Alexander Hamilton and the Poverty of Slavery

Alexander Hamilton and the Poverty of Slavery

By Robert E. Wright for the Alexander Hamilton Awareness Society at the Hamilton Grange in Manhattan, 22 February 2020, 1 p.m. ET

A spectre haunts the world, the spectre of the widespread return of slavery. A thorough dose of Hamiltonian economics, however, could save the world from this blight.

If suggesting that slavery could again haunt the world sounds alarmist to you, consider the following:

1.     Slavery is one of the few constants in world history. Although only a relatively few places became slave societies dependent on unfree labor, almost every society has countenanced slavery in some form or another and ample evidence suggests that slavery even existed in prehistory. Slavery has been so ubiquitous there is probably not a person alive today who is not descended from at least one slave and at least one slaveholder.

2.     Throughout the world today, tens of millions of people are enslaved. Slavery is illegal so estimates vary but the trend is upward and 40 million is a widely accepted round number. That likely is more individuals than in any previous epoch. Because of the 20th century population explosion, those 40 million enslaved souls represent perhaps the lowest percentage of people enslaved in human history but that simply means there is ample room for growth.

3.     And, indeed, the supply of potential slaves increases daily. Modern slavery is not explicitly racialized; enslavers feed upon the economically vulnerable regardless of their creed, color, or gender. The trafficking of females for sex has received the most attention but sex slavery is only part of much broader systems of forced labor practiced over broad swathes of the globe.

4.     Demand for slaves is also growing as producers without access to financial or high tech physical capital attempt to compete with AI-enabled robotics by driving down labor costs to their bare physical minimum, at which almost nobody willingly works.

5.     Most modern slaves are not chattels enslaved for generations but instead are what Kevin Bales calls quote unquote disposable people, whose slavery ends in a few years due to death or disability. Those few who escape find freedom fraught as former sex slaves are often stigmatized and former debt peons and other types of forced laborers rarely receive reparations or even help with repatriation. They re-enter society scarred emotionally, and often physically as well, often with little support unless they are fortunate enough to come to the attention of a rehabilitation NGO. 

6.     While slavery seems to be widely abhorred today, both major barriers to its widespread legalization or its de facto re-imposition have eroded in recent years.

What are those barriers? For over a century, most people agreed that slavery was immoral and detrimental to economic growth and development and hence not to be countenanced for any reason. Enslavers, almost everyone agreed, were nothing more than greedy brutes rightfully subdued by any means necessary. All people are created equal so all adults of sound mind are fully capable of making their own decisions about their own work lives.

Recently, however, experimental economists have shown that paternalism remains potent. In other words, despite the lip service paid to basic human rights and equality, many people believe that they know what is best for other human beings and are willing to act on that belief. The experiments are ingenious but for obvious reasons do not test the willingness to enslave directly. People who are willing to stop others from eating edible insects or accepting a little cash now instead of more cash later, however, may cross the line into employment issues without a second thought. 

Consider, for example, minimum wage laws, which are essentially paternalistic efforts to lawfully prevent people from working for less money than some majority deems adequate. Oddly when you think about it from a Hamiltonian perspective, most jurisdictions with minimum wage laws allow people to volunteer, which is just another way of saying to work for free, but make it illegal for those same people to work for a dollar a day or a penny an hour. Hamilton and almost everyone of his generation believed that people, so-called free people anyway, ought to be able to decide for themselves whether to accept a proffered wage or not, or whether to go into business for themselves or not. They saved paternalism for children, and slaves.

Paternalism was, of course, a major factor in America’s long history of chattel slavery. Many enslavers truly believed that they knew what was best for the enslaved, who they considered mere children or savages in need of their guidance and protection. Work was presumably good for slaves because idle hands are the devil’s workshop and all that. It was all some enslavers could do to keep their chattels busyand out of trouble. That was a sarcastic remark by the way.

One might think that paternalism would be on the wane due to the emergence of woke culture and social justice warrior movements but, in fact, the aforementioned experiments, which stem from the work of Nobel prize winner Al Roth on repugnant markets, show that many people on both sides of the political spectrum remain eager to impose their own values on others. Meanwhile, public intellectuals regularly accuse John Stuart Mill, James Buchanan, and others who championed individual liberty of being misanthropes or taking up space on the so-called autism spectrum.

