Slaves: The Capital that Made Capitalism

A re-post

This post, adapted from a lecture in the team-taught course “Rethinking Capitalism” at The New School for Social Research and first published last year, is being reposted to provide critical insight into today’s headlines. Slavery was central to the development of the American political economy. Ott reviews the recent scholarship that shows how it came to be that Black lives haven’t mattered. -J.G.

Racialized chattel slaves were the capital that made capitalism. While most theories of capitalism set slavery apart, as something utterly distinct, because under slavery, workers do not labor for a wage, new historical research reveals that for centuries, a single economic system encompassed both the plantation and the factory.

At the dawn of the industrial age commentators like Rev. Thomas Malthus could not envision that capital — an asset that is used but not consumed in the production of goods and services — could compound and diversify its forms, increasing productivity and engendering economic growth. Yet, ironically, when Malthus penned his Essay on the Principle of Population in 1798, the economies of Western Europe already had crawled their way out of the so-called “Malthusian trap.” The New World yielded vast quantities of “drug foods” like tobacco, tea, coffee, chocolate, and sugar for world markets. Europeans worked a little bit harder to satiate their hunger for these “drug foods.” The luxury-commodities of the seventeenth century became integrated into the new middle-class rituals like tea-drinking in the eighteenth century. By the nineteenth century, these commodities became a caloric and stimulative necessity for the denizens of the dark satanic mills. The New World yielded food for proletarians and fiber for factories at reasonable (even falling) prices. The “industrious revolution” that began in the sixteenth century set the stage for the Industrial Revolution of the late eighteenth and nineteenth centuries.

But the “demand-side” tells only part of the story. A new form of capital, racialized chattel slaves, proved essential for the industrious revolution — and for the industrial one that followed.

The systematic application of African slaves in staple export crop production began in the sixteenth century, with sugar in Brazil. The African slave trade populated the plantations of the Caribbean, landing on the shores of the Chesapeake at the end of the seventeenth century. African slaves held the legal status of chattel: moveable, alienable property. When owners hold living creatures as chattel, they gain additional property rights: the ownership of the offspring of any chattel, and the ownership of their offspring, and so on and so forth. Chattel becomes self-augmenting capital.

While slavery existed in human societies since prehistoric times, chattel status had never been applied so thoroughly to human beings as it would be to Africans and African-Americans beginning in the sixteenth century. But this was not done easily, especially in those New World regions where African slaves survived, worked alongside European indentured servants and landless “free” men and women, and bore offspring — as they did in Britain’s mainland colonies in North America.

In the seventeenth century, African slaves and European indentured servants worked together to build what Ira Berlin characterizes as a “society with slaves” along the Chesapeake Bay. These Africans were slaves, but before the end of the seventeenth century, these Africans were not chattel, not fully. Planters and overseers didn’t use them that differently than their indentured servants. Slaves and servants alike were subject to routine corporeal punishment. Slaves occupied the furthest point along a continuum of unequal and coercive labor relations. (Also, see here and here.) Even so, 20% of the Africans brought into the Chesapeake before 1675 became free, and some of those freed even received the head-right — a plot of land — promised to European indentures. Some of those free Africans would command white indentures and own African slaves.

To the British inhabitants of the Chesapeake, Africans looked different. They sounded different. They acted different. But that was true of the Irish, as well. Africans were pagans, but the kind of people who wound up indentured in the Chesapeake weren’t exactly model Christians. European and African laborers worked, fornicated, fought, wept, birthed, ate, died, drank, danced, traded with one another, and with the indigenous population. Neither laws nor customs set them apart.

And this would become a problem.

By the 1670s, large landowners — some local planters, some absentees — began to consolidate plantations. This pushed the head-rights out to the least-productive lands on the frontier. In 1676, poor whites joined forces with those of African descent under the leadership of Nathaniel Bacon. They torched Jamestown, the colony’s capital. It took British troops several years to bring the Chesapeake under control.

Ultimately, planter elites thwarted class conflict by writing laws and by modeling and encouraging social practices that persuaded those with white skin to imagine that tremendous social significance — inherent difference and inferiority — lay underneath black skin. (Also, see here and here.) New laws regulated social relations — sex, marriage, sociability, trade, assembly, religion — between the “races” that those very laws, in fact, helped to create.

