While it is true that the war had a profound effect on cotton prices in Great Britain – and the rest of the world – it is much too simple to look at the prices in Liverpool to back-calculate what the effect of slavery on cotton prices was.
The price was during the war mainly affected by trade not taking place. The blockade was effective. And after the war the basis of Southern cotton, the plantation system had to be completely re-organised or better replaced. Two quite disruptive factors that add onto the variable "slave-labour or not".
The American South was not the only place where cotton was grown and all the factors at play in Dixie helped to ensure the dominance of the product on the world wide market. While the war had steep raises in price as a consequence at first – and prices remained high after that – it also jump started cotton production elsewhere. And elsewhere in conditions not that much better than for those producing it in the South. This was a stone in the pond whose ripples caused a multitude of pork cycles.
The main effect of the war, and one of the main efforts the Northern Union made, in unison with all the cotton merchants around the world, is encouraging the cultivation of cotton in Africa and Asia.
First, cotton experts reckoned that enough cotton could be procured to permit cotton manufacturing to continue its dramatic expansion even without slavery. This was, for example, the judgment of the English Ladies' Free Grown Cotton movement, a loose association of women who committed themselves to purchasing only cloth produced with free labor cotton. And, perhaps most optimistically, it was embraced by Republicans in the United States such as Edward Atkinson, who believed that cotton production in the American South could be expanded dramatically through the use of "free labor"— that is, as long as freedpeople would not engage in subsistence agriculture.
Yet the Civil War experience also had shown that non-slave cotton had entered world markets only under conditions of unsustainable high prices; after all, the price of Indian cotton had quadrupled and earlier efforts to bring Indian cotton to market at lower prices had largely failed. Moreover, from the perspective of 1864 and 1865, emancipation was leading to dangerous social turmoil in the American South. It was thus reasonable to expect that freedom would bring a permanent reduction in the supplies of raw cotton—an expectation expressed most directly by the fact that postbellum cotton prices (for American middling in Liverpool) remained for ten years well above their prewar level.
Despite this uncertainty, the wartime rehearsals for reconstruction provided cotton capitalists and government bureaucrats with important insights into how the growing of cotton for world markets might be resurrected. Most importantly, they learned that labor, not land, constrained the production of cotton.
Members of the Manchester Cotton Supply Association, the world's leading experts on such matters, argued already during the war that three things were necessary for successful cotton cultivation: "soil and climate fit for the growth of cotton"—and labor. They understood that land and climate of a "quality equal, and in many cases superior, to that" of America was available in many different parts of the globe. But these experts on global cotton found that "only two regions" possessed "the very first requisite, which was labor"— West Africa and India.
Out of these failures an entirely different system of labor control was born: unlike in sugar production, which, after emancipation, relied to an important extent on indentured laborers, cotton would be grown by cultivators who would work their own or rented land with the input of family labor and metropolitan capital. Sharecropping, crop liens, and powerful local merchants in control of capital characterized the countryside in which they lived. These cotton farmers, the world over, were deeply enmeshed in debt, vulnerable to world market fluctuations, generally poor, subject to newly created vagrancy statutes and labor contracts designed to keep them on the land, and politically marginalized. They were often subject to extra-economic coercion. These were the people who would grow ever-larger amounts of cotton in the new empire of cotton, from India to Central Asia, from Egypt to the United States.
Sven Beckert: "Empire of Cotton: A Global History", Knopf: New York, 2014. (Partially online: PDF )
Slave labour is cheap, but not that much cheaper than slave-like labour that can be extracted from other people considered free in most definitions of that word.
The wage form thus extinguishes every trace of the division of the working-day into necessary labour and surplus-labour, into paid and unpaid labour. All labour appears as paid labour. In the corvée, the labour of the worker for himself, and his compulsory labour for his lord, differ in space and time in the clearest possible way. In slave labour, even that part of the working-day in which the slave is only replacing the value of his own means of existence, in which, therefore, in fact, he works for himself alone, appears as labour for his master. All the slave’s labour appears as unpaid labour. In wage labour, on the contrary, even surplus-labour, or unpaid labour, appears as paid. There the property-relation conceals the labour of the slave for himself; here the money-relation conceals the unrequited labour of the wage labourer.
Karl Marx. Capital Volume One, Part VI: Wages, Chapter Nineteen: The Transformation of the Value (and Respective Price) of Labour-Power into Wages.
On cotton Marx had this astute observation:
The cultivation of the southern export articles, cotton, tobacco, sugar , etc., carried on by slaves, is only remunerative as long as it is conducted with large gangs of slaves, on a mass scale and on wide expanses of a naturally fertile soil, which requires only simple labour. futensive cultivation, which depends less on fertility of the soil than on investment of capital, intelligence and energy oflabour, is contrary to the nature of slavery. Hence the rapid transformation of states like Maryland and Virginia, which formerly employed slaves on the production o f export articles, into states which raise slaves to export them into the deep South. Even in South Carolina, where the slaves form four-sevenths of the population, the cultivation of cotton has been almost completely stationary for years due to the exhaustion of the soil. Indeed, by force of circumstances South Carolina has already been transformed in part into a slave-raising state, since it already sells slaves to the sum of four million dollars yearly to the states of the extreme South and South-west. As soon as this point is reached, the acquisition of new Territories becomes necessary, so that one section of the slaveholders with their slaves may occupy new fertile lands and that a new market for slave-raising, therefore for the sale of slaves, may be created for the remaining section. It is, for example, indubitable that without the acquisition of Louisiana, Missouri and Arkansas by the United States, slavery in Virginia and Maryland would have been wiped out long ago. In the Secessionist Congress at Montgomery, Senator Toombs, one of the spokesmen of the South, strikingly formulated the economic law that commands the constant expansion of the territory of slavery. "In fifteen years," said he, "without a great increase in slave territory, either the slaves must be permitted to flee from the whites, or the whites must flee from the slaves."
Karl Marx: "Der nordamerikanische Bürgerkrieg", London, 20. Oktober 1861, English translation from "Marx on Slavery and the U.S. Civil War"
And it is just like now, capital will move if it finds conditions that are favourable.
The reason for the continued extensive use of forward selling in the years following the American Civil War was the difficult market conditions which Liverpool cotton merchants faced. From the end of the American Civil War and into the 1870s, the international price of cotton steadily fell. This was because of the recovery of the United States after the disruption of the war to its previous level of cotton production. Gradually, year on year, the United States recovered a little more, supplies of cotton increased, and prices fell. Merchants importing cotton were therefore at serious and prolonged risk of the value of their cotton stock falling between the date they purchased it in the United States and when they came to sell it in the Liverpool market. The Liverpool merchant Thomas Bower Forwood warned his son, William Bower Forwood, in August 1866: 'the most dangerous trade you can go into is cotton, and it will be so for years to come'.
Nigel Hall: "The Liverpool Cotton Market: Britain's First Futures Market",
For these complicated matters, remember the pork cycle, the Lancashire Cotton Famine.
The reasoning from the question, "if you make us pay our workers well and treat them with the respect and dignity that human beings deserve, it will DESTROY OUR ECONOMY!!!", is indeed the guiding principle of all local capitalists as they spin their narrative into the public mind. It is our economy that will go down, relatively, compared to other economies. A good old rat-race to the bottom.
Only that it is the cotton industry in the American South that also disproves this theory on a certain level. After slavery was abolished in America, the cotton industry re-entered the world market. Cotton remained a key crop in the Southern economy after emancipation and the end of the Civil War in 1865. As shown above prices remained high, because of the war, then came down despite no formal slavery. And the US is still the third biggest producer today.