Could the American South have worked without Slave Labour?

[Klausewitz]

Certainly in any immigrant's mind when choosing between the two possible destinations of north or south there must be a decision of conscience if slavery exists only in the south.

No.
Just No.
This isn't just extremly simplistic (slavery existed for some time also in the North, did not exist every in the South and did not exist exclusivly in the South among all available areas for immigration), but it is also wrong.
Slaves are expensive.
That is like saying that everybody immigrating to the Ruhr area is secretly hankering for his own foundry (and a foundry would be more use at that).
Slaves are only cost-effective if you are exchanging cash (and quite a bit of cash; about 5000 to 10000 dollar for a slave) for a field hand in the cash crop business. If you are running the family farm that is simply not cost-efficient. A farm hand or an indentured servant would be much cheaper and could also be paid in the produce from the farm, reducing conversion costs.

While a certain type of white society loved the idea of slavery to profit by, the majority abhorred the idea, its practice, and the seemingly despicable persons who engaged in it.

Or not. Again. Time is a factor here.

It is precisely for this reason that a Mason Dixie Line occurred... because certainly slavery would also have been profitable in the north to work mines, factories, etc had the idea even been tolerated there.

I find that doubtful.
Mines, maybe, though additional provisions would have had to be made to ensure survival of the slaves in the winter (in the relativly mild southern winter as much as half the slave population died of exposure during the winter. I can only imagine how high the quota would be in the north in the moutains) which might very well eat up all profit made from not having to pay wages, while using white 'free' miners and a company store scheme also gets you quite cheap labour (which is another flaw of your theory: Those upstanding people north of the Mason-Dixon-Line had absolutely no qualms about profiting from 'free' peoples misery). For factories you would want, up to the invention of the assmebly line, slightly more self-motivated and skilled labour than the typical slave could provide, which you would alos like to hire and fire as appropriate... also something not really possible with slaves. IIRC the Tredegar Iron Works, THE southern iron works run with slaves had trouble with huge labour costs even though they primarily used slave labour.

So, if you remove the stigma of slavery from the south, you remove a definite objection many people had to living or working there. So more white settlers would be the result.

You don't remove the Malaria. The Mason-Dixon-Line is more or less the upper northern limit for the malaria mosquitoes in the US.

 

[keynes2.0]

Slaves are only cost-effective if you are exchanging cash (and quite a bit of cash; about 5000 to 10000 dollar for a slave) for a field hand in the cash crop business. If you are running the family farm that is simply not cost-efficient. A farm hand or an indentured servant would be much cheaper and could also be paid in the produce from the farm, reducing conversion costs.

Slaveowners were not particularly rational when it came to the economics of slavery. For instance if you look at the examples of Frederick Douglass and Dredd Scott you will see that the terms of their enslavement didn't resemble that at all, despite the fact that both of them were young healthy men. Their owners didn't own a slave because it was profitable, they owned a slave because they were wealthy. For this reason there were a lot of slaves who were made into personal servants or used on small family farms. While culture can not make the economically impossible possible, it can make the economically pointless common.

 

[gagenater]

That's true, but the point was you don't even need to look to history to find examples of theft being a rational economic action. It happens all around us.

Oh absolutely - I was merely pointing out that it can even be a rational decision on the massive scale of a state with millions of inhabitants - not merely for a few 'oddballs' here and there.

 

[nerd]

I would disagree. Since when were economic perspectives not subject to morality? You might just as well support theft as an economically superior way to increase profits. But when we discuss economic theories related to increasing profits, we don't include a model of stealing to prove a point, do we?

My point was "slaves weren't capital" and any theory of economics saying they were has a serious problem that goes way past the study of economics.

it is a valid argument that any tangible property can be capital.

even in a non-slavery situation.......is not a contract that stipulates a celebrity or sports player perform not capital? how much more so would actual legal ownership?

 

[Klausewitz]

I think the sticking point there is that capital should ideally be investable and easily handled.
The nice thing about money or means of production is that you can quite easily turn them into more stuff, while if you possess the rights to a sports player you first need to find somebody who is actually willing to trade with you before you can get capital...

 

[Henry IX]

While culture can not make the economically impossible possible, it can make the economically pointless common.

If you don't mind I will add that to my signature. Is it a quote or your own?

