The Incompatibility of Slavery and Capitalism

September 23, 2016

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n-slavery-628x314 — Slaves picking cotton

Slavery and capitalism have always been linked by every political group you can think of. It is astonishing that many of these political groups have pointed out that the United States was built on slavery and thus make the parallel connection towards capitalism, assuming that capitalism intentionally uses means of exploitation to benefit the “greedy” owners of the means of production. While the first part is true — the United States, throughout the 19^th century, was built on capitalism — the second part is far from the truth. In fact, capitalism itself has essentially suppressed the use of slavery even before the Civil War began, which thankfully ended the use of slavery altogether.

One must ask: How was one of the most “profitable” operations being suppressed by a system which is built on profits in the first place? Simple. Slavery itself, like any other business model, could be profitable, or it could operate on a loss. As a matter of fact, many indicators show that slavery itself over the time period of 1800 to 1860 was slowly losing its profitability over the long term, and that, assumingly, if the Civil War did not happen, I believe that most probably, capitalism and its excellence in increasing productivity and the well-being of human civilization would’ve suppressed the use of slavery. This is due to its long term unprofitability.

We can start with point one: let’s look at the amount of slaves per 1000 rate during the 19^th century, before slavery was abolished:

Although not immediate, we can see that the amount of US slaves, per 1000 total slaves, had already started declining before the beginning of the Civil War in 1860. How can a “greedy” capitalist society reduce the amount of slaves when, according to the biggest misconception: the more slaves and land, the higher the profits?

Some may point out that the decrease of the slave rate was due to the increase of population, which to a certain extent is true. However, what if we use the population of the workforce, rather than the population of the United States itself?

As we can see here, for every 1000 additional personnel entering the workforce between 1800 and 1860, the amount of what could be denominated as “free from slave labor” increases from nearly half of the amount of the workforce to 87.1%. It shows that even when counting for the workforce, rather than population, that the amount of slaves being introduced every decade decreased dramatically from 42.2% to 12.5%.

The next point which I would like to present is that the ban on the Atlantic slave trade in 1808 barely reduced the growth of the slave population or the addition of slaves per 1000. During the decade of 1800 to 1810, the introduction of new slaves from the Atlantic slave trade only made up of 13.60% of the total growth of slaves, while after this period the amount of slaves being introduced towards the increase of slave population only made up 3.40%. Regardless, the slave population did increase with or without the introduction of slaves from the Atlantic trade, further showing that the majority of slaves in this increase were either “home-born” or “introduced illegally.” This shows that the increases in the workforce is due to the need of more productive, skilled labor rather than slave labor, as that’s what is needed for a growing and progressing economy.

We’ve now established that the amount of slaves being used in the United States had reduced over that time period, and that the majority of new workforce introduction is via “free-labor market.” Now, let’s address profit rates and rate of return for the slave owners.

According to a research report done by Tilburg University, named the “Economics of Slavery”, larger plantations did yield a larger profitability than smaller ones, however many indicators showed that too many farms owned too many slaves in the first place. This, in turn, resulted in the rate of return for farmers decreasing over time, especially with the introduction of an additional slave every single time, showing that maintenance costs exceeded the benefits of such productions.

While most rate of returns for farmers yielded about 5.26%, some states during this time period, like Texas, had resulted in yield results of 13.07%! Why such a difference between the rate of returns of farmers in most states and farmers in Texas? Simple. The report cites that with slave labor, any increase in time periods — or labor force within those farms — would result in quicker “depletion” of farm land, and thus farmers generally moved further west (hence why Texas had a higher yield result in the end) for fresher farmland.

However, one must ask, where and why did slavery become so popular, especially in the South? According to an article called “The Economic Impact of Slavery in the South,” labor shortages are one of the reasons that led to the use of slavery in the region’s earlier history. The increase of “white labor” immigration, and the freeing of slaves by slave owners, resulted in an increase of the labor force within the southern states, and somewhat improved the economic conditions throughout the region.

As cited in Tilburg University’s report, the advantages of using slave labor was only temporary, as the erosion of land was common. This resulted in farmers hoping that productivity by slaves would increase, and that the soil itself would retain its value.

However, one must ask, did slavery really make economic sense, especially in the long term?

Technically speaking, because you “exploit” someone, you merely increase your profitability by not paying for the labor needed to produce the goods and services you wish to provide.

From The Economist, in an article titled “Did slavery make economic sense?”, John Elliot Cairness believed that slavery may have impacted economic growth in the South as slaves (as previously noted) would deplete soil quicker, and that increases of technology for agriculture were slow to none in the South, and that even if technology increases were present, slaves may not be willing to take up such new technological tools.

To further rebut the myth of capitalism and slavery being complementary, slavery may have made it difficult to establish realistic trade routes, according to Ralph Anderson and Robert Gallon. This, in effect, forced farmers to diversify their economic activities in order to match the fixed costs associated with slavery itself.

