Inputs and institutions as conservative elements

Abstract

Ludwig von Mises argued that capital goods were “conservative elements” that constrain future production decisions. Similarly, social capital and institutions also constrain future production decisions. These insights are applied to the institutional transformation of the post-Reconstruction American South. It is argued that the structure of social capital that developed in the South was inappropriate to the formal institutions that emerged as a result of the Civil War and Reconstruction. The tensions between institutions and social capital are examined in the context of racist lynching.

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Fig. 1
Fig. 2

Notes

  1. 1.

    Curry (1896a).

  2. 2.

    Von Mises (1996) is a revised edition of Human Action, the first edition of which was published in 1949.

  3. 3.

    See Fogel (1989:60–113) and Margo (1995) for discussions of Southern economic development.

  4. 4.

    This is not to say that there were no rebellions and slave uprisings. While these did occur, a structure of social capital arose in the South that was amenable to the maintenance of the racial hierarchy. Alston and Ferrie (1999) discuss the revival of paternalism during the late nineteenth and early twentieth centuries. The structure of social capital that developed under slavery is illustrated in the descriptive words of Thomas Jefferson in his Notes on Virginia and quoted in Grimsted (1998: 85):

    The whole commerce between master and slave is a perpetual exercise of the most boisterous passions, the most unremitting despotism on the one part, and degrading submissions on the other. Our children seen this and learn to imitate it….The parent storms, the child looks on, catches the lineaments of wrath, puts on the same airs in the circle of smaller slaves, gives a loose to his worst of passions, and thus nursed, educated, and daily exercised in tyranny, cannot but be stamped by it with odious peculiarities.

  5. 5.

    Social capital is like human capital in that it can be depreciated, however. People can forget things; they can also allow relationships to deteriorate. Putnam (2000) offers one of the most comprehensive recent treatments of social capital, including a broad discussion of differences in social capital across regions. Cf. also Granovetter (1973) on “the strength of weak ties,” Boettke et al. (2005) on “institutional stickiness,” and Coyne (2005) on the institutional factors creating successful post-war transitions.

  6. 6.

    Wright (1976: 303) contends that the high productivity we observed during the late antebellum era was a product not of any inherent efficiencies in the slave system but of “the extraordinary growth of world demand for cotton between 1820 and 1860” and particularly a spectacular year (1859–1860) for cotton growers that happened to show up in official census statistics.

  7. 7.

    Public and private resources were devoted to maintaining segregation—public resources in the form of segregated public places, enforced segregation of schools, and segregated public services, and private resources in the form of informal lynch mobs, the Ku Klux Klan, and whitecaps.

  8. 8.

    North (2005) discusses how people arrive at correct or incorrect mental models of the social environment, arguing that this process by which mental models change is a key element of the economic, social, and institutional change. Institutionalized segregation reinforced incorrect mental models: black slaves were barred de jure from receiving formal education, and many demagogues took the resulting legacy of illiteracy as evidence that blacks had little to gain from education.

  9. 9.

    Wright (1976) argues that part of Southern poverty could be attributed to a weakening cotton market. Weakening cotton markets should not by themselves reduce Southern productivity. As cotton market conditions weakened, Southerners buying and selling in well-developed markets should have moved out of cotton (or out of agriculture) and into other pursuits. Figures 1 and 2 plot the number of lynchings over time as well as the geographic distribution.

  10. 10.

    See Alston (1986) for a discussion and empirical study of Southern “race etiquette.” Alston argues that the practice of “race etiquette” was constrained by blacks’ opportunities.

  11. 11.

    Wiener’s (1978) study of change in Alabama gives illuminating examples of Klan activity that hampered markets. The most comprehensive study of lynching is Tolnay and Beck (1995). Ransom and Sutch (1977) devote considerable space to credit constraints in the South.

  12. 12.

    Some argue that the murder of James Byrd and Matthew Shepard in 1998 were lynchings. A Google search for [“James Byrd” lynching] turns up 13,200 references, and a Google search for [“Matthew Shepard” lynching] turns up 961 references.

