Scott Sumner  

Ending slavery made America richer

Open Borders: My Vox In... Will Scottish secession be a d...

Matt Yglesias has a good post that goes right at the "smiley-face" view of early US history--that we were a great country save for the regrettable aberration of slavery. He doesn't pull any punches:

Specifically, white Americans conquered a vast new empire (Alabama, Mississippi, Florida, Arkansas, Louisiana, Missouri, and Texas), populated it with millions of slaves forcibly transported from the Atlantic coast, and developed innovative new torture-based management techniques to enhance the productivity of this coerced labor.
Thus I regret to say that the title of the post sends the wrong message:

American prosperity was built on slavery and torture

In fact, countries with free labor tend to be more prosperous. Indeed Yglesias's post contains a graph (from Thomas Piketty's book) that undercuts the message in the title:

Screen Shot 2014-09-13 at 11.14.00 PM.png
At first glance it doesn't look like there was much change in the capital stock between 1850 and 1880. But that's very deceptive, as Piketty classifies (or should I say mis-classifies) slaves as "capital." It's true that they were legally considered capital, but in a functional sense they were obviously labor. Slaves don't stop being people just because the government treats them like animals.

Between 1850 and 1880 the market value of slaves falls by just over 100% of GDP. And that decrease is almost precisely offset by a slightly more than 100% increase in capital (industrial and housing.) The total capital stock declines slightly in the Piketty graph, but that's only because of a fall in the value of agricultural land, not capital.

Now here's where mislabeling slaves as capital comes into the equation. At first glance it looks like America's capital stock was unaffected by the abolition of slavery. But the actual capital stock rose by over 100% of GDP---an industrial revolution. If you insist on treating slaves as "capital" it doesn't change the basic story. Because in that case a separate ledger of "labor resources" would have soared after 1865. Former slaves would now be classified as "labor," and hence the labor stock would rise dramatically, even on a per capita basis. Either way, abolishing slavery made America a much more productive, and hence richer country.

Now let me anticipate the "yes buts." Some Americans were made worse off. Obviously slave-owners, and less obviously those who were closely connected to the slave economy (bankers who financed them, cotton mills, etc.) But as Fogel showed (in a study of railroads), when thinking about any economy we tend to mentally overrate the importance of any one sector, especially big sectors. So despite the very real losses to a sizable group of Americans, the economy overall did much better as a result of the abolition of slavery.

Do we know that this was because of the abolition of slavery? There are very few certainties in economics, but consider:

1. Brazil didn't abolish slavery until the 1880s, and did worse than America. It also did worse than countries to the south of Brazil.

2. When the American South abolished Jim Crow, incomes in that region began to converge on those in the North. Indeed even southern whites began to catch up, especially when adjusting for cost of living differences. Freedom increases productivity.

3. Most of the rich countries around the world were places with free labor in the 19th century. Places that had slavery tend to be much poorer.

4. Superficially the South seemed "richer," but only if you don't count slaves. But why not count them? The North was far more dynamic, industrializing rapidly and drawing more immigrants from Europe. Why didn't more whites from Europe move to the South?

5. Countries are richer when workers have more rights---compare North and South Korea.

America still has a long way to go. Blacks (and whites) are legally barred from many professions by occupational licensing laws. It's also worth pointing out that Yglesias is one of the few progressives that frequently criticizes those laws.

America is much freer than it used to be, but there is more work to be done.

Comments and Sharing

COMMENTS (22 to date)
Boris writes:
Why didn't more whites from Europe move to the South?

Perhaps because until the invention of air conditioning, the US southeast was a miserable place to live for a good chunk of the year, with conditions that are hard to find in Europe -- summers in southern Europe are warm, but not as brutally humid as the US southeast.

Lorenzo from Oz writes:

Slaves were labour that was an asset. So, slaves were part of the wealth of the slave-owning South. One can see why Piketty classify how he does, but yes, functionally, slaves were labour.

Thinking that through a bit more, human capital can be invested in and creates a stream of income. But it still manifests through labour. Slave ownership can be invested in and creates a stream of income but still manifests through labour. Yet it was due to the attribute of being property, not created capital. Slaves were not produced means of production, which makes them labour.

In the case of serfs, their landlord owned their labour services (up to a point, via control over their movement), but not their person. Hence serfs could legally own property and had full family rights. Slaves could not legally do the former (though they functionally had property) and had none of the latter. (I find it helpful to be clear on the difference between slaves and serfs: the Spanish also used serf systems.)

