A House Dividing: Economic Development in Pennsylvania and Virginia, 1800-1860

Published by EH.NET (December 2000)

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John Majewski, A House Dividing: Economic Development in Pennsylvania and Virginia, 1800-1860. New York: Cambridge University Press, 2000. xx + 214 pp. $49.95 (cloth), ISBN: 0-521-59023-x.

Reviewed for EH.NET by Thomas Weiss, Department of Economics, University of Kansas

John Majewski (University of California-Santa Barbara) has produced an interesting comparative history in an attempt to show the impact of slavery on long-term economic development. He argues that Pennsylvania and Virginia, as well as two counties in each state — Cumberland in Pennsylvania and Albermarle in Virginia — were comparable in many ways, except one. Slavery was virtually absent in Pennsylvania and Cumberland county, but comprised a substantial share of the population and labor force in Virginia and Albermarle. The consequence was that slavery held back economic development in Virginia and Albermarle county, so that by the time of the Civil War there was a substantial gap between their economies and those of their northern counterparts. Or as the book’s jacket puts it “The chains of slavery… also shackled the invisible hand of the market.”

Majewski argues that the states and counties he has chosen hold constant the effects of geography, climate and timing of settlement and enable him to isolate the economic impact of slavery. This enables him to go beyond the previous, well known national and international comparisons done by Fogel and Engerman, Wright and others. Moreover, by focusing in detail on these few places he can examine slavery’s impact over a much longer time span.

One of his major contributions is to show that residents of both the northern and southern locales were not averse to economic progress or the extension of the market economy. Virginians and Pennsylvanians were more alike than is captured in the physical similarities of geography and climate. He uses archival materials, such as stockholder lists and corporate records, to show that the residents in both states and in both counties were interested in economic progress and appear to have been willing to invest in ‘developmental corporations’, such as the James River and Kanawha Company in Virginia or the Harrisburg, Carlisle and Chambersburg Turnpike in Pennsylvania in order to spur the growth of their pertinent markets. By linking the stockholders to census and tax records he shows that investment in these corporations was made primarily by local residents. (In an appendix he describes these samples and the methods and problems of linking observations).

There were differences to be sure — Albemarle’s investors were predominantly a small number of slave holders; Cumberland’s investors were more numerous, investment was more equally distributed, investors were more diverse occupationally, and Cumberland’s developmental projects were started a decade or more before Albemarle’s — but there was an essential similarity, namely the use of developmental corporations to mobilize local capital to finance unprofitable improvements. In addition, in both places, the local populace made investments even though the transportation corporations did not do well financially. Rather, they invested in the hopes of raising their land values and improving access to markets. This behavior, he argues, reveals that economic development was not restricted to places and societies that stressed individualism and competition; community values and ties were compatible with economicdevelopment — indeed, they may have been essential in the cases he examines.

Despite the similarities and apparently equal desire to experience economic development, Virginia and Albemarle county could not keep up with Pennsylvania and Cumberland county. The chain of causation is at once both a familiar story and a different one. The old part is that because of slavery, Virginia suffered from insufficient market demand. In the older argument, associated, say, with Genovese, this insufficient demand prevented the growth of industry because southern firms would not be able to take advantage of scale economies. Majewski’s twist is to stress that this insufficient demand meant an inability to develop major urban centers that had advantages of agglomeration. Those advantages manifested themselves in various ways in the labor and capital markets, as well as by contributing to a cultural system that encouraged technological advance, with the Franklin Institute being one such example. More specifically, without an urban center, Virginia did not have the concentration of capital or political influence to build the interregional transportation networks that made for Pennsylvania’s success.

Before reaching this conclusion we are treated to discussions about the developmental corporations and transportation projects that were tried in Albemarle and Cumberland counties. These were intriguing vehicles that were essentially similar in both counties in that their purpose was to mobilize local capital to finance unprofitable improvements. Because the investment returns would come about indirectly, primarily through an increase in land values, the majority of investors were residents in the county or state in which the project would be undertaken, and the closer one’s land to the project the greater the investment. Even still, there was the problem of the free rider, those who knew their land values would rise even if they did not invest in the project. This was circumvented by kinship ties, community spirit or boosterism, friendship and even honor.