 

[nerd]

I think the sticking point there is that capital should ideally be investable and easily handled.
The nice thing about money or means of production is that you can quite easily turn them into more stuff, while if you possess the rights to a sports player you first need to find somebody who is actually willing to trade with you before you can get capital...

all equally true for a sports player or a shipload of wheat.

anything is only worth what a seller can get a buyer to pay.

??which is worth more.......a truckload of food in Venezuela or a truckload of Venezuelan money????

 

[keynes2.0]

If you don't mind I will add that to my signature. Is it a quote or your own?

It's all yours. Not a quote.

 

[Klausewitz]

all equally true for a sports player or a shipload of wheat.

anything is only worth what a seller can get a buyer to pay.

??which is worth more.......a truckload of food in Venezuela or a truckload of Venezuelan money????

No.
Some things have the ability to make more of something.
Seed grain, or machines, etc.
Same goes for money as long as there is interest.

 

[cacra]

No.
Some things have the ability to make more of something.
Seed grain, or machines, etc.
Same goes for money as long as there is interest.

Money is a store of wealth, it cannot create wealth. Investments (which often happen with money) create wealth but it is a misconception to say that money, in and of itself, creates wealth.

Interest doesn't just happen when one stores money; one can keep a horde of cash under ones bed and not accumulate interest. Interest happens when you deposit your money in a bank account and the bank goes out and invests that money and pays you a proportion of the profits. It is absolutely inaccurate to assume that money generates more money.

 

[keynes2.0]

Money is a store of wealth, it cannot create wealth. Investments (which often happen with money) create wealth but it is a misconception to say that money, in and of itself, creates wealth.

Interest doesn't just happen when one stores money; one can keep a horde of cash under ones bed and not accumulate interest. Interest happens when you deposit your money in a bank account and the bank goes out and invests that money and pays you a proportion of the profits. It is absolutely inaccurate to assume that money generates more money.

This is a useful point however to play devils advocate I will point out that money does play it's part. Ever since Irving Fisher we have known that returns correlate between investments, e.g. if companies have larger profits that will make not only stock prices rise but the return on certificates of deposit as well. Money plays a crucial role in the process, it's the mechanism by which all the different investment opportunities compete with each other. So while money doesn't create wealth on it's own, without money much of wealth creation would not be possible. And we see this happen in a deflationary situation, not enough money means a loss of production from underinvestment.

 

[cacra]

This is a useful point however to play devils advocate I will point out that money does play it's part. Ever since Irving Fisher we have known that returns correlate between investments, e.g. if companies have larger profits that will make not only stock prices rise but the return on certificates of deposit as well. Money plays a crucial role in the process, it's the mechanism by which all the different investment opportunities compete with each other. So while money doesn't create wealth on it's own, without money much of wealth creation would not be possible. And we see this happen in a deflationary situation, not enough money means a loss of production from underinvestment.

I don't agree, money makes investment easier but investments can and do exist in barter economies and do happen today in non-monetary forms. I think we are bordering on the world of abstract economic theory here but there is no reason why, given enough computing power, you cannot create a barter economy with the same competition for investment as a money economy. Money is a useful tool but it should not be seen as essential for an economy to function and certainly not essential in the production of wealth.

 

[keynes2.0]

I think we are bordering on the world of abstract economic theory here but there is no reason why, given enough computing power, you cannot create a barter economy with the same competition for investment as a money economy.

With a theoretically infinite amount of computing power available for free it is possible. However the beneficial effects of monetary liquidity are something that are very relevant to very recent economic events. We just went through the Great Recession, nearly a decade where that was front and center.

 

[cacra]

With a theoretically infinite amount of computing power available for free it is possible. However the beneficial effects of monetary liquidity are something that are very relevant to very recent economic events. We just went through the Great Recession, nearly a decade where that was front and center.

Still you can say that the fundamental quality of liquidity makes money more efficient in creating wealth compared to other means of trade but not that money can, in and of itself, create wealth as was previously implied.

 

[keynes2.0]

The point is that the world very recently experienced a circumstance where it's not only more efficient but also does something that nothing else can do. Even though money is just a store of value, failure to have enough of it consistently creates a drop in real output, hence the Great Recession which was felt by the entire world. And it's not even the first time, we have tons of examples. Latin debt crisis, Asian debt crisis, great depression, long depression.

