What was the impact of slavery on the southern economy?

It also depends on what time frame you are referring to,
as colonial slavery prior to 1750 was much different than than the King Cotton slave
economy of 1800 - 1865.  In both cases though, reliance on slave labor for agriculture
prevented the South from diversifying economically and put them at a growing
disadvantage with the North.

We also have to admit that
slavery created a small but very wealthy and powerful class of landowners in southern
states that were to have a huge effect on the formation of the country in the early
years (many of the Founding Fathers were Virginia slaveholders) and the direction of
expansion and sectional tension in the 1800s.

With cotton
becoming the dominant crop in the South by 1820, the US became the leading exporter of
the crop to England's textile mills, giving the South a steady supply of income, and a
potential ally when the Civil War came.