Ignoring the moral abomination of using slaves in this way, it would seem like a wise investment for Northern business owners to make a deal with Southern slave owners for cheap labor to produce materials in new factories in the South, especially since the cotton gin was invented over 60 years prior to the start of the war. So what stifled Southern industrialization?
Hey! This is something I might be able to answer.
So my focus is on Post-War Georgia, very specifically some of the effects of "New South" industrialism on the Post-Bellum class structure, but a big portion of that involved reading a lot about what industrialization had already occurred before the war.
Long story short? There were attempts, but cash crop farming was just so much more profitable and the culture of the South was built around the agrarian lifestyle.
The majority of industry in the South, both before and after the war, was in textile manufacturing, which makes perfect sense when you consider the raw materials involved. The first attempts at Southern Industrialization actually occurred due to the War of 1812 and the British Embargo. Prior to this, the primary market for exported Southern Cotton was in Great Britain and France, and it was actually cheaper to ship the cotton to Britain, have it made into textiles there, and then re-import the textiles. But due to that first embargo, Southerners started experimenting with textile manufacturing of their own. However, that ended pretty quickly after the War of 1812 ended, and the British flooded the market with cheaper goods. [1]
For Southern planters, it was EXTREMELY profitable to just keep doing that. There wasn't really much incentive to go out of their way to finance a native textile industry yet. There were also structural incentives to just keep on doing things this way, as well. The Antebellum class structure had Planters up at the top, then Yeoman (Middle class farmers who owned their own land), Tenant Farmers, Sharecroppers, and Slaves.) The Planters were very well aware of their position at the top of this pyramid, and their small number, especially after the Haitian Revolution of 1791. In "Plain Folk And Gentry in a Slave Society," J. William Harris argues that Planters appealed to a shared identity as "cultivators" and formed networks of personal relationships through churches and other public events to build up solidarity among the different white classes. Industrialization posed a threat to this, as could be seen in the North. Creating a class of urban, industrial white laborers that felt exploited by the wealthy in society would pose a direct threat to Planter interests, and certainly did during the 1880s and 1890s. [2]
All that in mind, there were quite a few attempts, especially later on. During the Nullification Crisis, Southern Planters generally (and in some cases correctly) believed that Northern Capitalists were trying to use Protective Tariffs in order to hurt Southern interests, particularly slavery. Tariffs made it more expensive to trade internationally, and the Planters were mainly selling cotton in Europe. Tariffs made that more expensive and forced the Planters to sell their goods to Northern factories, like the Lowell Mills in Massachusetts. This prompted a second round of industrialists, like Henry Harford Cumming, to try and develop a native Southern textile industry, railroads, etc. that could compete with Northern industry on its own terms. But, due to some of the aforementioned reasons, it was relatively difficult for them to acquire the capital necessary to finance their projects, so it was slow-going. By the end of Reconstruction, though, those mills and railroads would become the backbone of Southern Industrialism during the "New South" Era.