Explain why the South was generally excluded from industrial development and fell into a "third world" economic dependence?
I must respectfully disagree with the above response. From the founding of the southern colonies, the economy of that region had been based on large scale agriculture, primarily staple crops such as tobacco, rice and indigo. Later these were replaced with cotton which the south sold to both European and northern manufacturers. The south did not industrialize as it saw no need to; its economy was quite sound, although it had unwittingly become dependent on the north and Europe for manufactured goods. Obviously, large scale agriculture requires a large input of labor, and this was supplied by slaves; however it was not under any circumstances a stubborn insistence on retaining slavery; slavery to the south was necessary for its economy to survive. The above answer has the carriage before the horse.
With the emancipation of slaves, large scale farming interests in the south largely collapsed, and the south did industrialize to an extent, largely with textile manufacturing. However, during the ante bellum period, the southern economy functioned as it had for over two hundred years, and southerners saw no good reason to abandon it. Industrialization to the south was not necessarily progress; in fact most southerners believed that slaves were better off than northern factory workers as they were guaranteed food and shelter and were not turned into the streets when they were too old to work. Northern workers enjoyed no such protection. The argument that the south cut offr its nose to spite its face by stubbornly holding on to slavery as a matter of principle is a fallacy often used by those who neither understand history or have any desire to do so.
The reason for this was slavery.
Slavery is generally said to have made it impossible for the South to industrialize. It also made it depend on the North and on places like England. The reason for this is that slavery is incompatible with industrialization. Slaves don't make good factory workers because they could "accidentally" destroy machinery too easily. In a slave society, it is hard to invest in industry as well because the rich people's money is generally tied up in slaves. For these reasons, the South couldn't industrialize and ended up selling raw materials (cotton) to the North and other countries and buying back finished goods (a classical colonial relationship).