The law of chattel applied to African and African-descended slaves to the fullest extent on eighteenth century plantations. Under racialized chattel slavery, master-enslavers possessed the right to torture and maim, the right to kill, the right to rape, the right to alienate, and the right to own offspring — specifically, the offspring of the female slave. The exploitation of enslaved women’s reproductive labor became a prerogative that masters shared with other white men. Any offspring resulting from rape increased the master’s stock of capital.

Global commerce in slaves and the commodities they produced gave rise to modern finance, to new industries, and to wage-labor in the eighteenth century. Anchored in London, complex trans-Atlantic networks of trading partnerships, insurers, and banks financed the trade in slaves and slave-produced commodities. (Also, see here.) Merchant-financiers located in the seaports all around the Atlantic world provided a form of international currency by discounting the bills of exchange generated in the “triangle trade.” These merchant-financiers connected British creditors to colonial planter-debtors. Some of the world’s first financial derivatives — cotton futures contracts — traded on the Cotton Exchange in Liverpool. British industry blossomed. According to Eric Williams, the capital accumulated from the transatlantic trade in slaves and slave-produced commodities financed British sugar refining, rum distillation, metal-working, gun-making, cotton manufacture, transportation infrastructure, and even James Watt’s steam engine.

After the American Revolution, racialized chattel slavery appeared — to some — as inconsistent with the natural rights and liberties of man. Northern states emancipated their few enslaved residents. But more often, racialized chattel slavery served as the negative referent that affirmed the freedom of white males. (Also, see here.) In Notes on the State of Virginia (1785), Thomas Jefferson — who never freed his enslaved sister-in-law, the mother of his own children — postulated that skin color signaled immutable, inheritable inferiority:

It is not their condition then, but nature, which has produced the distinction… blacks, whether originally a distinct race, or made distinct by time and circumstances, are inferior to the whites in the endowments both of body and mind … This unfortunate difference of colour, and perhaps of faculty, is a powerful obstacle to the emancipation of these people.

Even so, the former plantation colonies of the Upper South stood in a sorry state after Independence, beset by plummeting commodity prices and depleted soils. After the introduction of the cotton gin in 1791, these master-enslavers found a market for their surplus slave-capital.

The expanding cotton frontier needed capital and the Upper South provided it. Racialized chattel slavery proved itself the most efficient way to produce the world’s most important crop. The U.S. produced no cotton for export in 1790. In the antebellum period, the United States supplied most of the world’s most traded commodity, the key raw ingredient of the Industrial Revolution. Thanks to cotton, the United States ranked as the world’s largest economy on the eve of the Civil War.

From about 1790 until the Civil War, slave-traders and enslavers chained 1 million Americans of African descent into coffles and marched or shipped them down to southeast and southwest states and territories. They were sold at auction houses located in every city in the greater Mississippi Valley.

Capital and capitalist constituted one another at auction. At auction, slaves were stripped and assaulted to judge their strength and their capacity to produce more capital or to gratify the sexual appetites of masters. Perceived markers of docility or defiance informed the imaginative, deeply social practice of valuing slave-capital. In this capital market, Walter Johnson reveals, slaves shaped their sale and masters bought their own selves.

After auction, reconstituted coffles traveled ever deeper into the dark heart of the Cotton Kingdom (also, see here) and after 1836, into the new Republic of Texas. Five times more slaves lived in the United States in 1861 than in 1790, despite the abolition of the transatlantic slave trade in 1808 and despite the high levels of infant mortality in the Cotton Kingdom. Slavery was no dying institution.

By 1820, the slave-labor camps that stretched west from South Carolina to Arkansas and south to the Gulf Coast allowed the United States to achieve dominance in the world market for cotton, the most crucial commodity of the Industrial Revolution. At that date, U.S. cotton was the world’s most widely traded commodity. Without those exports, the national economy as a whole could not acquire the goods and the credit it required from abroad.

