Bloomberg: How Slavery Led To Modern Capitalism

[Nar Gilah]

http://www.bloomberg.com/news/2012-01-24/how-slavery-led-to-modern-
capitalism-echoes.html

How Slavery Led to Modern Capitalism: Echoes
By Sven Beckert and Seth Rockman - Jan 24, 2012

When the New York City banker James Brown tallied his wealth in 1842, he
had to look far below Wall Street to trace its origins. His investments
in the American South exceeded $1.5 million, a quarter of 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. Still, no
small amount of his time was devoted to managing slaves from the study of
his Leonard Street brownstone in Lower Manhattan.

Brown was hardly unusual among the capitalists of the North. 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.
Likewise, 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.

The story we tell about slavery is almost always regional, rather than
national. We remember it as 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.

Yet to understand slavery's centrality to the rise of American
capitalism, just 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.

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.

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

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 -- those who would soon 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.

In the North, where slavery had been abolished and cotton failed to grow,
the enterprising might transform slave-grown cotton into clothing; market
other manufactured goods, such as hoes and hats, to plantation owners; or
invest in securities tied to next year's crop prices in places such as
Liverpool and Le Havre. 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.

The perverse reality of a capitalized labor force led to new accounting
methods that incorporated (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.

So important was slavery to the American economy that on the eve of the
Civil War, many commentators predicted that the North would kill "its
golden goose." That prediction didn't come to pass, and as a result,
slavery's importance to American economic development has been obscured.

But 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.

(Sven Beckert and Seth Rockman, historians at Harvard University and
Brown University respectively, are co-editing "Slavery's Capitalism: A
New History of American Economic Development," to be published by
University of Pennsylvania Press in 2013. The opinions expressed are
their own.)

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

To contact the editor responsible for this post: Timothy Lavin at
tla...@bloomberg.net.