Whitney’s innovation vastly lowered the price of cotton. Before Whitney’s cotton gin, producing cotton was economically inefficient because of the enormous cost to separate cotton from seeds. After the innovation, cotton became a profitable crop.
Background
Coming of age during the Revolutionary War, Whitney made a nail company, at the age of 15. Later, he made hatpins. In May 1789, at age of 23 (unusually old for the time), Whitney attended to Yale, graduating in 1792. Being neither wealthy nor well-connected Whitney couldn’t find work and another Yale student, Phineas Miller, found him a job as a tutor in South Carolina. During his journey, he met Catharine Greene, widowed wife of Revolutionary War General Nathanael Green. All revolutionary leaders knew and respected General Green.
While living with Greene, Whitney invented the cotton gin to automatically separate cotton fibers from seed. Before the cotton gin, the separation process was labor intensive. Cotton was not economically viable crop, even using slave labor.
Patent Fail
Farmers ignored Whitney’s patents and copied his cotton gin despite patent protection. The cotton gin vastly reduced the price of cotton which increased the value of slaves in the southern US on cotton plantations. Before the cotton gin, slavery was trending towards being economically unviable and the number of slaves was dwindling because farmers did not have enough work to justify owning slaves. After the cotton gin, slavery vastly increased.
Besides patent fail, the gin failed due to Whitney’s business model. Rather than sell gins or licenses, Whitney created central factories and demanded one-third of the cotton cleaned, a price set by his law school fiend Miller (note a pattern where lawyers think the law can protect against the market). Instead of paying, farmers made knockoffs and risked lawsuits rather than paying the steep price.
Whitney’s lawsuits (over 60 at one point) went nowhere. “I had great difficulty to prove that the machine had been used in Georgia and at the same moment there were three separate sets of this machinery in motion within fifty yards of the building in which the court sat and all so near that the rattling was distinctly heard on the steps of the courthouse,” Whitney wrote to Fulton. (Evans, Harold. They Made America: From the Steam Engine to the Search Engine: Two Centuries of Innovators).
By 1797, Whitney and Greene were effectively bankrupt. Whitney did collect some money in 1807 but by then was off to his standardized parts project.