After President Andrew Johnson left the White House in 1869 the Gilded Age had a good head of steam. Capitalistic moguls became role models and nearly everywhere, outside the South, Americans focused optimistically on the pursuit of wealth. The possibilities seemed unprecedented. As always, those in power used the government to promote their own interest with little regard for others left behind. It was less a deliberate effort to penalize others than to promote one’s own interest. Nonetheless, some policies that prompted prosperity across the North were decidedly harmful to Southerners, both black and white. A couple of examples are provided below.
Almost from its beginning in 1887 the Interstate Commerce Commission (ICC) sanctioned discriminatory regional railroad rates. Even before the ICC was formed, Southern railroads charged more per mile than did Northern ones. The disparities were officially acknowledged at the beginning of the twentieth century but were excused on the presumption of higher Southern operating cost due to lower population density and seasonal shipment patterns.
No careful study was made until 1939 when rates for the same service in the South were found to be 39% higher than in the North while those in the Southwestern region (Arkansas, Louisiana, Oklahoma, Texas, and part of New Mexico) were 75% higher. The differentials were so discriminatory that remote Northern manufactures could ship finished goods into the South at lower cost than Southern makers of the same items could distribute them within their own region. (Three years later Carnegie demonstrated that racism was not limited to Southerners when he objected to black suffrage by saying that blacks “were steeped in ignorance of political responsibilities to a degree impossible for northern people to imagine.” [Ezell, 182])
My Civil War Books
Lee’s Lost Dispatch and Other Civil War Controversies
Trading With the Enemy
Co. Aytch: Illustrated and Annotated
To be released next month and available for pre-order: The Confederacy at Flood Tide
Due to a shortage of capital in the South for many years after the Civil War, Northern railroads steadily increased their ownership of Southern operators. They quickly began using the rate differentials to block Southern competition to principal Northern shippers such as steel producers and the makers of other manufactured goods. When asked in 1890 why shipping rates into the North for Southern iron products was higher, one Pennsylvania Railroad agent replied, “It was done at the request of the Pennsylvania iron men.” Yet due to its wealth and industrial concentration, the North was a market that all manufactures needed to access if they were to compete on a national scale. No producer could achieve economical high-volume production costs without access to Northern markets where most of the buying power was concentrated. As a means of impeding competition from Southern and Western manufactures the discriminatory rates were as effective as protective tariffs, which were Constitutionally prohibited between states.
In 1889 when Andrew Carnegie toured the emerging Southern steel industry centered in Birmingham, Alabama he declared, “the South is Pennsylvania’s most formidable industrial enemy.” About ten years later Carnegie’s mills were merged into, and became the largest component of, Pittsburg-based U. S. Steel. Six years later U. S. Steel purchased the biggest Southern steel mills.
It soon imposed discriminatory pricing on Southern production. Thereafter, steel from the company’s Alabama mills included an incremental mark-up, termed the “Birmingham Differential,” of $3 per ton over the Pittsburg quote. To further penalize Alabama production, buyers of Birmingham steel were required to pay freight from Birmingham plus a phantom charge as if the shipments originated in Pittsburg. After Woodrow Wilson became President the Federal Trade Commission (FTC) investigated the matter and concluded that Birmingham’s steel production costs were the lowest in the country and 26% below those of Pittsburg. Yet U. S. Steel continued to require a $3 per ton “Birmingham Differential” on Alabama steel, which was raised to $5 after 1920.
The chief exceptions to higher Southern freight charges were commodity rates for raw materials. Cotton, sugar, iron ore, coal, and petroleum were shipped out of the South at lower rates, but the prime beneficiaries were the Northern manufactures that transformed the raw materials into finished goods. (Based in New York, American Sugar controlled 98% of the refined market and sold under the still-familiar Domino brand.) They perpetuated the South’s dependence upon imports, or Northern tariff-protected manufacturers, for finished goods. While cotton and cotton-seed oil moved out of the South at low rates, those rates increased sharply in proportion to the fineness of the textiles or food products produced from the raw materials. The effect was to suppress Southern industrial development and consign the region to the status of an internal colony.
The South was also penalized by discriminatory banking regulations as well as protective tariffs. But those are other stories, and good ones, for another day.
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