How did the slavery in the south affect the Confederacy's ability to fight the Civil War?
After the invention of the cotton gin the mass farming of cotton became economically viable in the South, which already had a commercial agrarian economy with tobacco as the major cash crop. Cotton and slavery became essential to the economy of Southern farming, but ironically at the same time it undermined that economy and guaranteed a lack of industrialisation.
Slaves, as a commodity, were expensive to purchase. Because they were human beings and not machines they had to be fed, clothed, housed and given medical care. Because they were not hired all costs were born by the slave-owners. These factors, plus the general costs of farming and doing business meant that the large plantation owners and all larger farmers were constantly in debt for the credit to run their operations for the next year. The large banks were mostly in the North, and so although Southern farm products were the backbone of the American economy the money did not stay in the South.
These factors, plus protectionist tariffs and legislation favoring manufacturing industries in the North, insured that Southern capital stayed invested almost entirely in agricultural production, with few large manufacturing plants. There was simply not enough investment capital in the South free to move into industry, as both money and credit were tied up in farms and slaves. Most of the economic power was in the North by 1860, along with most of the industrial capability, largely because of the economic costs of slavery.