Freedom: A Documentary History of Emancipation, 1861-1867: Series 3, Volume 2: Land and Labor, 1866-1867

Chapter 6. Commerce, Credit, and Debt

6 Commerce, Credit, and Debt COMMERCE, CREDIT, AND DEBT 643 Credit was fundamental to the emergent free-labor economy of the postwar South. Relations of borrowing and lending shaped the lives of all the region’s inhabitants, whatever their color or social standing. While dependence on credit was not new, the prewar system was in tatters. Confederate bonds and currency were worthless, banks had collapsed, and the forms of property that had previously served as security for loans—slaves and land—could no longer do so, what with slavery abolished and land values severely depressed. Yet landowners, freedpeople, and merchants all needed to defer payment for all manner of goods and services. New modes of credit were therefore imperative. Indeed, without credit, few Southerners could have obtained either the food and clothing necessary for bare survival or the seed, tools, and fertilizer required for commercial agriculture.1 Credit relations linked Southerners of all stations to the world economy, but most borrowing and lending was enmeshed in local relationships. After the war, as before, Southern agriculturists seldom dealt directly with banks. Antebellum planters had generally financed their operations through advances from commission merchants (“factors”) in port cities. Factors extended credit based on a borrower’s assets in slaves and land and the expected value of the year’s crop, which they usually sold on his behalf. But for most small farm operators and landless laborers, the sources of credit were local. Merchants in market towns and crossroads hamlets advanced goods to those they judged likely to repay, carrying the debt until the purchaser satisfied it with payment in cash or in kind. More informally, rural Southerners borrowed money, goods, and services from their neighbors and friends, employers and patrons. Complex local networks of credit developed, in which financial and personal obligations intertwined and individuals were simultaneously lenders to some of their neighbors and borrowers from others.2 With emancipation, former slaves emerged as economic actors in their own right, assuming new, more prominent places in networks of credit and debt. A few 1. In this essay, quotations and statements of fact that appear without footnotes are drawn from the documents included in the chapter. Secondary accounts of financial conditions in the postemancipation South include Dan T. Carter, When the War Was Over: The Failure of SelfReconstruction in the South, 1865–1867 (Baton Rouge, La., 1985), pp. 97–103, 132–46; Gerald David Jaynes, Branches without Roots: Genesis of the Black Working Class in the American South, 1862–1882 (New York, 1986), pp. 33–53; Roger L. Ransom and Richard Sutch, One Kind of Freedom: The Economic Consequences of Emancipation, 2nd ed. (New York, 2001), chap. 6; Harold D. Woodman, King Cotton and His Retainers: Financing and Marketing the Cotton Crop of the South, 1800–1925 (1968; reprint, Columbia, S.C., 1990), chaps. 21–24, and New South—New Law: The Legal Foundations of Credit and Labor Relations in the Postbellum Agricultural South (Baton Rouge, La., 1995), chap. 1. 2. On credit relations in the antebellum South, seeWoodman, King Cotton and His Retainers, chaps. 1–16. On the character of exchange, credit, and indebtedness among smallholders, see Steven Hahn, The Roots of Southern Populism: Yeoman Farmers and the Transformation of the Georgia Upcountry, 1850–1890 (New York, 1983), pp. 70–77. 644 COMMERCE, CREDIT, AND DEBT freedpeople became independent proprietors or renters of land, owners of productive property who controlled the fruits of their labor and conducted commercial transactions as such. But even the mass of freedpeople, who worked for wages under someone else’s direction, now moved in a greatly enlarged arena of economic activity. Because they were to be remunerated for their labor, either in cash or a share of the crop, freedpeople were in a position to become both debtors and creditors and, at least in theory, to have money of their own. Although their propertyless emancipation severely limited their material resources, they embraced new opportunities to make economic decisions, viewing the ability to buy and sell in an unfettered market as a perquisite of freedom. Yet, even as their options increased, freedpeople often encountered official policies and extralegal measures designed to limit their freedom to buy, sell, and borrow. Freedpeople’s goals intersected and collided with those of their employers, merchants , and other Southerners. White planters and farmers, many of whom were reluctant to deal with former slaves as free people, sought to resume operations as...