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February 18, 2005

20050217: Econ 113: Handout on Analyzing Who Profited From North American Slavery

Who profited from North American slavery before the Civil War?

Ask a historian, or a political scientist, or a politician the question, “Who benefited from North American slavery?” and the answer you will probably get is, “The slaveholders, of course. The slaveholders got to work their slaves hard, pay them little, sell what they made for healthy prices, and get rich."

We economists have a different view. We economists think seriously about the real long-run "incidence" of events and processes. We economists think historians, political scientists, historians, and all others should take microeconomics to learn about incidence--and then take it again.

What's our take on the beneficiaries of North American slavery before the Civil War? Three groups gained the most:

  1. Those slaveholders who owned slaves when it became clear that Cotton would be King--that the British industrial revolution was producing an extraordinary demand for this stuff and that Eli Whitney’s cotton gin meant that it could be produced cheaply--profited immensely as the prices of the slaves they owned rose.
  2. Consumers of machine-made cotton textiles, from peasants in Belgium able for the first time to buy a rug to London carters to Midwestern pioneers who found basic clothing the only cheap part of equipping a covered wagon, probably profited the most in aggregate.
  3. Northern and western Americans whose taxes were lower because of the tariffs collected on imports of goods financed by cotton exports profited as well.

Why were these the principal profiters from North American slavery? Here is the argument.

Posted by DeLong at February 18, 2005 07:40 AM