The main effect of the system of debt peonage that emerged in the South during the late 19th century was the perpetuation of poverty and economic dependence among poorer whites and especially freed African Americans. This system trapped sharecroppers and laborers in a cycle of debt and servitude, effectively limiting their freedom and maintaining racial and social hierarchies established during and after slavery. Key aspects of this effect include:
- Sharecroppers were often forced to grow cash crops like cotton instead of food crops, making them dependent on merchants and landlords for food and supplies, which were sold at inflated prices on credit. This led to chronic indebtedness that was difficult or impossible to repay
- The local merchant and landowner often were the same person, controlling land, supplies, credit, and crop prices, which allowed them to manipulate accounts and keep laborers in debt
- African Americans, lacking education and legal protections, were especially vulnerable to exploitation, often ending each season deeper in debt and tied to the land in conditions akin to slavery, despite being legally "free"
- The system was reinforced by discriminatory laws and practices, including the use of the criminal justice system to force indebted black men into labor through convict leasing, further entrenching racial oppression
- Because banks were largely inaccessible to these laborers, they had no alternative but to rely on the exploitative credit system controlled by landowners and merchants
In sum, debt peonage maintained a socio-economic order in the Jim Crow South by economically enslaving African Americans and poor whites through a cycle of debt, limiting their mobility and opportunities, and preserving white supremacy and economic control in the post-Civil War South