And the Industrial Revolution that produced those goods depended absolutely on what Kenneth Pomeranz identifies as the “ghost acres” of the New World: those acres seeded, tended, and harvested by slaves of African descent. Pomeranz estimates that if, in 1830, Great Britain had to grow for itself, on its own soil the calories that its workers consumed as sugar, or if it had to raise enough sheep to replace the cotton it imported from the United States, this would have required no less than an additional 25 million acres of land.

In New England and (mostly) Manchester, waged-workers spun cotton thread which steam-powered mills spun into cloth. Once a luxury good, cotton cloth now radically transformed the way human beings across the globe outfitted themselves and their surroundings. Manchester and Lowell discovered an enormous market in the same African-American slaves that grew, tended and cleaned raw cotton, along with the same workers who operated the machines that spun and wove that cotton into cloth. According to Seth Rockman’s forthcoming book, Plantation Goods and the National Economy of Slavery, the ready-made clothing industry emerged in response to the demand from planters for cheap garments to clothe their slaves.

The explosion in cotton supply did not occur simply because more land came under cultivation. It came from increased productivity, as new work by Ed Baptist illustrates. The Cotton Kings combined the bullwhip with new methods of surveilling, measuring, and accounting for the productivity of the enslaved, radically reorganizing patterns of plantation labor. Planter-enslavers compelled their slave-capital to invent ways to increase their productivity — think of bidexterous Patsey in Solomon Northrup’s Twelve Years a Slave. At the end of every day, the overseer weighed the pickings of each individual, chalking up the numbers on a slate. Results were compared to each individual’s quota. Shortfalls were “settled” in lashes. Later the master copied those picking totals into his ledger and erased the slate (both mass-produced by burgeoning new industries up North). Then he set new quotas. And the quotas always increased. Between 1800 and 1860, productivity increases on established plantations matched the productivity increases of the workers that tended to the spinning machines in Manchester in the same period, according to Ed Baptist.

Slavery proved crucial in the emergence of American finance. Profits from commerce, finance, and insurance related to cotton and to slaves flowed to merchant-financiers located in New Orleans and mid-Atlantic port cities, including New York City, where a global financial center grew up on Wall Street.

Cotton Kings themselves devised financial innovations that channeled the savings of investors across the nation and Western Europe to the Mississippi Valley. Cotton Kings, slave traders, and cotton merchants demanded vast amounts of credit to fund their ceaseless speculation and expansion. Planter-enslavers held valuable, liquid collateral: 2 million slaves worth $2 billion, a third of the wealth owned by all U.S. citizens, according to Ed Baptist. With the help of firms like Baring Brothers, Brown Brothers, and Rothschilds, the Cotton Kings sold bonds to capitalize new banks from which they secured loans (pledging their slaves and land for collateral). These bonds were secured by the full faith and credit of the state that chartered the bank. Even as northern states and European empires emancipated their own slaves, investors from these regions shared in the profits of the slave-labor camps in the Cotton Kingdom.

The Cotton Kings did something that neither Freddy, nor Fannie, nor any of “too big to fail” banks managed to do. They secured an explicit and total government guarantee for their banks, placing taxpayers on the hook for interest and principal.

It all ended in the Panic of 1837, when the bubble in southeastern land and slaves burst. Southern taxpayers refused to pay the debts of the planter-banks. Southern States defaulted on those bonds, hampering the South’s ability to raise money through the securities markets for more than a century. Cotton Kings would become dependent as individuals on financial intermediaries tied to Wall Street, firms like Lehman Brothers (founded in Alabama).

It didn’t take very long for the flow of credit to resume. By mid-century, racialized chattel slavery had built not only a wealthy and powerful South. It had also given rise to an industrializing and diversifying North. In New England, where sharp Yankees once amassed profits by plying the transatlantic slave trade — and continued to profit by transporting slave-produced commodities and insuring the enslaved — new industries rose up alongside the textile mills. High protective tariffs on foreign manufactures made the products of U.S. mills and factories competitive in domestic markets, especially in markets supplying plantations.

