Who, me? Naw, I'd find me a slave to work out the math!

As a medieval historian, I ask, are those Belgium peasants who can't afford a rug for real? Given the many centuries when Flanders and Brabant were world leaders in industrial weaving?

[Yup. Lotsa very poor peasants before the industrial revolution--even in districts thought of as rich.]

One point off (at least) for poor use of the English language. Hey, but I can spell medieval.

I would say this backs up my gut feeling that the student in the other thread should have no more than one point deducted for mixing up on the page (and maybe not in his/her mind) H.R. and H.B.

The error comes in not ignorance, I'd guess (I know the difference between "Belgian" and "Belgium") but in not proofreading and revising. And there likely was not much time to do that in the exam period.

[What's wrong with talking about "peasants in Belgium" rather than "Belgian peasants" for the first half of the nineteenth century? I would argue that there are no "Belgians" at all until after 1870 or so...]

Brad is right about this being a useful way of looking at the history -- for one thing, maybe it helps explain why western farmers and Northern urban tradesmen and workingmen were willing to ally themselves with Southern slaveholding elite for so long, even when their interests differed on so many other issues, from internal improvements to the extension of the franchise. Which in turn may explain why Lincoln was just a one term Whig Congressman and why New York City toyed with the idea of seceding at the beginning of the Civil War.

Who knows? If the Southerners hadn't been so stubborn blocking a homesteading act, and so bloody minded about Stephen Douglas's "popular sovereignty" proposal for the Louisiana purchase territories, maybe there wouldn't even have been a Civil War...

Interesting post. From the standpoint of a reader of history (as opposed to an economist...), I'd have thought that a fourth group, the interests who were involved first in the triangle trade and then in the manufacture of cloth from the cotton, in New England and England, would have been major beneficiaries of slavery. I'm curious about that, Brad. In any event, I've printed the paper to read. Thanks for posting about your econ history course.

Who Profited From North American Slavery

I expected your answer would be

1. George Bush
2. Dick Cheney
3. Condoleeza Rice

One thing for sure, Eli Whitney’s cotton gin makes lousy martinis.

Brad,

I'm sorry to hear you have the flu, and I hope a lively discussion makes you feel better. A few points:

First, rather than assuming constant returns to scale, wouldn't it be more appropriate to acknowledge increasing returns to scale both in cotton growing and textile manufacturing? Jeffery Paige (in Agrarian Revolution) makes a very persuasive agrument that cotton is quite different from most other crops in that in actually can be grown efficiently in a plantation setting. Wouldn't that assumption be compatible with both a rising consumer surplus and a much larger producer surplus for the slaveholders than you acknowledge?

Second, this has to be the first time I've ever seen a neoclassical economist use the word "tariff" without launching into a discussion of the size of the welfare loss associated with said tariffs. Do you really mean to argue that consumers were better off with the high tariff/ low tax combination? If so, why wouldn't a similar arrangement be sensible now? Wouldn't this be a quick way to reduce both our present-day trade and budget deficits? If it was good enough for the early nineteenth century, why isn't it good enough for the early twenty-first?

Third, as a political scientist, I have to ask: doesn't this amount to a killer argument for reparations? I mean, if all US workers and consumers benfited from slavery as you describe, then they accumulated surplus at the expense of the slaves, some of which was capitalized and currently exists in the form of much greater net-worth (to say nothing of human capital) among European-descended housholds as opposed to African-American households. And yet, when has any economist made this seemingly obvious point? I'd be happy to take micro again if you'd brush up on logic ...

But from the point of view of a historian or political scientist, the subjective interpretation of who benefitted from slavery is important. The slave owner might not have been able to distinguish clearly between losing money because he would have to hire workers, or losing money because his endowment of slaves would become worthless after emancipation, but he knew that slavery (and the extension of slavery) was entirely in his interests. Meanwhile, I don't think that northern taxpayers (far less Belgian peasants) had any understanding of any economic benefit derived from slavery.

>Second, this has to be the first time I've ever seen a neoclassical economist use the word "tariff" without launching into a discussion of the size of the

Hah. Beat me to it.

How does this gell with the arguments that if you price slaves as if they were capital instead of labor, they were payed at fair market value?