While protecting slavery and seizing Amerindian land certainly were major motivators of the American Revolution (as can be seen by which British colonies did not revolt, with how important Imperial protection was seen to be also being a key factor), American prosperity was more crucially based on being mass settler colonies, which is why their politics were actually more broadly based than their metropole even before the revolution.

It was that broadly-based politics using inherited British institutions which made US (and Canada) prosperous and Latin America much less so. Hence the patterns you identify. So, yes, Yglesias (or at least the post title) way overstates.

Linda Seebach writes:

De Tocqueville has a long discussion of the social differences between the two banks of the Ohio River, north (in Ohio) being a free state and south (Kentucky) being a slave state.

Lorenzo from Oz writes:

Boris: The North also had a more broadly-based economy, which also made it more attractive. Slaves "crowded out" free labour and capital investment to a considerable degree.

Fogel was correct in arguing that Southern slavery was commercially/narrowly economically efficient (that is why it was persisted with), but it was not socially/broadly economically efficient (which is why the North ultimately won the Civil War: that and amazing bloody-mindedness--read the memoirs of Elisha Hunt Rhodes to get a sense of that).

Andras Toth writes:

The position of Carl Menger can be characterized as anything can be regard to be a capital good provided that the market values it as being a capital good. Thus, in this sense slaves were capital goods for their slave owners. They were seen, to use the term of a classical Antic Roman author, Varro, tools with ability to speak. So the slaves not only could be treated as capital good in theory in the Mengerian sense, but in a slave owning society they were recognized as capital good. None the less, treating humans as being a capital good not only inhuman and cruel practice, but highly inefficient. Inefficient as this practice reduce the human capacity to work along the orders dictated by the slave owner and supress the inherent human ability to innovate, to work more efficiently, more economically, to be alert and to be enterpreneurial in any field which best suit to the innate capacity of each human being in question. Consequently, using slavery for producing value is a very poor and inefficient way of using human capital. This form is only efficient in very underdeveloped markets.
No question, with freeing the slaves, slaveowners lost part of their capital. None the less, it is not the case for the US economy as such. The loss of "capital"portrayed in the graph only reflecting a statistical loss of capital for the US economy. Freeing slaves, the former slaves regained their own ownership over their own human capital (ability to work, create value, innovate and being enterpreneurial). But human capital is not measured. Thus, in macro-sense no capital was lost, just one form of statistically measurable capitals, slaves, ended to be statistically measured. Even one can argue, that the not statistically measurable capital of US has increased as former slaves gaining ownership over their own human capital could now use it more effectively. No wonder, that even the measurable capital growth was faster after the abolition of the cruel and inefficient practice of slavery.

Scott Sumner writes:

Everyone, Very good points.

Squarely Rooted writes:

Scott, this is confused.

Firstly, Matt's point is that industrial growth in the North was catalyzed and accelerated by the abundance of cheap Southern cotton. Therefore post-bellum industrial growth was built on a foundation fueled by slaves.

Secondly, capital and labor are legal distinctions - whereas morally, ethically, and spiritually, people never lose their humanity despite the predominance of a slave system, if a society treats them as capital rather than labor then it makes sense to do so as well.

Thirdly, it is pretty thin to simply say "post hoc ergo propter hoc" with this kind of evidence and you should know better.

Fourthly, post-bellum Southern incomes decidedly did not converge with Northern incomes, and in fact still haven't - and the South did not begin to resemble the North until the New Deal helped catalyze indoor plumbing and air conditioning spread post WWII.

Fifthly, describing the post-bellum South as a free society is, frankly, absurd. And both this and the previous point are undermined when you note that most immigrants to the United States avoided the South, and is further undermined by noting the massive migration of disenslaved blacks to the North and Midwest. The emigration of blacks to the North is precisely what you'd expect to see if North Korea allowed its citizens to relocate to the South.

Lastly, you are certainly right in your general point that societies built on slavery are less prosperous per-capita than those built on universal freedom and equality before the law. But it doesn't logically follow from any of this that Matt's more complex point is wrong.

TravisV writes:

Prof. Sumner,

Another Yglesias post comparing capital in the U.S. vs. Germany below:

It would be interesting to get your take on this one. Also notice the links included within the post.