 

[JodelDiplom]

I think the sticking point there is that capital should ideally be investable and easily handled.
The nice thing about money or means of production is that you can quite easily turn them into more stuff, while if you possess the rights to a sports player you first need to find somebody who is actually willing to trade with you before you can get capital...

I thought you had economic training?? What you write about capital doesn't sound like you ever opened an economics textbook. Or am I confusing you with a different poster? Of so, apologies.

"capital" is not money, or rather, only very little of the capital in any normal business is money. In the general sense "capital" is anything a business owns that they paid for. Including patents they bought (not patents they were granted themselves), machinery, real estate, inventories, and yeah if they own slaves then those totally are capital.

So capital is not just stuff that CAN be invested, it's also all the stuff that you bought as part of an investment.

 

[Klausewitz]

@JodelDiplom:
I doubt i ever claimed to have economic training.
I sat in lectures about it and had to do a bit of VWL and BWL in vocational school, but it did not agree with me.

 

[cacra]

The point is that the world very recently experienced a circumstance where it's not only more efficient but also does something that nothing else can do. Even though money is just a store of value, failure to have enough of it consistently creates a drop in real output, hence the Great Recession which was felt by the entire world. And it's not even the first time, we have tons of examples. Latin debt crisis, Asian debt crisis, great depression, long depression.

The causes of the declines in output you mention are up for debate. But in each and every one of the events you it seems likely to me that the underlying factor was actually a credit expansion rendering sub marginal capital profitable - I.e creating malinvestment - in which the errors are only shown when the boom ends.

In recent years I think we have seen the intellectual death of monetarism with austrianism being the logical usurper.

 

[keynes2.0]

The causes of the declines in output you mention are up for debate. But in each and every one of the events you it seems likely to me that the underlying factor was actually a credit expansion rendering sub marginal capital profitable - I.e creating malinvestment - in which the errors are only shown when the boom ends.

There is extremely strong empirical evidence that directly shows that changes in the creation of money create real and permanent changes on the size of the output gap. For instance Abenonomics which first produced exactly the inflation expected then created the change in real investment and just recently showed the expected wage increase. Or in the US in the 1930s where the expansion of the money supply created the expected increase in output, then the reversal of the policy created an immediate recession then the re-reversal caused the expansion to immediately resume.

If that doesn't do it for you there is the example of the Long Depression in the late 19th century. This was back when all major economies were still using currency backed by gold and silver. So when the world had insufficient money it was in very literal terms, the supply of gold and silver being mined was insufficient for the needs of the world. The result was over a decade of underinvestment and underemployment.

Misinvestment does not produce depressions in and of itself. There is a shock as it turns out that your assets are worth less then they were thought to be worth but the correction is rather rapid. This is why the tech bubble did not produce a global financial depression like the housing bubble did. In both cases you are looking at trillions of dollars of bad investments, the difference was in the financing.

 

[cacra]

There is extremely strong empirical evidence that directly shows that changes in the creation of money create real and permanent changes on the size of the output gap. For instance Abenonomics which first produced exactly the inflation expected then created the change in real investment and just recently showed the expected wage increase. Or in the US in the 1930s where the expansion of the money supply created the expected increase in output, then the reversal of the policy created an immediate recession then the re-reversal caused the expansion to immediately resume.

If that doesn't do it for you there is the example of the Long Depression in the late 19th century. This was back when all major economies were still using currency backed by gold and silver. So when the world had insufficient money it was in very literal terms, the supply of gold and silver being mined was insufficient for the needs of the world. The result was over a decade of underinvestment and underemployment.

Misinvestment does not produce depressions in and of itself. There is a shock as it turns out that your assets are worth less then they were thought to be worth but the correction is rather rapid. This is why the tech bubble did not produce a global financial depression like the housing bubble did. In both cases you are looking at trillions of dollars of bad investments, the difference was in the financing.

I must admit I am not sure what this strong empirical evidence is. Japan has inflation that has averaged 0.3 over the last 4 quaters which is close to the trend rate over the last 25 years. Abenomics has been a complete failure, as I predicted it would.


The Long Depression is a misnomer. Friedman himself admits that the decade from 1869 to 1879 saw a 3-percent-per annum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. There was no contraction in monetary supply, the money supply increased by 2.7% per annum over this period and the value of banknotes in the economy increased from $1.9bn to 2.3bn - that is an increase of 2.6% a year! I don't know how you define a depression but I would bet that most European chancellors would kill to have macroeconomic indicators like that!