Hamilton and the Economics of Slavery
Robert E. Wright, Nef Family Chair of Political Economy, Augustana University
Prepared remarks given 7/10/17 at Fraunces Tavern Museum:
I don’t think that Alexander Hamilton lived long enough, or did enough in the cause of antislavery, to quite deserve the label ABOLITIONIST, i.e., a person who actively sought to end slavery throughout the United States. While his hands were not entirely clean when it came to the ownership of other human beings, they were much, much cleaner than those of most of the Founders, including those of his mentor, George Washington. Part of this was the mere luck of being born poorer than any other Founder, or certainly any of the major Founders, with the possible exception of Franklin, who probably not coincidentally also came to hold antislavery views. But Hamilton’s brushes with slavery as an adult were also due more to chance than design. I’m thinking here of his marriage into one of New York’s wealthiest families and his long residency in Manhattan, that part of his adopted state most amenable to the peculiar institution.
Had more of his correspondence survived, or indeed if Hamilton himself had lived long enough to find the leisure time to wax eloquent about his views, we would enjoy a much more definitive understanding of Hamilton’s views on slavery. As matters actually stand, we have to piece together the most plausible story we can, which I think would conclude that Hamilton, had he lived, would have developed economic abolitionism decades before Hinton Helper did.
Economic abolitionism is much less studied and understood than its moral cousin, or what we might call mainstream abolitionism. For most abolitionists, slavery was immoral, plain and simple, because it was an abomination unto the Lord and/or unto natural reason or natural law. Many mainstream abolitionists did not, and would not, discuss the economic aspects of slavery. Most were not deep economic thinkers and intuited that they would lose any economic argument with slaveholders. Others grudgingly conceded that slavery was an economic good but found it repulsive to even think about exchanging material well-being for the suffering of the enslaved.
The great classical economist Adam Smith took a stab at economic abolitionism and failed badly. He argued that, regardless of race, free people were always more productive than slaves because the latter had but paltry incentive to work hard or smart. All they would do was the bare minimum to avoid punishment and they would resist and steal at every opportunity, views also held by Franklin. Smith, a careful student of history, had to concede that the world had always been full of enslavers, which he explained proved only that people really liked to enslave others. Nobody who saw firsthand the large profits produced by many slave plantations could follow Smith’s weak brand of economic abolitionism.
What finally convinced people that slavery was bad for the economy, that it reduced real per capita output and stymied development, was the concept of pollution, or what economists today call negative externalities. Everyone knew that, say, a tannery could be fabulously profitable but destroy a sizable town downstream. Total economic activity was therefore not the sum of private profits, it was the sum of private profits minus the costs of pollution, and other negative externalities. Ergo, slave plantations could be profitable but actually hurt the overall economy by creating costs borne by the rest of society. Enslavers’ profits were, in essence, stolen not only from the enslaved but from non-slaveholders as well.
The notion that slavery created large negative externalities percolated for centuries before culminating in Hinton Helper’s 1857 opus, The Impending Crisis of the South. That the enslavement of others enriched a few at the expense of the whole can be dated to sixteenth century French philosopher Jean Bodin, who argued that the profits created by slaves were offset by the fear induced by the institution in both slaves and the general population. As Bodin put it, slave societies were quote always in daunger of trouble and ruine, by the conspiracie of slaves combining themselves together: All Histories being full of servile rebellions and warres. unquote Johann Gottfried Herder, an eighteenth century German scholar, also clearly saw that slavery created social costs not borne by enslavers. His major example of a negative externality caused by slavery was the spread of syphilis, which devastated three continents.
The idea that slavery imposed large costs on non-slaveholders gained traction in early nineteenth century America. In 1805, Philadelphia’s Thomas Branagan compared slavery quote to a large tree planted in the south, whose spreading branches extends to the North; the poisonous fruit of that tree when ripe falls upon these states, to the annoyance of the inhabitants, and contamination of the land which is sacred to liberty. unquote George Mason had also likened slavery to a quote unquote slow Poison and in 1832, following a slave rebellion, fellow Virginian Henry Berry argued that slavery was akin to raising tigers, something the state certainly had an interest in arresting, even if it was quote a very lucrative business. unquote Virginians would not be allowed to raise the Upas tree or Tree of Death, Berry argued, even if it grew entirely on their own private land. In that same debate, Charles James Faulkner stated the matter directly: quote Slaves are injurious to the interests and threaten the subversion and ruin of this Commonwealth. Unquote
In 1833 British abolitionist Joseph Conder argued that free laborers cost society less than slaves did because slavery encouraged quote a wasteful and deteriorating husbandry unquote due to its reliance on monoculture and primitive tools as well as quote contingent social evils, which demand a precautionary provision unquote. The ultimate cost of slavery, he concluded, also included quote the state expenditure which it renders necessary in order to provide against the dangers inseparable from the existence of a servile class. Unquote
Former Kentucky slaveholder Cassius Clay converted to the antislavery cause after he took up a methodology, first tried in 1824, of comparing the economies of free and slave states. Despite Virginia’s natural advantages over New York, he noted, the latter exceeded the former in quote the elements of National prosperity and glory; wealth, numbers in new countries, literature, industry, the mechanic arts, scientific agriculture, &c. unquote Slavery, Clay concluded, was clearly to blame for Virginia’s economic retardation. Quote The twelve hundred millions of capital invested in slaves is a dead loss to the South, unquote he declared, predicting, accurately, that the free North would defeat the slave South in a civil war.
