Profit of slave labor in America

Profit of slave labor in America

In his memoirs about his personal life as a slave and slavery in general, Moses Grandy on page 65 claims that:

The proprietors, though they live in luxury, generally die in debt: their negroes are so hardly treated, that no profit is made by their labor. Many of them are great gamblers. At the death of a proprietor, it commonly happens that his coloured people are sold towards paying his debts.

Is his claim that the horrible treatment of the slaves caused them to be not profitable correct?


One of the great things about economics is that, in a way, it is self regulating. If slavery was unprofitable then plantation owners would exit the business and stop investing capital in unproductive capital goods (slaves). Please take into account the source of this comment, a former slave and anti-slavery activist. Which is more likely? A biased commenter was attempting to disparage an industry for political purposes or that there was mass-insanity where business men would allocate capital in such a manner so they often died in debt and year after year would not make a profit.


Slavery was quite profitable, according to Baptist's Half Has Never Been Told. It made many Southern slave owners significant money in the antebellum decades of the 19th century, especially when they raised cotton on large plantations. Baptist draws a strong picture of more and more deliberate violence against slave laborers to make them work harder and faster, raising productivity.

Plantation slavery's potential for ever increasing profit at larger scale demanded increasing investment and growing speculation in land, buying of more slaves from the northern slave states for sale in New Orleans and West, thus using a lot of Northern capital while replying on escalating British demand for cotton. This amounted to ever increasing risk of financial failure, especially severe when cotton prices declined. Some slave owners went bust or ran away from their debts but the money to be made attracted others to take their place, and buy the bankrupts lands and slave assets.


The very nature of the trade in those days ie. cotton , sugar and tobacco are high labour intensive "raw material" crops which required a deal of after processing the profits were mostly made by Merchants and Industrialists rather than the planters of the raw materials. It is said that the Glasgow tobacco merchants (they became known as the Tobacco Lords) specialised in giving American and West Indies plantation owners generous credit lines until they had them in a debt trap to ensure a monopoly on their tobacco/cotton supply at rock bottom prices , or they gained ownership of the plantations. Glasgow is full of grand buildings built from the profits of this trade and of course the profits of the slaves who worked on the plantations.

see attached for further info , particularly under the heading "American Revolution" which clarify's the state of plantation owners precarious financial situation.

https://en.wikipedia.org/wiki/Tobacco_Lords


15 Major Corporations You Never Knew Profited from Slavery

The enslavement of African people in the Americas by the nations and peoples of Western Europe, created the economic engine that funded modern capitalism. Therefore it comes as no surprise that most of the major corporations that were founded by Western European and American merchants prior to roughly 100 years ago, benefited directly from slavery.

Lehman Brothers, whose business empire started in the slave trade, recently admitted their part in the business of slavery.

According to the Sun Times, the now-defunct financial services firm acknowledged that its founding partners owned not one, but several enslaved Africans during the Civil War era and that, “in all likelihood,” it “profited significantly” from slavery.

“This is a sad part of our heritage …We’re deeply apologetic … It was a terrible thing … There’s no one sitting in the United States in the year 2005, hopefully, who would ever, in a million years, defend the practice,” said Joe Polizzotto, general counsel of Lehman Brothers.

Aetna, Inc., the United States’ largest health insurer, apologized for selling policies in the 1850s that reimbursed slave owners for financial losses when the enslaved Africans they owned died.

“Aetna has long acknowledged that for several years shortly after its founding in 1853 that the company may have insured the lives of slaves,” said Aetna spokesman Fred Laberge in 2002. “We express our deep regret over any participation at all in this deplorable practice.”


Slavery Made America

About five years ago, I began a deep dive into the Civil War, most of it chronicled here. That dive culminated in an essay in our commemorative Civil War issue, much like my deep dive on housing and "colorless" policy culminated in The Case for Reparations. The earlier piece built toward the later one. The Civil War revealed to me the price, and the bounty, of enslavement in this country. The things I focus on in the reparations piece—housing and 20th-century policy—all spring from that period of American history. I could not have understood 20th-century discrimination without understanding its 19th-century manifestations. My entry into this period was idiosyncratic and the reading list below reflects that. Again, nothing here is definitive. I can only show you the path I walked.

Before I took the dive into the Civil War, I understood the enslavement as a moral catastrophe. I also had some vague sense that that enslavement had helped shepherd America into being. Finally I knew that the Civil War was somehow related to slavery. All three of these notions ultimately had to be revised. That enslavement in America was somehow more than a moral problem became apparent while reading the grandfather of all Civil War histories, James McPherson's Battle Cry of Freedom. Battle Cry is ostensibly a history of The Late Unpleasantness, but it is also an expression of the centrality of enslavement in American history.

The first 200 pages or so show that the War was about not only the perpetuation of "African slavery," but its expansion. McPherson quotes directly from the mouths of secessionists who have no problem laying out bondage as their primary casus belli. McPherson shows the essential place enslavement held in the economy of the South and in America at large. Thus the conflagration that follows does not appear out of thin air. Thus when McPherson begins detailing double-timing and flanking maneuvers you have some sense that you are doing something more than watching people play out a violent football game.

Conservatively speaking, 600,000 soldiers lost their lives in the Civil War, two percent of the American population at the time. Twenty percent of all Southern white men of military age died in the War. Until Vietnam, more people had died in the Civil War than all other American wars combined. An interest which compelled that amount of death and suffering must be something more than vague disagreement over a "way of life."

While I was reading McPherson, I was listening to recordings of David Blight's course at Yale, The Civil War and Reconstruction. The great thing about this was I could listen to it while I was gaming, cooking, cleaning, or driving. Blight helps me put the economic portions that McPherson's work talks about in perspective. This stunning quote, for instance, blew me away:

. by 1860, there were more millionaires (slaveholders all) living in the lower Mississippi Valley than anywhere else in the United States. In the same year, the nearly 4 million American slaves were worth some $3.5 billion, making them the largest single financial asset in the entire U.S. economy, worth more than all manufacturing and railroads combined. So, of course, the war was rooted in these two expanding and competing economies—but competing over what? What eventually tore asunder America's political culture was slavery's expansion into the Western territories.

I quote that a lot, because it contradicts this idea of enslavement as ancillary to American history, and establishes it as foundational. Blight was pulling from Roger Ransom's incredible paper, The Economics of the Civil War. Again, the numbers are simply mind-bending—in a state like South Carolina, almost 60 percent of the people were enslaved. Beyond the numbers, Blight's lectures brought to life the words of the actual people who were enslaved. Pulling from a great number of oral sources, Blight bids us not to forget that there were actual humans, not abstract figures, who were being enslaved.