Eugene Genovese argued that slavery altogether was not for economic advantage, but merely a cultural phenomenon in the South, in which some slave owners themselves would continue the use of slaves, while other slave owners would become more “advanced.”

According to “The Economics of Slavery,” slavery was a minor feature in many places and times, however, large scale slavery had only been practiced by large empires (usually their governments) in almost every single historical example. The military expansion of these empires provided slave labor, not any kind of market mechanism. However, even if a capitalist society decided to take up the means of slavery, it was suppressed over the long term due to its unsustainability.

“The Economics of Slavery” notes that large scale slavery has been found to be quite rare, of which, according to Gordon Tucker, only the classical world and the East Coast Americas from Brazil to Virginia had used slavery on such a scale.

Stalin’s implementation of slavery could be considered a third example, however. Stalin’s slavery was unique in that it was the only use of public slavery — forced slavery by the State — while the two other aforementioned instances were due to institutional slavery. However, it is in fact good to keep in mind that Stalin’s slavery yielded much higher death rates than the ones of “private masters.”

According to Tucker, once a slave has been purchased, the owner must amortize the investment that he made. This, in turn, requires the owner to spend more in order to keep the slave alive, and can only make a realistic profit if the amount paid is less than the wages in free market labor, which can cover the costs of his original investment. As the historical numbers showed, this did not happen whatsoever. As we’ve seen, because slave labor was known to be less efficient (but not inefficient altogether), the difference between slave rate and wage rate is substantially different.

Many historians question the profitability of slaves, debating whether the amount paid for slaves themselves are counted as a fixed cost. As Tucker cites in his report, the amount paid for such slaves are fixed, and thus this makes slavery a capital investment, which means slavery — like any other investment — could be profitable or unprofitable.

Slavery essentially by itself, had no distinctive advantages. Like any other entrepreneurial business, it comes down to the personal abilities of the entrepreneur, plus capital, which would determine the profitability of the slave business model. An example Tucker gave in his report was that good care of slaves would allow for the “reproduction” of other slaves, thus allowing for an increase on the “interest” on investment.

Tucker also talks about how the runaway or attack of slaves required additional security in order to make sure such slaves are “obeying” the law and authorities. An example of this would be that the cost of the Roman slave wars or “country patrollers” who kept the slaves in the old South in line, had fallen exclusively on the slave holders, which raised the question if such systems could have survived in reality.

One may assert that the reduction in slaves per 1000 was due to the runaway of slaves, however, even so, this was minimized due to the fact that (as Tucker explains) a development of towns for freed slaves would be limited in its size so that runaway slaves won’t have the ability to hide within such locations. It’s why police officers would know most of the “freed Negros” within the towns in the first place.

Because the South had extreme views on limiting such towns and the development of big cities, this resulted in the South having limited ability to diversify its labor. This translated into northern cities having more interest and ability to grow their economy, technology, and social reforms as well.

However, how did slaves come into existence in the first place? Of course, logically, slaves had to be captured, or raised. However, as shown in the historical data, slaves themselves had been raised domestically more often than they were captured and brought to the United States, as demonstrated before and after the Atlantic slave trade ban of 1808. Raising slaves, of course, was expensive, and hence why throughout the time period of slavery, slavery and its practices declined due to the decline of revenues produced by slavery and the increase of costs (i.e. profitability diminished).

African kings who provided slaves were out-competing each other. Due to this, these kings along the coasts would not produce profits as described by Tucker. What about the shipping merchants? With shipping merchants creating inhumane and harsh conditions for slaves, the profit rates for such merchants did not increase greatly, even between what could be described as “higher quality ships” from “terrible quality” ships.

In conclusion, what we’ve learned is that slavery and capitalism are completely incompatible in nearly every way, and that when slavery originates, it is due to a totalitarian or imperial nation which had brought slavery into existence from war and conquest. The United States was no different. In fact, slavery was kept alive by cultural considerations, rather than economic and capitalistic considerations in the economy. Essentially, what had reduced the use of slavery within the 19^th century was not legislation such as the Atlantic trade ban of 1808, but the culture of capitalist societies.

Slavery, essentially, cannot be associated with capitalism because capitalism has many traits which obstruct the laws of slavery (and vice versa). An example is the accumulation of capital via the means of savings, which in turn is the engine toward productivity growth. The productivity growth results in increased efficiencies of resources, the diversification of labor, the increase of wages, increase in technological outputs, and the general wellbeing of the labor force and economy, which in turn, continues such a cycle in a sustainable and voluntary way.

Slavery does not accumulate capital (other than investment returns, but no savings are acquired), which in turn cannot accumulate and introduce new productive techniques or technologies. This leads to efficiency reductions, and a lack of labor diversity, which altogether cannot advance technological output, wages, and the general wellbeing of the labor force of the slave economy, hence why capitalist societies reduce the amount of slave use over the long term. We saw this quantified in the example of how slave rates in the United States declined while the economy grew from both quantitative and qualitative evidence, thus meaning slavery cannot be equated with capitalism or vice versa.

* The author of this article has requested anonymity.