On the Profitability of Slave Labor

In debates about the American Civil War and its causes, one often hears the argument advanced that the efforts of the Northern abolitionists were unnecessary as slave labor was already on the way out, owing to its declining profitability. I've always found this argument preposterous on its face, but in the course of reading Götz Aly's "Hitler's Beneficiaries", I am struck anew by the utter mendacity of such an assertion: not only did the Nazi regime make slavery pay, but it paid on a truly colossal scale, something on the order of $100-150 billion in the space of a handful of years. If slavery could be made to pay so handsomely in 1941-1945, and in a Germany whose economy was already far more knowledge-intensive than the American South would be until perhaps the 1980s*, why are we supposed to believe that slavery would be abolished today without a war to force its abolition? Why would the South have been willing to go to war to preserve a soon-to-be obsolete institution in the first place?

Human slavery is and likely always will be profitable, at least until reality catches up with Blade Runner and artificial sentient humanoids can be made to do what men, women and children in chains would have (and even that would simply be replacing one type of slavery with another). Optimists might like to believe otherwise, and nothing will stop neo-confederate apologists masquerading as "libertarians" from continuing to make stupid arguments to the contrary, but the viability of slavery is something that will not change in the foreseeable future.

*To be perfectly candid, it isn't even clear that this is true today, considered objectively. 1930s Germany was a creative and innovative powerhouse on a scale that the American South just doesn't seem to be.

PS: A little searching turns up this paper on the economics of slavery in the antebellum South. As expected - and in contrast to the rubbish to be found on "Lew Rockwell" and similar sites - the paper gives every reason to believe that slavery would have continued to thrive had the American Civil War been averted.

Comments

[Andrew Reeves]

I can't find the cite off-hand, but there were a lot of industrial institutions in the CSA that used slavery just as well as plantations did. The argument that industrialization would have ended slavery seems to be wishful thinking more than anything else.

[Abiola Lapite]

Indeed. As many Nazi profiteers (like Oskar Schindler) realized, a skilled slave set to work, say, manufacturing precision machine parts or Swiss style luxury watches, would be even more profitable to his/her owner than an unskilled one set to work picking cotton in the fields: in fact, the more skilled the work a slave can be made to do, the bigger the potential differential between potential vs. actual wages, a surplus the slave owner stands to expropriate outright.

[Ross]

"not only did the Nazi regime make slavery pay, but it paid on a truly colossal scale"

It's clear that the companies who used slave labour profited, but did the regime as a whole do so? After all it wasn't the companies involved who paid for the police state required to prevent escape or any of the other externalities.

[Abiola Lapite]

"It's clear that the companies who used slave labour profited, but did the regime as a whole do so?"

Given the rigorous accounting done by the Nazis on this very issue, there is absolutely no reason to assume otherwise. In any case, it is a huge mistake to assume that the extra costs involved in keeping large numbers of foreigners in slave camps must be correspondingly massive: we aren't talking about Club Fed here, just spending the bare minimum required to keep your slaves alive - and even that minimum amount of care only came later, when the German victories and seemingly unceasing flow of new helots evaporated.

Additionally, it must be kept in mind that a course of action need not be beneficial to "the state" for it to pay massive rewards to individuals who have a lot more incentive to lobby for it than the great mass of others have to lobby against it; cotton and ethanol subsidies are obviously value-destroying to American society as a whole, but do you think for a second that they'll ever be abolished?

This is public choice theory in action: even if one makes the assumption that the net opportunity costs* of slavery are positive - and this is an assumption that actually strikes me as quite sound, given how much more productive free, educated people engaged in voluntary transactions can be - it does not at all follow that "society" will therefore decide to abolish slavery, especially when the mere knowledge of the existence of an even lower slave class also provides certain psychic rewards to those at the bottom of "free" society, be they German "volksgenossen" or poor Southern whites who can say to themselves "at least I ain't a n*gger" ...

*I originally used the phrase "net social costs", but that is inaccurate. Opportunity cost better captures my real drift, which is that a policy can look profitable by accounting yardstacks without necessarily being pareto-optimal.

[Chuckles]

Abiola:

You might be interested in this one from the archives:

http://www.nybooks.com/articles/1936

Appiah disposes of Sowell's ridiculous argument in a flash. That is to say, one need not even establish the absolute profitablity of slavery to recognize its significance - hence the analogy of batteries as goods by themselves and batteries as crucial elements of a larger system - something, that you have again, pointed out above.
Its amazing how many times this argument comes up: Slavery was economically insignificant, its abolition was economically irrational.
The same fallacy bedevils those who like to claim that slavery was abolished by industrial society - hence points for those who birthed the industrial society, and yet fail to recognize that industrial society itself was built on the back of slaves.