In understanding the humanity of the enslaved, I don't know if there is a better book than The Life and Times of Frederick Douglass. Because Douglass wrote three autobiographies, and Life and Times is the longest, it tends to get short shrift. But, for my money, it's the best of the three and one of the most beautiful autobiographies ever written by an American. Douglass's portrait of slavery is just gripping. Forgive me for quoting at length:

The close-fisted stinginess that fed the poor slave on coarse corn-meal and tainted meat, that clothed him in crashy tow-linen and hurried him on to toil through the field in all weathers, with wind and rain beating through his tattered garments, and that scarcely gave even the young slave-mother time to nurse her infant in the fence-corner, wholly vanished on approaching the sacred precincts of the "Great House" itself. There the scriptural phrase descriptive of the wealthy found exact illustration. The highly-favored inmates of this mansion were literally arrayed in "purple and fine linen, and fared sumptuously every day."

The table of this house groaned under the blood-bought luxuries gathered with pains-taking care at home and abroad. Fields, forests, rivers, and seas were made tributary. Immense wealth and its lavish expenditures filled the Great House with all that could please the eye or tempt the taste. Fish, flesh, and fowl were here in profusion. Chickens of all breeds ducks of all kinds, wild and tame, the common and the huge Muscovite Guinea fowls, turkeys, geese and pea-fowls all were fat and fattening for the destined vortex.

Alas, this immense wealth, this gilded splendor, this profusion of luxury, this exemption from toil. this life of ease, this sea of plenty were not the pearly gates they seemed to a world of happiness and sweet content to be. The poor slave, on his hard pine plank, scantily covered with his thin blanket, slept more soundly than the feverish voluptuary who reclined upon his downy pillow. Food to the indolent is poison, not sustenance. Lurking beneath the rich and tempting viands were invisible spirits of evil, which filled the self-deluded gormandizer with aches and pains, passions uncontrollable, fierce tempers, dyspepsia, rheumatism, lumbago, and gout, and of these the Lloyds had a full share.

Douglass is a masterful narrator, and one of the things he communicates is that slavery is not a sanitized form of forced labor, but first and foremost, a system of violence, an assault on black bodies, black families, and black institutions. This all gets lost in the talk about economics and robbing people of their work. That robbery was abetted by the destruction of people. For me no book better captures this then Thavolia Glymph's Out of The House of Bondage. Glymph is specifically interested in the violence that allegedly mild slave-mistresses visited upon their slaves. By focusing on what people think of us as the mildest form of slavery (the domestic) Glymph reveals that enslavement is not violent sometimes, but is, itself, a form of violence.

Picking up from yesterday's readings on racism as a "done thing," as a choice, these readings helped me understand why that choice was made and how essential it was to the American project. And if that is the case, if enslavement was essential, how could it be that its effects faded in 1860? Douglass says "a man is worked on by what he works on." For 250 years, Americans worked on the breaking of people for profit. What I found, going forward, is that enslavement had worked on us too. You can see its ghost all over American policy, especially in the realm of housing.

1.) 2.) "The Civil War and Reconstruction," David Blight's lecture series
Blight is a great lecturer and covers the essentials of both periods.

3.) "The Economics Of The Civil War," by Roger L. Ransom
This is a really short but essential read. Perhaps more than any article I've read it explains the forces that led us to war.

4.) 5.) Out Of The House of Bondage, by Thavolia Glymph
I actually came to this after the reparations article was in the queue, but it crystalizes something that Douglass demonstrates--the horrific violence that was slavery. You can not divide the two. The Cliven Bundy fantasy of black people happily picking cotton, and living in two parent homes with food and shelter provided is the exact opposite of what slavery was. You can not plunder a people nonviolently.

Editor's note: This is the second part in a four-part series on the works of history that informed the author's recent piece, The Case for Reparations. Part one, on race and racism, is available here.


BIBLIOGRAPHY

Bailey, Guy Natalie Maynor and Patricia Cukor-Avila eds. The Emergence of Black English: Text and Commentary (Creole Language Library, vol. 8). Philadelphia: John Benjamins Publishing, 1991, 29-37.

Born in Slavery: Slave Narratives from the Federal Writers' Project, 1936–1938. Online collection of the Manuscript and Prints and Photographs Divisions of the Library of Congress. Available from http://memory.loc.gov/ammem/snhtml/snhome.html.

Franklin, John Hope and Alfred A. Moss, Jr. From Slavery to Freedom: A History of African Americans. 2 vols. New York: Random House, 2004.

Gillmer, Jason A. "Poor Whites, Benevolent Masters, and the Ideologies of Slavery: The Local Trial of a Slave Accused of Rape." North Carolina Law Review 489 (January 2007): 508-509.

Higginbotham, Jr., A. Leon. In the Matter of Color, Race and the American Legal Process: The Colonial Period. New York: Oxford University Press, 1980.

Johnson, Walter. Soul by Soul: Life Inside the Antebellum Slave Market. Cambridge, MA: Harvard University Press, 1999.


What is the comparable "value" of a slave in today's prices?

None of these prices has much meaning to us today, but they would if we revalue them in today's dollars to the amount of money slave owners spent 150 years ago. 9 . The techniques developed in MeasuringWorth have created ten "measures" to use to compare a monetary value in one period to one in another, as explained in the essay "Measures of Worth." 10 Of those ten, three are useful for discussing the value of a slave. They are: labor or income value, relative earnings and real price 11 . Using these measures, the value in 2016 of $400 in 1850 (the average price of a slave that year) ranges from $12,500 to $205,000.

Labor or Income Value

Labor Income Value
of Owning a Slave in 2016 Prices

As discussed above, the $400 price in 1850 represents the expected net value of the future labor services a slave would provide. This embedded meaning is why the labor or income value is the correct measure of the value of a slave's services in today's prices. That $400 would be $92,000 in today's prices.

While some slaves were rented out for farm and other types of work, most slaves worked on the farms and plantations of their owners. In both cases, the work they did was mostly unskilled, so a comparable measure of the value of these services is refeclted in the unskilled wage. 12 . In other words, we can assume that to hire a free employee to do the work of a slave would cost the unskilled wage of that day. Thus, a measure of the average value of a slave would be the present value of the net rental cost over the life expectancy of the average slave.

Thus the value in today's dollars of a slave during the antebellum period ranges from $50,000 (in 1809) to $150,000 of a slave's expected revenue less maintenance costs. If we assume, for example, that the average slave will live 20 more years, then today's price for a slave valued at $400 in 1850 could be interpreted as the $92,000 in wages plus the 20 years of room, board, and clothing that it would take to hire an unskilled worker today to perform the lifetime services expected of a slave. 13 . Unlike hired hands, slaves were responsible in large part for producing their own room, board, and clothing. Given that the work week today is significantly shorter than in 1850 and that slaves were made to work harder during the same amount of time as free workers, it would take more than one hired hand today to replace the labor supplied by a slave then.

