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Routledge Handbook of modern economic history (The Economic History of…

- - - - The importance of ﬁnance for long-term economic growth has been debated for years. Bagehot (1873), Schumpeter (1934), Gurley and Shaw (1955), Goldsmith (1969), Hicks (1969), McKinnon (1973), and Miller (1998) assert that ﬁnance plays a crucial role in fostering indus- trialization and long-term economic growth; Robinson (1952), Lucas (1988), and many develop- ment economists view it as being less essential.
- - - - But institutionalized trading arrangements soon replaced casual theft. Although early Spanish settlers at ﬁrst enslaved native Americans, the indigenous population perished in droves from smallpox and punishingly hard work. Via licensing agreements, Portugal and Spain started importing African slaves into their colonies in the early 1500s to replace the dying natives. In 1517, Charles I began to import Africans, ﬁrst to the West Indies, then to the Spanish- controlled mainland. Brazil commenced legal importation of black slaves in 1549. Traders could acquire slaves in speciﬁc African zones, then sell them in America – up to 120 per year per Brazilian planter, for example. Because prices for Brazilian licenses were cheaper than other licenses, traders applied for these, then rerouted their vessels in search of extra proﬁts.
    - - Many parties participated in the infamous “trading triangle”: European captains provided the chieftains of West and Central Africa with liquor, guns, cotton goods, and decorative orna- ments. In exchange, Africans supplied slaves to suﬀer through the arduous middle passage across the Atlantic. Slaves worked on sugar plantations in the West Indies, grew coﬀee and sugar as well as mining precious metals in Brazil, and raised tobacco, sugar, rice, and eventually cotton in North America. These goods, along with molasses and rum, went back to Europe.
    - - Few imported slaves actually ended up in what became the U.S. By 1808, when the trans- Atlantic slave trade to the U.S. oﬃcially ended, only about 6 per cent of African slaves landing in the New World had come to North America. The remainder went further south, with the majority landing in the Caribbean and the rest primarily in Brazil.
    - - But of all who reaped rewards from the Atlantic trade, British and U.S. citizens stand out. In the 1940s, West Indian scholar Eric Williams went so far as to suggest that British indus- trialization was intimately linked to slavery. Without the slave trade to fuel growth in her colonies, Williams claimed, Great Britain could not have become the industrial superpower of the eighteenth and nineteenth centuries that she was (Williams 1944). Although Williams’s thesis has largely been discarded, other scholars nevertheless agree that the slave trade beneﬁted England. Even Elizabeth I made money by investing in slaving ships and captains. David Eltis speculates, in fact, that Britain would
  - - - Colonial slavery had a slow start, particularly in the North. At the time of the American Revolution, fewer than 10 per cent of the half million slaves in the 13 colonies lived in the North, working primarily in agriculture. Most of the original Northern colonies implemented a process of gradual emancipation in the late eighteenth and early nineteenth centuries; other regions above the Mason-Dixon Line ended slavery upon statehood early in the nineteenth century. A substantial portion of Northern slaves were sold South rather than obtaining freedom, however.
    - - Antebellum slaveowners experimented with other methods to increase productivity. Masters developed an elaborate system of “hand ratings” in order to improve the match between the slave worker and the job. Slaves could sometimes earn bonuses in cash or in kind, or quit early if they ﬁnished tasks quickly. Perhaps surprisingly, slaves often had Sundays oﬀ. Some masters allowed slaves to keep part of the harvest or to work their own small plots. In places, slaves could even sell their own crops and produce. To prevent stealing, however, many masters limited the crops that slaves could raise and sell, conﬁning them to corn or brown cotton, for example. Most slaves in the U.S. South lived in small groups rather than on large plantations.
    - - In contrast to U.S. slaves, the average slave elsewhere in the Americas did not live past his or her mid-20s. Mortality rates were higher due to a harsher disease climate and more grueling work conditions. Masters in Brazil and the West Indies therefore behaved diﬀerently, estab- lishing much longer periods of breastfeeding (which helped provide natural protection against subsequent pregnancy). The demographic ratio was also skewed heavily toward males. As a result, birth rates among West Indian and Brazilian slaves were relatively much lower.
    - - Society as a whole shared in maintaining the machinery of slavery as well as protecting its existence and enjoying its yields. All Southern states except Delaware passed laws to establish citizen slave patrols that had the authority to round up suspicious-looking or escaped slaves, for example. Patrollers were a necessary enforcement mechanism in a time before standing police forces were customary. Essentially, Southern citizens agreed to take it upon themselves to protect their neighbors’ interests as well as their own so as to safeguard slavery.
      - collaboration between the north and th south
        
