Replies

Tariffs were taxes on imports. There were about 20 million people in the North in 1860 and about 8 million free people in the South, most of whom weren't wealthy planters. Doesn't it stand to reason that Northerners bought more imported wine, spices, coffee, tea, fabric and other products than Southerners? Isn't it likely that Northern manufacturers - there were more of them than Southern planters - bought more equipment from abroad than Southern planters. Free trade or protectionist convictions didn't matter when it was a matter of the bottom line. So obviously, Northerners paid more in tariffs. It doesn't matter that Southern cotton accounted for a large part of US exports. Slaveowning planters took the money they got and used it to buy products and those who made and sold those products could use the money they got to buy imports which were what the government taxed.

That's the short explanation, but I had time to write more last night:

Southern planters got money from exporting cotton. They could use that money to buy products from England or France, but at least as often they used to buy the things they wanted or needed from Northern merchants who could use the money earned to buy the things they wanted or needed, often from abroad. The people who bought the imported items paid the tariff in higher costs (or the importer had to swallow the cost if the goods wouldn't sell). It wasn't exporters who paid the tariff - or rather, they only paid the tariff in proportion to what they imported, not in proportion to what they exported.

Or the planters' money was invested in banks and corporations, mostly Northern, to provide them interest. Most of the time the foreign currency remained in banks in the cities, domestic or foreign, and never made its way to the plantations. It would be foolish to think that the smaller number of cotton planters bought enough imported goods to outbalance the much larger population of Northern merchants, manufacturers and consumers. But you know all that by now if you've been paying attention.

Let's say that you are the king of Saudi Arabia, or maybe a sultan or emir of some Persian Gulf state. You think that the oil that you personally own is the basis of all the prosperity of your state. If nobody grows food or makes the tools they use or the cars they drive - if all that has to be imported - you might well be right. Colonial plantation societies tend to follow the same model: they produce oil or sugar or cotton or rubber or coffee, ship it to the colonial power and use the money they get to buy the imported goods that they need.

The US in the 1850s was far from following that model. We grew our own food. We made things, big and small, and we could export them to earn money abroad. We weren't dependent on cotton or some other export crop. We weren't just some colony exporting products to the mother country and importing its finished goods. We could survive a dip in cotton prices, because we produced other things.

Now let's say that as king, or sultan or emir you impose income and import taxes on your people. How do you get any money from those taxes? The money is all yours, right? Well, you have to pay people to drill the oil, barrel it, transport it to your harbor, ship it overseas, and deal with all the financial and insurance and legal aspects. You pay those people and they have income, which you can tax and they can use to buy imports, which you can also tax.

Is all the money that makes its way into your pockets in taxes, just coming out of your own pocket from the money you earn from exporting oil? I don't think so. There's something called value added. I think it goes like this. You can produce a lot of cotton or lumber or iron ore, but it's not worth that much if it just sits there on your plantation or forest or mine, unprocessed. You'd have to have that cotton ginned and then you'd have to have the cotton or wood or iron transported to some place where it can be spun and loomed or cut or smelted. And then you'd have to have it transported to wholesalers, retailers and eventually consumers. And those steps would come with various financial and legal and insurance costs, and all those costs add to the value of the raw cotton. All the people who contribute to processing the cotton or wood or metal and taking it to the consumer contribute to its value and have earned and taken a share of the eventual price of the cotton.

We can consider all those involved as making an input to the eventual price of the good: factory owners and workers, truckers and shippers, banks, insurance companies, law firms, and the people who actually and physically get the cotton or timber or iron ore for you. Who might they be? ... If you are a slaveowner, it doesn't matter. Your slaves don't get a share of the profits, and they don't get wages. If you are a slaveowner you are used to not assigning a cost to your labor force. True, you have to consider the cost of your keeping them, but they don't make cash demands on your money for their own use, so it's easy to overlook their contribution to the cotton growing process.

If you are a slaveowner and habitually ignore the imput of labor to your product's costs and profits, you are that much more unlikely to seriously consider the contribution - the value added - made by the other imputs. You buy tools to plant and hoe and harvest and deseed the cotton. You may have to borrow money from banks to tide you over from harvest to harvest. You may have to ensure your crops and your shipments against misfortune. You may have money invested in places - not strictly speaking a contribution to the value of the cotton, but a contribution to your own bottom line. And you forget about the money you pay to those people to make your plantation profitable like you forget about the money you aren't paying to your slaves, and just think you are getting a raw deal. How hard it is - the life of a slave owner.

P.S. Save this. I don't want to have to keep repeating it until it sinks in.