Slaves constituted a valuable kind of private property that could be traded or used to provide labor, usually at less cost than hiring free labor. The institution of slavery was interwoven into many aspects of law, business, and financial affairs until it ended in 1865.
When Americans during the early twenty-first century think about slavery, they usually focus on its morality, particularly the issues of exploitation, inequality, and cruelty. Slaveholders and their defenders, in contrast, tended to look on the institution primarily as a business. Most contemporary historians agree that the main reason for the existence of American slavery was the expectation that it would provide a dependable, flexible, and cheap supply of labor. Like industrial capitalists in the North, most slaveholders rationally attempted to minimize their expenses to maximize their profits. In addition to profits, of course, slavery was also part of a social pattern in which the ownership of slaves was prestigious because it symbolized success.
From about 1502 until the mid-nineteenth century, the
The trans-Atlantic trade was often the most profitable aspect of the slave business. When all conditions were favorable, those engaged in traffic were sometimes able to double their investments within a year. Eric Williams estimated in Capitalism and Slavery (1944) that the average gain was between 16 and 30 percent, and he asserted that the Industrial Revolution was largely financed from these profits. Many modern historians, however, are skeptical about the so-called “Williams thesis.” Transporting slaves across the ocean was an expensive and risky enterprise that required large capital outlays. Slaves were unwilling passengers, constantly ready to revolt, and their presence required twice as many crew members as on regular commercial ships. Insurance was expensive, and special permits had to be purchased. Any number of problems, including epidemics, rebellions, and attacks by pirates, could arise on voyages, which would result in serious financial losses. Whatever the risks, however, there never seemed to be any shortage of merchants and investors ready to transport human cargo.
When historian Johannes Postama analyzed the business records of 159 Dutch slaving voyages, he found that 113 of the voyages resulted in profits on investment of at least 5 percent, which was the average return. A minority of transports were extremely profitable, one reporting a return of 88 percent. Some 14 of the voyages reported neither profit nor loss, while 32 incurred losses, with one expedition reporting a loss of 48 percent. Postama found evidence that the merchants of other countries were more successful than the Dutch. At the time, an average of 10 percent was considered a very good return on investment, and the larger British traders, with experience, organization, and stable finances, achieved profits of that scale. The many smugglers who did not pay the required fees sometimes did better financially, although they risked severe punishment and confiscation of both ships and cargo.
The transporting of enslaved Africans to America was often called the
The trans-Atlantic slave trade gradually ended during the nineteenth century. The United States outlawed the importation of additional slaves in 1808, although smugglers continued to bring them to the South until enforcement of Abraham Lincoln’s blockade in 1861. Great Britain abolished slavery throughout its empire in 1833 and established a network of treaties with other countries limiting or ending the traffic. In the famous case of the slave rebellion on the Spanish ship La Amistad, for example, the U.S. Supreme Court held that the slaves had been taken illegally from Africa, based on an 1817 treaty between Spain and Britain. Brazil in 1850 was the last major country to prohibit the importation of slaves from Africa. Even then, however, the illicit smuggling of slaves across the Atlantic continued until 1871, when Brazil finally adopted a gradual emancipation law.
An abolitionist print depicting the slave trade in the United States in 1830.
The use of slave labor was always most common in warm climates and in places conducive to plantation-type
During the first half of the nineteenth century, the Industrial Revolution and the invention of the
It is estimated that 75 percent of the labor in the cotton kingdom was performed by slaves. Although ownership varied greatly among the states in the four decades before 1860, only approximately one-fourth of white households owned any slaves at all. Slaveholders with twenty or more slaves were considered to be members of the planter class, which represented about 12 percent of slaveholders, or approximately 3 percent of total white households. Considerably less than 0.5 percent of the white population owned fifty or more slaves, which was considered the minimum necessary to belong to the planter aristocracy. However, a large percentage of slaves lived and worked in large agricultural units. More than half of them resided on plantations with thirty or more slaves, and one-fourth resided in units with fifty or more slaves. Less than 20 percent belonged to a farmer possessing a single slave family.
