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"(Our) peculiar institution" was a euphemism for slavery and the economic ramifications of it in the American South. The meaning of "peculiar" in this expression is "one's own", that is, referring to something distinctive to or characteristic of a particular place or people. The proper use of the expression is always as a possessive, e.g., "our peculiar institution" or "the South's peculiar institution". It was in popular use during the first half of the 19th century, especially in legislative bodies, as the word slavery was deemed "improper," and was actually banned in certain areas.
Some[who?] see this expression as specifically intended to gloss over the apparent contradiction between lawful slavery and the statement in the Declaration of Independence that "all men are created equal". But, in fact, at the time this expression became popular, it was used in association with a vigorous defense of slavery as a good thing. One of the leaders in using the phrase, and in advancing the argument that slavery was a "positive good", establishing the proper relation between the races, was John C. Calhoun, most notably in his Speech on the Reception of Abolition Petitions. The March 1861 "Cornerstone Speech" of Confederate Vice President Alexander Stephens even argued that Jefferson's words in the Declaration were mistaken, and that the Confederacy's new Constitution, establishing "our peculiar institution", had rectified the error.