After the Erie Canal opened in 1824, the North slowly began to reorient towards timber and coal extraction, grain production, livestock, transportation construction, and the manufacture of a vast array of commodities for all manner of domestic and international markets. Chicago supplanted New Orleans. By the 1850s, industrial and agricultural capitalists above the Mason-Dixon line no longer needed cotton to the same extent that they once did. With the notable exception of Wall Street interests in New York City, Northerners began to resist the political power — and the territorial ambitions — of the Cotton Kings. Sectional animosity set the stage for the Civil War.

But up to that point, slave-capital proved indispensable to the emergence of industrial capitalism and to the ascent of the United States as a global economic power. Indeed, the violent dispossession of racialized chattel slaves from their labor, their bodies, and their families — not the enclosure of the commons identified by Karl Marx — set capitalism in motion and sustained capital accumulation for three centuries.

Julia Ott

  • Sara Akhmedjanova

    When I think of capitalism I think of diversification. Russia under communism had a tremendous lack of diversification and also exhibited similar features of the “ceaseless expansion” of the South as described above. When I think of the expansion of the Russian Communist enterprise, a major example that comes to my mind is the cotton trade in Uzbekistan as well as “total government guarantees” that the government provided to communist businesses. In many ways the South under slavery reminds me of Russia and its satellites under communism. For me, it was a personal experience –having relatives who worked under that Russian communist regime. For that reason, and my own experience, I could not read and make any sense out of the above article.

  • Sara Akhmedjanova

    When I think of capitalism I think of diversification. Russia under communism had a tremendous lack of diversification and also exhibited similar features of the “ceaseless expansion” of the South as described above. When I think of the expansion of the Russian Communist enterprise, a major example that comes to my mind is the cotton trade in Uzbekistan as well as “total government guarantees” that the government provided to communist businesses. In many ways the South under slavery reminds me of Russia and its satellites under communism. For me, it was a personal experience –having relatives who worked under that Russian communist regime. For that reason, and my own experience, I could not read and make any sense out of the above article.

  • Sara Akhmedjanova

    Another major distinction between the western capitalist world and the eastern communist block is that citizens under the communist regimes could have few personal possessions. Women living in communist apartments did not even have private kitchens in which to cook. Women were forced to send their children to pick cotton for the communist regime. They could not even produce handicrafts for sale or even make items at home as a hobby. That was under communism. I would not like to waste my time writing a book to argue that communists under communism were really capitalists and that capitalists were really communists. Academicians should stick to studying clear distinctions between economic and political systems in order to aid in the education of their fellow citizens and foster the remembrance of history.

  • Sara Akhmedjanova

    Another point that I can’t accept– that the slaves were the commodity: that is absurd. The slaves were kept as workers. if they did not work they were sometimes killed or replaced. If they were the commodity then they would not have had to work. Their bodies would be the commodity. Their skin used as hide and their bones as beads and so forth. Very hideous to imagine but I am trying to make the point more real. They obviously were not kept that way– they were used for their work. The native americans kept before them were not as “effective” as slaves and so they were not used in the long run.

    • Jennifer Abramson

      The enslavement of African people in the Americas by the nations and peoples of Western Europe, created the economic engine that funded modern capitalism. Therefore it comes as no surprise that most of the major corporations that were founded by Western European and American merchants prior to roughly 100 years ago, benefited directly from slavery.

      Lehman Brothers, whose business empire started in the slave trade, recently admitted their part in the business of slavery. According to the Sun Times, the financial services firm acknowledged recently that its founding partners owned not one, but several enslaved Africans during the Civil War era and that, “in all likelihood,” it “profited significantly” from slavery. “This is a sad part of our heritage …We’re deeply apologetic … It was a terrible thing … There’s no one sitting in the United States in the year 2005, hopefully, who would ever, in a million years, defend the practice,” said Joe Polizzotto, general counsel of Lehman Brothers.

      Aetna, Inc., the United States’ largest health insurer, apologized for selling policies in the 1850s that reimbursed slave owners for financial losses when the enslaved Africans they owned died. “Aetna has long acknowledged that for several years shortly after its founding in 1853 that the company may have insured the lives of slaves,” said Aetna spokesman Fred Laberge in 2002. “We express our deep regret over any participation at all in this deplorable practice.”