Too bad "profit" has been turned into a synonym for "benefit" in this argument.

[Be polite]

Cotton was sold into a highly competitive, commodity market and so its price was the "marginal" cost of producing cotton. If you want to argue that anyone, other than the slave owners, benefitted from slavery, you need to show not that the average wage of free cotton growers would be higher, but, rather that the marginal wage of free cotton growers would be higher.

[Not so. The price of textiles matters a lot--consumer surplus.]

In fact, free farmers did grow cotton, at the prices prevailing in the antebellum period, on land of marginal quality.

There was cotton grown, which would not have been grown by freeman -- the long staple cotton grown in the malarial swamps of South Carolina would be a good example, but, in the main, the marginal price/cost of growing cotton was high enough to draw in some free labor. Post-war experience confirmed that cotton could and would be grown by free (or, at least, semi-free) labor at higher wages and lower cotton prices.

As for the theory that economic rents disappeared into efficient market pricing soon after the cotton gin -- did not happen. In fact, there were a couple of cycles of boom and bust.

[And during the booms current slaveowners made windfalls. And during the busts they incurred losses.]

In the boom of the 1850's, the economic profits available in the South in slaves and land drew up almost all available investment, and many fortunes were made.

[And during the busts many fortunes were lost.]

As for the tariff argument, this was a favorite of antebellum Southerners, who thought that they were paying the whole cost of the Federal government, whose revenue came principally from the tariff. The truth is that the North America in the first half of the 19th century was chock full of potential exports; during the Civil War, the United States shifted to supplying Europe food, scarcely without missing a beat. Cotton was the predominant export, but it was not much ahead of a large number of other potential exports

[Yes it was. It was the only potential export with a relatively inelastic demand]

Why isn't the question posed as "who benefited from slavery relative to some plausible alternative system?"? If it were, maybe we'd get an answer to the naive objection--which begins by observing that those southern slaveholders sure fought hard to keep their supposedly unprofitable arrangement.

Yes, concievably under other societies with relatively sane laws that apply to slavery.

Antebellum South? ouch...I don't think so...

[troll]

I like this as a kind of "Fermi question", but I have a quibble. You say (p.6) "but the message-- thatBritish workers had ample other opportunities and would have done almost as well without the option of working in spinning mills -- is almost surely true." A look at British history from 1800 to the Emancipation Proclamation suggests your assumption is almost surely false.

Consider: 1) the depression of 1811-12 when poorhouse rolls skyrocketted and Luddite attacks on mills began; 2) labor unrest due to a swelling labor force from the demobilization after the Peninsular War; 3)increased cheap child and female labor in the 1820's; 4) influx of cheap Irish labor (100K per year in mid 1830's); 5) additional cheap Irish labor in 1840's from the potato famine 1845-50.

Pictured otherwise, the rocky transition from Jane Austen's to Charles Dickens' England does not admit significant space for worker opportunities required for your assumption's validity.

Now, I think your primary purpose is to throw around concepts in applications, but I'd have to say after reading it, that I disagree very strongly about some of the items in there.

The first and formost objection is with your formulation of t. t was not purely a financial cost in this scenario. There were other benefits that accrued that were not financial, and some driving motivations that didn't even make sense to us now!

Oh and yes, there are other models other than slavery and free working people, like the model we *currently* use with mexican agricultural workers. Namely import dirt poor serfs and let 'em have at it...

I find it rather haughty to state that "We economists think seriously about the real long-run 'incidence' of events and processes"
and later advise political scientists, historians, and all others "take microeconomics to learn about incidence--and then take it again."

In the same vein, economists and mathematicians should learn medieval history, sociology or for that matter art history "again and again", since it could well offer new and surprising insights.

One might also consider the value added to property owned by slaveholders created by construction of buildings, furnishings, raising livestock, planting food crops and trees, etc. done by slave labor and skill. Also cooking, housekepping and raising the master's children.

Slaveholders also contracted out their slaves for labor on other building projects - including if I am not mistaken, the White House. I presume streets, roads, canals and railoads were built with slave labor as well.

All of this to build wealth for a certain group of people who were able to retain and invest this wealth and pass it down by inheritance to their children. In a very real sense there are plenty of people who STILL profit from slavery.