TravisV writes:

Rats, here is a shortened URL of the link above:

"German stocks are worthless perhaps due to codetermination"

Michael Byrnes writes:

Even though I generally agree with your post, I think the title of Matt's post was entirely appropriate.

American prosperity, such as it was, was indeed built on slavery and torture.

Gustav writes:

I'm with Squarely Rooted. The Civil War did not "end" slavery, which persists as a rigid, caste system that segregates "racial" components of the labor market. Poor whites, as opposed to the planters, are just as victimized as ex-slaves.

It would be interesting to see a study of regionality that takes into account the social institutions of the South and their economic impacts.

Scott Sumner writes:

Squarely Rooted, You said:

"Firstly, Matt's point is that industrial growth in the North was catalyzed and accelerated by the abundance of cheap Southern cotton. Therefore post-bellum industrial growth was built on a foundation fueled by slaves."

I see no evidence for that claim. If railroads can't explain the industrial revolution, how likely is it that somewhat cheaper cotton can explain it?" And why did the industrial revolution accelerate after slavery was abolished? Obviously it's possible Yglesias is correct, but that's a pretty implausible claim.

You said:

"if a society treats them as capital rather than labor then it makes sense to do so as well."

I must say I find this comment to be troublesome on many levels. If North Korea's government were to declare that freight trains are not capital, but rather are "labor" would you consider it appropriate for economists analyzing North Korea to play along? I don't follow your logic at all. And I refuse to treat slaves as anything other than human beings. In any case, as I clearly explained, that assumption has no bearing on the argument that ending slavery made America more prosperous.

You said:

"Thirdly, it is pretty thin to simply say "post hoc ergo propter hoc" with this kind of evidence and you should know better."

If you read my post again you'd see that you are mischaracterizing my argument.

You said:

"Fourthly, post-bellum Southern incomes decidedly did not converge with Northern incomes, and in fact still haven't"

They "began" to converge, I certainly did not suggest they completely converged. But when you adjust for cost of living differences, the gap between the North and South became much smaller. That's my claim and if you'd check the data you'd discover my claim is accurate.

You said:

"Fifthly, describing the post-bellum South as a free society is, frankly, absurd."

Yes, it would be absurd if I had done so. Instead I pointed to the problem of Jim Crow, which was only abandoned in the 1960s. I said it became freer after Jim Crow was abolished. I also said the US isn't completely free even today. Perhaps you missed that part of the post. Claiming I made that claim is itself rather . . . absurd. Can you provide an exact quote?

You said:

"And both this and the previous point are undermined when you note that most immigrants to the United States avoided the South, and is further undermined by noting the massive migration of disenslaved blacks to the North and Midwest."

Now you are just making things up. The convergence argument applied the post Jim Crow era, not the post Civil War era. So your comment makes no sense. In any case, the South has attracted lots of foreign immigrants in the period after Jim Crow was abolished, which supports my point and contradicts your claim.

Nice try, but you would have more success if you did not mischaracterize almost all my arguments.

Michael, I think his title implied American prosperity was reduced when we eliminated slavery. If it did not imply that, then someone would have to explain to me what he was claiming.

No one would dispute that slaves produce lots of valuable output. If that was his claim . . . then why bother writing the post?

Les Cargill writes:

Two things:

- "Time On The Cross" shows that the antebellum economy was profitable. It's a myth that Yankee ( as in Connecticut/Massachusetts/Maine - conservative, rock-ribbed, Congregationalist, dour and stoic ) industrialism was an inevitably superior system. Since particularly cotton was the raw feedstock for the British textile revolution, you better believe there was money in it.

It's a mistake to assume that antebellum slavery was simply some sort of retrograde anomaly - it was anomalous, but only in a path-dependent way.

Antebellum slavery is a variation on the theme of Mercantilism. It took a long time for that to become less productive than industry. It's also true that a Yankee abolitionist was just as likely to consider Irish immigrants subhuman and good for nothing but stoop labor in his sweatshop as a plantation owner was to think the same of African slaves. The descendants of carpetbaggers were just as cruel in the period leading to the Greenville, MS flood.

- The various financial crises between the adoption of the Constitution and the Civil War made land and non-slave property lower in value than slaves. Since a great deal of these crises were centered on Andrew Jacksons's assault on the Bank of the United States...

Lincoln was a *railroad lawyer*. It is the railroad that exposed the weaknesses in this equilibrium, as distance melted away. Stephen Douglass tried the last patch on this mess, but it failed.

