Woodman

King Cotton and His Retainers: Financing and Marketing the Cotton Crop of the South, 1800-1925, by Harold D. Woodman, (Lexington: University of Kentucky Press, 1968) Pp. 386.

Any mention of cotton immediately brings to mind the Old South. The cash crop's influence to this region is overwhelming: the power of the planters, the growth of the system of slavery, and the rigid class system of the South all developed as a result of this products grip on the region. But the system was not based merely on the growing of cotton, but the distribution and selling of it. Thus, a network of cotton buyers, distributers, and sellers grew to move the crop to Northern and European markets. Harold D. Woodman explores these agents in his book, King Cotton and His Retainers. His goal is to examine the important individuals in the cotton selling process who were not planters and slaves, namely the bankers, merchants, and, above all, the cotton factors.

The factors of the old Southern cotton system were indispensable to the upper-class planters. The previous arrangement for planters, whether the crop was cotton or tobacco, was hardly an ideal system for making a profit, requiring the planter to accompany his product to market. As he had no method of maintaining it on site, and his presence would soon be required back at his plantation, he would often need to sell his crop at whatever price he could get.

This changed with the eventual evolution of the factorage system. Similar in ways to the Scottish system, factors were a proxy for the planters, receiving cotton from the plantations and selling it on behalf of their clients. Trusted with business decisions, the factors could hold their received shipments until the market improved, thus allowing a greater yield of profit. This was not the only role that factors played: they acted as bankers, creditors, and sometimes interim overseers for the planters, allowing them to live a lifestyle that was far beyond the means that the planters would have otherwised enjoy.

Factors were not the only 'retainers' to King Cotton; Woodman brings attention to the individual merchants and local shopkeepers who would gladly purchase and resell cotton for the greater number of lesser planters who could not afford or maintain the services of a factor. Some of the more interesting portions of the book, however, is the chapter discussing the relationship of the banks and the planters. It is apparent that the bankers were unwilling to deal with the planters, who Woodman indicates as being financially irresponsible as a rule. Cotton as a product was not a guaranteed money-maker: the market jumped and shrank, one of the reasons that factors were able to gain such prominence in Southern cotton society. Thus, planters proved to be risky investments; factors, however, were not. In an amusing loophole, the banks would gladly extend small business loans to the factors, who possessed a much better sense of business and finance than their clients. These loans in turn became new extensions of credit for the planters.

The Civil War, upon its arrival, was a great upset for the factorage system. Many factors were unable to survive the first year or two of the war, and their businesses closed. The Northern markets were largely inaccessible to the growers, and the European markets were blockaded. Planters were undeterred by these inconveniences, and frequently dealt with their former buyers in the North. Even though this presented risks, and were viewed as unpatriotic, it happened with enough frequency that it could be seen as integral to maintaining the system during the war.

The end of the Civil War saw the return of the factorage system, but it was apparent that it was a system on the way out. The personable system of yesteryear was being replaced with a more structured, guarded arrangement, and competition was growing: factors, used to wearing many different hats, were finding that they had to compete for each of them with new agents. The advance of technology further decreased their ability to make a living for themselves, with new rail networks webbing throughout the South. This seems to indicate a new opportunity for Southern planters to gain economic independence; however, it is simply another indicator of the strong dependence that the South retains in the North, for its money, material, and markets.

It does Woodman credit that the topic he chose to present is not one that is immediately associated with King Cotton. The intricacies of the economic system built around the movement, purchase, and distribution of the crop, from plantation to mill, are indicative of the changing structure of Southern society, from the feudal nature of the factor system to the more capitalist furnishing merchant system.

What is especially interesting is Woodman's assertion that cotton provided the South the equivalent of a paper tiger. It seemed, for all intents and purposes, a crop that gave its growers great financial and political power. The system built around its distribution, predominently in the role of the factors, did a good job of masking and coddling the planters to this delusion. However, following the Civil War and a good chunk of the post bellum period, it became apparent to all those involved in the cotton industry that it was a dependent industry; a 'puppet monarch,' according to Woodman (Pp. 359).

This is probably the greatest strength of the book. By analyzing the outlying system of cotton distribution, Woodman is able to dissect the idea of King Cotton. He shows it to be a much weaker model for wealth than it appeared, while still respecting the obvious strength that the crop did hold over the South. By analyzing the massive apparatus that grew to distribute cotton, Woodman demonstrates the inability of the Southern planters to move away from a crop that provided wealth, but to a point.

John McCarron

King Cotton and His Retainers: Financing and Marketing the Cotton Crop of the South 1800-1925. By Harold D. Woodman. Lexington: University of Kentucky Press, 1968.

Cotton Factors played an extremely important role in the Southern economy, but few acknowledge their presence and even fewer have chronicled their place in Southern society. Author Harold Woodman offers several explanations to this trend, among them the fact that Americans have never liked “middle men” and that perhaps Cotton Factors lack the romance associated with large planters. In King Cotton and His Retainers Woodman attempts to remedy this deficiency by looking at the development, flourishing and ultimate decline of Cotton Factors in the twentieth century.

