Slave era - Business in United States of America

The Era: Period in United States history in which slaves, or individuals who were the property of other people, could be traded for profit and used to provide cheap, dependable labor
Date: 1619-1865
Place: Primarily eastern and southern United States
Significance: 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.

Trans-Atlantic Slave Trade

From about 1502 until the mid-nineteenth century, the trans-Atlantic slave trade brought approximately 10 million African slaves to the Western Hemisphere. Approximately 50 percent of the slaves were taken to the islands in the Caribbean, some 38 percent went to Brazil, and less than 5 percent (fewer than 400,000) were brought to U.S. territory. Portuguese merchants dominated the business until the early seventeenth century, when the Dutch became a major competitor. From the early eighteenth century through the early nineteenth century, English and French merchants controlled about half the imports.
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 Middle Passage, because it was the second of the three states in the triangular trade among Europe, Africa, and America. It was a journey of almost five thousand miles, in which as many as 350 African captives were packed below the deck of a single ship. To prevent revolt, the captives were normally kept in chains and allowed on the deck for only a few hours of each day. According to contemporary accounts by Olaudah Equiano and others, the voyages were marked by crowding, poor ventilation, and filthy conditions. The large-scale Cambridge University Press database of the slave trade, developed by Herbert Klein and a team of historians, concluded that approximately 22 percent of the Africans did not survive the ocean crossing during the years before 1700 and that thereafter the average death rate was about 12 percent.
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.

Slavery in the Antebellum South

The use of slave labor was always most common in warm climates and in places conducive to plantation- type agriculture, with optimum-size units larger than a family farm. The first evidence of African slavery in British North America was in 1619, when about twenty Africans were purchased from a Dutch ship in colonial Virginia. It is possible that they might have initially been considered the same as indentured servants, the poor white immigrants who contracted to work four to seven years to pay for passage to the New World. By the 1660’s, however, the laws of Virginia stipulated that slaves of African ancestry and their children could be held as permanent property. All thirteen colonies allowed the ownership of slaves. The American Revolution, however, provoked a strong antislavery movement in the northern states, where there were relatively few slaves. By 1804, all the states north of the Mason- Dixon line either had emancipated slaves or were in the process of doing so.

Slavery in the United States and Its Territories, c. 1860

Profitability

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 labor was unprofitable, however, historian Kenneth Stampp observes that it is difficult to explain why slaves brought such a high price and why so many southerners wanted to own them. If the employment of free workers provided an equal or greater return, one would expect that many wealthy plantation owners would have pursued this alternative strategy.
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, strongmen 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 Civil War, according to Lewis, many business leaders of the South believed that the use of slaves provided a comparative advantage over manufacturing in the North.
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.

Consequences

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 no slaveholding 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 no slaveholders. 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. In addition, 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.