Ron Paul and the Economics of Slavery

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Say what you will about the Ron Paul campaign, it makes you think. During his grueling Meet the Press battle with Tim Russert (transcript and video), Paul didn’t discuss which subset of subprime borrowers he wanted to bail out, or how many percentage points he’d increase Medicare spending in fiscal 2010. No, Paul and Russert discussed things like abolishing the income tax, whether the Civil Rights Act of 1964 was a good idea, and how fascism would come to America. In the present article, I’ll focus on their discussion of slavery:

MR. RUSSERT: I was intrigued by your comments about Abe Lincoln. "According to Paul, Abe Lincoln should never have gone to war; there were better ways of getting rid of slavery."

REP. PAUL: Absolutely. Six hundred thousand Americans died in a senseless civil war. No, he shouldn’t have gone, gone to war. He did this just to enhance and get rid of the original intent of the republic. I mean, it was the — that iron, iron fist.

MR. RUSSERT: We’d still have slavery.

REP. PAUL: Oh, come on, Tim. Slavery was phased out in every other country of the world. And the way I’m advising that it should have been done is do like the British Empire did. You, you buy the slaves and release them. How much would that cost compared to killing 600,000 Americans and where it lingered for 100 years? I mean, the hatred and all that existed. So every other major country in the world got rid of slavery without a civil war. I mean, that doesn’t sound too radical to me. That sounds like a pretty reasonable approach.

Here Dr. Paul has made a fascinating point. Even though every generation of American children is taught that the so-called Civil War — which is a poor title since the Southern states weren’t fighting for control of the federal government — was necessary to free the slaves, no one ever learns the dates of analogous civil wars to free the slaves in Britain, Spain, Brazil, or other major participants in the slave trade. And for once, this isn’t because of a US-centric curriculum, but because there were no bloody wars in other countries to end the scourge of slavery. (Another arguable exception, where massive violence ended institutional bondage, was the Haitian revolution.) As abolitionist campaigns changed public opinion, and modern capitalism swept the globe, the injustice and inefficiency of slavery became more and more manifest. Russert’s claim that we would have slavery today in the United States were it not for the Emancipation Proclamation is as silly as labor leaders who think twelve-year-old children would pack the coal mines were it not for key legislation.

SLAVERY NEEDS GOVERNMENT TO PROP IT UP

As I argue in my book, The Politically Incorrect Guide to Capitalism, the conventional explanation has things exactly backwards. People think that "pure" capitalism entails buying and selling human beings as chattel, and that only farsighted government intervention could stop this crass practice. Yet on the contrary, slavery is inherently inefficient, and can only survive when propped up by government limitations on private property.

It would be easy (and correct) to declare, "The free market is all about the respect of private property rights, and so of course institutionalized bondage is incompatible with the free market." Yet for many people, that would be too easy; it would be an argument from definitions. So let us explore the more interesting question: What if, for some horrible reason, 90 percent of the people in a society had all of the guns and wealth, and thought it perfectly fine to treat the other 10 percent as their personal property? Would it take government action to alter this miserable state of affairs?

SLAVERY IS INEFFICIENT

The answer is "no!" Slavery is not only immoral, it’s also grossly inefficient. As the great Austrian economist Ludwig von Mises explains:

The price paid for the purchase of a slave is determined by the net yield expected from his employment…just as the price paid for a cow is determined by the net yield expected from its utilization. The owner of a slave does not pocket a specific revenue. For him there is no "exploitation" boon derived from the fact that the slave’s work is not remunerated…. If one treats men like cattle, one cannot squeeze out of them more than cattle-like performances. But it then becomes significant that man is physically weaker than oxen and horses, and that feeding and guarding a slave is, in proportion to the performance to be reaped, more expensive than feeding and guarding cattle…. If one asks from an unfree laborer human performances, one must provide him with specifically human inducements. If the employer aims at obtaining products which in quality and quantity excel those whose production can be extorted by the whip, he must interest the toiler in the yield of his contribution. Instead of punishing laziness and sloth, he must reward diligence, skill, and eagerness.… It is this fact that has made all systems of compulsory labor disappear. (Human Action 3rd edition, pp. 630—631)

Lest the reader think these are the Neanderthal views of a fringe economist, let us quote Gordon Tullock, who is a quite respectable leader of the Public Choice School:

The institutional arrangements for permitting the slave to "purchase" himself from his master are extremely various, but there is one simple and straightforward method which can do as an example. Suppose that the return that a slave owner may expect from a slave after having paid for his sustenance (but not [his purchase price]) is $.50. The slave "rents" himself from his master for $.55 and seeks employment from someone else. In this other employment he will work as hard or harder than a free man and can make $.90 per day over his sustenance. He saves the [$.35 after paying his daily rental price to his owner] and eventually purchases himself from his master. Both master and slave have benefited from the bargain, and the shortage of major slave systems in history comes simply from the fact that slaves and masters normally, perhaps only after a generation or two, see this opportunity.

The basic reason for the failure of this type of "sale" of the slave to himself in the guise of manumission to develop in the ante-bellum South would appear to be the stringent and steadily growing legal restrictions on manumission. (Gordon Tullock, 1967, "The Economics of Slavery," Left and Right, Vol. 3, No. 2, Spring-Summer, pp. 10—11.)

CONCLUSION

Of course, it would have been grossly unfair to "solve" the problem of slavery by expecting people who were captured in Africa to work extra hard in order to buy back their freedom from plantation owners in the South. But was it any fairer to solve the problem by forcing hundreds of thousands of non-slave-holding citizens to slaughter each other? Just to clarify, Ron Paul isn’t saying that the slaves in the US should have purchased their freedom. Rather, he’s arguing that a far more humane solution than the Civil War would have been for the federal government to pay fair market prices to the slaveholders for their property, and then to free the people whom the government had just “purchased.” This is consistent with the 5th Amendment, after all, which requires that taking private “property” (much as that terminology shocks us today) for “public use” requires “just compensation.”

For those who think it axiomatic that an unbridled free market fosters slavery, while government intervention is necessary to end it, I encourage you to read up on the academic literature (pdf). As I hope this short essay has demonstrated, the case isn’t nearly as open-and-shut as it first appears. Indeed, the more one thinks through the economics of the situation, the more the problem becomes, "How the heck did the South maintain such an inefficient system for so long?"

I’ll close with one final observation: If slavery is such a material boon to a society — from the point of view of the non-slaves, of course — then why was it the North that blockaded and invaded the South, rather than vice versa? It’s no coincidence that the North, based on free labor, was more industrialized than the South, just as it was no coincidence that the US had far more matriel with which to conquer Nazi Germany or engage in an arms race with the Soviet Union. Freedom works.

Bob Murphy [send him mail] has a Ph.D. in economics from New York University, and is the author of The Politically Incorrect Guide to Capitalism. He has a personal website at ConsultingByRPM.com

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