(Bloomberg Opinion) -- The 400th anniversary of the arrival of the first African slaves in what was to become America has reopened an old debate: How important was slavery to the rise of the U.S. as an economic power?

One school of thought argues that slavery in general, and cotton in particular, was the driving force behind the development of America’s distinctive brand of capitalism. (The New York Times’s ambitious 1619 Project contains a good encapsulation of this argument.) But not only has this theory come under fire for inaccuracies, its central narrative is incorrect.

The reality is that cotton played a relatively small role in the long-term growth of the U.S. economy. The economics of slavery were probably detrimental to the rise of U.S. manufacturing and almost certainly toxic to the economy of the South. In short: The U.S. succeeded in spite of slavery, not because of it.

That said, there is no doubt that slavery made many Southern plantation owners rich and propelled the U.S. cotton industry. In 1795, the year after the invention of the cotton gin, the U.S. produced 8 million pounds of cotton. Widespread adoption of the gin raised that to 40 million pounds by 1801. From there, production increases came from the reallocation of slaves to cotton plantations; production surpassed 315 million pounds in 1826 and reached 2.24 billion by 1860.

The financialization of slave labor was key. Demand for slaves led to an increase in their price, which in turn allowed plantation owners to obtain cash-out mortgages to expand production. In just a quarter of a century, Southern agriculture was transformed into a nearly single-crop production. This rapid shift was not possible anywhere else in the world.

Nevertheless, the total effect of this boom on the U.S. economy was modest. In 1860, on the eve of the Civil War, cotton production represented just 5% of the U.S. economy. Crucially, relatively little — just 13% in 1830 — was used in the domestic textile industry. Virtually all the rest was exported to Great Britain.

These cotton exports skewed the terms of international trade, against the North and in favor of the South and Great Britain. Today, President Donald Trump rails about how the low value of the Chinese yuan puts U.S. manufacturing at a competitive disadvantage. In the 1800s, under the gold standard, a similar mechanism was at work. In exchange for cotton, Great Britain sent shipments of gold to the U.S. These shipments drained Great Britain of gold — and hence money. This transfer of cash pushed down cotton prices in Great Britain and up in the U.S.

The U.S. attempted to remedy the situation in 1828 by imposing tariffs on cotton. Just as today, that simply induced further imbalances in currency markets and had only a minor impact on the overall trade balance. By 1860, domestic use of cotton had increased to only 20% of total production, and U.S. prices were so inflated that a bale of cotton in New York cost more in real terms than a bale in Liverpool. Far from supporting U.S. industry, cotton cultivation was undermining it, a fact not lost on Northern opponents of slavery.

Still, it might be argued that the growth of a textile industry — in either the U.S. or Great Britain — would not have been possible without mass quantities of U.S. cotton. Unfortunately, this does not appear to be true.

After the onset of the U.S. Civil War, British imports of U.S. cotton collapsed, from 1.2 billion pounds in 1860 to just 28 million in 1862. By 1864, however, the shortage had been largely erased by an enormous increase in imports from India. Even more telling, after the Civil War and the loss of slave labor, U.S. production rapidly recovered. By 1871 the U.S. had exceeded its 1859 levels of cotton exports and was just short of its 1860 record, despite competition from India.

As Stanford economic historian Gavin Wright argues, slavery was a hindrance to U.S. cotton production. Prior to the Revolutionary War the price of slaves in the U.S. had been declining as the arrival of new slaves steadily increased the supply. After 1807, when the slave trade was officially banned, slave prices began their famously rapid climb.

Abundant land and a limited supply of slaves discouraged the South from investing in infrastructure. Planters would locate on the banks of a river, work the soil until it was depleted and then move — or in many cases simply sell their ever-more-valuable slaves — to a new spot down the river. This slash-and-burn economy, dominated by a rent-seeking elite, trapped the South in poverty.

Just before independence, the per capita GDP of the South, adjusted for inflation, was $3,100 per year — compared with just $1,832 in New England. Over the next 60 years Southern per capita GDP actually declined, to $2,521. British demand for cotton helped it to recover to $4,000 per person in 1860, but by then the comparable figure for New England was $5,337.

Slave labor was no match for canals, railroads, steel mills and shipyards. Slavery — and the parochial rent-seeking culture it promoted — inhibited the growth of capitalism in the South. Ultimately, it was Northern industrial might that ended that peculiar institution in the U.S. once and for all.

To contact the author of this story: Karl W. Smith at ksmith602@bloomberg.net

To contact the editor responsible for this story: Michael Newman at mnewman43@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Karl W. Smith is a former assistant professor of economics at the University of North Carolina's school of government and founder of the blog Modeled Behavior.

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