In the long run, most wealth is produced,
not plundered. Slavery created bad institutions that inhibited
industrialization.
Yesterday I wrote about the response on Twitter to this
statement by Noah Smith and said that today I would write about my thoughts on
this statement.
In general, I tend to agree with Smith, largely because
plunder is not a sufficient condition for economic growth and innovation and
investment are. Plunder has existed throughout human history, and for most of
human history it did not lead to sustained economic growth. Spain and Portugal
did plenty of plundering, and it did not lead to economic growth. Switzerland
became rich without much plundering. That said, the economic history of the
United States had plenty of both plunder and productivity improvement.
Economists generally define economic growth as increases in
real GDP per capita. That simply means that on average people produce more
goods and services than they did the year before. There are basically two ways
to increase output per person. First, you can give people more resources to
work with: more natural resources and more capital. Second, you can figure out
ways to get more output from the resources you have: you can create a cotton
gin, or a spinning jenny, or ways to refine crude oil into kerosene. Both were
at play in American economic growth.
Both the South and the North increased the amount of natural
resources through movement to the West. This is probably the most obvious role
for plunder in American economic growth: appropriation of land from Native Americans. But growth was not solely attributable to increases in land.
Capital increased as well. Capital is anything that has been produced in order
to increase production in the future. People most often associate capital with machines
and equipment, but roads, ports, and canals are important examples of capital
as well. There was a lot of new capital in the North, both public and private.
Investment in canals and railroads was more extensive in the North than in the
South. There were also more buildings, more mills, more agricultural equipment,
etc. But neither the increases in land or capital would have really transformed
economic life. Simply increasing the amount of land, the number of sawmills,
and the number of spinning wheels and looms would not have led to modern
economic growth. The fundamental source of growth was improvement in productivity,
coming up with new and better ways to do things. These changes in technology
were not just in cotton textiles and railroads and the other things people
associate with industrialization. The North was still an agricultural economy
and much of the growth came from improvements in crops, livestock and farm
machinery, see Olmstead and Rohde’s Creating
Abundance and David McClelland’s Sowing
Modernity: America’s First Agricultural Revolution .These changes in
technology are what made 1900 different than 1800 and 2000 different than 1900.
Can they be attributed to the cotton
economy of the South?
Cotton accounted for about 4 % of U.S. GDP. That is a lot
for one sector of the economy. After all, Fogel estimated that GDP would have only
been about 4 % lower in 1890 if you had wiped out all the railroads. The point
is that even during the antebellum period the US economy was highly
diversified. No one thing could drive growth. Four percent is big, but it does
not make slave produced cotton the driving force behind economic growth.
But Baptist’s argument is essentially that cotton provided
the stimulus for growth in the North. As I have pointed out previously
his attempt at calculating the spillover effects of cotton are nonsense. The biggest
problem with them is that he just makes up the numbers, but even if he had
produced the numbers through research it doesn’t make any sense to compare them
to GDP.
Putting aside Baptist’s nonsense calculation, his argument
is actually pretty old and has not stood the test of time. It is essentially the
argument that Doug North made in The
Economic Growth of the United States, 1790-1860. It seemed like a
reasonable story given the evidence that Doug had collected, but subsequent research
generated evidence that contradicted the theory. First, work by a number of
economic historians (Gallman, Hutchison and Williamson, and Herbst) found that
Doug’s theory tended to underestimate the degree of regional self-sufficiency
and overestimate the importance of interregional trade. The evidence did not
support the conclusion that cotton was the driving force behind economic
growth. Second, much of the work done on early industrialization has emphasized
the role of intraregional trade. Much of early industrialization appears to
have been directed at local demand not demand from the South or Europe. Notable
contributions on this subject were made by Diane Lindstrom Economic
Development in the Philadelphia Region and more recently by David Meyer Roots
of American Industrialization or see his essay on Industrialization in
EH.Net’s Encyclopedia.
Finally, there are
reasonable arguments supported by evidence that slavery had a negative effect
on long run trends in per capita GDP. The more a region depended on slave labor
in the past the lower its per capita income now.
By the way, all of the studies I have mentioned are actual
empirical studies. Their authors did the hard work of collecting and analyzing
evidence, rather than setting in an office in, for example, Ithaca making up
numbers.
Finally, I will note that enslaved people may have made contributions
to economic growth that aren’t included in Baptist’s story. The McCormick
reaper is one of the most famous innovations in American economic history. McCormick
was from Virginia, and, according to at least some accounts, an enslaved
blacksmith, Jo Anderson, was instrumental in helping him develop a working
reaper. I think this example actually
supports Smith’s view about the negative effects of slavery. The vast majority
of enslaved people did not even have this sort of limited opportunity to
contribute to the sort of technological innovations that produce economic
growth. How much more rapid might economic growth have been if African
Americans had the same opportunities as Americans of European descent to
exploit their ingenuity? How much more rapid might economic growth be now if
African Americans had the same opportunities as others?
