Tuesday, February 28, 2017

Selling Slavery: Conflating Profits with Prosperity in the Early Republic

Apologies for the last post but I hit both the ASSA/AEA and the AHA this year, while teaching an intensive January course to boot! So this slipped my mind until now.

Selling Slavery: Conflating Profits with Prosperity in the Early Republic
Robert E. Wright, Augustana University, at the American Historical Association Conference, Sheraton Denver, CO, 7 January 2017, 1:30-3:00 p.m. Governor’s Square 15

Slavery in America was often called the “Peculiar Institution” but what is truly peculiar is the historiography of slavery. From about 1850 until about 2010, people opposed to slavery held that slavery hurt economic growth, defined as increased, inflation-adjusted per capita aggregate output and measured by indices like GDP, and development, defined as the capacity for growth and measured by various indices of literacy, education, technology, and infrastructure. People who argued during that period that slavery aided economic growth and development were racist, pro-slavery advocates like George Fitzhugh, or, like Robert Fogel and Stan Engerman, they were castigated as racist, pro-slavery advocates by various liberals and progressives.
That equilibrium made good intuitive sense because it allowed anti-slavery thinkers to advocate abolition on both moral and economic grounds. No tradeoff between morality and growth was necessary on either side; either slavery was all bad or it was all good. In recent years, however, a spate of books by Ed Baptist, Sven Beckert, Robin Blackburn, Walter Johnson, Calvin Schermerhorn, and others has attempted to break the equilibrium by maintaining that slavery, while a moral evil, aided, nay caused, U.S. economic growth and development. None of those authors has been called racist because their goal is to make a case for general reparations from taxpayers to the descendants of slaves. Such a policy, though, would be fraught with difficulties, the most important of which is that slavery actually hurt the overall U.S. economy.
As I show in Poverty of Slavery: How Unfree Labor Pollutes the Economy, which Palgrave is publishing in early March of this year, slavery creates profits for enslavers but it does not stimulate growth or development. Most obviously, only a few slave nations grew rich and some grew rich without, or before, becoming slave powers. Without having to run a single regression, we therefore know that slavery is neither a necessary nor a sufficient cause of economic growth.
Poverty of Slavery also shows that slavery could not have aided growth or development at the margins either. That is because slavery creates huge negative externalities, or costs not born by enslavers. So while slavery was often profitable for enslavers, its marginal net effect on the economy was clearly negative when the costs of controlling slaves and numerous other negative externalities, like decreased innovation, population, and non-slave wages, are accounted for. That holds not just for the antebellum U.S. but for every slave society the globe over since prehistoric times. Those few slave nations that attained wealth and development did so despite slavery, not because of it.
Without the concept of negative externalities, which economists did not formally name until the early 20th century, identifying the poverty induced by slavery is difficult to discern. That is why prior to about 1850 or so abolitionists were often silent about the economic effects of slavery. They knew that slavery was a ubiquitous institution because it was usually profitable and feared that those profits meant that slavery stimulated growth and development. So they remained fixated on the moral and religious aspects of the institution, a message that many Americans did not find compelled them to action. Early proslavery thinkers also did not calculate the negative externalities created by slavery, yet they often downplayed the profitability of enslaving others for rhetorical and competitive reasons, so they, too, generally concentrated on the cultural and religious effects of enslavement.
Those who came to see the negative externalities created by slavery became abolitionists because it removed all doubt from their minds. Hinton Helper was the most famous of these. His Impending Crisis is basically an extended, if somewhat sloppy, analysis of the negative externalities created by slavery. “Slavery,” he wrote, “benefits no one but its immediate, individual owners, and them only in a pecuniary point of view.” “Does the slaveholder, while he is enjoying his slaves,” Helper wondered, “reflect upon the deep injury and incalculable loss which the possession of that property inflicts upon the true interests of the country?” Or my favorite: “Slaveholders! … You are daily engaged in the unmanly and unpatriotic work of impoverishing the land of your birth. … Your conduct is reprehensible, base, criminal.”