Even at these prices, some slaves, particularly those with artisan skills, might ultimately earn enough to buy themselves out of slavery. It was not uncommon, especially in the Old South, for masters to allow others to hire the services of his or her slaves. This was particularly true of slaves who lived in urban areas, independent of the master. They were expected to make their own arrangements. "The master fixed the wage that the slave must bring in. All above this amount the slave might keep himself. Employers frequently hired the slave's time from the owner at a certain amount and paid the slave an additional wage contingent on amount of work accomplished." 14

Relative Earnings
of Owning a Slave in 2016 Prices

The $400 average slave price in 1850 can also be thought of as a signaling device of status in a period where the annual per capita income was about $110. relative earnings can be viewed as the ability to purchase expensive goods. Today, the middle and upper-middle classes aspire to goods and services such as a second home, servants, and an expensive car as a way of showing others that they have "arrived"-- that they have achieved some status in the economy. The average slave price in 1850 was roughly equal to the average price of a house, so the purchase of even one slave would have given the purchaser some status. Comparisons based on relative earnings are measured by the relative ratio of GDP per capita. Consequently $400 in those days corresponds to nearly $195,000 in relative earnings today. 15

The Real Price of Owning a Slave
in 2016 Dollars

Economists commonly use the real price measure when they are trying to account for the impact of inflation. The real price today is computed by multiplying the value in the past by the increase in the consumer price index (CPI). The result compares that past value to a ratio of the cost of a fixed bundle of goods and services the average consumer buys in each of the two years. In the construction of the CPI bundle, an effort is made to compensate for quality changes in the mix of the bundle over time. 16 Still, the longer the time span, the less consistent the comparison. In the 19th century, there were no national surveys to figure out what the average consumer bought. The earliest budget study used by economic historians was of 397 workmen's families in Massachusetts and was constructed in 1875. These families spent over half their income on food and rented their housing. 17

The MeasuringWorth calculator shows that the "real price" of $400 in 1850 would be approximately $12,000 in 2016 prices. We all can identify with what that amount of money would buy today, but hardly anything we would spend $12,600 on today was available 160 years ago. $400 in 1860 would have purchased 4,800 pounds of bacon, 3,000 pounds of coffee, 1,600 pounds of butter, or 1,000 gallons of gin. It is unlikely, however, that this was the budget of the typical slave owner. Most of the food would be produced on the plantation, and housing would have been buildings constructed by the owner (and his slaves). The "opportunity cost" of the $400 for the slave owner would have been supplies for the plantation, or perhaps luxuries and travel.

Using the real price is not the correct index to use for measuring the value of a slave's labor services in today's prices. It does, however, give an idea of what the cost of purchasing a slave was in 2016 dollars. Thus, just before the start of the Civil War, the average real price of a slave in the United States was $23,000 in current dollars. There is ample evidence that there are several million of people enslaved today, even though slavery is not legal anywhere in the world. There are several organizations such as Anti-Slavery International that will point out that in many places today, slaves sell for as little as (or even less than) $100!


The Men Who Turned Slavery Into Big Business

The domestic slave trade was no sideshow in our history, and slave traders were not bit players on the stage.

About the author: Joshua Rothman is a professor and chair of the University of Alabama history department. He is the author of The Ledger and the Chain: How Domestic Slave Traders Shaped America.

I saac Franklin spent part of Christmas Day 1833 assessing his company’s operations and making plans for the future. Writing from New Orleans to one of his business partners in Virginia, Franklin took a few moments out of his holiday to report that he had rented a new showroom in the city from which he would soon start making sales, and that sales up the Mississippi River at the company’s branch in Natchez, Mississippi, were going swimmingly.

Franklin had just come from Natchez, and he was happy to relay the news that he had seen “first rate prices and profits,” realized nearly $100,000, and likely outdone all of his competitors put together. He was also collecting outstanding debts from customers to whom he had extended credit, and he promised that he would soon send along some money, though he told his partner that he ought to consider rustling up additional funds from his banking connections if he could. Franklin wanted “four hundred more slaves this season,” and keeping the supply chain steady did not come cheap.

Franklin and his business partners, John Armfield and Rice Ballard, were the most important domestic slave traders in American history. Through their company, commonly known as Franklin and Armfield, they moved roughly 10,000 enslaved people out of Maryland and Virginia for sale in Mississippi and Louisiana. They transformed the domestic slave trade by demonstrating how white men could make it their profession, not just something they might do as a temporary means of earning extra cash. And they did it not only through remorseless violence but also by taking maximum advantage of the fact that enslaved people were considered both laborers and financial assets that could be integrated into the money markets and credit networks of early American capitalism.

In 1808, Congress banned the importation of enslaved people from overseas, but a domestic slave trade flourished in the United States during the first 60 years of the 19th century. From 1800 to 1860, more than 1 million enslaved people were forcibly moved across state lines, shifting American slavery’s center of gravity steadily southward and westward as slaveholders relentlessly pursued greater profits from cotton and sugar production.

Slave traders bore responsibility for executing the bulk of this massive forced migration, providing a labor force that made them indispensable to slavery’s expansion and thus to the broader economic development of the country. As conduits for the financialization of enslaved people and their movement across the country, men such as Franklin, Armfield, and Ballard facilitated the systematic extraction of capital from Black labor and Black bodies that circulated around the country and around the world, and that benefited nearly everyone but the enslaved themselves. Their business, which I explore in my forthcoming book, The Ledger and the Chain, utterly belies any notion that slavery sat at the margins of American society.

The domestic slave trade was no sideshow in our history, and slave traders were not bit players on the stage. On the contrary, the trade and its operators were pervasive in American life before the Civil War. They played vital roles in shaping the demographic, political, and economic contours of a growing nation, and we ought not fool ourselves into thinking we have left that past behind. In truth, we still live in the world that Franklin and Armfield’s profits helped build, and with the enduring inequalities that they and their industry entrenched.

I n 1828, Franklin , a native of Tennessee, and Armfield, a native of North Carolina, signed “articles of co-partnership,” formalizing a business arrangement to work together as dealers in enslaved people. Both had been slave traders for a number of years before they joined forces, but they had in mind a different kind of operation than either had been involved with before. Investing the modern equivalent of roughly half a million dollars between them, they rented a three-story townhouse with an attached walled compound in Alexandria, Virginia, where Armfield purchased, accumulated, and stashed enslaved people. From there, he sent them to New Orleans, usually by ship down the Atlantic coast, into the Gulf of Mexico, and up the mouth of the Mississippi River. Franklin received the shipments there, sold some of the captives in the city, and sent the rest upriver by steamboat to the company’s sales facility and showroom in Natchez.

Franklin and Armfield brought on Rice Ballard, a native of Virginia, as a third partner in 1831. The company stationed him in Richmond, where he worked out of a private jail, purchasing more enslaved people and sending them down the James River to Norfolk, where they were added to the vessels dispatched by Armfield as they headed south.

Within just a few years, Franklin and Armfield was the largest domestic slave-trading operation in the United States, and larger than any operation before it had ever been. The company ran daily advertisements in multiple newspapers announcing that it had “cash in market” and would buy “any number of LIKELY NEGROES.” It had in its employ a small army of purchasing agents and subagents, who bought slaves across more than 20,000 square miles of Maryland, Virginia, and the District of Columbia. It shipped 1,000 to 1,500 enslaved people to the lower South every year, mostly on one of three brigs that composed a private fleet owned by the company. After unloading their cargo, those brigs often brought cotton, sugar, and other commodities back for delivery to merchants from New York to Virginia, opening still another revenue stream for the company. Gross receipts for Franklin and Armfield came to the modern equivalent of millions of dollars annually, measured simply by inflation. Measured as a share of GDP, they came to several hundred million dollars.