The states with slavery were not wealthy, and most free white persons found it difficult to make a good livelihood and stay out of debt. Contrary to the stereotype, successful planters were not genteel men of leisure; rather, they were usually skillful entrepreneurs who paid attention to efficiency and used careful financial planning. To own and operate an estate with twenty or more slaves required a large capital investment, and mistakes could easily result in financial ruin. Almost all large planters hired full-time overseers to supervise their operations, and frequently planters also hired slave drivers, who worked under the overseers. Overseers were expected to be competent managers of labor and to keep good records. Those who effectively supervised large estates were rewarded with salaries considered good for the time. Their contracts usually motivated them to be more interested in short-term results than in the long-term return on investments in slaves. Because they exacted labor from slaves who were not their property, they tended to be rather harsh and to frequently resort to corporal punishment.
Contemporary defenders of slavery often claimed that owning slaves was a financial burden and that the institution existed for humanitarian, noneconomic reasons. Apologist James Hammond wrote in 1849 that “free labor is cheaper than slave labor,” and many liberal defenders of free-market capitalism agreed with this assessment. If slave
The capital investments of plantations included the cost of land, equipment, slaves, and usually an overseer. The monetary value of a slave depended on variables such as age, sex, health, and disposition. Slaveholders were willing to pay premium prices for young women of childbearing age and for healthy, strong men who did not appear prone to rebellion. Records of Georgia, collected by U. B. Phillips, indicate that the average price of a prime young male slave ranged from $700 to $1,100 from 1830 to 1850 and from $1,050 to $1,800 during the 1850’s. Slaves were quite expensive in comparison to the cost of land. Although land values depended on location and quality, prime cotton-growing land usually sold for $25 to $40 per acre, and a plantation commonly used one slave for every twenty or thirty acres in production.
Journalist Frederick Law Olmstead studied slavery in several parts of the South during the years just before the U.S. Civil War. He noted that a prime field hand produced seven to ten bales of cotton a year and that the living expenses of a slave amounted to about $30 a year. Olmstead estimated an average yearly profit of about $250 per slave. This would mean that the output of a healthy field hand would pay for his purchase price in about six years, except in periods of recession. Olmstead concluded that the possibility of an attractive profit using slave labor was “moderately good, at least, compared with the profit of other investments in capital and enterprise in the North.”
One of the main indications of profitability was that slaveholders often hired out their slaves at yearly rates averaging 10 to 20 percent of the slave’s market value, plus maintenance. Although most slaves were rented for agricultural work, in the Chesapeake region they were often hired to work in textile factories, railroads, coal mines, and ironworks. Investigating these labor practices, historian Ronald Lewis found that industrialists reported that the renting of slaves was more profitable than the hiring of free white workers. In addition to being cheaper, slaves were not able to refuse harsh working and living conditions. By the beginning of the
On the eve of the Civil War, most slaveholders were optimistic about the future of their economic system. The typical slave field worker was not at all lazy or unproductive; on average, he worked harder and was more efficient than free white workers. According to the calculations of Robert William Fogel and Stanley L. Engerman, in Time on the Cross: The Economics of American Negro Slavery (1974), southern slave agriculture, because of its economy of scale and flexible use of labor, was about 35 percent more efficient than the northern system of family farming. Although many historians think that Fogel and Engerman exaggerated slavery’s efficiency, the behavior of southerners before the Civil War is strong evidence that they believed “the peculiar institution” to be economically viable. Before enactment of the Thirteenth Amendment, moreover, Abraham Lincoln was unable to persuade the states of Maryland, Kentucky, Delaware, and Missouri to accept a plan for emancipation with compensation for owners of slaves.
Slaves sometimes died early or escaped, which obviously meant a large financial loss for an owner. The loss, however, was mitigated by insurance. Within a relatively large population of slaves, of course, the majority could reasonably be expected to work for an average of at least twenty years or more. Compared with free labor, slaveholders had the advantage of having firm control over how they used their labor force. They could apply harsh discipline without any concern about the worker leaving, and they did not have to be concerned about labor unions or strikes. In calculating return on investment, moreover, it is important not to overlook the potential value of babies born to slave women, who were encouraged to give birth at a young age and as frequently as possible.
Just as historians argue about the issue of profitability, they also disagree about whether the total effects of slavery were positive or negative on the economy. Hinton Helper, for instance, argued in The Impending Crisis of the South (1857) that slavery discouraged the development of resources and impoverished the majority of white southerners. Some historians have argued that the large capitalization of slave labor made it impossible for southerners to invest surplus capital in more productive sources, thereby retarding the development of manufacturing industries. Certainly it is true that the rural South was not as progressive and prosperous as the Northeast in industry and cultural achievements. It is not at all clear, however, that slavery was a significant cause. Many slaveholders, especially those in the planter class, were highly educated and competent businessmen. The relative backwardness of the South was apparently caused by a host of other reasons, including geographical features, a sparse population, and a lack of infrastructure, especially in the area of transportation. The South, moreover, enjoyed more prosperity than most foreign countries of the period.