Helper was not the first to separate profits from growth and development, nor was he the first to point to the many costs that slaves imposed on the larger economy. In 1764, Philadelphia merchant Nicholas Waln wrote to Richard Waln: “The illicit Trade wch has been carryed on a long time has probably enriched the Individual, but I believe in the Event will extremely derogate from the Good & true Interest of the Colonies.” A few years later, a writer in New York also noted that “a Merchant may, and often does, get rich by a Trade that makes his Country poor.” In one of his famous state papers, Alexander Hamilton also noted that profits and economic growth were sometimes incompatible. In 1817, Littleton D. Teackle of Maryland noted that “merchants, speculators, stock-jobbers and money changers … may flourish and get rich though the country be ruined.”
The notion that the enslavement of others was one of the activities by which a few became enriched at the expense of the whole can be dated back to at least Jean Bodin, a sixteenth century French philosopher, 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 “always in daunger of trouble and ruine, by the conspiracie of slaves combining themselves together: All Histories being full of servile rebellions and warres.” Eighteenth century German scholar Johann Gottfried Herder also clearly saw that slavery created social costs not borne by slave masters. He attributed to slavery the spread of syphilis and the devastation of three continents.
In the early nineteenth century, the notion that slavery imposed large costs on non-slaveholders gained traction in America. In 1805, Thomas Branagan of Philadelphia compared slavery “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.” George Mason had also likened slavery to a “slow Poison” and in 1832 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 “a very lucrative business.” Virginians would not be allowed to raise “the far-famed Upas tree” (the “Tree of Death”), he argued, even if it grew entirely on their own private land. That same year, Charles James Faulkner said the same thing but much more directly before the Virginia House of Delegates: “Slaves are injurious to the interests and threaten the subversion and ruin of this Commonwealth.”
Just a year later, on the other side of the Atlantic, Joseph Conder argued that free laborers cost society less than slaves did because slavery encouraged “a wasteful and deteriorating husbandry” due to its reliance on monoculture and primitive tools as well as “contingent social evils, which demand a precautionary provision.” “The ultimate cost of slavery,” he concluded, also included “the state expenditure which it renders necessary in order to provide against the dangers inseparable from the existence of a servile class.”
Such arguments could at first be dismissed as mere rhetoric but as the years turned into decades one of the greatest natural experiments in history, the division of the United States into free and slave slaves, helped observers to test the negative externality hypothesis. As early as 1824, the economies of Pennsylvania and Virginia were compared and the former found superior. Several decades later, the economic differences between otherwise comparable free and slave states were even more pronounced, a point made forcefully by Cassius Clay, a Kentucky slaveholder ‘mugged by reality’ and converted to the antislavery cause. Despite Virginia’s natural advantages over New York, the latter exceeded the former in “the elements of National prosperity and glory; wealth, numbers in new countries, literature, industry, the mechanic arts, scientific agriculture, &c.” Slavery, Clay concluded, was clearly to blame. “The twelve hundred millions of capital invested in slaves is a dead loss to the South,” he declared, predicting, accurately, that the free North would defeat the slave South in a civil war.
At the outset of that war, Irish economist John Elliott Cairnes established the orthodox view that held until about 2010:
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.
Before closing, I need to make clear that the issue of externalities and the economic effects of slavery is not a merely academic one. In case you haven’t heard, slavery did not end in the nineteenth century, it merely changed form, into debt peonage, bonded labor, sex trafficking, child soldiers, and myriad other forms. Although unfree laborers compose a much smaller portion of the global work force than ever before, in absolute numbers they are now more numerous, between 30 and 45 million by common estimates, than at any time in history. The notion that slavery can jumpstart economies can, and has, been used to justify enslaving people today. Claims that Britain and the U.S. grew rich due to slavery have emboldened those in developing nations to ignore international anti-trafficking protocols on the supposition that it is not fair for the rich nations to prevent poor nations from catching up economically by outlawing a key growth driver. What this paper, and Poverty of Slavery, re-establish is that slavery is not just immoral, it is bad economics because any economic benefit produced by enslavers’ marginal profits, the profits earned above and beyond what would have been earned using a less coercive labor regime, is more than wiped out by the societal costs created when people are forced to work against their will. This in no way diminishes the sacrifices of African-American slaves or indeed any other group enslaved in the past, which, by the way, would include most people alive today. It does, however, suggest that general reparations for slavery are not merited and that the descendants of slaves should look to the profits created by their ancestors for recompense.
Thank you.