Franklin and Armfield succeeded in part because of timing. The first five or six years of the 1830s brought the biggest economic boom the United States had ever seen, and the core of that boom lay in the land, slave, and cotton economy of the lower South. The region’s white population increased by nearly 1 million in the 1830s, encouraged by federal policies that forced Indian nations off the best cotton land on the continent and by banks that flooded the lower South with easy credit and cheap loans. Demand for slaves skyrocketed accordingly, and during the 1830s, slave traders moved about as many enslaved people via the interstate trade as they had in the previous two decades combined. Though Franklin, Armfield, and Ballard might have done well whenever they went into business together, it is unlikely they could have done better than to have started their endeavor precisely when they did.

The company succeeded, too, because its operators concealed the brutality that served as the foundation of their business with efforts to build sterling public reputations. In their correspondence, the partners often referred to themselves as “robbers” and “pirates,” reveling in a kind of roguishness derived from being engaged in an industry that everyone understood was more than a bit dirty and had no room for sentimentality. In their eyes, enslaved people were merchandise, marketable commodities useful solely to the extent that they could be exploited for profit. Franklin and Armfield routinely separated enslaved families disposed of enslaved people who had died from disease under cover of darkness, lest potential customers shy away from purchases kept whips and rifles handy to control those they imprisoned and trafficked and always kept an eye out for young enslaved women who could bring a premium on the market as “fancies” whom white men might want to rape.

At the same time, however, Armfield acted the consummate professional at his Alexandria headquarters. He offered customers and antislavery activists alike a tour and a drink when they appeared in his offices, and he claimed that he always stayed within the boundaries of the law, tried to expose criminals who kidnapped free Black people and sold them into slavery, and looked after the well-being of the people he bought and sold as best he could. Similarly, when slaveholders were unhappy with their purchases, as sometimes happened, Franklin typically preferred to make an exchange or even provide a refund rather than risk a lawsuit. That might have cost him money in the short term, but Franklin believed that having a reputation among white people for straight and dependable dealing would redound to the company’s benefit.

The real key to Franklin and Armfield’s success, in fact, lay in that carefully cultivated reputation, because it brought with it the confidence of the business world, especially banks and bankers. Most slave traders sought quick cash sales, and Franklin was perfectly happy for customers to pay for enslaved people with cash. But he also understood that a slave-trading company known for reliability and volume was a slave-trading company able to gain access to borrowed capital that would pay off more handsomely over time.

So as the company grew in size and renown, Franklin established credit lines with banks from New Orleans to New York, which provided assurance that even if tough economic times came around, he could always, as he put it, “get money when no other Trader can obtain a Dollar.” With that assurance, Franklin could sell enslaved people in the lower South to customers on credit, sometimes in exchange for negotiable commercial paper, and sometimes in exchange for mortgages on the very people he was selling, thus forcing the enslaved to ground the financing of their own sale. He held on to some of the paper and collected the debts it represented when they came due, and some of it he transmitted back east, where Armfield and Ballard turned it into cash to be pumped back into purchasing markets for more slaves.

The company thus trapped enslaved people in an endless financial loop, as confining in its own way as the ships that transported them and the prisons that caged them. And Franklin, Armfield, Ballard, and the legions of merchants, planters, bankers, and others who acted as their accomplices realized profits at every step.

More than anyone in their industry before them, Isaac Franklin, John Armfield, and Rice Ballard demonstrated how to become extremely wealthy from the process, and other men were watching. Though the three partners mostly left the slave-trade business in 1836, dozens of large slave-trading companies followed and built upon the model they pioneered, carrying out the trade for another 30 years, until the Civil War finally put an end to slavery and the slave trade alike.

The capital enslaved people had generated, however, would never come back to its producers.


Slavery Did Not Make America Richer

In the past few decades, a new subfield of history has emerged: the history of capitalism. The subfield is widely popular in the media as a result of hugely influential books such as those of Sven Beckert and Edward Baptist. These two particular authors tie the “peculiar institution” of slavery in American history to capitalism. Many media pundits, as witnessed by recent articles in the New York Times and Vox, jumped on the works of these authors to claim that slavery was “the building block of the American economy” and it made America richer.

To make this case, these scholars invoke three facts. First, the southern states enjoyed relatively faster growth than the free northern states. Second, slavery was immensely profitable to slaveholders. Third, the rapid increases in slave productivity – as measured by cotton picked per slave – meant that cotton output exploded. From this, a causal claim is made: slavery made America rich because increasing slave productivity increased profits and fastened economic growth.

With the exception of whether or not the South grew faster than the North, which is debatable to some degree, there is little to dispute on a factual basis. However, it is impossible to infer that America was made richer from these facts. In fact, when interpreted with the light of economic theory, the second and third facts actually suggest that the reverse is true: America was made poorer because of slavery.

Economic growth in the United States pre-1860

One of the most-cited pieces of evidence is that south enjoyed rapid economic growth before emancipation. The logic is that if the south grew faster than the north, slavery – which was so important to the southern economy – must have been a contributing factor. Most of the evidence for this rests on the works of Robert Gallman and Richard Easterlin who constructed income estimates for the period after 1840. In their pioneering work, Time on the Cross, Robert Fogel and Stanley Engerman used this data to show that, between 1840 and 1860, the south grew faster than the north: 1.7% per annum versus 1.3%.

However, this is a claim with shaky foundations. First, the benchmark year of 1860 overstates the level of income per capita. The cotton crop that year was higher than normal. The effect from this is mild, but it is enough to shave off a few decimal points to the initial estimates of growth for the southern states. Economic historian Gerald Gunderson also suggested that the census of 1840, which was used to estimate output in that year, was known to be one of the most poorly conducted in census history. This lead, in his opinion, to an inaccurate starting point that also contributes to overstating southern growth between 1840 and 1860.

Secondly, economic historian Jeffrey Hummel identified a series of weak points in the national account estimates of Gallman and Easterlin. These weak points relate to how the South was defined (some slave states were wrongly allocated to the North), how certain new states like Texas had overstated incomes, how the income from service sectors was underestimated in some regions and overestimated in others, the value of subsistence goods given to slaves and the price deflators used to estimate output. Hummel proposed revisions to adjust for some of the problems he exposed. The revisions reduced the gap in growth rates between the region.

Third, taken separately, none of the different regions of the South experienced faster growth than the different regions of the North: the Northeast and North Central enjoyed growth rates of per capita income equal to 1.7% and 1.6% between 1840 and 1860 while the South Atlantic, East South Central and West South Central regions enjoyed growth rates of 1.2%, 1.3% and 1.0% during the same period. This apparent anomaly is explained by internal migration: Southerners moved from where incomes below average to where they were above average. These movements in population, when aggregated for the two while regions, create the impression of fast growth in the South. However, it is worth pointing out that the higher-income states of the South grew more slowly than the higher-income states of the North.