My questions would be in regard to the northern taxpayers. How did the federal government raise taxes in those days, other than tariffs? What was an individual citizen's tax burden, and was it really significantly, or even measurably reduced by cotton tariffs?

Anything to say about the shippers who transported the slaves, and the Africans who captured and sold them?

Brad: This is off-topic, but wanted to bring it to your attention: If you're looking for a good "Why Can't We Have A Better Press Corps?" item, check out Steve Landsburg's new article at Slate. I can't believe it was written by an economist.

Prof. DeLong, aren't the "lowered tax" benefits to the Northern and Western taxpayers likely to be fairly small relative to your first two benefit categories? Aren't there a number of other classes who would have the same order of magnitude benefit? Specifically:

1) As I understand it, your argument is that because the ability to import new slaves was essentially zero, the seller-side benefits of the expansion of the cotton trade would be accumulated primarily by existing slaveholders. Those slaveholders would buy more imported goods, increasing their relative share of the tax burden due to import taxes.

1.1) Under this analysis, wouldn't Southerners who didn't own slaves at the beginning of the analysis reap the same "lowered tax" benefits as the residents of free states?

1.2) Isn't there a benefit to all Southerners as the increased wealth of the year 0 slaveholders is spent in the community? It seems to me that this benefit should be of the same order of magnitude as the reduced tax benefit, and therefore equally worthy of mention.

2) Assuming that the means of production (slaves) are fixed, does this suggest that most of the surplus would be concentrated in the sellers' rather than the buyers' side? If so, should we expect much more of the wealth to end up in the hands of the year 0 slaveholders, rather than in in those of consumers?

Thanks,
Jon

Ah, Charlie, you must not be familiar with Landsburg. He is to economists what...well, Luskin is to economists.

The relevant question is who is in the pictures of Jake Wesiberg that he obviously has.

I am grateful, I shouldn't complain, but -

when you link to a PDF doc, can you put "(PDF)" after the link so we know what we're getting?

From http://www.rolandtanglao.com/categories/webbrowsers/2003/11/28.html -

"...none of these documents use any features exclusive to PDF that would preclude them being published as HTML...

It seems that the PDF format signifies something now, and it's something more than just user inconvenience. In addition to requiring the user to shift mental modes, ("I'm seeing something designed as a PDF now, this must be serious information...") the requirement that a document either be downloaded or viewed in a context that's radically different from standard web pages seems like a subtle assertion of authority by a document's creator."

And sometimes PDFs hose my browser.

Oh, and it should be mentioned that the House Organ of this Administration, the Washington Times, would argue that the slaves themselves benefitted most, what with being granted Christian salvation by their beneficient masters.

If you don't know what I'm talking about, look into Wes Pruden and the Council of Conservative Citizens.

This must be OT, but... I was actually surprised to find the first half not so bad: pure accounting tricks will not do much for real standard of living in the future; follow the goods not the money. Then comes the let-down of predictably backing the current adiministration without mentioning among others *higher risk through higher choice *more debt *unproven "growth-policies".

Landsburg could be only slightly misrepresented as a public troll. ;)

Meanwhile, I don't think that northern taxpayers (far less Belgian peasants) had any understanding of any economic benefit derived from slavery.

I'm not so sure of this. One of Emerson's earlier lectures, "Man the Reformer" (1841)--as well as the more famous "Self-Reliance" (also 1841)--show a pretty consistent obsession with what it means to be a consumer. Both texts argue that labor produce value:
...it is the sailor, the hidedrogher, the butcher, the negro, the hunter, and the planter, who have intercepted the sugar of the sugar, and the cotton of the cotton. They have got the education, I only the commodity ("Man the Reformer," Liberary of America, 140)

There were some other radical puritans who thought and acted along these lines--and not just Thoreau and John Brown. Utah Mormons, under Brigham Young, felt it their moral duty to establish an economically self-sustaining settlement. They grew their own cotton and produced their own silk. The economic profit to consumers of slavery wasn't obvious to all, of course, and even if people recognized it they didn't necessarily want to upset things, but it was commented on at the time.

