Father of Our Country as an Economist

(Photo: Cliff)

In his book Washington: A Life, Ron Chernow quotes a letter that speaks to the hoary economic historians’ debate about the profitability of slavery.  Washington noted that in his time Virginia estates were forever doomed to lapse into debt, “as Negroes [sic] must be clothed and fed and taxes paid…whether anything is made or not.” Even if slavery were on average profitable, Washington noted that slaves represented a fixed cost of production.  Thus if total revenue were low, perhaps because of the effects of bad weather on his crops, he would earn negative profits. Given that plantation owners borrowed heavily from British lenders, this was a discouraging situation (of course, even more so for his slaves).


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  1. Vnny says:

    Slaves were part of the overhead costs for a business . Stop the presses !

    Surely the overhead on SLAVES was smaller than legit paid workers .

    What the hell is the point of this post? Sometimes slave owners couldn’t turn a profit ?

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    • Neil (SM) says:

      Paid workers don’t have to get paid when there’s no work to do.

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      • Austin says:

        Good point Neil, but surely the significantly reduced slave labor cost in good years would be enough to cover the cost of the negative years, with interest.

        Having said that there are plenty of other good reasons slavery was a bad economic model, this one is just kinda silly… and false.

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      • Mike B says:

        Slavery was a great economic model as long as the local labour supply in the new world remained tight. With the native population decimated due to European diseases there was little to stop a freely employed labour force from eating the plantation owners’ lunch. What kept slavery going in the American South (besides the strange socio-religious aspect) was that the slaves all had values as industrial assets. The value of all the slaves was something on the order of 3 trillion in 2011 dollars, greater than the value of all the Railroad at the time. Plantation owners undoubtedly had a lot of their wealth tied up in their slaves (and in a way could generate new wealth by breeding more) which made it a very intractable problem to solve. Forced Labour systems where there was no capitol tied up in the slave labour force (such as the Gulag or Organization Todt) had no problem rapidly depreciating the value of their labour assets.

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  2. Dave says:

    Hidden due to low comment rating. Click here to see.

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    • If you can't count . . . says:

      Economics rests upon the shoulders of accounting. Even if you strip out the numbers and just talk theory, the principles of accounting are still fundamental to economic analysis. That’s a fact most obviously ignored when we come to the politics side of political economy. If you can’t balance a checkbook, you’re going to have a hard time managing a household.

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  3. Chris L. Robinson says:

    Well, you know what you have to do when you have fixed costs and reduced revenues–defer maintenance and sell equipment.

    It’s just math! SMH.

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  4. Jason says:

    I am currently reading 1493 by Charles Mann. Mann presents a significant amount of evidence that slavery would not be advantageous economically but contrasts it with the fact that African slaves were strongly resistant to malaria and similar diseases. Thus, it became more profitable for English farmers in the Americas to use slaves instead of European or Native American servants. This was particularly true in the South, where mosquito-borne diseases are most prevalent. (It is unlikely that slave-owners knew that disease-resistance was the reason for their preference, and more likely market driven.)

    Presumably by Washington’s time, slavery was so entrenched in the culture that the economics were no longer the primary driving force. Like many issues that we see in politics today, the people who supported slavery did so because that is how it has always been, and they embraced any “reasoning” that supported their cause (the Bible says its okay; our economy depends on it; etc.) Just goes to show that even when markets are no longer favorable to a condition, inertia can keep it from changing for a long time (especially when government fails to intercede).

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    • Mike B says:

      Slavery as an institution got a big shot in the arm when the cotton gin was invented which once again created a high value industry with significant manual labour inputs. Prior to that the overhead of slavery was not as advantageous compared to just employing people. Slavery only makes sense under a very narrow set of economic conditions where the supply of unskilled labour is very tight and therefore can demand a high premium. Where the supply of labour is large then the prevailing wage will naturally settle at the subsistence point, which is always cheaper than outright slavery due to the absence of security overhead. Now, slave owners are often free to trade the future value of their slaves for short term decreases in the cost of maintenance. While ultimately unsustainable, if prevailing economic conditions have already depreciated the value of said slaves there is little incentive not to.

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  5. Suneye Rae says:

    North American slavery was probably more a more traditional than market-based economy at the onset; it was custom, a way of life for the well-heeled. But when the question turned to whom should the slave be that’s when U.S. slavery took on a form of it’s own. Native Americans were susceptible to disease as Jason said above, but they also had established social networks, knowledge of the lay of the land and a (relatively) nondistinct phenotype compared to that of the slavers. African slavery was in fact an economic decision in Central/South American and the Caribbean: for the crops in highest demand African slaves were best suited physically. African slavery in the U.S. was adopted because the Africans were a better labor chocice than the natives. They couldn’t coordinate escape if they didn’t speak the same tongue or know where they were, and were much easier to identify on sight if they left their owners.

    I’d argue that this is an economic issue as during the time of America’s founding, the nation was moving from a traditional economy to a market-based economy wherein slaves were naturally the initial commodity. They were altogether a resource – skilled labor – a capital good used to produce myriad agricultural products, domestic and commercial services, and the consumed good. Assuming that resource costs were rising faster than increases in revenues of slave-produced goods and services, owners would opt to sell the resource or get rid of it, in this case through starvation, abandonment, murder, conspiracy, et cetera.