The strength of paternalism -- the urge to force other people to do what you want, not what they want -- obviously does not bode well for those of us concerned with the revivication of slavery because paternalists easily turn immoral behavior, like forcing others to work against their will, into moral behavior by insisting that the will of others is infantile and hence not equal or fully human. For paternalists, questions like “how can you justify enslaving others?” can quickly become “how can you forgo enslaving others” who so clearly need our parental help and guidance?

Even more frighteningly, morality too often takes a backseat to economic growth and development. People who do not buy into the paternalistic notion that enslavement is good for the enslaved, for example, may acquiesce to slavery on the grounds that the suffering of the few is the necessary cost of economic progress.

That is why perhaps the single most disturbing intellectual trend of the last decade or so is the repeated claim by several Ivy League historians, who anointed themselves the New Historians of Capitalism, and more recently the New York Times, that slavery made America and Britain wealthy. Such claims are not just wildly historically inaccurate, they threaten to justify the enslavement of tens or even hundreds of millions more people today.

One of the great misfortunes of American history is that Alexander Hamilton died in 1804, well before he had the time to carefully lay out his views on many economic matters. To this day, many scholars misunderstand Hamilton’s views on bailouts, corporations and their governance, tariffs, and slavery because he never wrote the economic treatise he likely would have completed if he had lived until 1836, as his assassin did. Sorry, couldn’t resist that swipe at Burr, a sitting Vice President who for some reason was not impeached for shooting the leader of a rival political party.

In any event, Hamilton did not live to see the great natural experiment that took place in antebellum America, where people who shared the same culture, language, laws, and religion split on their choice of labor system, with some embracing, some tolerating, and others eschewing chattel slavery. By the 1820s, the results of the experiment were already becoming evident and by 1860 were palpable to all who dared to look.

In short, the Great Labor Experiment showed that slavery, while profitable to the enslaver, hurt economic growth and development pretty much in proportion to its proliferation. The Black Belt was akin to today’s Saudi Arabia, a kingdom of cotton instead of oil where a few rich princes owned almost everything, including the local and state governments. There, corporations of any type were few, transportation infrastructure primitive, civil society stunted, and innovation almost absent. More upland and northern areas, where slaves were fewer, showed more signs of development, especially in border states where free whites were not forced to capitulate to slaveholders’ interests. But only in the family and wage labor North did economic freedom reign, and banks, corporations, financial markets, inventions, and transportation infrastructure truly thrive, as I described in many of my early books, like Hamilton Unbound; The Wealth of Nations Rediscovered; Financial Founding Fathers; The First Wall Street; One Nation Under Debt; and Corporation Nation.

The so-called New Historians of Capitalism, in other words, have gotten the story backwards. Slave-grown cotton did not cause the industrialization of the North or England, the economic development of those places created demand for cotton and, to a lesser extent, other agricultural staples that many, but not all producers in the South chose to supply with slave labor, not because it drove development, which it palpably did not, but because it proved profitable.

Hamilton well understood the difference between private profit and economic growth. The former occurred whenever a proprietor was able to sell his or her goods for more than the total private cost of their production. Profits are relatively easy to come by when a proprietor can force laborers to engage in simple, repetitive tasks in the most efficient ways known and receive public subsidies that help the enslaver to control his or her enslaved laborers. 

Economic growth, by contrast, occurs when output per person increases. Economic development occurs when potential output per person increases due to the creation of institutions and infrastructure that reduce transaction, transportation, and other costs, like patents, roads, and schools. Private profits do not sum to total output because they measure different things. Most importantly, private profits do not account for public benefits or public costs, or positive and negative externalities in the parlance of economists, or spillovers and pollution in regular person-speak.

Hamilton clearly understood the concept of externalities, both positive and negative. In his report on manufactures, he 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 preferred strong coffee over arduous spirits and was happy to tax the latter via tariffs and excise taxes. 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.

Others less economically astute than Hamilton realized that slavery’s total social costs far exceeded the private profits of enslavers. In the sixteenth century, French philosopher Jean Bodin argued that the fear induced by slavery in both slaves and the general population more than offset the profits slaves created for their masters. 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.

Like Bodin, Hamilton well understood that wars were expensive and did not cause economic growth or development. War destroys human and physical capital and the opportunity costs of many men engaged in non-productive pursuits and consuming war material is high. Although as a young man Hamilton pined for war, as a statesman he did everything he could to avoid it, and to establish for America Adam Smith’s wealth-producing formula of quote peace, easy taxes, and a tolerable administration of justice unquote.