[troll]

Tangential point:

Is it really accurate to say that the early slaveholders profited because of the rise of King Cotton? Didn't this occur at about the same time that the supply of slaves became fixed? What happened to the wealth of non-slaveholders who owned land suitable for cotton growing?

[Rose slowly over time from a very low initial price--there was a *lot* of land suitable for cotton growing.]

[troll]

about the belgians, I sort of remeber that J, Caesar, had problems with the Belgae.

[troll]

How much is the tariff a cause here? Isn't this conclusion specific to XIXc America? Without the tariff, the tax benefits to other Americans would be gone. What shares of the advantage have moved to the planters and to the consumers?

To say that the benefits only went to planters who already owned slaves isn't exactly the same as to say that it didn't go to planters, just that the old-money established planters got all the advantage.

I think that a more nuanced framing of the piece would have been better. If I understand the piece right, it isn't terribly paradoxical. Some planters profited more than others, consumers profited a lot, and (because of local circumstances) some of the profit was spread into the general community via taxation.

Politically, support for slaveholders included support for lower tariffs, which was the Democratic position IIRC, whereas high tariffs were Republican (and anti-slavery). But Northern Democrats in favor of lower tariffs would have cancelled out that part of their advantage, according to DeLong's model.

Historians think that economists are too fixated on the monetary meaning of "profit."

Come on, Prof. DeLong, what does it take to get past your troll detector? Ok, I'll take out the last paragraph. But this is not troll material. And you did say, you know, that historians aren't serious -

[Well, most of it *is* wrong. For example, there is a substantial literature that looks at whether there were excess expected returns to be earned from buying slaves and putting them to work... and finds by and large not. That's a pretty efficient capital market...]

DeLong takes as an a priori assumption that after the close of the slave trade the supply of slaves was "fixed." This is incorrect over any period longer than 5-10 years. One of the distinguishing characteristics of U.S. slavery - as opposed to Caribbean or Brazilian slavery - was that in the United States, the slave population grew rapidly from natural increase. From the close of the slave trade in 1808 to 1860, the slave population of the US tripled. In the Caribbean and South America, where conditions were much more brutal (as bad as Nazi slave labor camps), mortality rates were higher than birth rates and slavery could be maintained only by continuous imports from Africa.
To some extent, slave population growth was a product of the upper South- one of the exports of Virginia was slaves, who were sold to the harsher plantations of the deep South. But even there, birth rates exceeded mortality and the slave population increased naturally. Overall, natural increase meant that the owners of slaves at the time of the invention of the cotton gin could not garner all profits from the increased utility of slaves.
Indeed, one of the driving forces of Southern expansionism- into Florida, Texas, Missouri, and Kansas, with abortive efforts to annex Cuba and Nicaragua - was the need to keep slave prices high by finding new lands for them to work.
In any event, efficient capital markets barely existed in the North and did not exist at all in the South. There is no way that a buyer could have taken out a loan sufficiently large to finance the purchase prices that, DeLong posits, should have prevailed once "Cotton became King."

The economic analysis is an excellent approach, and far better than the conventional history. But there are some important characteristics of slavery that it misses.

One of these is social inequality among whites. In the tobacco regime of Tidewater Virginia, there was a much more even distribution of land and income before 1700 or so, when slavery took off. This was true of cotton culture from the invention of the cotton gin.

Another side effect was the fact that slaves had no consumer choice, in turn leading to lack of retail trade and a relatively small urban component of the society. Gouverneur Morris denounced slave holding areas as a 'desert' at the Constitutional Convention, by which he meant that a traveler saw few thriving towns.

There's probably some data to allow estimating effects, but a lot assumptions would be required to come up with numbers.

The South essentially imported Northern wheat and converted it into cotton. The amount of by god hay they imported was ridiculous. How could you not be able to compete with low value high volume products like hay?

Well, one of the reasons I really doubt that all of the benefits and costs are measured is the track record of areas that depended on low value labor like cash crop agriculture and mining tends to have long term issues. I think that the impact of cheap cotton wasn't so much important in price as in availability.