Lastly, if we extend the period considered, the picture that emerges is quite different. Peter Lindert and Jeffrey Williamson reconstructed income statistics between 1675 and 1860 in order the different regions of the United States with Great Britain. They found that, between 1675 and 1774, incomes per capita in the southern states fell by roughly 15% while the middle colonies stagnated and New England enjoyed a mild increase.

Thereafter, the southern economy grew, but at a slower pace than the North: economic growth stood at 1.94% per annum in New England between 1800 and 1860 while it stood at 1.66% and 0.90% in the Mid-Atlantic and South Atlantic states.

Similarly, Robert Margo’s work on wages between 1820 and 1860 showed that wages for common labor in the Northeast increased faster than in the South Atlantic and South-Central regions (although wages in the Midwest did not increase as impressively). Adding to this the wealth estimates of scholars like Alice Hanson Jones, we find that the South actually lost ground relative to the North from the beginning of the colonial era. It did grow, but the Northern states performed better.

The sum of these points suggest that we ought to be careful about making inferences from this “fact.” However, even if that point was a certain one, it would not say much about wellbeing.

Productivity and profitability: do not confuse output with utility

The other two facts – that slavery was immensely profitable and that slave productivity increased – are not debated. Scholars accept them as true. In fact, of all the claims contained in Time on the Cross, these are the two that survived the test of time. However, one cannot infer that slavery made America richer from them. In fact, these two facts point in the opposite direction.

Under slavery, slaves received as “wages” (for lack of a better term) only the subsistence items that their owners allowed them to consume. That is a (poor) form of compensation. As a counterfactual, imagine a world where slaves were free and ask yourself this question: what quantity of labor would have been provided for the utility derived from these subsistence items?

It is hard to arrive at a convincing number. However, it is clear that whatever the quantity of labor provided when induced solely by compensation, it would have been less than the quantity of labor coerced by slaveowners. Consider the flipside of that counterfactual market. If slaveowners had to convince free workers to work for them, they could only have induced them to do so via higher wages. And this is not only a counterfactual that includes quantity of work, it includes also the quality of work. In free situations, workers in unpleasant jobs tend to be offered higher wages to compensate for the inconvenience. This is why backbreaking work, all else being equal, tends to be better remunerated than physically easy work.

As long as there was a difference between the value of what a slave produced and the value of subsistence, there was a transfer from slaves to slaveowners. This is why economic historians like Gavin Wright writes that “slave-based commerce remained central (…) not because slave plantations were superior as a method of organizing production, but because slaves could be put to work on sugar plantations that could not have attracted free labor on economically viable terms”.

However, here comes the rub: this increased physical outputs.

In economics, dollar signs are often used to “mimic” utility. This is because the models that teach students about utility implicitly embed an assumption about personal freedom and agency. If people are free to take prices as they are, the prices can be translated into information about utility in a very straightforward manner. This is why economists frequently emphasize how well statistics about Gross Domestic Product (GDP), which rely on market prices to be calculated, speak to human wellbeing. The quantity produced and measured are reflective of utility. As such, the changes in one will be reflected by changes in the same direction in the other.

In the presence of coercion, this is not necessarily the case. All the statements that economics students are taught remain true. However, it is no longer possible to infer utility as easily from reported prices. If one is coerced into working more than he would have at the compensation offered, he will increase economic output. More labor, more output. However, at that level of compensation, he would have preferred to work less and take more leisure time. This why some economists like Yoram Barzel and Stefano Fenoaltea consider slavery as a tax on leisure rather than a tax on labor. As that person would have derived more utility from leisure than from work at the offered compensation, the coercion changes output in a manner that divorces it from the change in utility (greater output, lower utility).

In such a divorce, the coercion of a greater labor supply creates a deadweight loss. In other words, people would have gained more utility without the coercion. This deadweight loss can be approximated and be given a monetary value that does speak to utility. The amplitude of that loss is the extent to which Americans were made poorer.

This deadweight loss serves to resolve two conundrums. The first is that it explains the institution’s profitability and viability. Slaveowners used the inputs they had as efficiently as possible and extracted important profits. However, this says little about living standards as the level of these profits reflects the extent of the deadweight loss. Thus, the institution may have increased output in ways that made slaveholders rich– as it did – but it made Americans worse off.

The second resolved conundrum relates to the finding of Fogel and Engerman that southern slave farms were more productive than free northern farms and slave productivity increased importantly during the Antebellum period. Fogel and Engerman argued initially in Time on the Cross and later in Without Consent or Contract that this was a result of the economies of scale involved in plantation farming: large plantations were more efficient than small plantations. That finding in their work was hotly debated on methodological grounds.

However, even if one remains agnostic on the methodological choices, that finding is unsurprising. The gang labor system under slavery, which generated the economies of scale described by Fogel and Engerman, was adopted because it could best extract output from coerced workers. It does not deny the existence of a deadweight loss – it confirms it!

That resolution is only reinforced when one stops being agnostic with regards to some of the methodological choices made by Fogel and Engerman. For example, more recent evidence discussed by Jeffrey Hummel suggests that hours worked by slaves were greater (even at the low bound) than by free workers in the North. As Fogel and Engerman had argued “greater intensity of labor per hour, rather than more hours of labor per day” explained the productivity advantage, finding that both intensity and quantity were higher only piles it on.

The Deadweight Loss of Slavery

What was the deadweight loss of slavery? Using data on estimates of earnings of free workers, hire rates for slaves (which are better at approximating the marginal value to slaveowners of an extra slave) and subsistence consumption taken from the core texts on the economics of American slavery, Jeffrey Hummel estimated that deadweight loss. He placed it at between $52 and $190 million in 1860 with the smaller amount representing 5 percent of total oncome in the region. In other words, the loss in utility of forcing slaves to provide more labor than they otherwise would have had a value of between $52 and $190 million.

But that is not the whole sum of deadweight losses. In the southern states, the enforcement of slavery was not fully undertaken by slaveowners. The states mandated slave patrol duty for free whites. This relieved slaveowners of the costs of enforcement (while they kept the rewards from coercion) which were spread over a large population. The mandatory duty was a tax in the form of labor in kind. In some states, there were actually taxes to finance the patrols. Hummel estimated the sum of enforcement costs brought his estimates to between $64 and $210 million. This represents at most a fifth of the southern economy in terms of inefficiency. This remains a conservative estimate as there was also a deadweight loss from forcibly reallocating non-slave labor towards patrolling which is hard to measure.

This addition is useful as it shows that the deadweight loss was not contained to slaves. It extended to poor non-slaveholding whites. Scholars, such as Keri Leigh Merritt in Masterless Men, have begun to highlight how the preservation of slavery necessitated policies that kept non-slaveholding whites poor, landless and illiterate. While slaves bore the brunt of the harm done, it was not contained to them. This explains why Hinton Rowan Helper’s Impending Crisis was so popular (even in the South) even though it was racist and anti-slavery: it catered to another impoverished group.

