By Vincent Geloso. Vincent Geloso is a visiting assistant professor of economics at Bates
College. He obtained a PhD in Economic History from the London School of
Economics.
"In the past few decades, a new subfield of history has emerged: the
history of capitalism. The subfield is widely popular in the media as a
result of hugely influential books such as those of Sven Beckert and
Edward Baptist. These two particular authors tie the “peculiar
institution” of slavery in American history to capitalism. Many media
pundits, as witnessed by recent articles in the New York Times and Vox,
jumped on the works of these authors to claim that slavery was “the
building block of the American economy” and it made America richer.
To
make this case, these scholars invoke three facts. First, the southern
states enjoyed relatively faster growth than the free northern states.
Second, slavery was immensely profitable to slaveholders. Third, the
rapid increases in slave productivity – as measured by cotton picked per
slave – meant that cotton output exploded. From this, a causal claim is
made: slavery made America rich because increasing slave productivity
increased profits and fastened economic growth.
With the
exception of whether or not the South grew faster than the North, which
is debatable to some degree, there is little to dispute on a factual
basis. However, it is impossible to infer that America was made richer
from these facts. In fact, when interpreted with the light of economic
theory, the second and third facts actually suggest that the reverse is
true: America was made poorer because of slavery.
Economic growth in the United States pre-1860
One
of the most-cited pieces of evidence is that south enjoyed rapid
economic growth before emancipation. The logic is that if the south grew
faster than the north, slavery – which was so important to the southern
economy – must have been a contributing factor. Most of the evidence
for this rests on the works of Robert Gallman and Richard Easterlin who constructed income estimates for the period after 1840. In their pioneering work, Time on the Cross,
Robert Fogel and Stanley Engerman used this data to show that, between
1840 and 1860, the south grew faster than the north: 1.7% per annum
versus 1.3%.
However, this is a claim with shaky foundations. First, the benchmark year of 1860 overstates the level of income per capita.
The cotton crop that year was higher than normal. The effect from this
is mild, but it is enough to shave off a few decimal points to the
initial estimates of growth for the southern states. Economic historian Gerald Gunderson
also suggested that the census of 1840, which was used to estimate
output in that year, was known to be one of the most poorly conducted in
census history. This lead, in his opinion, to an inaccurate starting
point that also contributes to overstating southern growth between 1840
and 1860.
Secondly, economic historian Jeffrey Hummel
identified a series of weak points in the national account estimates of
Gallman and Easterlin. These weak points relate to how the South was
defined (some slave states were wrongly allocated to the North), how
certain new states like Texas had overstated incomes, how the income
from service sectors was underestimated in some regions and
overestimated in others, the value of subsistence goods given to slaves
and the price deflators used to estimate output. Hummel proposed
revisions to adjust for some of the problems he exposed. The revisions
reduced the gap in growth rates between the region.
Third, taken
separately, none of the different regions of the South experienced
faster growth than the different regions of the North: the Northeast and
North Central enjoyed growth rates of per capita income equal to 1.7%
and 1.6% between 1840 and 1860 while the South Atlantic, East South
Central and West South Central regions enjoyed growth rates of 1.2%,
1.3% and 1.0% during the same period. This apparent anomaly is
explained by internal migration: Southerners moved from where incomes
below average to where they were above average. These movements in
population, when aggregated for the two while regions, create the
impression of fast growth in the South. However, it is worth pointing
out that the higher-income states of the South grew more slowly than the
higher-income states of the North.
Lastly, if we extend the period considered, the picture that emerges is quite different. Peter Lindert and Jeffrey Williamson
reconstructed income statistics between 1675 and 1860 in order the
different regions of the United States with Great Britain. They found
that, between 1675 and 1774, incomes per capita in the southern states
fell by roughly 15% while the middle colonies stagnated and New England
enjoyed a mild increase.
Thereafter, the southern economy grew,
but at a slower pace than the North: economic growth stood at 1.94% per
annum in New England between 1800 and 1860 while it stood at 1.66% and
0.90% in the Mid-Atlantic and South Atlantic states.
Similarly, Robert Margo’s
work on wages between 1820 and 1860 showed that wages for common labor
in the Northeast increased faster than in the South Atlantic and
South-Central regions (although wages in the Midwest did not increase as
impressively). Adding to this the wealth estimates of scholars like Alice Hanson Jones,
we find that the South actually lost ground relative to the North from
the beginning of the colonial era. It did grow, but the Northern states
performed better.
The sum of these points suggest that we ought
to be careful about making inferences from this “fact.” However, even if
that point was a certain one, it would not say much about wellbeing.
Productivity and profitability: do not confuse output with utility
The
other two facts – that slavery was immensely profitable and that slave
productivity increased – are not debated. Scholars accept them as true.
In fact, of all the claims contained in Time on the Cross, these
are the two that survived the test of time. However, one cannot infer
that slavery made America richer from them. In fact, these two facts
point in the opposite direction.
Under slavery, slaves received
as “wages” (for lack of a better term) only the subsistence items that
their owners allowed them to consume. That is a (poor) form of
compensation. As a counterfactual, imagine a world where slaves were
free and ask yourself this question: what quantity of labor would have
been provided for the utility derived from these subsistence items?
It
is hard to arrive at a convincing number. However, it is clear that
whatever the quantity of labor provided when induced solely by
compensation, it would have been less than the quantity of labor coerced
by slaveowners. Consider the flipside of that counterfactual market. If
slaveowners had to convince free workers to work for them, they could
only have induced them to do so via higher wages. And this is not only a
counterfactual that includes quantity of work, it includes also the
quality of work. In free situations, workers in unpleasant jobs tend to
be offered higher wages to compensate for the inconvenience. This is why
backbreaking work, all else being equal, tends to be better remunerated
than physically easy work.
