Slavery and Prosperity

Gerald O'Hara: Now gentlemen, Mr Butler has been up North, I hear. Do you agree with us, Mr Butler?
Rhett Butler: I think it's hard winning a war with words, gentlemen.
Charles Hamilton: What do you mean, sir?
Rhett Butler: I mean, Mr Hamilton, there's not a cannon factory in the whole South.
Man: What difference does that make, sir, to a gentleman?
Rhett Butler: I'm afraid it's going to make a great deal of difference to a great many gentlemen, sir.
Charles Hamilton: Are you hinting, Mr Butler, that the Yankees can lick us?
Rhett Butler: No, I'm not hinting. I'm saying very plainly that the Yankees are better equipped than we are. They've got factories, shipyards, coalmines...and a fleet to bottle up our harbors and starve us to death. All we've got is cotton, slaves, and arrogance.
--Gone With the Wind

Salient point by Bob Murphy. Leftists have been coming out of the woodwork claiming that slavery was a boon to economic activity in the South and formed the basis for an unfair but lucrative capitalistic system in America. The ulterior motive behind this movement is to build political rationalization for reparations and, more generally, for delegitimizing America's founding principles.

While the portion of the claim explicitly linking 'brutality' and 'American Capitalism' can be set aside on grounds of pure absurdity, the portion about slavery being an economic blessing for large groups of people merits scrutiny. On the surface, the claim seems valid. After all, slave owners, particularly those who operated businesses, had access to low cost (although not 'no cost), forced labor that seemingly permitted higher profit margin businesses.

While there can be little doubt that small groups of people can benefit from this arrangement in the short term, the question is whether benefits flow to society at large over time. This is where the reasoning mind starts chipping away at the proposition. Several obvious questions arise that Murphy doesn't even mention. One is that many people in the South did not own slaves. How precisely did these people benefit? Weren't they put at an unfair disadvantage in labor and product markets? In addition, for those proprietors who did employ slave labor, wouldn't competition drive down prices such that their labor cost advantages would be competed away over time--particularly as markets opened to external competitors?

Proponents of the 'slavery was good for the economy' argument offer various statistics from the period showing that output of slave-using plantations increased significantly over time and that the US economy grew in size relative to the world economy while slavery was still in force.

But such statistics do little to validate the 'slavery was an economic godsend' case. After all, as Murphy notes, one could just as easily draw from post-Civil War economic data and cite booming farmer productivity, technological improvements, and rise of the United States to largest economy in the world as 'proof' that getting rid of slavery was the real boon to the economy.

Murphy contends that the real question to ask when considering whether slavery constitutes an economic boon to society is: As compared to what? The comparison in this case is between servile labor and labor, producers, and consumers that are free to do what they want as long as their action is peaceful.

It is on this ground that the 'slavery is great for the economy' falls apart. The institution of slavery rigidifies labor and stifles the entrepreneurial quest for technological improvement. Unhampered markets do the opposite. Labor is free to contract where opportunities are deemed bright. Entrepreneurs must innovate in order to become more productive and serve customers.

Of course, Antebellum America offered a side-by-side comparison of the two systems at work. Productivity in the relatively unhampered North increased orders of magnitude that of the relatively hampered South--as did median standard of living. As Mises observed:

"Servile labor disappeared because it could not stand the competition of free labor; its unprofitability sealed its doom in the market economy."

As these pages have observed, war was not necessary to end slavery in the United States. It was destined to die a peaceful death at the hands of competitive markets.