The function of the Factor, whether selling rice, sugar, tobacco or cotton, was to purchase the crop of a planter or planters on consignment and find the best buyer or buyers and markets for the crops at the right time and place. Essentially, the Factor became “the planter’s commercial alter ego, his personal representative in the marketplace.” Though the Factor’s primary concern was with selling the crop, he also performed many other personal services for the planter. No matter how far from the city or commercial area the planter lived, he always had the resources of the city and marketplace at his disposal through the Factor. The Factor would be hired for his knowledge of the market for a particular crop, and his ability to turn a profit on said crop. In this way, the planter could deal with buyers of every description in a delicate world- wide market. The factor supplied him with information and advice regarding the sale of the crop, or, as was more often the case, was simply authorized to sell the crop as he alone saw fit.

The factor also played an important role in providing plantation supplies and credit to the planter throughout the planting year as the need arose. As food, rope, clothing, and other necessities ran short throughout the year, the planter would simply authorize the factor to buy these supplies at the lowest possible price. If the planter needed a loan, the factor was often authorized to provide that as well, borrowing against the sale of the next year’s crop. The entire credit structure was built around the presumption that the next year’s crop would be worth a certain amount. In a fluctuating market, that was not always the case, and then the debt would spill over into the next year, against the next crop. This left the factor holding the bag, so to speak, for the crop’s shortcomings, and most of the time he would just agree to take the money out of next year’s crop, creating a long-term system of chronic debt that followed most planters.

The factor also often served as the bookkeeper and personal banker of the planter, as well as at times his social equal. The factor took upon himself the responsibility of managing the planter’s money, so that the planter did not have to travel from town to town, or worry about currency exchanges and the like in a complicated economic system. This also propelled the factor into the role of personal banker in many instances for the planters he served. However, the line between factor and planter was often blurred by the fact that the wealthier factors were themselves planters and slaveholders. This alone would allow a factor to break into the upper rung of society, so to speak. Just being a factor alone could not make up for a lack of money in social standing.

For their services, most factors received 2.5% of the profits reaped from the sale of cotton, not a small amount in some cases, but they too were caught in the circular nature of Southern agrarian economics, receiving their pay once a year and immediately being forced to put it back into their operation. Woodman notes that because most industry and manufacturing occurred in the North, a portion of the money from Southern crops went to the North to pay for manufactured goods. This created a Southern economic dependence on the North that few could escape. Some tried to diversify the Southern economy, but to little avail; antebellum Southerners wanted little to do with change, and so the dependence continued. The author concludes that in the antebellum era the cotton factor neither created this environment, nor can he be charged with its persistence.

During the Civil War, cotton trade was obviously interrupted, and after the war “king cotton” once again took its place and with it the factor system resumed for a while. However, with advanced communications and transportation, factors were slowly put out of business and replaced in the new South with “the furnishing merchant,” a landlord, storekeeper and creditor who became the most powerful agent of the Southern countryside. In the 1890s many Southerners belatedly tried to gain independence from northern manufacturing to no avail: neither the merchant nor anyone else had the capital resources necessary to extend long-term loans regarding cotton or any other crop, and so as of 1925 when Woodman ends his narrative, the South remained a dependent agrarian society, free of the factor, but with the furnishing merchant in his stead.

In his book King Cotton & His Retainers, Harold Woodman provides an in-depth look at the cotton industry, which dominated the United States Southern economy for more than 150 years. Much of the previous research on cotton has focused on the planter and slave aspects of the Southern economy, but little work had been done on “the factors”, the merchants who bankrolled and sold the cotton crops. Woodman makes a convincing case that these factors, or middlemen, played an important and vital role in the cotton economy.

Principally situated in Southern seaports such as New Orleans, Mobile, Charleston and Savannah, the merchants or factors were of paramount importance to the Southern cotton planter. These merchants helped the planters finance their crops by providing them with credit, and the factors also marketed those crops, trying to secure the planter and themselves the best price possible. Each merchant specialized in one Southern staple crop, such as cotton, sugar, rice or tobacco. Rarely did they market more than one crop.

A planter bringing his cotton to market and trying to sell it himself would have to take whatever he could get for it on a given day. Whereas the factor could hold the crop and wait to sell until he obtained the best price. The factor also had access to all Northern and European markets, giving him the widest pricing options for Southern staples.

Southern banks, from 1837-1930, were very conservative and tight on credit to planters. Prior to 1837 banks had made scores of bad agricultural loans. The banking crises of 1837 saw the collapse of many banks in the South and numerous foreclosures on planters. For the next 100 years it would be hard for any planter to get a loan from Southern banks. Planters needing more land, slaves or financing for the year’s crop production were forced to look elsewhere for credit. It was the factor or merchant who stepped in to provide this important credit. Factors would advance the planter cash throughout the year, or purchase supplies and merchandise that were needed on credit. The factor was an all-around utility man; he became the planter’s buyer, seller and banker. Often times the planter and factor became personal friends and had a cordial relationship. Sometimes a merchant married into a planter family. In some cases factors were themselves planters.