        Northern citizens often worked hand-in-hand with their Southern counterparts, returning fugitive slaves to masters either with or without the prompting of national and state law. Yet not everyone was so civic-minded. As a result, the profession of “slave catching” evolved – often highly risky (enough so that insurance companies denied such men life insurance coverage) and just as often highly lucrative.
    - - One element that contributed to the proﬁtability of New World slavery was the African heritage of the slaves. Africans, more than native Americans, were accustomed to the discipline of agricultural practices and knew metalworking. Some scholars surmise that Africans, relative to Europeans, could better withstand tropical diseases and, unlike native Americans, also had some exposure to the European disease pool.
      - African skin colour
        
        Perhaps the most distinctive feature of Africans, however, was their skin color. Because they looked diﬀerent from their masters, their movements were easy to monitor. Denying slaves education, property ownership, contractual rights, and other things enjoyed by those in power was simple: one need only look at people to ascertain their likely status. Using color was a low- cost way of distinguishing slaves from free persons. For this reason, perhaps, early colonial practices that freed slaves who converted to Christianity quickly faded away. Deciphering true religious beliefs is far more diﬃcult than establishing skin color.
  - - - reflections in prices
        
        Prices reﬂected the characteristics of particular slaves, including their sex, age, skill level, and physical condition. Important individual features also included temperament and, for females, childbearing capacity. In addition, the supply of slaves, demand for products produced by slaves, and seasonal factors helped determine market conditions and therefore prices.
        
        Girls cost more than boys at young ages; the genders then switched places in terms of value. Compared with men, women were worth 90 to 95 per cent as much in Cuba, 80 to 90 per cent as much in the U.S. and West Indies, and 70 to 80 per cent as much in Brazil.
      - slavewners agsindy the atlantic trade
        
        Many Southern slaveholders actually supported closing the Atlantic trade because the result- ing reduction in supply drove up prices of slaves already living in the U.S. and, hence, their masters’ wealth. U.S. slaves had high enough fertility rates and low enough mortality rates to reproduce themselves, so Southerners did not worry about having too few slaves to go around. Unlike elsewhere in the New World, the South did not require constant infusions of immi- grants to keep its slave population intact. In fact, by 1825, 36 per cent of the slaves in the Western Hemisphere lived in the U.S.
      - demand dependent suring the year
        
        Demand sometimes had to do with the time of year a sale took place. For example, slave prices in the New Orleans market were 10 to 20 per cent higher in January than in September. Why? One possible explanation is that the opportunity cost of spending time away from the plantation was high during harvest season, making the net willingness to pay for slaves relatively low in September.
        
        legal slavery
        
        One additional demand factor loomed large in determining slave prices: the expectation of continued legal slavery. As the American Civil War progressed, slave prices dropped dramati- cally because people could not be sure that the peculiar institution would survive. In New Orleans, prime-age male slaves sold on average for $1,381 in 1861 and for $1,116 in 1862. Burgeoning inﬂation meant that real prices fell considerably more. Not surprisingly, by the end of the Civil War, slaves sold for a small fraction of their 1860 price.
      - Even controlling for inﬂation, slave prices rose signiﬁcantly in the six decades before seces- sion, as Figure 24.1 shows. Slavery remained a thriving business on the eve of the Civil War: by some estimates, average slave sale prices by 1890 would have increased more than 50 per cent over their 1860 levels. It is no wonder that the South rose in armed resistance to protect its enormous investment.
    - - slavery was a profitable business
        
        Slavery was a proﬁtable enterprise in the New World, although it never generated superproﬁts because people always had the option of putting their money elsewhere. Nevertheless, invest- ment in slaves oﬀered a rate of return – about 10 per cent – comparable to returns on other assets (Fogel 1989).
      - The debtae
        
        That slavery in the American South was proﬁtable seems almost obvious. Yet scholars have argued furiously about this matter. On one side stand antebellum writers such as Hinton Rowan Helper and Frederick Law Olmstead, and contemporary scholars like Eugene Genovese (at least in his early writings), who speculated that American slavery was unproﬁtable, ineﬃ- cient, and incompatible with urban life. On the other side are those who contend that slavery was proﬁtable and eﬃcient relative to free labor, and that slavery suited cities as well as farms, industry as well as agriculture. These researchers stress the similarity between slave markets and markets for other sorts of capital.
        
        Time on the cross
        
        Despite criticism (notably a collection of articles entitled Reckoning with Slavery edited by Paul David and others [1976]), Time on the Cross and Fogel’s subsequent Without Consent or Contract (1989) have solidiﬁed the economic view of Southern slavery. Even Eugene Genovese, long an ardent proponent of the belief that Southern planters held slaves for prestige value, ﬁnally acknowledged that slavery was probably a proﬁtable enterprise.
        
        the explicit findings
        
        Among Fogel and Engerman’s ﬁndings are these: antebellum Southern farms were 35 per cent more eﬃcient overall at turning inputs into output than Northern ones, and slave farms in thecotton South were 28.5 per cent more eﬃcient than free farms. Moreover, slavery generated a rate of economic growth in the U.S. South comparable to that of many European countries.
        