An eighteenth century German scholar named Johann Gottfried Herder also realized that slavery created negative externalities. The spread of syphilis due to sex slavery, which devastated three continents, constituted a prime example of social costs not borne by enslavers, Herder argued.

In Philadelphia in 1805, 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. Founding Father George Mason had also likened slavery to a quote unquote slow Poison, a negative externality if there ever was one!

In 1832, soon after Turner’s rebellion, Henry Berry of Virginia 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. Another Virginian, Charles James Faulkner, also noted that quote Slaves are injurious to the interests and threaten the subversion and ruin of this Commonwealth unquote.

Joseph Conder, a British abolitionist, argued in 1833 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. Slavery survived only by state subsidy, specifically quote the state expenditure which it renders necessary in order to provide against the dangers inseparable from the existence of a servile class unquote. Such public expenditures also included public whipping posts and an extensive separate legal code for slaves.

Nobody has quantified all the negative externalities spawned by slavery but they were undoubtedly large. It was all I could do to describe them over 90 pages and two chapters in The Poverty of Slavery. The biggest single cost was protection from vengeful slaves, which took the form of nightly patrols by poor whites in peaceful times and deployment of the military following insurrections. Following Turner’s rebellion, for example, militia from 3 Virginia counties joined regular army forces to sweep The Dismal Swamp, which was thought to hold 2,000 to 3,000 maroons, or escaped slaves. But many smaller events, including court cases involving runaway slaves in states like Massachusetts, necessitated calling out the militia to maintain order. All those men had to be paid and of course were not at home working while they were trudging about swamps or providing courtroom security.

A couple of haters tried to take me to task for not bean counting the costs of all the many negative externalities that I found but in the case of the antebellum United States we really do not need to carefully quantify the externalities, which is a wicked business by all accounts and explains why governments rarely tax pollution directly despite the compelling theoretical justification for doingso. Quantification is unnecessary because the results of the Great Labor Experiment came so quickly and clearly.

By the 1810s, not long after Hamilton’s early demise, foreign and domestic travelers began to comment on the vastly different appearance of the free and slave states. One wrote how quote the smiling villages, and happy population of the Eastern and Central States, give place to the splendid equipages of a few planters, and a wretched Negro population, crawling among filthy hovels -- for villages (after crossing the Susquehanna) there are scarcely any unquote.

By the 1820s, still well within Hamilton’s natural life expectancy, observers began to systematically compare the economies of free and slave states and invariably found the latter lacking. Despite Virginia’s natural advantages over New York, Cassius Clay of Kentucky 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, caused Virginia’s relative 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 if civil war ever erupted.

In1823, another observer claimed quote in Virginia, land of the same natural soil and local advantages, will not sell for one-third as high a price as the same description of land will command in Pennsylvania unquote. A British author that same year argued that slavery quote could not exist for a single year, but for the aid of the public purse; which, to the extent of two or three millions, is, at this moment, annually expended in bolstering up this fabric of inquity unquote. Bolstered by such such sentiments, the British abolished chattel slavery in the 1830s and spent those millions instead trying to end the African slave trade.

In America, by contrast, it took several more decades for Hinton Helper to make a compelling case that the North had won the Great Labor Experiment, much as free market West Germany and South Korea later won their natural experiments with communist East Germany and North Korea. But Hamilton was often ahead of his time and less racist than most Southerners and so less blinded by the racial rhetoric that for a time obscured the North’s clear victory.

Note that I don’t claim that Hamilton was not prejudiced against African-Americans, just that he was much less so than most of his contemporaries, especially those from the South. In The Farmer Refuted, Hamilton made clear that he was convinced that quote the whole human race … [was] intitled [to] civil liberty, … [which I considered] in a genuine unadulterated sense … [to be] the greatest of terrestrial blessings unquote. If he intended a Jeffersonian asterisk on the whole human race, I haven’t seen any sign of it. 

During the Revolution, for example, Hamilton told John Jay that he believed that African-Americans 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 dark-skinned people] that are founded neither in reason nor experience unquote.

Like myself and several other scholars, Hamilton saw chattel slavery as the extreme end of a continuum of freedom and unfreedom that included institutions like serfdom, which still existed in parts of Europe in the early nineteenth century. Hamilton deprecated serfdom in no uncertain terms. Quote Certain foedal rights which once oppressed all Europe and still oppress too great a part of it made absolute slaves of a part of the community and rendered the condition of the greatest proportion of the remainder not much more eligible unquote. Those feudal rights, he continued, tellingly, were quote contrary to the Social order and to the permanent welfare of Society unquote and hence were quote justifiably abolished unquote.