Helper took those hints and ran with them. Although his execution proved poor in places, Helper showed in devastating detail that the free states were economically superior to comparable slave states and then convincingly argued that slavery was the culprit because of the pollution necessarily created when holding millions of human beings in abject bondage. Republican politicians soon extended Helper’s ideas to claim that enslavers effectively taxed Northern workers in several ways, only the most palpable of which was the Fugitive Slave Act. The South’s poor whites were probably the biggest non-slave victims of slavery because enslavers did not support public education or quality transportation systems that would have allowed Buckram, as they were derisively known, from having a shot at bettering their condition. Who then would man the nightly slave patrols that allowed enslavers to sleep?
So slavery was not just a moral atrocity, it was economic theft en masse, one well worth fighting to end. During the Civil War, bona fide economists like John Elliott Cairnes adopted the negative externalities view of slavery. Cairnes argued:
QUOTE 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. UNQUOTE
That remained the orthodox view until about 2010. The debate sparked by Time on the Cross in the 1970s was more about the relative efficiency of free and slave labor. All Fogel and Engerman did was to re-establish that Smith and Franklin were wrong, that slaves could be more efficient than free laborers under certain circumstances. In the twenty teens some so-called historians of capitalism began to argue something much broader, that slavery made the U.S. and U.K. wealthy. Economic historians have successfully attacked their sloppy work, which hopefully has been completely put to bed by my book The Poverty of Slavery: How Unfree Labor Pollutes the Economy, which came out of Palgrave this spring and copies of which are available for sale here.
Killing off the notion that slavery can cause economic growth and development will be an important victory for the modern antislavery movement. Slavery, you see, did not end in the nineteenth century in the U.S., or anywhere else for that matter, it merely changed names and forms into debt peonage, bonded labor, white slavery, and child exploitation. Today, we call it by such euphemisms as sex trafficking and unfree labor. Although the percentage of people enslaved today globally is less than it probably has been at any point in world history, 30 to 40 million people remain enslaved worldwide and that is 30 to 40 million too many. We did not need some Ivory Tower, Ivy League historians to strengthen modern slavery by claiming, more out of ideological conviction to support reparations claims than an understanding of economic growth processes, that slavery can stimulate economic growth and development.
Of course, those are the same types of scholars who don’t understand Alexander Hamilton’s contribution to modern America very well. Hamilton wasn’t a royalist, he was a republican, of the constitutional monarchist variety at times, but not because he was an aristocrat. As noted earlier, he came from a very humble background. He wanted strong checks on each of the three branches of government in case a demagogue ever became president (as if!), Speaker of the House, or chief justice of the Supreme Court. Even when he spoke of constitutional monarchy, Hamilton did not advocate an authoritarian state, but rather sought bulwarks against tyranny, specifically the tyranny of the majority.
As I show in One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe, copies of which are available for sale here, what Hamilton ultimately wanted was an energetic government that provided public goods as efficiently as possible. That meant providing national defense and protection of citizens’ lives, liberty, and property at the lowest possible cost. Hamilton did not want a big government by today’s standards, he wanted one bigger than that desired by Thomas Jefferson, which Hamilton believed would be too weak to protect the young United States from foreign threats. Jefferson did not want an energetic federal government because it threatened slavery; he and his slaveholding followers hated Hamilton because they feared that he was the man most capable of threatening the peculiar institution.
Hamilton did not want any person to be under the absolute control of another, even a political leader. So at the end of his pamphlet The Farmer Refuted, Hamilton made clear that he was convinced that quote the whole human race … [was] intitled [to] civil liberty, … [which he considered] in a genuine unadulterated sense … [to be] the greatest of terrestrial blessings. unquote Importantly, Hamilton believed that people of all races were fully human. When he said that all men had the right to the administration of justice, there was no implied asterisk by the word men. I can’t credibly argue that Hamilton held no racial prejudices but belief in the systematic exclusion of any group of citizens from civil society was not among his shortcomings.