As long as there was a
difference between the value of what a slave produced and the value of
subsistence, there was a transfer from slaves to slaveowners. This is
why economic historians like Gavin Wright
writes that “slave-based commerce remained central (…) not because
slave plantations were superior as a method of organizing production,
but because slaves could be put to work on sugar plantations that could
not have attracted free labor on economically viable terms”.
However, here comes the rub: this increased physical outputs.
In
economics, dollar signs are often used to “mimic” utility. This is
because the models that teach students about utility implicitly embed an
assumption about personal freedom and agency. If people are free to
take prices as they are, the prices can be translated into information
about utility in a very straightforward manner. This is why economists
frequently emphasize how well statistics about Gross Domestic Product
(GDP), which rely on market prices to be calculated, speak to human
wellbeing. The quantity produced and measured are reflective of utility.
As such, the changes in one will be reflected by changes in the same
direction in the other.
In the presence of coercion, this is not
necessarily the case. All the statements that economics students are
taught remain true. However, it is no longer possible to infer utility
as easily from reported prices. If one is coerced into working more than
he would have at the compensation offered, he will increase economic
output. More labor, more output. However, at that level of compensation,
he would have preferred to work less and take more leisure time. This
why some economists like Yoram Barzel and Stefano Fenoaltea
consider slavery as a tax on leisure rather than a tax on labor. As
that person would have derived more utility from leisure than from work
at the offered compensation, the coercion changes output in a manner
that divorces it from the change in utility (greater output, lower
utility).
In such a divorce, the coercion of a greater labor
supply creates a deadweight loss. In other words, people would have
gained more utility without the coercion. This deadweight loss can be
approximated and be given a monetary value that does speak to utility.
The amplitude of that loss is the extent to which Americans were made
poorer.
This deadweight loss serves to resolve
two conundrums. The first is that it explains the institution’s
profitability and viability. Slaveowners used the inputs they had as
efficiently as possible and extracted important profits. However, this
says little about living standards as the level of these profits
reflects the extent of the deadweight loss. Thus, the institution may
have increased output in ways that made slaveholders rich– as it did –
but it made Americans worse off.
The second resolved
conundrum relates to the finding of Fogel and Engerman that southern
slave farms were more productive than free northern farms and slave
productivity increased importantly during the Antebellum period. Fogel
and Engerman argued initially in Time on the Cross and later in Without Consent or Contract
that this was a result of the economies of scale involved in plantation
farming: large plantations were more efficient than small plantations.
That finding in their work was hotly debated on methodological grounds.
However,
even if one remains agnostic on the methodological choices, that
finding is unsurprising. The gang labor system under slavery, which
generated the economies of scale described by Fogel and Engerman, was
adopted because it could best extract output from coerced workers. It
does not deny the existence of a deadweight loss – it confirms it!
That
resolution is only reinforced when one stops being agnostic with
regards to some of the methodological choices made by Fogel and
Engerman. For example, more recent evidence discussed by Jeffrey Hummel
suggests that hours worked by slaves were greater (even at the low
bound) than by free workers in the North. As Fogel and Engerman
had argued “greater intensity of labor per hour, rather than more hours
of labor per day” explained the productivity advantage, finding that
both intensity and quantity were higher only piles it on.
The Deadweight Loss of Slavery
What
was the deadweight loss of slavery? Using data on estimates of earnings
of free workers, hire rates for slaves (which are better at
approximating the marginal value to slaveowners of an extra slave) and
subsistence consumption taken from the core texts on the economics of
American slavery, Jeffrey Hummel estimated that deadweight loss. He
placed it at between $52 and $190 million in 1860 with the smaller
amount representing 5 percent of total oncome in the region. In other
words, the loss in utility of forcing slaves to provide more labor than
they otherwise would have had a value of between $52 and $190 million.
But
that is not the whole sum of deadweight losses. In the southern
states, the enforcement of slavery was not fully undertaken by
slaveowners. The states mandated slave patrol duty for free whites. This
relieved slaveowners of the costs of enforcement (while they kept the
rewards from coercion) which were spread over a large population. The
mandatory duty was a tax in the form of labor in kind. In some states,
there were actually taxes to finance the patrols. Hummel estimated the
sum of enforcement costs brought his estimates to between $64 and $210
million. This represents at most a fifth of the southern economy in
terms of inefficiency. This remains a conservative estimate as there was
also a deadweight loss from forcibly reallocating non-slave labor
towards patrolling which is hard to measure.
This addition is
useful as it shows that the deadweight loss was not contained to slaves.
It extended to poor non-slaveholding whites. Scholars, such as Keri
Leigh Merritt in Masterless Men,
have begun to highlight how the preservation of slavery necessitated
policies that kept non-slaveholding whites poor, landless and
illiterate. While slaves bore the brunt of the harm done, it was not
contained to them. This explains why Hinton Rowan Helper’s Impending
Crisis was so popular (even in the South) even though it was racist and
anti-slavery: it catered to another impoverished group.
It is
clear that one cannot infer that America was made richer from the
often-used facts about growth and slavery. It is even clearer that
America was made poorer by slavery. Slavery leaves a nasty legacy. Its
preservation required the use of racist ideological constructs to
justify it. These constructs persist today and, since Emancipation,
meant that incredible violence was directed towards African-Americans.
It bred a class of rent-seekers who continued their rent-extraction
efforts in the form of segregation laws and public goods funded by all
but whose use was restricted to whites. To these items in the shadow of
slavery, we must also add a poorer America. "