Hamilton’s views on chattel slavery and abolition remain hotly debated but if he ever owned slaves they were few and probably acquired for the convenience of his wife, who bore 8 children, mostly domestically useless boys, between 1782 and 1802. If my model of firm labor choices in the “Uncle Tom’s Cabin” chapter of my book Fubarnomics is correct, Hamilton had little choice in the matter as the continued existence of slavery in New York, especially as domestics in urban areas, decreased the availability of free domestic laborers.

If you are interested in deep legal and philosophical arguments that point towards Hamilton’s disdain for slavery, read Michael Chan’s 2004 article “Alexander Hamilton on Slavery” in the Review of Politics. Suffice it to say here, Hamilton clearly frowned on the institution, which is why he helped to establish the New York Society for Promoting the Manumission of Slaves in 1785. But up until his death he was too busy trying to keep his fragile Union together to push for even gradual emancipation in other states.

Moreover, although Hamilton wanted to beef up the national government, he still advocated for a federal system in which the individual states retained considerable power, especially over local economic issues, including labor regulation. He would not have wanted the national government to end slavery by force but rather would have tried to reason with the leaders of slave states by arguing that slavery was profitable but immoral and clearly not a boon to growth or development.

Once the result of the Great Labor Experiment was clear, Hamilton certainly would have tried to minimize federal subsidies for slavery like the fugitive slave act of 1793. In fact, Hamilton’s reasoning on the issue of slaves that escaped to the British during the Revolution suggests that he believed in something like Stadluft macht frei [mock fry] which is my bad German pronunciation of the doctrine that free air makes you free, that enslaved people who made it to free soil without their owners’ consent won their freedom, a custom diametrically opposed to the fugitive slave clause and act.

Had Hamilton lived to clearly see the results of the Great Labor Experiment, he might have even urged the federal government to end its tolerance for the interstate slave trade, which by all accounts kept the peculiar institution profitable in older states like Virginia and North Carolina.

And Hamilton would have certainly pushed, as Edward Atkinson eventually did, for free labor demonstration projects to show that cotton, sugar, tobacco, and other crops could be grown profitably by family and free laborers. This was the same man, after all, who claimed that quote the sacred rights of mankind are not to be rummaged for among old parchments or musty records. They are written, as with a sunbeam, in the whole volume of human nature, by the hand of divinity itself, and can never be erased or obscured by mortal power unquote. In other words, truth inscribed itself on reality if given the chance, which is why Hamilton pushed for the creation of the Society for the Establishment of Useful Manufactures across the river from here in Patterson, New Jersey to demonstrate that Americans could, in fact, produce textiles. The corporation and demonstration did succeed, though only after Hamilton’s untimely death.

Those approaches to ending chattel slavery would have worked better than mere legal abolition. We know that because another victim of assassination freed the slaves de jure before he could take deeper measures to free them de facto. That man, Abraham Lincoln, who counted Benjamin Franklin, Gouvernor Morris, and Hamilton as the three greatest enemies of slavery in the Founding generation, knew, as did Hamilton, that to end slavery in fact one must reduce the supply of, and demand for, slaves, and that requires more than laws. In the absence of economic abolition, slavery reappears in sundry forms, just as it did in the postbellum South and just as it did throughout the British Empire in the nineteenth century and much of the globe in the twentieth century.

In sum, if Hamilton were here today, he would try to reduce the supply of slaves by removing barriers to human flourishing, from onerous drug laws to occupational licensing to technological transfer and immigration barriers.

He would also try to reduce demand for slaves by raising the cost of enslaving others. In many parts of the world today, slavery is technically illegal but tolerated to the point that it is essentially decriminalized. To end its profitability, enslavers must be imprisoned and their ill-gotten gains stripped from them and allocated to survivors.

Finally, Hamilton would duel Ed Baptist and the other leaders of the New History of Capitalism crowd. Or, at least, having learned his lesson in 1801 and 1804, he would enjoin them to read my book The Poverty of Slavery: How Unfree Labor Pollutes the Economy, which shows how enslaving others cannot possibly help the overall economy. I understand the New Historians of Capitalism want to make a compelling case for reparations, but it is the wrong one factually for the reasons just adduced, and it is the wrong one morally because it is being used to justify the enslavement of human beings today.

Thank you for your attention! 

Questions?