Brendan writes:
4. Superficially the South seemed "richer," but only if you don't count slaves. But why not count them? The North was far more dynamic, industrializing rapidly and drawing more immigrants from Europe. Why didn't more whites from Europe move to the South?

But the thick is: slavery allowed the South not not count the slaves when assessing wealth. Since they were treated as capital rather than labor by the slavery system itself, it allowed the owners to achieve what seemed, within the rules of the system, like outsize gains.

Now, there was a capital barrier to entry and it arguably pushed out a lot of demand for wage labor, which would explain why most immigrants went to the North. But it seems like within the logic of the system it arguably was highly profitable.

JKB writes:

Well, I took Yglesias' title and post as an attempt to indict all of America for prospering due to the slave labor used in the Southern plantation system. Cotton was a valuable cash crop and its cultivation demanded the enterprise system of large-scale farming, with lots of low skilled, (slave), labor, that prevailed from the US plantation belt southward over most of Central and South America and into the Caribbean with sugar, etc. cultivation. Being a cash crop, cotton was profitable. First as export to England and then as feedstock to the Northern cotton mills.

I found this lecture at Marginal Revolution University contrasting North America and South/Central America developmental economics to be useful in seeing the differences.

Post Civil War after the Carpetbagger exploitations, the most valuable crop was still cotton with lots of labor knowledgeable in its production. Share-cropping became the way to retain ownership of the land while having some production. But share-cropping does not incentivize development by the share-cropper as the improvements would just be taken the next year by the landowner. As an interesting aside, Alan Macfarlane in his 'The Invention of the Modern World' cites that share-cropping was not used in England but rather long term sub-letting with secure rights were used.

The large landholdings with share-cropping was unlikely to attract immigrants to migrate into the area. Not to mention, European immigrants were not knowledgeable in cotton/sugar cultivation. Those seeking to continue in farming would stick with the climate for which their experience and crops would thrive.

If you listen to the MRU lecture, you might, as I did, come away with the impression that without the more individualized democracy from New England probably saved the US South from establishing bad undemocratic institutions like happened in South and Central America which persist to today.

Flocccina writes:

It is hard for me to believe that people would have been more productive as slaves than free. Now slavery might have brought more people to the USA, increasing the division of labor but I would think that effect would be smaller.

Steve Sailer writes:

Without slavery bringing in people adapted to hot climates, the cotton belt would have been less populated until the invention of electric fans, air conditioning, antibiotics, swamp-draining pumps, anti-hookworm campaigns, and the like made the South more habitable to Europeans. You can see the same thing even further south in Florida south of the Panhandle; it was thinly populated until the real estate boom of the 1920s.

Yet, the U.S. survived Florida not being well-developed until the 20th Century. The U.S. would have done okay without slavery. The big difference would have been the South wouldn't have been as populated until later.

Shane L writes:

In a free market, labour can move about. Individuals can experiment and innovate. I presume that was much harder for slaves. They had little incentive to innovate since their owners would seize any wealth from greater productivity. Is that why slave economies do worse?

Scott Sumner writes:

Les and Brendan, I certainly agree that slavery was profitable in the US.

Of course slavery ended almost everywhere by 1890 (except illegal forms of slavery, which unfortunately persist to this day.)

JKB, Good points.

Steve and Shane, I agree.

Bob Murphy writes:

Great post, Scott. For anyone who's interested, I did more of a "thought experiment"-type analysis to reach the same conclusion in this post.

pseudoerasmus writes:

Re the Yglesias argument (rather than the Sumner reaction to it) :

(1) There were other sources of cotton. It would have been a little more expensive, but there were other sources. During the US civil war England was able to substitute Indian cotton for southern cotton. Indian fibers were shorter and the lint was less good quality, but over time Indian cultivars would have improved.

(2) A lot of the productivity growth in southern cotton came from a combination of new higher-yield cultivars, better soils in the southwest frontier and of course the cotton gin. So even if cotton had been crucial to US industrialisation (it was not), it's grossly hyperbolic to say American prosperity was built on torture.

I don't want to spam so I won't put links but I have blogged an extensive criticism of the recent book by Edward Baptist which attributes to intensification of torture the 400% increase in labour productivity in cotton in the period 1800-60.

[Links added by Econlib Ed. per email with commenter.--Econlib Ed.]

Comments for this entry have been closed
Return to top