created by the demand of a dense consumer market. Not only did these economies allow skilled workers and capitalists to thrive in a web of other successful firms, it also allowed increased collective investment in development corporations.

The book shows that early canal and turnpike companies almost never made profits and thus their shares were bought mainly by local landowners who used social pressure (and thus "social capital") to capture the positive "externalities" of these developments for farmers and artisans, and thus overcome the "free rider" problem. Large urban areas created more of this social capital and thus more investment, and by the railroad era in Pennsylvania Philadelphians bought the majority of the state's railroad shares, even when they were for distant projects, and thus furthered the city's importance as a central commercial emporium. By contrast, Virginia, despite its Jacksonian leanings, used the state government to invest in these development companies and to overcome its inherent problems with low population density (about 60% of development company funds came from the state government). This state involvement created the inevitable legislative logrolling and thus several underfunded, competing, and poorly designed lines. Although Virginia actually had more railroad miles per capita than Pennsylvania, its railroads hardly ever issued a dividend or even received enough revenue to pay off their debt. The state thus tried to overcome its social capital disadvantages with government capital, and failed.

Although I'm not sure all of the evidence in the book supports the author's argument, he makes a strong and interesting case that although many have studied the manufacturing advantages of urban areas, the investment benefits of these cities have been largely ignored. He also shows why, despite all the wealth generated by slavery, it ultimately limited the South's growth and development. The horrors of Jim Crow and its aftermath, with its continued inhibition on the growth and prosperity of the black population, surely had a similar effect on the South in the next century.