Vivek Nemana looks to a 2009 paper by Art Carden to explain the American South's historic economic underdevelopment:
Before the War, Southern social networks were based on hegemonic bonds relying on power imbalances and the threat of violence. The South was heavily invested in racial subjugation – slavery directly accounted for over a quarter of the GDP. The region spent an enormous amount of resources to justify slavery, hiring silver-tongued apologists like John C. Calhoun to spin slavery as humane. In this light, slavery was an economic institution that was designed for racially hegemonic society. [...]
While the Civil War radically restructured Southern laws to promote racial equality and property rights, the hegemonic bonds were resistant to change. This generated a major friction, Carden writes, that manifested through the racist Jim Crow laws and, most gruesomely, lynchings that openly defied the new freedoms for blacks.
The backlash against black self-determination, the politically-enforced segregation, and the conviction that one race was inferior were societal phenomena that hurt economic growth. For example, segregation and racist violence meant that markets were smaller and the division of labor shallower than it could have been. Mutual fear and distrust made contracting and doing business across racial boundaries more expensive. As a result, Carden writes, “Southern entrepreneurs, innovators, and laborers relied more heavily on kinship networks and informal arrangements than on formal markets.”
This sounds exactly right. I'd only add that we shouldn't discount the extent to which "mutual fear and distrust" led white Southern elites to intentionally under-invest in their states and localities, as to avoid redistribution to blacks, and embrace a particularly vicious form of wage slavery in order to keep blacks impoverished. Even if the South enjoyed more open markets, the sheer fact of Jim Crow would have kept large portions of the region impoverished and underdeveloped.
Relatedly, this throws water on at least one historical counterfactual, namely, that economic growth would have eventually ended Jim Crow. People are motivated by a lot more than lucre, and the deep hold of white supremacy led Southern elites to accept widespread poverty and economic underinvestment as the price for keeping blacks in their "place." Economic growth is nice, but I doubt that it would have toppled a centuries-long (if you count slavery) system of oppression.