With the industrial revolution going apace, it was the first time, my guess, that cotton materials could be had at all on a mass consumer level. Meaning the infrastructure available for processing cotton was more important than the cotton itself...the factories, the shipping, the dyers, all that jazz. Even the fact that the US had so much arable land suitable for growing the *very* thirsty and hungry crop close to transportation channels was more important than what kind of labor provided the picking. I don't even think the kind of mass economies that could be had by using slave labor instead of hiring labor played that large a role in starting up the infrastructure.

Contrast it to this...Instead of people who could choose various items to consume, and feeding a local economy that can supply with the various items needed for a hard life, instead people were told to eat mush and maybe if they're good...entrails. People were only given a pair of trousers and maybe a shirt. Many of them did not have clothes worth a damn. Slaves didn't feed much of anything to a local economy. All that went in were items with little value added. Much less need for craftspeople was present. Yes, slaves are more efficient [i]on a local and micro basis[/i], but they aren't good for gross slave area product.

View this not only like Walmart doing wage arbitrage from overseas, but like Long Term Capital Managment doing currency arbitrage with capital even more. Slavery required [b]predictability[/b]. You can make money by having as many slaves as possible working as hard as possible on as few resources as possible--if you can anticipate demand growing. With alot of slaves and alot of land and alot of water and you can make sizable economies snatching all the pfennings from all of that worked land. However, one shouldn't mistake this for anything OTHER than a leverage play. Slavery isn't completly a wage arbitrage opportunity, it was also a commodity arbitrage, and the advantage that slavery provides is ensuring the maintenance of marketsize, that a landowner has an absolutely garunteed labor supply to keep growing more and more cotton on more land as more finished cotton products find more markets. It's a one way play...THAT THE MARKET FOR COTTON PRODUCT KEEPS GROWING. The cotton growing industry took up a huge amount of economic oxygen in many areas of the south. When the cotton market matured, as it inevitably would, the trade unwound. Even if it did lower taxes at earlier times, the price was paid in severe economic retardation and massive capital depreciation, and there were few industies in the south able to create economic wealth. And most of the potential wealth were in slave assets that got freed. Instant wealth depreciation, and this step was almost inevitable in a sense...

Mobile Al should be one of the wealthier cities in the US. Cities with good bays like Mobile, usually have much of the economic activity of the region focused in it. However, it and New Orleans are some of the poorer major cities in the US.

The Walmart/China analogy is apt. Where I live, NW Louisiana, the whole process of constructing the slave economy played out in 20 years. The Red River was blocked by shifting logjams collectively known as The Great Raft, which was broken up enough to allow reliable river traffic in 1839. The post-Civil War history, including racial demographics and cotton monoculture, was similar to the rest of the South. The only specialized infrastructure needed was riverboats and cotton gins. Capitalizing labor in the form of slaves did involve estimates about future market conditions, but what drove the economy was short-term inelastic demand for cotton.

We don't know how it would have played out because the Civil War and Reconstruction altered the whole system. The tobacco economy of Tidewater Virginia is a reasonable model. There, the economy diversified. The richest planters became overleveraged. Slavery became less profitable. Ending slavery was a respectable topic of discussion around 1790, just before the invention of the cotton gin.

The lack of efficient capital markets is a side point - the main point is the fact that the supply of slaves was not fixed. But let's discuss the side point for a minute. There were no capital markets that would have been necessary to finance the purchase price of slaves if the supply of slaves had truly been fixed such that slave-owners at the time of the development of the cotton gin could have captured expected future returns. If the supply of slaves had been fixed- like taxi medallions in New York - the prices would have had to sky-rocket to capture the expected returns - again, like taxi medallions in New York. But the prices could not have sky-rocketed without the capital markets able to provide mortgage-like financing that would have permitted loan payments over a period of decades. This would have required not merely sophisticated lenders but also sophisticated insurance markets to insure the mortgaged assets, and a system of medical care for slaves (like modern vets for race-horses). It would have led to highly capitalized slave-agencies which owned slaves and leased them to farmers. It would have been a world of slavery totally unrecognizable from the true historical world. It is true that you could buy insurance on the life of a slave but the mortgage and insurance limits that would have been required under Prof. DeLong's scenario would likely have been far higher than anything the systems then in place could have managed. These are all counter-factuals, as no such upward pressure on prices emerged, simply because there was no cap on the number of available slaves.

