Slavery Could Not Last in an (Otherwise) Free Market

With all of the hubbub recently over slavery and its (alleged) ties to Austro-libertarianism, I thought it important to point out that the very nature of a market economy is incompatible with the institution of slavery. slaveNote, I am NOT relying on a definitional tautology; I’m not arguing, “In a free market people own their bodies, so slavery can’t exist on a free market.” Rather, I am making the much stronger claim that in a society with strict property rights, market forces would lead to self-ownership even if (for some horrible reason) the society started out with some people being legally recognized as the owners of other human beings.

The essential insight here is that slavery, besides being immoral, is also incredibly unproductive. As Mises writes on page 626 of the Scholar’s Edition of Human Action:

Now, at no time and at no place was it possible for enterprises employing servile labor to compete on the market with enterprises employing free labor. Servile labor could always be utilized only where it did not have to meet the competition of free labor.

If one treats men like cattle, one cannot squeeze out of them more than cattle-like performances. But it then becomes significant that man is physically weaker than oxen and horses and that feeding and guarding a slave is, in proportion to the performance to be reaped, more expensive than feeding and guarding cattle. When treated as a chattel, man renders a smaller yield per unit of cost expended for current sustenance and guarding than domestic animals. If one asks from an unfree laborer human performances, one must provide him with specifically human inducements. If the employer aims at obtaining products which in quality and quantity excel those whose production can be extorted by the whip, he must interest the toiler in the yield of his contribution. Instead of punishing laziness and sloth, he must reward diligence, skill, and eagerness. But whatever he may try in this respect, he will never obtain from a bonded worker, i.e., a worker who does not reap the full market price of his contribution, a performance equal to that rendered by a freeman, i.e., a man hired on the unhampered labor market. The upper limit beyond which it is impossible to lift the quality and quantity of the products and services rendered by slave and serf labor is far below the standards of free labor. In the production of articles of superior quality an enterprise employing the apparently cheap labor of unfree workers can never stand the competition of enterprises employing free labor. It is this fact that has made all systems of compulsory labor disappear.

Let’s walk through a simplified scenario to see the logic of Mises’ position. Suppose we had an otherwise “purely free market” in the sense that someone like Mises would have advocated, except that for some reason, in the beginning a bunch of people were considered the legal property of a few plantation owners. What would happen?

Well, in order to compel the slaves to produce (such as picking cotton), the owners and their subordinates would have to announce minimum standards of output, below which the slaves would be punished. In setting this threshold, the owners couldn’t be too unreasonable, because frequent physical punishments would reduce the health of the slaves.

Yet this means that all of the slaves who actually were “above average” would have no reason to excel. They would have the incentive to do the bare minimum to avoid punishment.

In this environment, one plantation owner perceives the problem. He makes the rounds and gives speeches to all of the slaves held by his neighbors. He says, “I know the conditions you face here, and I know some of you have the ability to produce much more, if only it were in your self-interest. So if you volunteer, you can come to my plantation for a trial period of one month. I will expect you to pick twice as much cotton as your current master expects. However, if you do so, then I will give you twice the standard of living you currently enjoy here. Further, if you don’t live up to my expectations, you won’t be punished; I will simply return you here. You will find that the slaves at my plantation are all treated with courtesy, because I’m running a business. I have made an arrangement with your current owner, so that if you end up staying with me permanently, I’ll pay him a price 50% above your current market value for you. He wins, but so do I, because you’ll produce double at my plantation what you would produce anywhere else under their existing framework.”

The above story is just to get the logic across. I am trying to show why, IF we agree with Mises that slavery is unproductive relative to free labor, that it could not last in an otherwise free market economy. Over time, incremental moves such as the above would transform the slaves into self-owners, because that would be the most efficient outcome, setting aside moral considerations.

Think of it like this: Imagine if, during the night, gnomes took all of the cartons of cigarettes from the homes of smokers, and deposited them in the homes of non-smokers. The legal system now said that the non-smokers were the owners. Wouldn’t market forces soon move the cigarettes back into the possession of the smokers?

By the same token, under a free market economy, if for some reason the property titles to particular human beings initially started out in the hands of other people, market forces would soon return everyone to a state of self-ownership.

2 Responses to “Slavery Could Not Last in an (Otherwise) Free Market”

  1. Rob Huck says:

    Slavery benefits only a few, while capitalism benefits a broader stratum of society. One could use the antebellum American North v South as a real-life example. From an economic sense, the landed aristocratic South did fairly well under slavery themselves but it did not benefit the rest of the population. As a whole, the South's economy lost advantage to the industrial and more capitalist north, which became wealthier over time. Capitalism, as much as anything else, allowed the North to better finance the war and win.

  2. brucetheeconomist says:

    I think the conclusion that slavery would always go away is wrong.__The suggestion is that labor is most valuable when free because incentives are a much more cost-effective way of inducing production that force. So: slaves could borrow and buy their freedom

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