Slavery's defenders often portrayed the South's "peculiar institution" as the antithesis of money-grubbing Yankee capitalism, rooted in an idealized agrarian hierarchy of white master and enslaved African that had been ordained for all time by God and natural law. Indeed, they often insisted that it was a supremely charitable endeavor that saved the slave from his own innate barbarism, asserting, for example, that they had to provide for elderly, infirm and immature slaves whether they were productive or not, as if they were members of their own family—albeit of a very inferior sort. As the wealthy South Carolina planter and politician James H. Hammond condescendingly put it in 1845, in a truculent rebuttal to attacks on slavery made by a British abolitionist: "We must therefore content ourselves with our dear labor under the consoling reflection that what is lost to us is gained to humanity." Abolitionists were contemptuous of such self-serving nonsense, but they too tended to see slavery as an economically inefficient, and morally reprehensible, hangover from the premodern past.The slave economy was also expansionist, with proponents supporting the acquisition of Cuba by the United States and a general southward expansion into more climes suited to the plantation model. It's hard to imagine that slavery would have remained economical to the present day. But there was clearly a lot of steam left in the engine as of 1861, had the Civil War not brought it to a violent close.
In "The Half Has Never Been Told," Edward E. Baptist takes passionate issue with such assumptions. He asserts that slavery was neither inherently inefficient nor a counterpoint to capitalism. Rather, he says, it was woven inextricably into the transnational fabric of early 19th-century capitalism. Banks and financiers fed it with the investment it needed to continue expanding and were rewarded with handsome profits from the labor of enslaved millions. Although crashes, depressions and market fluctuations inevitably affected the slave-based economy, large-scale investors in slavery consistently earned handsome profits, at least in the rich cotton-growing regions of the Deep South.
The morality of slavery rarely if ever entered into the business equation. As the number of slaves in the U.S. swelled from just under one million at the dawn of the century to about four million at the time of the Civil War, investors consistently demonstrated their confidence in slavery's profitability. As the historian Walter Johnson has eloquently put it, slaves represented "a congealed form of the capital upon which the commercial development of the [Mississippi River] Valley depended. . . . The cords of credit and debt—of advance and obligation—that cinched the Atlantic economy together were anchored with the mutually defining values of land and slaves: without land and slaves, there was no credit, and without slaves, land itself was valueless." The value of the dollar, Mr. Johnson adds, "as often as not . . . turned out to be backed by flesh rather than gold."
As early as the 1820s, says Mr. Baptist, slave owners commanded the biggest pool of collateral in the United States: two million slaves worth more than $1 billion. "Not only was that almost 20 percent of all the wealth owned by all US citizens," Mr. Baptist writes, "but it was the most liquid part of that wealth, thanks to the efficiency of markets manned by professional slave traders." Slaves were a uniquely flexible commodity: There was a ready market for them everywhere in the South; they could be either sold or leased; they could be moved from place to place under their own power; and unlike tools and buildings, they naturally reproduced, adding to the value of their master's investment.
Read the rest
There's been an interesting sidebar to the issue in that The Economist ran a review (which they've since officially withdrawn) which sounded almost 19th century in its rationalizations of the "peculiar institution". Baptist has written a response to the review incident in Politico, in which he blames the review on "market fundamentalism".
In the last couple of decades, the Economist and its suspender-wearing core readers have usually been reliable allies of market fundamentalism—the idea that everything would be better if measured first and last by its efficiency at producing profit. I, on the other hand, argue in the book that U.S. cotton slavery created—and still taints—the modern capitalist economy which the Economist sometimes seems to prescribe as the cure for all ills. I’d like to think we all agree that slavery was evil. If slavery was profitable—and it was—then it creates an unforgiving paradox for the moral authority of markets—and market fundamentalists. What else, today, might be immoral and yet profitable?
I hesitate to make the argument "nobody says that", because you can usually rely on someone to say almost anything, no matter how wrong, but it does at least strike me as very obviously wrong to assert that if something is profitable, it must be moral. Morals and economic efficiency seem to be clearly different worlds. Whether something is profitable and whether it is moral are two questions which have no bearing on each other.
For an in depth discussion of the economics of slavery, I'd also suggest this EconTalk from some years ago, in which Russ Roberts interviews Stanley Engerman, co-author of Time on the Cross: The Economics of American Negro Slavery