In a letter to John Jay in 1779, Hamilton believed that “negroes,” a polite term for African-Americans at the time, would quote make very excellent soldiers, with proper management … [because] their natural faculties are probably as good as ours unquote. Whites, Hamilton lamented, were quote taught … contempt … for the blacks [which made them] fancy many things [about Negroes] that are founded neither in reason nor experience unquote. One might dismiss such sentiments as so much fodder in favor of Hamilton’s desire to enlist African-American troops for the cause but Hamilton also wrote that quote the dictates of humanity and true policy equally interest me in favour of this unfortunate class of men unquote. He thought that arming blacks would not only allow them to defend themselves but also spur slaves to shake off their shackles.
In 1785, Hamilton helped to form the New York Society for Promoting the Manumission of Slaves, an NGO that encouraged New Yorkers to let their slaves go free and that hoped to prevent their re-enslavement, or the kidnapping and enslavement of free blacks, through registration. Three years later, Hamilton’s good friend, the Marquis de Lafayette, updated Hamilton on France’s new policies quote Respecting the Negroe trade, and slavery unquote. He then begged Hamilton to subscribe him to the anti-slavery societies in New York and elsewhere. Hamilton remained a member of the society until his death, and was elected counsellor of the society in 1803, but he was active only in spurts because his overriding goal was preservation of the precarious Union that he had helped forge. Without the Union, the liberties of all Americans, black and white, would be endangered.
When commenting on the Jay Treaty, which he generally favored, Hamilton approved of the emancipation of American slaves during the Revolution by the British because quote it would have been still more infamous to have surrendered them [freed slaves] to their Masters unquote. The peace treaty, Hamilton noted, did not require the British to restore property, just to not carry any away. But once captured by the British, slaves were freed and hence stopped being property.
In addition to opposing slavery on moral grounds, Hamilton clearly understood the concept of externalities, both positive and negative. In his report on manufactures, Hamilton noted that manufacturing created positive economic spillovers, specifically an increase in quote unquote ingenuity. Hamilton also noted that alcohol consumption created negative externalities, like decreased productivity, which is why he personally preferred strong coffee over arduous spirits. In his report on the Bank of the United States, Hamilton argued that by printing too much fiat paper money, governments could create negative externalities in the form of an inflationary bubble quote incompatible with the regular and prosperous course of the political economy unquote.
All that remained for Hamilton to become an economic abolitionist was to observe the economic differences between slave and non-slave states and to explain their differences by referencing negative externalities. When he died in 1804, the differences between North and South, and free and slave, were not yet as palpable as they would become. Had he lived into the 1820s or 1830s, as Jefferson, Adams, and Madison did, Hamilton would certainly have learned of the increasing economic differences between the two sections and put his keenly analytical mind to explaining why. As I show in One Nation Under Debt, Hamilton was nothing short of an economic genius. There is no doubt that he was economically more astute than any of the economic abolitionists, including Cassius Clay, Hinton Helper, or even J. E. Cairnes. It is difficult to believe that he would have missed the application of negative externalities to slavery.
Albert Gallatin, America’s second greatest treasury secretary, was born just a few years after Hamilton, and lived until 1849. Although a member of Jefferson’s entourage, Gallatin long opposed slavery. Like Hamilton, Gallatin was a member of his adopted state’s abolition society in the 1790s. While lamenting the loss of innocent lives in the Haiti uprising, he believed the uprising itself just retribution for “the crimes of so many generations of slave-traders and slave-holders,” a sentiment similar to one that Hamilton expressed during his 1789 eulogy of Revolutionary War General Nathanael Greene that rendered him persona non grata with the Jeffersonian slaveholding elite. Unsurprisingly, Gallatin did what he could to stop the expansion of slavery into new U.S. territories but at the same time admitted he was tempted to buy slaves to help build his estate in western Pennsylvania. He resisted the temptation, though, and in one of his last public acts he opposed the annexation of Texas, and the subsequent war with Mexico, on general antislavery grounds.
Although antislavery in principle, Gallatin was no abolitionist because, like Edward Everett, he ultimately valued the Union over the lives of slaves. Gallatin therefore spent his last years studying the plight of American Indians instead of slaves. Moreover, slavery remained simply a moral problem for Gallatin as well as for Everett. Hamilton was too astute an economist not to have discovered economic abolitionism. Although he, too, would have been loath to endanger the Union, he would have seen, as Helper and others later did, that slavery was not only a political threat to the Union, it was an economic threat because it created two economies – not one slave and one capitalist, whatever that means – but one a horrid Southern vampire that sucked resources out of the other by imposing massive negative externalities on it. The most telling evidence of that fact is that the Confederate states seceded not because Lincoln threatened to free the slaves but because he threatened merely to remove federal subsidies for slavery. Without those subsidies, slavery would have unraveled, and perhaps in an ugly way. Now imagine Hamilton during the Missouri or Nullification crisis arguing, in his usual indomitable way, that federal subsidies for slavery, which ranged from the postal service to river clearing to fugitive slave laws, had to cease. I think the South would have capitulated but worst case scenario the North would have won the Civil War in the early 1820s or 1830s instead of the 1860s.