        Perhaps the most controversial book ever written about American slavery is Time on the Cross. Authors Robert Fogel and Stanley Engerman (1974) were among the ﬁrst to use modern statistical methods, computers, and large data sets to answer a series of empirical questions about the economics of slavery. Building on earlier work by Alfred Conrad and John Meyer (1958), Fogel and Engerman used data from probate and plantation records, invoices from the New Orleans slave-sale market, coastwise manifests for shipped slaves, and manuscript census schedules to ﬁnd proﬁt levels and rates of return. Fogel and Engerman pioneered the use of “total factor productivity,” which measures output per average unit of all inputs.
        
        further evidence
        
        One potent piece of evidence supporting the notion that slavery provided pecuniary beneﬁts is this: slavery often gave way to other forms of organizing the labor force when the costs and risks of maintaining slaves become too large. Within Africa in the nineteenth century, certain developments shifted some of the risk of poor crop yields away from masters: slaves began to pay masters for the right to work on their own as masters stopped paying for the slaves’ upkeep. And the Spanish Crown for a time favored a system of forced labor called encomienda, whereby the indigenous population could not be bought, sold, rented, bequeathed, or removed from the area. Scholars have speculated that this form of coercion, relative to outright slavery, reduced threats to the security of the Crown’s interest. Thus, other types of labor took the place of slaves when slavery cost too much.
        
        In like fashion, slavery replaced other labor when it became relatively cheaper. In the early
        U.S. colonies, for example, indentured servitude was common. As the demand for skilled ser- vants (and therefore their wages) rose in England, the cost of indentured servants went up in the colonies. At the same time, second-generation slaves became more productive than their fore- bears because they spoke English and did not have to adjust to life in a strange new world. Consequently, the balance of labor shifted away from indentured servitude and toward slavery. Georgia oﬀers a compelling example. Its original 1732 charter prohibited ownership of black slaves. Yet by 1750 the trustees of the new colony had to relax the prohibition because Georgia growers simply could not compete with producers elsewhere who utilized lower-cost slave labor.
    - - It has been established that slavery in the new world was profitable but whteher it was efficent is a different wquestion
      - arguments for being more efficeint
        
        Fogel and Engerman claim that slaves kept about 90 per cent of what they produced. They also note that, because slaves constituted a considerable portion of individual wealth, masters fed and treated their slaves reasonably well. Although some evidence indicates that infant slaves suﬀered much worse conditions than their freeborn counterparts, juvenile and adult slaves lived in conditions similar to – sometimes better than – those enjoyed by many free laborers of the same period. Because Fogel and Engerman ﬁnd as well that agricultural slavery was 35 per cent more eﬃcient than family farming in the North, they argue that slaves actually may have shared in the overall beneﬁts resulting from the gang system. Other scholars contend that slaves in fact
        
        Criticism of Fogel and Engerman
        
        Gavin Wright (1978) critiques Fogel and Engerman by focusing on the exceptional nature of the crop year they used to calculate their statistics and by using alternative data to attack their estimates of total factor productivity. Wright calls attention as well to the diﬀerence between the short run and the long run. He notes that slaves accounted for a very large proportion of most masters’ portfolios of assets. Although slavery might seem an eﬃcient means of production at a point in time, it ties masters to a certain system of labor that may not adapt quickly to changed economic circumstances.
    - - Rising British sentiment against slavery culminated in the Somerset case, which outlawed slavery in England in 1772 (Somerset v. Stewart, 98 English Reports 499–510 [King’s Bench, 22 June 1772]). Britain and the U.S. abolished the international slave trade in 1807–8; Britain freed slaves in its colonies (except India) in 1833, with full emancipation in 1838. Slavery in the U.S. oﬃcially disappeared by the end of the American Civil War in 1865.
      - Yet slavery in Southeast Asia, the Arabian peninsula, and parts of Africa continued well into the twentieth century. Perhaps the saddest legacy of American slavery is that the system estab- lished to supply the New World with slaves also shaped society at home. Some scholars believe that slavery was endemic to Africa, others date its origins to medieval Muslim society or the later European inﬁltration. Regardless of beginnings, slavery within Africa burgeoned along with the Atlantic trade – in 1600 Africa had a minority of the world’s slaves, in 1800 the overwhelming majority. The Great Scramble for Africa spread slavery further. Although some scholars suggest that African slavery was more benign than the American version, recent research indicates that the two were not very diﬀerent. Regrettably, the tragedy continues:Angolan slaves fought bloodily for freedom in 1961; Mauritania kept slavery legal until 1980; Nigeria still had slave concubinage in the late 1980s; and numerous African regions actively practice slavery today.