How did slavery affect the development of the Southern economy?
It was the main activity of the Southern economy and thwarted industrialization.
Before the Civil War, the North tended to have an economy that was increasingly industrial, it was not the case in the South. The economy in the South was much more based on agriculture, and it was thus much more rural(it had only three major cities, New Orleans, Vicksburgh and Atlanta) as well as the capital of the Confederacy Richmond Virginia.
On the eve of the Civil War, the South had 4 million slaves(the population was roughly 9 million people. Most white people did not own slaves(those who were slaveowners had less than 10 slaves generally) and were poor farmers working on the lands left over by the planters. 80 % of the industries were in the North which explains why the South eventually lost the war.
The Civil War ravaged the South, nevertheless it made possible its industrialization by destroying the institution of slavery and the aristocracy which thrived on it. The exportation of cotton had brought great wealth to the south, but the wealth had been unevenly distributed.