Does Enslaving Others Help the Economy or Not?

Does Enslaving Others Help the Economy or Not?

Robert E. Wright, Nef Family Chair of Political Economy, Augustana University, for the Historians Against Slavery Symposium, Loyola University, New Orleans, La., 19 February 2016.

For millennia, the answer to the query posed in the title of this talk would have been “of course slavery helps the economy.” Even early abolitionists believed that slavery was an economic “necessity,” so they concentrated on the many immoral aspects of the institution. These early views were premised on the well-supported belief that enslaving others was profitable for enslavers. Surely some enslavers owned too many slaves or otherwise botched the management of their households or commercial enterprises but no economic institution of such ubiquity and longevity could have been unprofitable on average. Slavery of course began in prehistory and touched every major society on every inhabited continent.

In the eighteenth century, Benjamin Franklin, Adam Smith, and others argued strenuously that slavery was unprofitable because slaves did not have much incentive to work hard or smart. Enslavers and abolitionists alike knew claims of unprofitability were wrong, so their arguments, eloquent as they were, fell flat.

In the nineteenth century, by contrast, U.S. observers like Cassius Marcellus Clay, Hinton Rowan Helper, and Frederick Law Olmsted noted that slave districts did not keep pace economically with regions relatively devoid of slaves. Real per capita incomes were lower in the slave states, which also lagged the so-called free states in education, infrastructure, and other measures of development, i.e., the capacity to generate growth. All three authors blamed slavery for the discrepancy. It was not that slavery was unprofitable for slaveholders, they argued, it was that profitability did not ensure economic growth or development. During the Civil War, Irish economist John Elliott Cairnes made the matter clear:

Those who are acquainted with the elementary principles which govern the distribution of wealth, know that the profits of capitalists may be increased by the same process by which the gross revenue of a country is diminished, and that therefore the community as a whole may be impoverished through the very same means by which a portion of its number is enriched. The economic success of slavery, therefore, is perfectly consistent with the supposition that it is prejudicial to the material well-being of the country where it is established.

That slavery led to enslaver profit but economic backwardness became the standard interpretation, as in Lewis C. Gray’s History of Agriculture in the Southern United States to 1860, save of course in the racist literature inspired by Ulrich Bonnell Phillips, which argued that slavery was too paternalist to be profitable. Stan Engerman and Bob Fogel put that notion to bed in Time on the Cross and Without Consent or Contract. Subsequent studies, like John Majewski’s A House Dividing, documented the South’s relative economic backwardness without challenging slavery’s profitability for individual enslavers or even its economic efficiency, narrowly defined.

Recently, however, a bevy of books by Ed Baptist, Calvin Schermerhorn, Robin Blackburn and others have claimed that slavery was an indispensable part of the Industrial Revolution, the development of capitalism, and so forth. In their view, slavery was both profitable and crucial for economic growth and development.

These good folks are trying to lay the grounds for reparations but at the same time putting living people at increased risk of enslavement by providing developing world officials with yet another reason not to clamp down on human trafficking, debt peonage, child soldiering, and so forth. If slavery made the U.S. wealthy, as Baptist and his buddies claim, such officials reason, then aren’t antislavery efforts just another imperialist attempt to keep their nations impoverished? Perhaps slavery should even be encouraged. Maybe slavery is immoral, they reason, but the ends justify the means.

I believe that Baptist et al are wrong and Helper et al were right. For starters, slavery can’t be a necessary cause of growth because the Dutch became wealthy before they began enslaving others and the Scandinavians after they gave it up. It also can’t be a sufficient cause of growth because most slave societies did not experience sustained economic growth or development. The best that can be said of slavery is that it did not completely stop the growth or development of some economies, like that of the antebellum U.S. South.

But let me be clear that slavery did not help the overall U.S. economy. In fact, I’m sure that enslaving others always hurts the overall economy regardless of how profitable it is for individual enslavers or how efficient it is in narrow economic terms. That is because slavery creates very large negative externalities, or costs imposed on society rather than on enslavers. Slavery, in other words, is akin to pollution spewing from an unregulated factory. The factory owners get rich and the factory appears to be very efficient because it produces goods at a relatively low cost, but only because the people downwind and downstream of the factory pay the bulk of the costs in the form of dirty and poisonous air and water.

The negative externalities created by slavery are, unfortunately, more difficult to see than smoke plumes and dead fish but they did, and do, exist. They range from the socialized costs of controlling slaves by means of slave patrols, fugitive slave acts, public whipping posts, and insurrections to the opportunity cost of slaves’ lost talents. Other factors equal, slaves die younger than free people and are more likely to spread disease and suffer from debilitating accidents and psychological disorders. They are much less likely to be literate or to invent new tools or techniques. In short, masters deprive society of their slaves’ full human potential. Thomas Fuller, for example, did drudge work at his masters bidding instead of mathematics although he could solve complex arithmetic problems in his head faster than any of his educated, white challengers could do using pen and paper. From society’s standpoint, Fuller should have been a merchant or a census enumerator, not part of a potent military threat.