Punched in the Gut, Twice

This first appeared on the blog of Historians Against Slavery.

Whenever I hear anyone earnestly claim that slavery is/was good for the economy, I feel like I have been punched in the stomach, twice. That is because I’m a neo-abolitionist and a scholar of economic growth who knows that slavery causes only poverty.

My first seven books, from my dissertation (unpublishable at 1,300 pages) through Financial Founding Fathers, explored the finance-led growth hypothesis, the notion that financial services like intermediation and risk management cause economic growth. While writing those books, I noticed the crucial role played by the protection of human rights, especially the rights to life, liberty, and property, underlying financial development. That led to books like One Nation Under Debt and Little Business on the Prairie. I also noticed that economic growth was often impeded by irrational institutions and public policies of dubious quality, themes I explored in books like Broken Buildings Busted Budgets, Bailouts, Fubarnomics, Corporation Nation, Genealogy of American Finance, and, ultimately, The Poverty of Slavery.

Nobody seriously doubts the claim that slaves were important components of many economies, especially the economies of slave societies like the antebellum U.S. South. But many important factors of production can be adduced and none of them are causal in any fundamental sense. What differentiates wealthy (high real output per capita) economies from poor ones is the incentive to produce goods for market. People in poor countries fear for their lives and property, just as the colonists in British North America did before, during, and just after the Revolution. The Constitution, and the policies enacted during the Washington administration, changed that and the U.S. economy has been growing at more or less modern rates ever since, subject only to the periodic and temporary reversals associated with business cycles.

The U.S. economy should have, indeed would have, grown faster early on but it was held back by slavery, which created enormous negative externalities, or costs not borne by enslavers. Slave patrols, public whipping stations, standing military garrisons, and fugitive slave acts were among the most palpable ways in which enslavers milked taxpayers to keep their wretched system alive. The fact that slaveholders were heavily subsidized became widely understood by the late antebellum period and helped lead to the sectional break that ended in civil war.

The Poverty of Slavery describes the negative externalities created by enslavement in great detail, not only in America but in every major slave society across the globe, from 10,000 BCE to the present. It pays particular attention to the ways in which enslavement changed in response to the Great Emancipations of the nineteenth century and, while doing so, defines slavery along a 20-point scale of freedom designed to allow scholars and activists to identify subtle differences in the lived experiences of sundry types of laborers, both free and unfree, across time and space.

The final chapter explains that slavery must be ended, once and for all, because it is always a moral abomination and a drag on prosperity. Eradication must entail catching and convicting enslavers and stripping them of their wealth. Then, and only then, will they conclude that slavery does not pay and give it up. We will all be the better, both spiritually and materially, for de facto abolition.

Monday, February 13, 2017

Bad News: Banning Muslims May Be a Prelude to Killing Them

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If X wants to kill Y, X is going to figure out a way to kill Y. If Y tries to stop being killed by banning X, all that will do is induce X to look like ~X to get around the ban. Y would be much better off by discovering why X wants him/her dead and coming to terms.* If it is not possible to resolve the dispute (or if Y won't even bother to try due to prejudice), then the only rational solution is for Y to kill X first (or be prepared to die but the ban suggests Y is not up to that). So, bad as the ban is, it may only be the tip of the proverbial spear.

*What Trump should do instead of a ban, then, is to pull the U.S. military and oil interests out of the Middle East. We don't need the oil there anymore and Israel can take care of itself at this point (and we'll always have missiles, drones, aircraft carriers, and submarines if necessary). That essentially would turn Americans into Canadians in the eyes of Muslims. Americans are safe and we can redeploy our military assets or, better yet, wind them down.

Addendum 3/19/17: What was that song? "It's no fun, being an illegal alien?" Seems an understatement now.