252 / PAEADOXES or FORCED LABOR

this subregion enjoyed an even higher level of per capita
income than the Northeast. Approximately 30 percent of
the annual growth in per capita income was due to the redis-
 n among subregions and the bala'rT<F’Eo

e growth of per capita income within each of the sub-
regions. '

One scholar has recently argued that only the growth
within subregions is meaningful, that the proportion of the
growth rate which is due to the redistribution of the
population from east to west is a statistical illusion that
ought to be exorcised. The people within each subregion, he
states, “could hardly see the realities, advantages, or even
any meaning in such economic development.”

This viewpoint reflects a fundamental misconception of
the process of economic growth. The various industries or
subregions of a nation never grow at even rates. Shifting
demand for iron, for example, led the U.S. iron industry to
grow much more rapidly than cotton textiles between 1842
and 1848, but much more slowly than textiles between 1848
and 1858. Technological progress also proceeds at uneven
rates among industries and regions. The capacity of an econ-
omy to grow depends not only on its luck in the marketplace,
and its luck or creativity with respect to technological break-
throughs, but on the Capacity of the economy to respond to
such developments. The ability of an economy to shift labor
and other resources from one sector or subregion to another
is always a major determinant of its growth. This was true
in the North as well as the South. Roughly 16 percent of the
northern growth rate between 1840 and 1860 was due to
the shift of labor and other resources from agriculture to
manufacturing. In other words, if we consider only growth
rates within sectors, the rate of growth of northern per
capita income between 1840 and 1860 would have been not
1. 3 percent but less than 1.1 percent.

To argue that the people within subregions "could hardly
see the realities” of growth which could be obtained through

"1

 

ECONOMIC caowrn IN THE sourn, 1840—1860 / 253

shifts between subregions is to misunderstand completely
the meaning of figure 1 1, which showed the dramatic shift
of the slave population from a concentration along the
Chesapeake Bay in 1790 to a concentration in the cotton
belt in 1860. It is precisely because Southerners could per-
ceive the benefits to be achieved from interregional migra-
tion, because they could perceive the “meaning in such
economic development,” that so many of them moved. The
large share of the southern growth rate due to interregional
migration underscores the point made at the end of chapter
2, the extreme flexibility of the slave economy and the ease
with which it "adjusted to the rapidly changing labor re-
quirements of various southern firms and localities.”
Equally fallacious are the arguments that the skewed
(unequal) income distribution of the South made its
markets too small to support a large-scale, modern manu-
facturing industry, and reduced the rate of investment in
physical capital by reducing savings. The assumption that
the inequality of the southern income distribution lowered
its aggregate savings rate is probably false. This assumption
is based on the mistaken belief that large consumption ex-
penditures by the rich necessarily imply low savings. In the
fairly typical year of 1925, the per capita consumption
of the top one percent of income earners in the United States
was about $4,800, while that of the remaining 99 percent
was under $550. Certainly this is a pronounced difference,
and given normal human reactions this could (and did)
lead to discussions of wasteful expenditures by the rich. Yet
in 1925 the top one percent had a savings-income ratio of
42.9 percent, and accounted for over 50 percent of esti-
mated personal savings. This suggests the possibility that
the effects of large consumption expenditures on southern
capital formation may be overstated. Whatever conspicuous
consumption did exist was probably carried on mainly by
planters who were wealthy by the standards of the times.
Their conspicuous consumption probably absorbed only part