Majewski shows clearly that these corporations were not profitable and did not pay much in the way of dividends. He claims the indirect benefits were large and substantial, but this is less well documented. For example, in the 1820-40 period he shows that property values in the towns of Charlottesville and Scottsville increased, but has no evidence about rural values. He says at one point that “rural property values generally stagnated from 1820 to 1840,” but later claims that “Developmental corporations to a lesser degree also raised rural land values” (p. 29). For Cumberland he allows that the “evidence about indirect benefits occurring for the period 1820-40 is inconclusive…” (p. 53). He can not cite land values, so he argues that they must have been beneficial because they were used. Even if land values rose, as they did between 1850 and 1860 in both Albermarle and Cumberland counties, we do not know how much was attributable to the developmental corporation’s project and how much to other things.

Majewski presents as well an enlightening account of the politics of market development (chapter 4). He points out that concerns about large or special corporations that reflected the republicanism of the time played out to some extent at the local level. And to some extent so too did national issues — such as those confronting the Bank of the United States — reverberate locally. But there were some seeming inconsistencies, perhaps especially as regards the chartering of banks within a state or county. Although banks or corporations represented the sort of political power republicans feared or distrusted, they also promoted development. So in both Albemarle and Cumberland counties the populace accepted pertinent corporations because they wanted development; but they kept a watchful eye. The long history of legal conflict between the James River and Kanawha Company and the Shadwell Mills demonstrates that local juries and state courts in Virginia “believed that even the cause of improvedtransportation failed to justify the uncompensated taking of private property” (p. 96).

In the end, it was private investment that seemed to make the difference in Pennsylvania. The state’s attempt at a canal system is a well-known failure, and may have retarded the development of a superior transportation system. The Mainline canal subsidized Philadelphia and Pittsburgh at the expense of the entire state. All of which raises doubts about the benefits of the developmental corporations, and whether Virginia’s even poorer performance in this regard mattered much. The Pennsylvania Railroad (PRR), on the other hand, appears to have been of great consequence, and voters rejected both state and local investment in this enterprise. This was the key trunk line between Philadelphia and Pittsburgh, which also linked those cities to larger rural markets. And it was the PRR that made some good business decisions — to build a railroad to compete with a canal near Pittsburgh and to buy the Mainline near Philadelphia — that made the system more efficient. The PRR appears to have persuaded the state legislature to pass certain rules that made the system more efficient as well — at least for transportation within Pennsylvania.

Why could such a private company arise in Pennsylvania and not in Virginia? Majewski’s argument is that this was because Philadelphia was located in the former, whereas the latter had no such concentration of population and thus no concentration of wealth that could have financed such a project. Philadelphia’s superiority over any city in Virginia reflected “the cumulative nature of urban development,” which had transpired over three periods: the colonial period when staple production shaped development; the early republic when rural markets were the key; and the antebellum period when agglomeration advantages favored Philadelphia and thus Pennsylvania. There is no doubt that by 1840 Philadelphia had advantages over any smaller Virginia city. (Majewski cites the populations for 1860, indicating that Philadelphia was nearly 14 times the size of Richmond, the largest city in Virginia — and the situation must have been very similar in 1840). The key issue then for Majewski’s thesis is what held back the growth of southern cities in the first two periods he delineated. He argues that in the colonial period the processing of tobacco discouraged the settlement of towns and cities in Virginia, whereas wheat and other grains required processing centers. Between 1800 and 1840, Philadelphia made the transition to a manufacturing city because it had access to the denser rural markets in Pennsylvania, whereas Virginia cities were restrained by the limited market imposed by slavery.

Majewski has certainly weaved together a plausible story. He has done a good job of tying together some statistical evidence with more traditional narrative in an engaging and generally convincing way. But his story may not be the only one, and his rests on two key matters. Were these locales essentially the same except for the presence of slavery in Virginia and Albermarle and its absence in Pennsylvania and Cumberland? And was Philadelphia’s early success tied to the rural hinterland, while urbanization in Virginia floundered because of the inadequate demand arising from the presence of slavery?

Even Majewski points out that his hinterland-agglomeration model has “limitations when applied to America as a whole” (p. 143). The presence of thick rural markets does not work well for New England, while New Orleans was a large city that appears not to have industrialized. He notes that Baltimore, located in a slave state, subsequently developed because it had access to a free-labor hinterland, but one can imagine that western Virginia served the same role in Virginia. He does admit that the Navigation Acts, as well London and Glasgow, shaped the developmental path of Virginia in ways that were not conducive to growth in the early national period. So, one wonders whether in the absence of those factors Virginia’s development would have been different even in the presence of slavery.

