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Slavery and Development

October 12, 2018

One of the core ideas in economics is the difference between zero sum and positive sum transactions. Because of a belief in zero sum, some of the stranger arguments I’ve seen on the left is the belief that slavery was actually good for the South, since obviously it was bad for the slaves themselves. It’s similar to the “Dependency Theory” of the early post-war period where since colonies were screwed over by Europeans, therefore Europeans must have been made much better off. Nope. Sometimes things are bad for nearly everyone involved. Slavery is certainly one of those things.

For the slave-owners themselves, slavery was awesome – free labor plus you can abuse them as much as you like without repercussions. But for literally everyone else in the society, including future generations, it was a horrible deal.

1.) Farms exhibit inverse productivity in relation to size. That is, the larger the farm, the less productive it is. This result has occurred across many societies, from Africa, to Europe, to Asia. Plantations were less productive than sharecropping.

2.) Slavery inhibited the development of human capital – slaves were not allowed to read or write, nor to learn any sorts of advanced skills. Economies are reliant on skilled workers and thus slavery handicapped the most important aspect of any economy.

3.) Slaves had a principle/agent problem. The incentive they had to work was not wages, but instead to avoid being beaten or killed. Therefore they didn’t work as hard as free laborers and slave owners had to spend a lot of money keeping them in line.

4.) The institutions of the South and slave holding areas worldwide were extractive and underdeveloped relative to those of areas without slavery. The best distribution of wealth and political power for economic development is that with a large middle class. Slavery created an aristocracy and a large mass of slaves and extremely poor disenfranchised whites who did not own slaves. This inequality is corrosive to democratic institutions and discourages innovation and entrepreneurial activity.

5.) As an empirical fact, slave owning areas were far poorer than non-slave areas, even if you exclude the slaves themselves from the calculation, which makes it massively worse. The welfare loss to the slaves cannot be overstated (to put it in a very euphemistic way).

6.) Cotton was a highly profitable natural resource export and thus acted like a natural resource curse. Resources flowed into exploiting the resource and thus did not get spread out into diverse productive enterprises. Why develop industry or infrastructure when you can just farm cotton?

Anyone arguing that slavery was good for the Southern economy has a high burden of proof, since such a conclusion flies in the face of previous empirical work and economic theory.

Addendum: There is a situation where slavery can improve the economy (if you ignore the slave’s welfare) – A production technology with a very high mortality rate. Non-slaves won’t volunteer for a suicide job, but you can force slaves to do it. Pre-modern mining was often like this, like the Roman mines in Spain or the silver mines of Bolivia. I would guess that there were safer methods of mining, but the costs exceeded the costs of replacing slaves. I don’t think this example is relevant to the modern world.

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