In return for the credit extended, both in cash and merchandise, the factor took a lien on the planter’s crop. If the sale of the crop did not cover all the debts accumulated during the year, the remaining debt would be rolled over onto the next year’s crop sale. This debt kept rolling over from year to year, accumulating in size, until often the planter became significantly indebted to his factor.

The factor added a surcharge onto every service he provided. To sell a crop it was 2.5%. To buy merchandise or supplies, there was a 2.5% fee. To extend cash or credit was another 2.5%. The credit line the merchant extended to the planter usually came from Northern or British banks or capital ventures. The interest charged planters on long-term (12 months or more) credit was 8%. There were also charges for storing the crops in warehouses as well as wharfage and labor fees. It wasn’t long before all these fees, commissions and surcharges added up, leaving the planter scratching his head and wondering where all his money had gone. One complaint voiced just before the Civil War summed up the situation. “The South has a system of banking which has no parallel except in a pawn-broker’s shop.” (p.125)

However, these factors were providing a service that Southern banks refused to. What’s more, no one was forcing the planters to go into debt. The planter often exacerbated the problem by acting out of an obsessive pattern. “Planters (were) always looking to buy more land and slaves, ownership of slaves and land was indication of social prestige.” It became a vicious cycle of “ sell more cotton to buy more Negroes to make more cotton to buy more land”. (p. 135) While some historians paint the factor as a loan shark or necessary evil, the fact is that planter was responsible for his economic woes, not the merchant. The planter simply did not want to face facts and deal with his situation. One astute farmer in 1849 suggested the key to financial well-being was to “keep out of debt and control your cotton”. Unfortunately, few planters heeded such sage advice. (p. 132)

Another common complaint voiced by Southerners was the economic dominance of the North. Many in the South felt the North literally owned them and their crops. The North supplied the long-term credit planters needed to make it from year to year. Southern banks could not or would not. The North had the capital to loan. The North supplied much of the manufactured goods and supplies the planters needed. The South did not have a manufacturing base. Population growth was five times greater in the North. The North was 25% urban, the South 91% rural. 84% of the South was involved in agriculture, whereas only 40% of the North farmed. The North had three times more capital at its disposal than did the South. The North also had superior transportation networks (railroads).

It is no surprise then, that the North dominated the South economically in almost every category. Was this economic disparity the North’s fault? Woodman makes a compelling case that it was not. The South’s economic woes were clearly of its own making. That these woes did not ease or go away was also solely the South’s responsibility. The South collectively, like the planter, did not want to face up to facts and change its economic behavior.

It was the South’s stubborn refusal to diversify economically and its intransigent dependence upon cotton as its savior that doomed the region to second-class economic status. Fore more than 100 years some in the South repeatedly suggested overhauling the system, but no action was ever taken. Establishing a diversified agricultural and manufacturing base required both significant Southern capital and sacrifice. While there was much talk, there was little capital, and planters were not going to sacrifice their established, comfortable lifestyles for the good of their region.

The Civil War disrupted the cotton industry and the South lost 43% of its economic wealth, not counting slaves. Yet for all its upheaval, the war did not dislodge King Cotton as the linchpin of the Southern economy. From 1865-1930, cotton production was still the South’s largest industry and export. Slave labor was replaced by tenant farm labor. The factors were eased out of the cotton market. Improvements in technology and transportation made them obsolete. With the telegraph and then telephone, cotton prices could be transmitted instantaneously. The growth of the railroad meant cotton was no longer shipped exclusively to ports for transport. Now the railroad came to the cotton. Merchants and storekeepers located in the Southern interior, often in towns along the railroad, now purchased the cotton crops, supplied merchandise and furnished credit to planters and small farmers. Once again the credit supplied by merchants (and now Southern banks also) came from the North.

Instead of learning the lessons of the past and finally diversifying economically, the South instead chose to increase cotton production five fold, from seven and a half million bales in 1866 to 42 million bales in 1930. This overproduction kept prices low and tenant farmers in abject poverty. By1930 the North was 50% urban; the South was still 82% rural and only provided 16% of the country’s manufacturing. Only 10% of American capital was located in the South. This cotton dependency was an economic millstone around the South’s neck up until World War Two. In 1938 President Franklin Delano Roosevelt declared “the South presents right now the No.1 economic problem”. (p.317)

The South had become a colonial dependent state to the North’s capital and manufacturing. King Cotton ruled the South, but the North owned King Cotton. Woodman aptly sums up the situation: “The major economic and social change in the South after the Civil War was the end of slavery. The institutions of agriculture and King Cotton stayed in place.” (p.374)

Woodman’s book is essentially an economic history of the South. His work is lucid and holds the reader’s interest. His major fault is the chronic repetition of what are at first, excellent issues, to the point they become belabored. This redundancy lessens the overall impact of what is a solid, well-researched and groundbreaking study of the factors/merchants and the Southern economy from 1800-1940.