It is clear that one cannot infer that America was made richer from the often-used facts about growth and slavery. It is even clearer that America was made poorer by slavery. Slavery leaves a nasty legacy. Its preservation required the use of racist ideological constructs to justify it. These constructs persist today and, since Emancipation, meant that incredible violence was directed towards African-Americans. It bred a class of rent-seekers who continued their rent-extraction efforts in the form of segregation laws and public goods funded by all but whose use was restricted to whites. To these items in the shadow of slavery, we must also add a poorer America.


Rattling the Bars

Rattling the Bars, hosted by former Black Panther and political prisoner Marshall “Eddie” Conway, puts the voices of the people most harmed by our system of mass incarceration at the center of our reporting on the fight to end it.

James further believes that in order to restore humanity to prisoners, you have to legitimize political dissent, especially against racial capitalism. “You have to rehumanize the incarcerated, and progressives tend to say focus on their suffering, that’s going to humanize them. I say that is absolutely right, but you also have to focus on their agency. But there is no way to reconstitute the human without legitimizing political dissent,” said James. “There is no way you can reconstruct the criminal… when police and civilians can kill with impunity just as long as the people are seen as disposable.”

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Profit of slave labor in America - History

Historians today say “yes.” But free men and women would have built it better and made it richer.

The Half Has Never Been Told: Slavery and the Making of American Capitalism

Basic Books, 2014, 528 pp., $35

Cotton and Race in the Making of America: The Human Costs of Economic Power

Ivan R. Dee, 2011, 432 pp., $18.95

Without Consent or Contract: The Rise and Fall of American Slavery

W.W. Norton & Company, 1994, 544 pp., 18.95 (paperback)

H istorians once thought that slavery had been a source of poverty. Back in the 1950s, when income levels in places like Alabama and Mississippi qualified them as second, if not third, world countries, most academics engaged in the question argued that by tying up large amounts of capital in an inefficient system, slavery had prevented the Southern economy from industrializing. Some, like U.B. Phillips and D.H. Potter, even went so far as to suggest that in 1860 slavery was about to collapse of its own weight, and the Civil War had been an unnecessary bloodbath.

Now the Old South is one of the fastest-growing parts of the country, and the old argument has shifted a full 180 degrees. After the 1989 publication of Robert Fogel’s Without Consent or Contract, historians take for granted slavery’s contribution to the prosperity of the white South and hence, statistically at least, to the country as a whole. They are now prone to ask to what extent the entire United States down to the present day owes its prosperity to 19 th -century slavery. Was slavery some kind of platform upon which the modern American economy was built? That would be the politically correct question to study these days in the academy, especially if the answer can be made to come out “yes.”

This is not surprising. In the present context, with the United States still struggling to build a multiracial society 150-odd years after the Emancipation Proclamation, the economic history of slavery is obviously a politically freighted issue. But it always has been to one extent or another, and American scholars and intellectuals have never ceased arguing over the question. For every Oscar Handlin who downplayed the evils of slavery, and even argued that slavery caused racism rather than the other way around, there has been a Nate Glazer who has stressed the singular evils of the American form of slavery compared to every other form known to history. Only someone unfamiliar with the literature can be surprised that, even aside from Ta-Nehisi Coates’s call for reparations payments, much of the current crop of books on the topic slides rather quickly from scholarship into advocacy. 1 The three books reviewed here all were written in the main with scholarly intent, but in reading them one soon realizes how far we are from having any interpretation of the strictly economic impact of slavery that could be called settled doctrine.

A t a certain level there is little disagreement over the outline of events that led to the present question. In 1787, when the Constitutional Convention met in Philadelphia, there were about half-a-million slaves in what would soon become the United States. About a third of them were involved in growing rice and indigo, marginal enterprises at best that would soon all but disappear. Another 40 percent produced tobacco, which was a viable export commodity, but as the account books of George Washington testify, by the time the slave-holder paid to support those who worked as well as those who were either too young, too old, or too infirm to work, the cost advantage of slave labor relative to free labor wasn’t that great. It took a particular personality type—and not a very nice one—to get value out of slaves, but Washington wasn’t among them. Slavery had been a source of riches on the sugar plantations of the Caribbean Islands, but almost no part of the United States at the time could grow sugar. The real money awaited the arrival of cotton, which was still unforeseen as of 1787.

That’s right: On the day the United States adopted its Constitution, the country grew no cotton. Twenty years later, after the invention of the cotton gin, it still produced only a modest amount, but Sven Beckert’s “Empire of Cotton” was about to take form. 2 Consumers not just in Britain and the United States but throughout the whole of Europe began replacing wool with cotton garments, and because it was now cheap to do so, they bought more clothing in general. Producers responded, the technology was easily transferable, and the number of mechanized spindles in operation increased almost daily. The limiting factor became raw material, and in the search for a source it soon became clear the American South was what today might be called the Saudi Arabia of raw cotton. The region possessed the perfect temperature and rainfall, and for the next several decades it supplied between 60 and 70 percent of the entire world’s raw cotton. Cotton farming rose in importance until, by 1850, the value of the cotton crop accounted for some 5 percent of the nation’s total, a position comparable to that of the automobile a century later.

The spread of the cotton industry shaped much of the nation’s early history. Once the textile industry got rolling, in England and New England, only a short time passed before the industry needed more raw cotton than the coastal states could provide. Population moved toward new land, into areas that would become Alabama, Mississippi, Louisiana, Arkansas, and ultimately Texas. To make room, Native Americans had to be evicted. The steamboat, test-driven on the Hudson, found its real employment on the Mississippi River. Some 9,500 miles of railway had to be built to transport people and cotton. Once Andrew Jackson killed the Bank of the United States, wildcat banks sprang up to finance the enterprise, and state politicians dreamed up crazy schemes that would saddle them with debt upon which they would eventually default. And above all, there was the unending struggle over the spread of slavery. The South, anxious to fortify itself against the rising swell of abolition, pressed for slavery in every new territory, even those where cotton wouldn’t grow.

As the population moved westward, it dragged 835,000 slaves behind it, most walking at least part of the way. By 1850, more than 3 million slaves worked in the American South, 60 percent of them in the cotton fields and the rest either in other crops or as craftsmen. Of every hour of useful work done in the Southern states, roughly 40 minutes was performed by a slave. Given the obvious importance of slave labor, it may come as something of a surprise to find that, as already noted, the early historians of slavery judged it to have been a burden on the South’s economy rather than its strength. Edward Baptist, in his new and widely successful The Half Has Never Been Told, has not been misled. His reading of events is right up front in his subtitle, “Slavery and the Making of American Capitalism.” Early on he asserts, “The idea that the commodification and suffering and forced labor of African Americans is what made America powerful and rich is not an idea people are necessarily happy to hear. Yet it is the truth.”

This is a statement about the national economy by an historian rather than an economist, so one has to struggle a bit to find its precise meaning. It could mean that the incomes of some Americans, probably white, are greater today than they would have been had the slaves been free men and women. Individuals in both the South and the North accumulated fortunes through dealing in the slave economy. Some fraction of that wealth could have survived the Civil War and, thanks to compound interest, could today amount to a tidy sum.