    Nonetheless, because of the heavy dependency on slave labor for practically, well…everything, owners had incentive to enhance their property in hopes of future profits. Of course slaves are a fixed cost of production, they were people and had to be fed, clothed, nursed back to health, and even paid attention to if anything was going to get done let along a country being built. The founding fathers treated a permanent servile subclass as an economic “given” (read: right), as ha their fathers before them.

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  6. RGJ says:

    Since Mt. Vernon is one of my favorite places to visit, it should be mentioned that not every slave was living in a shack and picking cotton. Mt. Vernon is virtually a town, slaves did a great and diverse deal of work, more economically complex than straightforward crop production. Cobbler, blacksmith, fishermen, cooking, stablemen, etc.

    I suspect that is Washington was paying freemen, two things at least would result. Mt. Vernon wouldn’t such a sweet pad, and those freemen would have been at literal starvation level. Washington’s economic plight was that, like his neighbor slaveowners, he was floated on credit by “agents” in London, who would also do his shopping for luxury goods, etc. Some of Washington’s correspondence was very bitter about getting jacked on the quality of things he had them buy…one I remember was a carriage which he thought he got ripped off on.

    Washington tried to branch into other areas, whisky production, fishing for shad, in order to keep the place going.

    It is an interesting question, though….I guess despite the picture of slaves being sold off alot, when there is a bad drought or harvest, who is going to buy them? Your neighbors are screwed too.

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  7. surya dharma p. says:

    In the era of classical economics, the behaviour of wage system was “if the workers pick five basket of apple, they may take three of it”. That is fixed, then we call it real wage. It doesn’t happen today, the workers may angry when their nominal wage lower although the economy is in recession.

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  8. Pensées sur l'esclavage says:

    Don’t farmers always have up and down years? They tie up money in expensive equipment and have variable weather, etc. and so don’t expect to have profits every year, but hope to pull out ahead in the long run.

    How do the economics of slavery differ from that of 1) indentured servitude or 2) feudal serfdom?

    The first, indentured servitude, is for a term of years and is paying back a contractual debt, but still, as employer, you have to provide room and board, and the exchange has to be profitable for you in the long run. It is not all that different from apprenticed labor, except that under apprenticeship, the benefit to the laborer comes at the end, when the apprentice graduates to become a master.

    In the second, feudal serfdom, there is no termination point. You, as a serf, have a perpetual relationship of having to turn over a portion of your production in exchange for protection from your lord or seigneur. If the system is large enough for economies of scale and there are markets enough to supply the right inputs, why shouldn’t the system carry on indefinitely? In what way does it differ from a world of Marxian “wage slavery”?

    But in human slavery, you have a perpetual system in which you give up a portion of your production for what? For clothing and shelter and protection in an alien world where you have no family and few friends? What if you have some family or friends and a private system of exchange? [J. Paulhan once made allusion to a slave protest in Barbados in 1838 wherein recently emancipated slaves begged their master to be taken back into bondage, and upon his refusal massacred him and his family. Factual or not, what he failed to mention was that emancipation at this time in Barbados came without land. The former slaves were turned out of their homes and given nothing in return.]

    The key word that stands out here in what Washington says is that “taxes” must be paid. I presume he means property taxes on the ownership of slaves. Taxes in themselves should not be economically onerous or prohibitive, but, as we know, very often are . . . What is worse from our point-of-view is that “taxes” in this case goes beyond state allowance of the ownership of humans by others, but implicates the state in sanctioning slavery so that it can support itself off the profits of such a system.

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    • RGJ says:

      I think that maybe on a year-to-year basis indentured servants and slaves my be apples to apples…but in reality, you didn’t get to own the offspring of indentured servants, you didn’t (or some didn’t) care for them into their dotage, and you had the benefit of a life of slave servitude after investment in multiple types of skills. I don’t think many slaves served a life of strictly, say, cooper or shoemaker as I picture indentured servants….many probably had much broader and diverse tasks. And I also don’t think anyone signed up for six years of picking cotton.

      A lot of differences…

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      • D'autres pensées says:

        Is the mode of human bondage dependent on the modes of production? Helots in military (Spartan) society, vassal serfdom in feudal society, human slavery in a developing agrarian society, wage slavery in a rising industrial society, welfare dependency in a technological society? What does life-cycle theory have to say about slaves’ perception of their future prospects? Unless they were part of a large, established, and profitable plantation system, what were their actual prospects as they grew older and less productive and turned out to pasture, so-to-speak? Obviously, slaves were not part of a cradle-to-grave welfare state, but was there not a societal place for them?

        Former slave Henry Clay Bruce wrote: “During the crop season in Virginia, slave men and women worked in the fields daily, and such females as had sucklings were allowed to come to them three times a day between sun rise and sun set, for the purpose of nursing their babes, who were left in the care of an old woman, who was assigned to the care of these children because she was too old or too feeble for field work. Such old women usually had to care for, and prepare the meals of all children under working age. They were furnished with plenty of good, wholesome food by the master, who took special care to see that it was properly cooked and served to them as often as they desired it. On very large plantations there were many such old women, who spent the remainder of their lives caring for children of younger women.”

        . . . And tracing the phrase “human bondage” back through Somerset Maugham to Baruch Spinoza, isn’t much of bondage is driven by emotions and not mind (or as Spinoza describes human freedom—the control of understanding)? How many people today without thinking are emotionally rather willing to give up freedom for security? Quite a few it would seem . . .

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