The fact that there were no "excess expected returns to be earned from buying slaves and putting them to work" merely means that plantation owners were willing and able to put slaves to work on marginal land, or to substitute slave labor for alternative capital investment (such as animal power or improved technology) up to the point that the return was sufficient to justify the purchase price and no farther. It has nothing to do with whether there were capital markets that would have permitted borrowing to finance slave purchases at the very high prices that Prof DeLong's explanation posits.

I seem to recall an estimate that the total market value of slaves in the Ante Bellum era was 4 times the value of the capital stock of the rest of the nation. And the natural increase in the slave population, post import ban, already noted above, which contrasts with the figures further south, suggests owners attending to the value of their capital. Also, wouldn't the surpluses extracted from slavery, together with its capacities for expansion, which would have effected such things as land values, come at the expense, as well, of free but poor southern whites? So perhaps the macro-economic facts cast some doubt on the micro-economic analysis.

I looked at the census data for my part of Louisiana (NW corner) and from 1840 when settlement began to 1860 slaves were about 2/3 of the population. The land in the two parishes I looked at includes some rich flood plain and some forested hills with patches of rich soil. This area was settled by poorer whites with few or no slaves, and they tended to grow mixed crops for local consumption. The local river port had factors and merchants from the beginning. I assume they bought cotton by the bale for shipment to New Orleans, so there was transmission of the international price to the planters.

It looks like the local beneficiaries of slavery were the planters. But since the system depended on slavery from the beginning, it is difficult to go back and see whether the earlier owners profited to the extent of the discounted future returns of the slave labor.

Another consideration is that land under cultivation doubled between 1850 and 1860, and in 1860 was the largest recorded for some categories. So prices may have been distorted by boom conditions.

I am not an historian, only a “ local witness”.

The fact that peasants produced textile existed already in the middle ages; this cloth was sold in this old “Lakenhallen” (cloth-halls) in Bruges, Ieper, Ghent, Brussels, Louvain and was famous all over Europe. But the cotton production was different.

England wanted to keep a strict monopoly on the production of cotton textile and they were very serious about that. In fact there was the dead penalty on exporting the automatic weaving-loom, called the Mull-Jenny. This was the basic of their industrial production and market power. Around the time of the French revolution, Lieven Bauwens, a rich leather manufacturer of Ghent, who was often in England, bought one, pretending that he liked to start up a textile business in Scotland. With huge bribes and at the risk of his live, he smuggled the machine to Ghent, replicated it and put those machines in the buildings of old abbeys, that were confiscated in the mean time by the “Sansculottes” of French the revolution – and there were a lot of abbeys here in Flanders.

Now my point is only that cotton production became an industrial and urban phenomenon and that the age-long decentralized production in the farms came at that moment nearly to and end.

The company of Lieven Bauwens, too much linked to the French occupiers, didn’t survive the fall of Napoleon. But his entreprise not only gave rebirth to the for centuries looming economy of Ghent, but is considered as the trigger of the industrialization of Belgium (steel, coal glass, textile ….. chocolate….) what made this country at the end of the 19 th century one of the richest of the world. As far as the social aspects are concerned, the textile industry in Ghent was the cradle of the “working class movement” in Belgium, while the agriculture in the small farms tumbled in a deep crisis.

But all this doesn’t alter fundamentally Brad Delong’s remarks on the relation between the slavery in America and the economic opportunities here in Belgium.

I find the emphasis on slaveowners "who owned slaves when it became clear that Cotton would be King" difficult to follow--when is this supposed to have been? The graph of New Orleans slave prices does not show any sudden rise to a plateau. Slave prices were at an all-time high in 1860, having steadily increased for over 20 years.

[There's a big runup in the 1830s, followed by a collapse in the early 1840s: anyone who bought slaves at the end of the 1830s to set up or expand a plantation was in big trouble. Prices were then roughly stagnant until the 1850s, when there is another runup.]

Also, it's worth noting that slaveowners _did_, in general, "work their slaves hard, pay them little, [and] sell what they made for healthy prices". It's perfectly true that not all slaveowners "got rich"; slaveowners could fail financially for any of a large number of reasons (including overpaying for slaves).