Tracing the origin and forward journey of that wealth could have made an interesting story, but it’s not the story Baptist wants to tell. He’s out for bigger game. His is a societal indictment according to which the entire capitalist development of 19 th -century America was woven around slavery, benefitting the country’s GDP down to this day. Baptist pursues this theme not with an econometric model but with the tools of the historian, which he deploys with great vigor. His book is a prodigious work that stacks up a mountain of documentary evidence. The antebellum South comes alive beneath Baptist’s pen. Mostly it’s a tale of unending physical and mental torment, especially in the western regions, where planters bought slaves on credit and had either to succeed or face bankruptcy. The average plantation with 50 or more slaves was run by just one or two white men. Subduing males slaves wasn’t enough they had to be emasculated, in Baptist’s reading. This is not the South of “Gone With The Wind.” Indeed, it’s not even the South of Eugene Genovese’s classic 1972 book Roll Jordan Roll. Genovese at least saw a little space within which the slave could maneuver and in many cases negotiate some elemental protections from the slave master. There’s little of that in Baptist. His players are one-dimensional characters who have one objective, money, and one means of obtaining it, physical force.

There is also a certain confusion at the heart of Baptist’s argument. He doesn’t want to be bound to economic data, but for an historian is remarkably materialist. Literary flourishes aside, his argument reduces to this: Slave grown cotton yielded vast wealth, and wealth powered the nation’s growth. He’s certainly correct on the first point. The white South, and not a few individual Northerners, became wealthy on the backs of slaves, but if Baptist had taken the time to look, he’d have realized the numbers aren’t large enough to support his claim. Thanks to Fogel, we actually can calculate the amount of extra income enjoyed by Southern whites as a result of owning slaves. In the 1850s, the zenith of the cotton economy, it came to between 1 and 1.5 percent of the nation’s GDP, not a trivial sum. By this period, however, the United States was already the second-largest economy in the world and was investing every year between 13 and 15 percent of GDP in new capital. Even if the entire “slave surplus” were saved (which it wasn’t, because there were mansions to build and ball gowns to buy), it would have made a respectable contribution to growth, but it just wasn’t large enough to be the basis of an empire.

There is also a more troubling point in Baptist’s argument. Individuals clearly benefitted from slavery, but not the nation as a whole. To believe as Baptist does one has to believe the Founders’ decision in Philadelphia to allow slavery was a boon and not a blunder—that they did the economy a favor by keep 10 percent of the resident population in chains. Baptist not only sells short the enslaved men and women, but he contradicts a fair body of research on the history of slave economies. The slave-run gold mines of Peru, Mexico, and the sugar islands also produced impressive fortunes in their day. Their legacy is modern Peru and Haiti. Edmund Phelps, in his recent book, Mass Flourishing argues that long-term growth requires continuous innovation not just the big discoveries, but the steady flow of cost savings and improvements that come from an engaged workforce. Slaves, looking over their shoulder at the overseer’s whip, don’t get many innovative ideas. They were deprived of the benefits of freedom, and so the country lost the fruits of their genius. Jazz music is exactly the type of thing Phelps has in mind. African Americans always had it in their bones as they toiled in the fields, but it took freedom for it to flourish.

G ene Dattel’s Cotton and Race in The Making of America makes an argument similar to The Half Has Never Been Told, but in a less evangelical tone. His enthusiasm for cotton as a source of riches is tempered by the industry’s experience in the 70 years after the Civil War. Fogel would disagree, but the postwar economy of the American South looks a great deal like the economy of every other commodity producer in history once its heyday had passed. The great wealth of the planters upon which Baptist rests his argument was largely wiped out by the stroke of Lincoln’s pen—abolition, as enacted in the United States, represented the greatest outright confiscation of property by a government in modern history. As insensitive as the statement sounds, remember that slavery was legal and that, in some fairly small number of cases, free blacks owned slaves as well.

After a period of groping about, the planters and their former slaves settled into a system of sharecropping that was acceptably efficient at producing cotton, but cotton had already become a bad business. In 1900, the cotton crop was three times the crop of 1860, but its value had fallen from nearly 5 percent of GDP to 1.7 percent. Incomes were spiraling downward to the point that by 1950 Alabama had less than half the per capita income of New York. Former slaves who were now sharecroppers endured great poverty, as did their white neighbors. Cotton still proclaimed itself King, but the king nonetheless held out his hand for a government subsidy.

Cotton and Race in The Making of America is largely a compilation of previously published works, but the particular strength Dattel brings to the story is his feel for cotton farming as a business. Planters knew that collectively they were into a seam of gold, but so long as they acted independently they were at the mercy of market prices. Production rose, land values increased, and slave prices remained elevated so long as the price of raw cotton was over 10 cents per pound. Planters went bankrupt when it sold for much less than 8 cents, as it did for much of the 1840s. The Southern Planters Association sought to form a sort of OPEC of cotton, which would have allowed it to extract more of the monopoly rent. Its efforts foundered, however, because planters were too numerous and too dispersed to permit centralized control over production, and they could never raise enough capital to establish a proper commodity-buying board.

Where Baptist wants Northerners to feel guilty over being prosperous, Dattel wants them to feel guilty over being racist. One of his abiding themes is the conflict that arose within a North that was at once partly abolitionist and very largely racist. Northerners wanted to see blacks free but not in person. This stance, Dattel asserts without a great deal of support, is what kept African Americans trapped in sharecropping for so long after emancipation. Northern industry imported millions of immigrants from Europe but ignored proven workers to the south. His categorical example is New York Senator William Seward, who in an 1848 speech warned of “an irrepressible conflict between opposing forces, and it means the United States will sooner or later become an entirely slave-holding nation or an entirely free-labor nation.” At the same time he could say, “The North has nothing to do with the Negroes. I have no more concern for them than I have for the Hottentots. They are God’s poor—they always have been and always will be.” Seward knew his audience and was a man of his time. His mindset is what freed the Northern conscience to deal with the South and trade in slave-grown cotton.

R obert Fogel’s Without Consent or Contract deserves inclusion here because, 25 years after its publication and three years after Fogel’s death, it remains the best single volume in print on the history of American slavery in all its dimensions—economic, political, and moral. It followed an earlier book, Time On The Cross, which Fogel had written with coauthor Stanley Engerman. This first book, which was similar in method to Without Consent or Contract, was severely criticized when it came out for its detached tone and lack of ostensible outrage over the institution it analyzed. Fogel, in his later book, goes to some length to remedy this deficiency without ever abandoning the high-minded perspective of a man who would soon win the Nobel Prize. Yet he doesn’t pull any punches. Why were slaves so much more productive than free workers? “… the feature that made planters prefer slave labor even when free labor was relatively abundant … is the enormous, almost unconstrained degree of force available to masters….. Centuries of tradition shielded European laborers from the force that was permitted against African and Afro-American slaves.” The heart of slavery was violence.