Were these counties and states comparable in all regards, except for slavery. Of course, one cannot expect that he could hold constant all other variables, but did they have as much in common as he claims. Early on he argues that Cumberland and Albermarle counties had both been settled rapidly in the late colonial period, had significant commercial links with the Atlantic world, and had benefited from rising prices of staple crops (wheat in Cumberland, tobacco in Albermarle). But as he notes later, and as becomes important to his thesis, Cumberland had the advantage of strategic proximity to Philadelphia and Baltimore. He might have pointed out as well that Cumberland’s population exceeded Albermarle’s from some early date. He does not present time series for both counties going back into the colonial period, but his evidence does show that Cumberland’s population of 24,000 in 1779 was twice the size of Albermarle’s a decade later. In other words, at some point in time before the early national period, Cumberland had advantages in population density. It would have been useful to have included a clear comparison of the population history, and so far as possible the economic history of the two counties and states.

Of course, some of those desired comparisons would not possible, but the notes and narrative suggest that more direct and compelling comparisons could have been made. Rather than have to look here and there for some pertinent statistic for one county to compare to a series presented in tabular form for the other county, I would have liked to have seen a more comprehensive and consistent presentation of the data on pertinent variables. For example, Majewski makes a tabular presentation about the increase in farm value per improved acre in Albermarle between 1850 and 1860 based on a careful study of a sample of farmers, but for Cumberland he gives only a summary statement, that U.S. census data show that farm values went up by 62 percent in the 1850s (p. 79). That increase for Cumberland was almost exactly equal to the increase shown in the table for Albermarle, but of course the latter was a sample statistic.

Despite these problems, the book is intriguing and provocative; so much so that I thought it worthwhile to look at some pertinent census-based information that was readily at hand. One bit of information strengthens Majewski’s case. The increase in farm value per improved acre that occurred between 1850 and 1860 for all farms in Albermarle county was only 53 percent; less than the sample statistic and noticeably less than the increase in Cumberland. But both counties are outliers. Cumberland showed one of the better performances in Pennsylvania; its increase of 62 percent was nearly twice the 33 percent increase for all non-urban counties in the state. Albermarle, on the other hand, was a relatively poor performer in that decade; its increase of 53 percent was below the 64 percent increase for all non-urban counties in Virginia. These calculations are not quite as comparable as desired because the counties that became West Virginia were excluded from the Virginia totals, whereas the more remote western counties in Pennsylvania were included in that state’s totals, but it does raise some question about the typicality of these two counties. Moreover those same data raise questions about the indirect benefits of the improvements in the transportation system.

My quick calculations revealed also that between 1850 and 1860 real agricultural output per rural person (valued in 1860 prices) increased much faster in Albermarle than in Cumberland (71 percent versus 34 percent) and faster in Virginia as a whole (again excluding West Virginia) than in Pennsylvania (27 versus 9 percent for non-urban counties). The average output in Cumberland and Pennsylvania was higher in both 1850 and 1860, but the gap was narrowing. In 1850 agricultural output per rural person in Cumberland county was $61 versus $44 in Albermarle; the latter amounting to only 72 percent of the former. In 1860, however, the figures were $81 in Cumberland versus $74 in Albermarle, a difference of only 10 percent. In other words, even though the rural market in Cumberland county was growing faster in the aggregate thanks to a much faster rate of population growth, a substantial portion of Virginia’s rural hinterland was not doing too badly.

This is not to suggest that the House was not Dividing, but it does raise some questions as to the impact of the developmental corporations and transportation improvements that were spawned by Philadelphia’s presence, and suggests there is yet a fuller story to be told. The industrious rural population in Pennsylvania was, of course, doing other things besides farming, and those activities were no doubt stimulated by the transportation improvements, but other factors must have played some role as well. There was some increase in urbanization there unlike in Albermarle, but one has to wonder why would that occur in the shadow of Philadelphia and Baltimore. As Majewski says, “urbanization and industrialization, despite decades of intense scholarly research, are still mysterious enough to undermine almost any generalized model” (p. 143). He has taken us a step further, but there remains more to learn about these two states and counties. More importantly, his book has set out an approach that many more comparative explorations could follow fruitfully.

Thomas Weiss is currently engaged in collaborative research on economic growth in the Lower South. An article written with Peter Mancall, “Was Economic Growth Likely in Colonial British North America?” was published in the Journal of Economic History, March 1999.