      JPMorgan Chase recently admitted their company’s links to slavery. “Today, we are reporting that this research found that, between 1831 and 1865, two of our predecessor banks—Citizens Bank and Canal Bank in Louisiana—accepted approximately 13,000 enslaved individuals as collateral on loans and took ownership of approximately 1,250 of them when the plantation owners defaulted on the loans,” the company wrote in a statement.

      New York Life Insurance Company is the largest mutual life insurance company in the United States. They also took part in slavery by selling insurance policies on enslaved Africans. According to USA Today, evidence of 10 more New York Life slave policies comes from an 1847 account book kept by the company’s Natchez, Miss. agent, W.A. Britton. The book, part of a collection at Louisiana State University, contains Britton’s notes on slave policies he wrote for amounts ranging from $375 to $600. A 1906 history of New York Life says 339 of the company’s first 1,000 policies were written on the lives of slaves.

      USA Today reported that Wachovia Corporation (now owned by Wells Fargo) has apologized for its ties to slavery after disclosing that two of its historical predecessors owned enslaved Africans and accepted them as payment. “On behalf of Wachovia Corporation, I apologize to all Americans, and especially to African-Americans and people of African descent,” said Ken Thompson, Wachovia chairman and chief executive officer, in the statement released late Wednesday. “We are deeply saddened by these findings.”

      N M Rothschild & Sons Bank in London was linked to slavery. The company that was one of the biggest names in the City of London had previously undisclosed links to slavery in the British colonies. Documents seen by the Financial Times have revealed that Nathan Mayer Rothschild, the banking family’s 19th-century patriarch, made his first personal gains by using enslaved Africans as collateral in dealings with a slave owner.

      Norfolk Southern also has a history in the slave trade. The Mobile & Girard company, which is now part of Norfolk Southern, offered slaveholders $180 ($3,379 today) apiece for enslaved Africans they would rent to the railroad for one year, according to the records. The Central of Georgia, another company aligned with Norfolk Southern Line today, valued its slaves at $31,303 ($663,033 today) on record.

      USA Today has found that their own parent company, E.W. Scripps and Gannett, has had links to the slave trade.

      There is evidence that FleetBoston evolved from an earlier financial institution, Providence Bank, founded by John Brown who was a slave trader and owned ships used to transport enslaved Africans. The bank financed Brown’s slave voyages and profited from them. Brown even reportedly helped charter what became Brown University.

      CSX used slave labor to construct portions of some U.S. rail lines under the political and legal system that was in place more than a century ago. Two enslaved Africans who the company rented were identified as John Henry and Reuben. The record states, “they were to be returned clothed when they arrived to work for the company.” Individual enslaved Africans cost up to $200 – the equivalent of $3,800 today – to rent for a season and CSX took full advantage.

      The Canadian National Railway Company is a Canadian Class I railway headquartered in Montreal, Quebec that serves Canada and the midwestern and southern United States. The company also has a history in which it benefited from slavery. The Mobile & Ohio, now part of Canadian National, valued their slaves lost to the war and emancipation at $199,691 on record. That amount is currently worth $2.2 million.

      Brown Brothers Harriman is the oldest and largest private investment bank and securities firm in the United States, founded in 1818. USA Today found that the New York merchant bank of James and William Brown, currently known as Brown Bros. Harriman owned hundreds of enslaved Africans and financed the cotton economy by lending millions to southern planters, merchants and cotton brokers.

      Brooks Brothers, the high end suit retailer got their start selling slave clothing to various slave traders back in the 1800s. What a way to get rich in the immoral slave industry!

      Barclays, the British multinational banking and financial services company headquartered in London, United Kingdom has now conceded that companies it bought over the years may have been involved in the slave trade.

      USA Today reported that New York-based AIG completed the purchase of American General Financial Group, a Houston-based insurer that owns U.S. Life Insurance Company. A U.S. Life policy on an enslaved African living in Kentucky was reprinted in a 1935 article about slave insurance in The American Conservationist magazine. AIG says it has “found documentation indicating” U.S. Life insured enslaved Africans.

  • Jessica

    Am I the only one finding the language in this article and in the responses very dehumanizing of the people who were enslaved?

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