The degree to which force was applied is almost palpable in Fogel’s calculations of output per hour worked. On small plantations, employing 15 or fewer slaves, there was no difference between slave labor and free. On large plantations, however, those employing 50 or more slaves, the slaves were 39 percent more productive per hour worked. The source of this extra output was the gang system of work that was used on large plantations but not on small ones. The gang system divided cotton cultivation into simple linear tasks each of which was assigned to a group of workers. No group could fulfill its daily quota unless the one ahead of it did so as well. One pushed the other, with the entire operation supervised by a single overseer with a bullwhip.

Free white workers refused to work like this even when offered higher wages. Baptist wants to see the gang system as some kind of capitalist innovation, which in a sense it was. Economists, however, reserve the term innovation for inventions that conserve resources. The gang system didn’t reduce even by one calorie the energy required to cultivate and harvest a cotton crop. It merely allowed slave-owners to beat more work out of their chattel. At some point, even the slave-owners had to realize they were depreciating their own capital, and Fogel does point out that they did a fair amount of experimentation with the length of the work week. It settled in at about 58 hours per week, which meant slaves worked about 400 fewer hours per year than the average yeoman farmer on his own land.

Without Consent or Contract, however, is not all numbers. Some of its more intriguing passages contain Fogel’s speculations on the morality of fighting a Civil War in which 600,000 men lost their lives, one for each six slaves. Fogel sees the war as a historical necessity. Slavery was certainly profitable in cotton cultivation and no less profitable than free labor in manufacturing. In his view, it was not about to disappear of its own weight. Left to itself, the South, while behind the North, would have been among the five largest economies of the world. Its presence, he maintains, would have encouraged European aristocrats and set back liberalizing trends throughout the West. It also would have had a monopoly on a raw material upon which the world was, at least for a time, vitally dependent. The inelasticity of that demand meant that an excise tax on cotton would have yielded a Confederate government enough revenue to pursue an adventurous foreign policy in Latin America, and to finance all kinds of mayhem toward the end of perpetuating slavery.

O ne of the more attractive properties of Fogel’s work is the intellectual modesty with which he pursued his subject. Fogel was well aware that in writing on slavery he was playing with political dynamite, but he steadfastly refused to go beyond his material. The overall impression one takes away from his book is of a composite built up from the accretion of evidence on the subtopics within slavery, each of which is too narrow to carry much political weight. He may well have ended his work with a judgment of what contemporary America owes its dead slaves, but unlike too many other writers in the field, he didn’t start with one.

1 Coates, “The Case for Reparations,” The Atlantic (June 2014).

2 Beckert, Empire of Cotton: A Global History (Knopf 2014). See also Harold James, “Capitalism Da Capo,” The American Interest (May/June 2015).


Profiting off of Prison Labor

“Factories with Fences” and “American Made” boasts UNICOR. Better known as the Federal Prison Industries program, UNICOR makes nearly half a billion dollars in net sales annually using prison labor, paying inmates between 23¢ to $1.15 per hour. Despite already earning one-sixth of the federal minimum wage, inmates with final obligations must contribute half of their earnings to cover those expenses. UNICOR, in addition to other government-owned corporations and private prisons, makes millions upon millions of dollars using nearly free prison labor.

Forced prison labor in the United States is nothing new, and in fact, it originates with the passing of the 13th Amendment. This amendment reads: “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” Hidden within those monumental words is the phrase “except as a punishment for crime.” Why this addition? Considering that free slave labor contributed billions to the antebellum South’s economy, the abolition of slavery soon devastated their way of life. This loophole was exploited immediately, leading to the first prison boom in American history. Now both public and private prisons alike profit off of cheap prison labor.

UNICOR derives the bulk of its sales from selling to other government agencies, with over 50% of its sales coming from the Department of Defense, with other customers including the Department of Homeland Security, the Department of Treasury, and the Federal Bureau of Prisons. Though UNICOR is typically restricted to selling to the Federal Government, the Consolidated and Further Continuing Appropriations Act of 2012 permitted UNICOR to work with select private companies. Aside from the federal prison industry, state-run prisons generate millions in profits, making prison labor an industry worth over $1 billion.

Federal and state-run facilities aren’t the only competitors in this market. Ever since the federal prison population began booming due to the war on drugs declared by President Nixon and enforced under President Reagan, the Bureau of Prisons began looking for ways to keep up with the demand. Then, the bureau began contracting with private prisons. At its high in 2013, an approximate 220,000 inmates were held in private prisons, the two largest being CoreCivic (formerly known as Corrections Corporation of America) and GEO Group.

Though CoreCivic and GEO Group constitute half of the market share of private prisons, they made a combined revenue of $3.5 billion in 2015. Additionally, both groups have been expanding their business beyond simply owning corrections facilities (which was the rationale behind CoreCivic’s name change). GEO Group acquired BI Incorporated, which creates ankle bracelet monitors, in 2011 and a reentry facility called Alabama Therapeutic Facility in 2017 while CoreCivic acquired half-way houses. These purchases to diversify their offerings came amidst increased scrutiny of mass incarceration.

Because the business model of prison labor requires a constant influx of prisoners, private prisons have included “lockup quotas” into their dealings with federal and state authorities. The premise of the lockup quota is that taxpayers either have to keep these facilities at least 90% capacity or pay for the empty prison beds. For example, in Colorado, private prisons were initially intended to help house overflow inmates. With a crime drop of 33% in 2009, CoreCivic negotiated to include a quota in the 2013 state budget for all of its facilities. Now, instead of using private prisons for overflow purposes, it’s the first priority for placing prisoners. Thus, if prison labor is ever in short supply, then private prisons can turn to lockup quotas to offset lost revenue.

In order to continue bringing in profits, private prisons have found new sources for forced labor. In California, immigrants who were held in detention facilities owned by GEO Group are suing GEO Group for forced labor and wage theft. One of the class-action lawsuits alleges that detainees at the Adelanto ICE Processing Center were paid $1 a day for their labor, two others allege that GEO Group violated federal and California forced labor laws, while the fourth hopes to stop forced labor at 12 of GEO’s immigration facilities. Some immigrants worked for $1 a day while others worked for extra food, and under GEO’s Housing Unit Sanitation Policies, detained immigrants must work or face sanctions like solitary confinement or interference with their immigration cases.

American history is largely intertwined with forced labor, whether it be outside on plantations or inside prison walls. In both the case of public and private prisons, forced labor is used to gain a profit, and the products of that labor can be found in everything from Microsoft computers and Victoria’s Secret lingerie to Boeing airplanes and Idaho potatoes. Ironically, even the US Department of Justice purchases goods made with prison labor. And at the end of the day, after UNICOR, CoreCivic, GEO Group, and others rake in their profits, the prisoners are left to return to their cells with only a few dollars to show for their labor.

Katherine is a sophomore in the Global Management Program and intends to minor in History. Her interests in international business and markets inspired her to join BRB’s economics column to explore more about economics around the world. Beyond international relations, she also enjoys understanding how the political landscape affects markets and is excited to pursue these passions in BRB. As a San Diego native, she loves nice, sunny days and can be caught reading in the park otherwise, you’ll find her binging some movies or shows.