How Slavery Led to Modern Capitalism?

Any direct connections between slavery and capitalism?

Posted on February 25, 2012

A slave being auctioned, 1861. Source: Sketch by Thomas R. Davis, Library of Congress, Prints and Photographs Division

The story told about slavery is that it is almost always regional.  Wrong. It is an inherent US national story.

The story goes that slavery was a cruel institution of the southern States that would later secede from the Union. Slavery, in this telling, appears limited in scope, an unfortunate detour on the nation’s march to modernity, and certainly not the engine of American economic prosperity.  That’s a very funny story.

For example:

“New York City banker James Brown tallied his wealth of $1.5 million in 1842. Brown investments in the American South exceeded a quarter of his wealth, which was directly bound up in the ownership of slave plantations.  Brown was among the world’s most powerful dealers in raw cotton, and his family’s firm, Brown Brothers & Co., served as one of the most important sources of capital and foreign exchange to the U.S. economy.   Most of James’ time was devoted to managing slaves from the study of his Leonard Street brownstone in Lower Manhattan.

Nicholas Biddle’s United States Bank of Philadelphia funded banks in Mississippi to promote the expansion of plantation lands. Biddle recognized that slave-grown cotton was the only thing made in the U.S. that had the capacity to bring gold and silver into the vaults of the nation’s banks.

The same facts were recognized by the architects of New England‘s industrial revolution watched the price of cotton with rapt attention, for their textile mills would have been silent without the labor of slaves on distant plantations.

Consider the history of an antebellum Alabama dry-goods outfit called Lehman Brothers or a Rhode Island textile manufacturer that would become the antecedent firm of Berkshire Hathaway Inc.”

The story goes that the civil war was to abolishing slavery in the southern States.  That a lie and big smokescreen to reality.  

The northern modern capitalists, specially those born in the 1840’s and made their fortune building railways, telegraph, and media…wanted to keep controlling the southern gold goose: Cotton production transformed into gold by export, and worked by the black slaves.

The southern elite class of “nobility” wanted the gold to be kept in the south and not be controlled by the new northern capitalists class.

After the war, the north wanted gold to be the currency, and the south wanted the “Green-buck” paper currency as the national money because they had no gold anymore.

Gold or Green-buck, it didn’t matter to the north: the money presses were in the north anyway.  And slavery remained in the south, and was transferred in the north to making hats, shoes, hoes…

The enterprises transformed slave-grown cotton into clothing; market other manufactured goods to plantation owner.  Or invest in securities tied to next year’s crop prices in places such as Liverpool and Le Havre….

America’s “take-off” in the 19th century wasn’t in spite of slavery; it was largely thanks to it.

And recent research in economic history goes further: It highlights the role that commodified human beings played in the emergence of modern capitalism itself.

Such revelations are hardly surprising in light of slavery’s role in spurring the nation’s economic development.

The U.S. won its independence from Britain just as it was becoming possible to imagine a liberal alternative to the mercantilist policies of the colonial era.

Those best situated to take advantage of these new opportunities — soon to be called “capitalists” — rarely started from scratch, but instead drew on wealth generated earlier in the robust Atlantic economy of slaves, sugar and tobacco.

Fathers who made their fortunes outfitting ships for distant voyages begat sons who built factories, chartered banks, incorporated canal and railroad enterprises, invested in government securities, and speculated in new financial instruments.

This recognizably modern capitalist economy was no less reliant on slavery than the mercantilist economy of the preceding century. Rather, it offered a wider range of opportunities to profit from the remote labor of slaves, especially as cotton emerged as the indispensable commodity of the age of industry.

This network linked Mississippi planters and Massachusetts manufacturers to the era’s great financial firms: the Barings, Browns and Rothschilds.

“A major financial crisis in 1837 revealed the interdependence of cotton planters, manufacturers and investors, and their collective dependence on the labor of slaves.

Leveraged cotton — pledged but not yet picked — led overseers to whip their slaves to pick more, and prodded auctioneers to liquidate slave families to cover the debts of the overextended.

The plantation didn’t just produce the commodities that fueled the broader economy, it also generated innovative business practices that would come to typify modern management.

As some of the most heavily capitalized enterprises in antebellum America, plantations offered early examples of time-motion studies and regimentation through clocks and bells.

Seeking ever-greater efficiencies in cotton picking, slaveholders reorganized their fields, regimented the workday, and implemented a system of vertical reporting that made overseers into managers answerable to those above for the labor of those below”.

Capitalists reworked the accounting methods: labor force was incorporated in human property depreciation in the bottom line as slaves aged, as well as new actuarial techniques to indemnify slaveholders from loss or damage to the men and women they owned.

Property rights in human beings also created a lengthy set of judicial opinions that would influence the broader sanctity of private property in U.S. law.

As scholars delve deeper into corporate archives and think more critically about coerced labor and capitalism, (perhaps informed by the current scale of human trafficking) the importance of slavery to American economic history will become inescapable.

Reparations lawsuits (since dismissed) generated evidence of slave insurance policies by Aetna and put Brown University and other elite educational institutions on notice that the slave-trade enterprises of their early benefactors were potential legal liabilities.

Recent State and municipal disclosure ordinances have forced firms such as JPMorgan Chase & Co. and Wachovia Corp. to confront unsettling ancestors on their corporate family trees.

Note: Post inspired by the article of Sven Beckert and Seth Rockman, historians at Harvard University and Brown University respectively.  They are  co-editing “Slavery’s Capitalism: A New History of American Economic Development,”

To contact the writers of this post: Sven Beckert at beckert@fas.harvard.edu and Seth Rockman at Seth_Rockman@brown.edu.