🔃 Did slavery make the West rich?
Ultimately, the key lesson to learn from the Industrial Revolution and Great Acceleration is one about the power of economic freedom
The answer to the above question — at least for someone responding in good faith — is that slavery didn’t make the West rich, to the best of our knowledge. An absolute assertion to the contrary would merely be extreme lefty, anti-West, anti-market, anti-liberal wishcasting. After all, slavery is thousands of years old, while prosperity is maybe two hundred, maybe less. Economist Deirdre McCloskey is correct to summarily dismiss the notion: “Empire did not enrich Britain. America’s success did not depend on slavery. Power did not lead to plenty, and exploitation was not plenty’s engine.”
But is the answer “No” the same as “Not at all, not even a smidge?” Maybe not. In the new NBER working paper “Slavery and the British Industrial Revolution,” researchers Stephan Heblich (University of Toronto), Stephen J. Redding (Princeton University), and Hans-Joachim Voth (University of Zurich) try to determine to what extent, if any, overseas slaveholding by Great Britain accelerated the Industrial Revolution. What makes this an interesting question, as HRV notes, is that Britain was both the first nation to industrialize and also the nation with the greatest involvement in the trans-Atlantic slave trade.
A new theory about slavery and the IR
The modern economic consensus is one of skepticism toward the notion of slavery as a significant causal factor in the IR. “Profits from the slave trade were no higher than in other lines of business, the argument goes, absolute levels of profit from the slave trade were small relative to the size of the British economy,” the paper summarizes. But then the researchers state their disagreement with that consensus conclusion. The key conceptual breakthrough here is a focus on the wealth generated by slaveholding as well as slave trading. This is the paper's basic summary, cobbled together and boldfaced by me:
We provide theory and evidence on the contribution of slave wealth to Britain’s growth prior to 1835. We compare areas of Britain with high and low exposure to the colonial plantation economy, using granular data on wealth from compensation records. Before the major expansion of slave holding from the 1640s onwards, both types of area exhibited similar levels of economic activity. However, by the 1830s, slavery wealth is strongly correlated with economic development – slave-holding areas are less agricultural, closer to cotton mills, and have higher property wealth. … Greater access to slavery investments raises the productivity of the investment technology, which stimulates capital accumulation and increases the steady-state capital stock. Additionally, slavery investments can readily be collateralized, alleviating financing constraints, and again stimulating domestic capital accumulation. In the presence of financial frictions, the greater capital stock is disproportionately invested locally, which in turn accelerates local economic growth and structural transformation towards capital-intensive manufacturing. … Quantifying our model using the observed data, we find that Britain would have been substantially poorer and more agricultural in the absence of overseas slave wealth. Overall, our findings are consistent with the view that slavery wealth accelerated Britain’s industrial revolution.
Specifically, areas with the greatest levels of participation in slavery investment experienced “increases in total income of more than 40 percent, with population increasing by 6.5 percent, capitalists’ income rising by more than 100 percent, and landlords’ income declining by just over 7 percent.” One way financial advantage manifested itself was in the use of steam power, a key technology of the Industrial Revolution. But it was a costly technology. The researchers find that areas with more slaveholding in 1833 showed a higher rate of adoption.
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