Growth in the Postbellum Economy: Entrepreneurship and Tobacco Manufacturing in Virginia and North Carolina, 1890–1900

 

Introduction: Two states that grow tobacco in a changing South

In the last decades of the nineteenth century there was a long-standing agricultural link between Virginia and North Carolina, although the two states showed very different trends in industrial development. When the period of reconstruction began Virginia had Richmond firmly in mind as one of the principal centres of national tobacco manufacturing. On the other hand, North Carolina had a smaller manufacturing sector but did experience a major entrepreneurial change as part of the New South. By the end of the century companies located in Durham and Winston had turned tobacco from a local agricultural product into one that was marketed nationally.

This leads to an important economic question: why did tobacco manufacturing in North Carolina grow more rapidly than in Virginia in the last decades of the postbellum period? The census figures show that access to tobacco by itself does not explain this difference; instead, it was factors including mechanization, advertising, capital investment, organizational development, and entrepreneurial decision-making that allowed the manufacturers in North Carolina to overcome Virginia's long-established industrial advantage.

The methodology and sources: how economic growth is measured

Economic growth can be measured by means of a number of different indicators, since no one figure gives a full picture. This study looks at the manufacturing data collected by the United States Census, with emphasis on capital investment, the number of businesses, employment figures, and the value of manufactured tobacco products. The census of 1900 enables a direct comparison to be made with the 1890 census, which ensures that the measurements remain consistent during the last decade of the postbellum period.

The methodological caution advanced by David A. Freedman in his article “Statistical Models and Shoe Leather” is especially pertinent. He argues that statistical techniques cannot take the place of a careful research design, relevant evidence, or a comparison with historical facts and circumstances. As a result, census data are seen as evidence which has to be subject to historical interpretation rather than being taken as explanations by themselves. For example, any changes in the reported value of products have to be examined together with changes in firms, technology, markets, and organizational structures.

Andrew Popp and Susanna Fellman also emphasize that business historians create narratives on the basis of archival evidence and that there needs to be a careful interpretation of the relationship between the evidence, the narrative, and historical understanding. This method is particularly relevant when comparing Virginia and North Carolina, since numerical data only become significant when they are set within the wider narrative concerning entrepreneurs, business practices, technological choices, and changing consumer markets.

Virginia and North Carolina: Two Different Routes of Tobacco Cultivation

At the beginning of the 1890s Virginia was in a position of dominance in the manufacturing of tobacco. Richmond enjoyed many generations of experience in the processing of tobacco, had a well-established commercial infrastructure, employed a skilled workforce, was well connected by railroads, and had access to both domestic and international markets. Because of this, Virginia started the decade with the advantages it had built up over a long period of time.

In contrast, the tobacco industry in North Carolina was going through a clear change. Entrepreneurs like Washington Duke, and especially James B. Duke, managed to increase production beyond the usual limits that smaller manufacturers had been subject to. Because of the introduction of mechanized cigarette production, intensive national advertising, and efficient distribution systems, the companies were able to sell large amounts of standardized products to consumers outside the tobacco-growing South. In the case of chewing and smoking tobacco and snuff, the value of the products reported for North Carolina rose from about $4.8 million in 1890 to $18.6 million in 1900, a rise of roughly 289 percent. Virginia's output stayed higher, going from about $11.8 million to $21.7 million, an increase of about 84 percent. By 1900 therefore North Carolina had got much nearer to Virginia, even though at the start of the decade it had had less than half of Virginia's product value. The Census itself noted that tobacco manufacturing was highly geographically concentrated and listed both North Carolina and Virginia as among the top producers in the country.

The idea of organizational capabilities that Alfred Chandler proposed helps to explain the importance of such differences. He argues that the growth of modern industrial businesses needed more than just the acquisition of machinery; successful companies developed managerial structures, gained specialized expertise, coordinated production and distribution, and made use of organizational learning in order to keep on expanding.

James B. Duke's tobacco businesses provide a particularly clear example from the period after the American Civil War. Although mechanization increased productive capacity, Duke's competitive edge also depended on effective marketing, management, distribution, and consolidation. Patrick Porter emphasizes the important role that advertising played in the quick expansion of W. Duke, Sons & Company, and Nannie Tilley places this development in the context of the wider Virginia–North Carolina tobacco economy. It was because of these factors that the American Tobacco Company was set up in 1890 and that a more consolidated national industry emerged.

Virginia saw continued substantial growth at this time, the value of its manufacturing rising and Richmond keeping its position as a major centre for tobacco. The difference between the two states shows what is meant by growth in a well-established industrial area as opposed to rapid expansion in one that is emerging. The entrepreneurs in North Carolina combined locally sourced tobacco with new technologies, capital, advertising and organizational structures in order to reach a national consumer market.

Conclusion: Entrepreneurship and the New South

The fact that Virginia and North Carolina were similar in that both had a long tradition of growing tobacco, as well as labour forces, transportation facilities, and markets shows that postbellum economic growth cannot be accounted for entirely by natural resources or agricultural production. Yet the much quicker manufacturing growth in North Carolina in the 1890s points to the importance of entrepreneurial organisation in changing the competitive position of the two states.

These results support Chandler's emphasis on organizational capabilities and serve as an example of Freedman's view that statistical evidence has to be understood in the light of historical context. Although census data provides a measure of change, elements such as entrepreneurship, technological innovation, marketing, management, and institutional development offer a deeper explanation. By using the narrative method which Popp and Fellman promote, the growth of tobacco manufacturing in North Carolina appears as more than just a statistical trend; it shows how entrepreneurship contributed to the industrial transformation of the postbellum South.

Source List

Chandler, Alfred D. “Organizational Capabilities and the Economic History of the Industrial Enterprise.” Journal of Economic Perspectives 6, no. 3 (1992): 79–100. https://doi.org/10.1257/jep.6.3.79.

Freedman, David A. “Statistical Models and Shoe Leather.” Sociological Methodology 21 (1991): 291–313. https://doi.org/10.2307/270939.

Popp, Andrew, and Susanna Fellman. “Writing Business History: Creating Narratives.” Business History 59, no. 8 (2017): 1242–60. https://doi.org/10.1080/00076791.2016.1250742.

Porter, Patrick G. “Advertising in the Early Cigarette Industry: W. Duke, Sons & Company of Durham.” North Carolina Historical Review 48, no. 1 (1971): 31–43.

Tilley, Nannie M. The Bright-Tobacco Industry, 1860–1929. Chapel Hill: University of North Carolina Press, 1948.

United States Census Office. Twelfth Census of the United States, Taken in the Year 1900: Manufactures, Manufactures of Tobacco. Washington, DC: Government Printing Office, 1902.