Most historians agree that the use of slave labor exacerbated the enormous gulf that separated the slaveholding class from the nonslaveholding whites of the South. Historian Gavin Wright calculates that slaveholders owned about 93.1 percent of the region’s wealth and that the average wealth of slaveholders (almost $25,000) was almost fourteen times the average wealth of nonslaveholders. It is likely that competition from slave labor tended to push down the average wages of white workers. This, of course, was beneficial to consumers, even while it marginally depressed the incomes of lower-class whites. Members of the planter class definitely possessed a disproportionate share of political power. In 1860, slaveholders occupied between 41.2 and 85.8 percent of the seats in southern legislatures, and members of the planter class occupied half of the seats in Mississippi and South Carolina legislatures.
Before the Civil War, people living in the North received a number of economic benefits, directly and indirectly, from the existence of slavery in the South. The price of cotton, so important to the textile mills, was somewhat less than it would have been without slave labor. By the 1850’s, cotton represented 60 percent of the total domestic exports of the country, which helped accumulate the capital necessary for the modernization of the economy. Historian Douglas North called cotton the “proximate prime mover in quickening the pace of the country’s growth.” Without slavery, the South’s cotton would most likely not have had as much of a competitive advantage in world trade. Income from slave labor, moreover, helped provide markets for manufactured goods from the North, thereby stimulating industrialization. Also, northern creditors and insurance companies made profits in doing business with slaveholders in the South.
Unquestionably the buying, selling, and exploitation of slaves ultimately resulted in tragic consequences for the United States. The long and bitter controversy about slavery was the major reason that the southern states seceded from the Union in 1860-1861, thereby bringing about the violence, destruction, and great expense of the Civil War. The institution of slavery was not the only cause for the development of white racism, but it was unquestionably one of the contributing factors. Even though slavery ended long ago, it continues to leave legacies of stereotypes and bitterness, and most economists acknowledge that it is one of the reasons for the economic gap between African Americans and whites. Because the past continues to have an impact on the present, many people agree with the thesis of Randall Robinson’s The Debt: What America Owes to Blacks (2001), which insists on monetary reparations to the descendants of slaves as compensation for unpaid labor and exploitation. Similar arguments are sometimes used in defense of affirmative action programs.
Fogel, Robert William. Without Consent or Contract: The Rise and Fall of American Slavery. New York: Norton, 1989. The Nobel Laureate’s defense of the controversial views in the book he coauthored with Stanley L. Engerman, Time on the Cross. Helper, Hinton. The Impending Crisis of the South. 1857. Reprint. Westport, Conn.: Negro Universities Press, 1970. A reprint of Helper’s argument that slavery impoverished southerners. Klein, Herbert. The Atlantic Slave Trade. New York: Cambridge University Press, 1999. An outstanding survey and analysis of the slave trade, incorporating the quantitative information in the Cambridge University Press database. Lewis, Ronald. Coal, Iron, and Slaves: Industrial Slavery in Maryland and Virginia, 1715-1865. Westport, Conn.: Greenwood Press, 1979. Through an examination of the use of slave labor in ironworks and coal mines of the Chesapeake region, Lewis gives compelling evidence that the practice was more profitable than the use of free white labor. Postama, Johannes. The Atlantic Slave Trade. Gainesville: University Press of Florida, 2003. A concise, readable, and scholarly work that summarizes the author’s larger books and includes an up-to-date annotated bibliography. Robinson, Randall. The Debt: What America Owes to Blacks. New York: Plume, 2001. Robinson calls for reparations to be made to African Americans whose ancestors were slaves. Stampp, Kenneth. The Peculiar Institution: Slavery in the Ante-Bellum South. New York: Alfred A Knopf, 1975. A standard and dependable work that includes much information about the business and financial aspects of the institution. Williams, Eric. Capitalism and Slavery. 1944. Reprint. Miami: Ian Randle, 2005. A new introduction by Colina Palmer graces this classic work on the economics of slavery. Wright, Gavin. Slavery and American Economic Development. Baton Rouge: Louisiana State University Press, 2006. The premier scholar on the economics of slavery, Wright emphasizes the importance of slavery during the colonial period and views the antebellum period as a cold war between two systems of property ownership.
U.S. Civil War