The problem with all of the recent studies that purport to show that slavery helped the U.S. economy is that they ignore the numerous negative externalities created by slavery. In other words, they forgot the lesson of Bastiat’s Window, or “That Which is Seen, and That Which is Not Seen.” In that parable by French political economist Frederic Bastiat, a boy breaks a shopkeeper’s window. Onlookers beseech the shopkeeper not to be angry with the boy because he has provided employment for a window maker. Bastiat grants that fact but notes “All this is that which is seen.” That which is unseen, Bastiat points out, is that due to the broken window the shopkeeper has less money with which to buy bread, wine, cheese, and so forth. So the boy’s actions did not help to stimulate the economy, as the onlookers suggested, but merely redistributed wealth from the bread maker to the window maker. Plus, the little bastard broke a window.

In Bastiat’s language, the profits of slavery are that which is seen. That which is not seen are the negative externalities caused by slavery, the death, destruction, and rapine that always accompanies the enslavement of others and that imposes significant costs onto society at large, i.e., the overall economy. In Baptist’s language, negative externalities are yet another half untold.

Measuring all the many negative externalities created by slavery with any degree of precision is difficult if not impossible but thankfully we do not need a close accounting to be convinced that they outweigh the benefits of slavery, which of course are only marginal. In other words, to discern the effects of slavery on the overall economy we should not compare the negative externalities to profits but only to those profits due to the use of enslaved labor, or, in other words, the enslavers’ profits minus the profits that he/she or it would have earned without the use of slaves. That is also difficult to measure precisely but we know it is usually relatively small, on the order of a few percent of total profits at most.

While developing this argument, it became clear to me that we should not maintain binary definitions of slave and free. Julia O’Connell Davidson’s Modern Slavery: The Margins of Freedom cemented that conclusion for me. I have therefore created a scale of freedom that ranges from 0 to 20 based on 20 questions about a given worker’s ability to make decisions for him or herself. Chattel slaves in a gang system score 0 on my freedom scale and today’s CEOs 20. Modern debt peons in India score a 3 or 4. Wage laborers in the antebellum North score about a 10, while wage laborers in the U.S. today generally score around a 15. The higher the score, the smaller the negative externalities that are created. So public policy should encourage increasing every worker’s freedom by as much as possible, starting, of course, with those with the lowest freedom scores, who we term modern slaves.

When I had lunch with Kevin Bales back in September, he responded enthusiastically to the notion of a scale of freedom but I have not yet heard back from him on the details. With your permission, I’d like to read the questions, which I have divided into three sections, direct methods of control, working conditions, and personal life, to you for your comments. You might think of your own work situation as I go through these. Yes answers get a 1, no a 0, sometimes or it depends a .5.

Keep in mind throughout that these questions relate directly to the employer-employee relationship and not to all constraints that workers face. A laborer confined to a wheelchair due to polio, for example, is not physically restrained by his or her employer but rather by reality. Similarly, workers who are allowed to seek, but cannot find, other employment are constrained by economic conditions, not by their respective employers. 

Direct Methods of Control:

1.      Is the laborer paid primarily in cash or other liquid asset (e.g., company stock)?

2.      Can the laborer own property on the same terms as his or her employer?

3.      Is the laborer free from physical restraints?

4.      Is the laborer free from psychological constraints?

5.      Is the laborer not legally required to work?

6.      Is the laborer inalienable (unsalable or otherwise nontransferable to another employer without his or her consent)?

7.      Is the laborer incapable of owing his/her employer significant sums or of being listed as collateral security for an advance or other loan payable to his/her employer?

8.      Has the worker not been subjected to “seasoning” designed to break his/her will to find other employment?

9.      Does the laborer have freedom of movement in order to search for other employment?

10.  Can the laborer quit without monetary or other loss?

Working Conditions:

11.  Can the laborer control his/her work schedule?

12.  Can the laborer control the total hours s/he works?

13.  Can the laborer control the tempo of his or her work?

Personal Life:

14.  Is the laborer not legally “dead,” “socially dead,” or otherwise alienated from the formal or dominant social order?

15.  Does the laborer not belong to a group that has been “dishonored?”

16.  Can the laborer determine his/her own name?

17.  Can the laborer determine what to consume and where to buy consumption goods?

18.  Can the laborer choose his/her place of residence?

19.  Is the laborer able to marry on the same terms as his or her employer?

20.  Does the laborer control his or her own children on the same terms as his or her employer?

Again, the argument is that less worker freedom means more negative externalities which means less growth and development. The effect is most pronounced with slaves but any increase in freedom for any worker should have beneficial effects on the overall economy. Any questions or observations on any of this?