  13. 13.

    “The lynching era” broadly defined covers roughly the period of prolonged Southern stagnation. While there were occasional lynchings in the 1950s and 1960s, lynching largely disappeared at the same time that the Southern economy began its rapid convergence to income levels consistent with those in the rest of the country. The Historical American Lynching (HAL) Data Collection Project contains an inventory of Southern lynchings drawn from Tolnay and Beck (1995). The HAL researchers are attempting to compile an inventory of lynching victims outside the South and from before the “official” data begin in 1882. Grimsted (1998) argues that antebellum lynchings were generally aimed at intimidating abolitionists.

  14. 14.

    The states are the “Deep South” states of Alabama, Georgia, Louisiana, Mississippi, and South Carolina as well as the “Border South” states of Arkansas, Florida, Kentucky, North Carolina, and Tennessee.

  15. 15.

    Work in progress examines the role of white lynchings, as well.

  16. 16.

    These examples are drawn from Finnegan (1998), Ginzburg (1962, 1988), Markovitz (2004), and Tolnay and Beck (1995).

  17. 17.

    See, for example, the images compiled by Allen et al. (2003).

  18. 18.

    As quoted by the Springfield Weekly Republican and reproduced in Ginzburg (1962:17–18).

  19. 19.

    Kissimmee Valley Gazette, April 28, 1899, reproduced in Ginzburg (1962:10–11). Litwack (2000) argues that Holt had killed his employer in self-defense during a dispute over wages. He also suggests that the alleged victim later confessed to fabricating the accusation.

  20. 20.

    Kissimmee Valley Gazette, April 28, 1899., reported in Ginzburg (1962:10–11).

  21. 21.

    Reproductions of the Springfield Weekly Republican’s coverage of the Holt and Strickland lynchings are contained and discussed in Ginzburg (1962:12–21). Coverage from the Kissimmee Valley (FL) Gazette of April 28, 1899 is reproduced in Ginzburg (1962:10–11).

  22. 22.

    The following discussions of the McGowan and Crawford lynchings are drawn from Finnegan (1998:244–252).

  23. 23.

    Finnegan (1998:244) notes that the McGowan lynching precipitated other violence, specifically separate beatings administered to a black man and a black woman.

  24. 24.

    Finnegan (1998:244–252) discusses the Crawford case in greater detail. The Crawford lynching is also summarized in a story in the June 30, 2005 issue of Northwestern University’s Daily Northwestern on Crawford’s great-great-grandaughter Doria Johnson, who attended the Senate’s 2005 voice-vote resolution to apologize for not making lynching a federal crime.

  25. 25.

    Finnegan (1998:247) notes that “(s)ome of his sons attended college, and all of the children had farms in close proximity to their father.” Part of the animosity between Crawford and the white community stemmed from a 1905 incident involving Crawford’s sons in which a white man was wounded (Finnegan 1998:247).

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Acknowledgements

Peter J. Boettke, Emily Chamlee-Wright, Steven Horwitz, Jeremy Meiners, Douglass C. North, John V.C. Nye, Tara M. Sinclair, Virgil Storr, Marc Treutler, several anonymous referees, and seminar participants at Washington University in Saint Louis and the 2005 meetings of the Southern Economic Association in Washington, DC, USA, provided extensive and useful comments. Linda Gibson proofread the manuscript and made numerous helpful suggestions. Financial support from the Center for New Institutional Social Sciences, the Institute for Humane Studies, the Ludwig von Mises Institute, and the Society for the Development of Austrian Economics is gratefully acknowledged.

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Correspondence to Art Carden.

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This essay is based on chapter 3 of my doctoral dissertation.

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Carden, A. Inputs and institutions as conservative elements. Rev Austrian Econ 22, 1–19 (2009). https://doi.org/10.1007/s11138-008-0048-2

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Keywords

  • US South
  • Racism
  • Lynching
  • Social capital
  • Institutions

JEL codes

  • B53
  • N11
  • N91
  • O18