Freedom, Not Slavery, Is the Root Cause of Economic Growth

tags: slavery, economics

Robert E. Wright, the Nef Family Chair of Political Economy at Augustana University and the Treasurer of Historians Against Slavery, is currently seeking a publisher for his eighteenth book, The Poverty of Slavery: How Enslavers Victimize Us All. The views expressed herein are personal and do not necessarily reflect those of the above mentioned institutions.

A slurry of recent books purports to show that slavery drove the development of “capitalism” (whatever that is) and hence created the material comforts enjoyed today by most people in the world’s wealthiest countries. Historian Joshua Rothman briefly surveys the new subfield in “The New History of Slavery and Capitalism” Count me among those who, in Rothman’s words, “question whether the authors of these works have an understanding of economics deep and thorough enough to sustain their claims.” In fact, I think the new studies have the story backwards: freedom, not slavery, is the root cause of our wealth.

Most mainstream historians (those who teach non-economic courses out of history departments) have yet to fully understand the fundamental or root causes of modern economic growth, which is generally defined as sustained increases in real per capita aggregate output. Although for millennia various civilizations experienced so-called golden ages, all were essentially the centers of tributary states that expropriated resources from vast hinterlands. Rome flourished, for example, mainly by stealing from captive populations, not by increasing average output per person. Only in the past few hundred years have some economies significantly increased average output on a per capita basis, i.e., by increasing productivity rather than by expropriating wealth from others.

In lieu of a theory of modern economic growth, most historians rely on narratives that stress the growth of specific salient industries or that describe sector “revolutions.” While such narratives are not necessarily untrue, they ignore the crucial fact that in the United States growth began in 1790 and continued, reversed only temporarily by recessions, until the present. The same phenomenon has occurred in some two score countries, starting with the Netherlands in the sixteenth century and continuing through the rise of the sundry “tigers” and “dragons” of the post-World War II period.

The ostensible drivers of growth differed in each of those cases. Some appeared to have been led by agricultural advances or natural resource endowments, others by manufacturing inventions, and still others by business process innovations. Moreover, reputed growth drivers changed over time. America’s growth, for example, was apparently led at times by “revolutions” in agriculture, finance, transportation, manufacturing, management, and information. If one were to catalog every plausible driver of growth in every developed economy over time, one would conclude that everything, or perhaps anything, can spur growth. The list of drivers would include enslaving others but it would also include virtually ever other economic activity imaginable, from fishing (Iceland) to corporate offshoring (Ireland) to pharmaceuticals (Israel).

Of course the notion that any economic activity can induce sustained increases in real per capita aggregate output suggests that more fundamental forces are involved, i.e., that specific economic activities are the effects of economic growth or that reputed growth drivers are merely links in long chains of causation. In the last few decades, economic historians have traced those chains of causation back to their common origin, incentives to work harder and smarter.

The incentive to work harder and smarter is rooted in what today are commonly called human rights, the right to life, liberty, and property that featured so prominently in the public policy debates that led to the formation of republican government in the Netherlands, Great Britain, the United States, and the other so-called Western Offshoots. In poor countries, most people fear expropriation of their lives, liberty, and property by neighbors, foreign foes, and/or their own governments. The nations that were able to make credible commitments to protect their denizens’ human rights, by contrast, grew rich because individuals could reasonably expect to reap the fruits of hard work, innovation, and invention.

Evidence that modern economic growth is ultimately spurred by the protection of human rights abounds. The correlation between various indices of economic freedom and per capita income levels is very high. (See, for example, the Fraser Institute’s work.) Correlation is only the first step in determining causation but numerous so-called natural experiments only increase confidence in the hypothesis. North Korea, for example, is abysmally poor while South Korea flourishes. Can it be coincidence that the former has for decades been led by a series of capricious dictators while the latter is controlled by a government that, while imperfect, provides most of its citizens with what Adam Smith once called a tolerable administration of justice? East and West Germany; China, Taiwan, and Hong Kong; black and white South Africa; the United States and its Indian Reservations; and numerous other natural experiments strongly suggest that what ultimately causes growth is the cultivation of human rights and not climate, culture, geography, natural resource endowments, religion, or slavery.

Once protection of basic rights unleashes human creativity, new businesses, processes, and markets spring up. Most new ideas and ventures fail but those that meet needs at a low enough cost thrive and are emulated by competitors. Sometimes that means that major resources go into cutting down forests or draining wetlands. Sometimes it means building factories or programming smartphone apps. Sometimes, the way to wealth for individuals entails acquiring, transporting, selling, or managing slaves. That doesn’t mean that slavery causes economic growth in any fundamental sense, only that slaving is sometimes a profitable enterprise. Were slaving somehow to suddenly end, enslavers would not sit on their hands doing nothing. Rather, they would find other ways to try to earn profits, just as former slavemasters did both North and South of the Mason-Dixon line.

The notion that freedom, not slavery, drives economic growth is of more than historiographical importance. Today, millions of people throughout the world toil in conditions barely discernible from those of the chattel slaves of mid-nineteenth century Mississippi, Cuba, or Brazil. Efforts to free as many of them as much and as quickly as possible are hurt by claims that slavery made America, Britain, and so forth rich. The best that can be said of slavery is that it did not prevent modern economic growth in countries that adequately protected the human rights of its non-slaves. To go any further, however, is to conflate cause and effect, or primary with at best tertiary causes.

Finally, none of the contributors to the new subfield identified by Rothman have adequately considered negative externalities, or costs imposed on the overall economy rather than the participants in specific economic activities. Like pollution, enslaving others imposes large costs on third parties, including servile insurrection, fugitive slave and other legal codes, and the opportunity costs of lives wasted performing drudge work for the benefit of others, to name just a few. With negative externalities accounted for, slavery is reduced to a brutal form of exploitation that enriches a few enslavers at the expense of the enslaved (a lot) and everyone else (a little).

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