How the Slave Trade Affects the Economy
Howthe Slave Trade Affects the Economy
Labor is an essential factor of production. Reducing labor costs isone way of increasing profitability of enterprises. In fact,businesses do restructuring to improve efficiency and cut on the wagebill. For all reasons, cheap labor is a positive presupposition tofirms. For example, one major reason why companies in the UnitedStates are shifting their manufacturing base to Mexico and China isthe lower cost of labor in those economies. Notably, cheap laborenables firms to produce a product or offer services at lower prices.Typically, the lower the price of a good or service the higher itsdemand and unit sales. In America, the labor costs have been risingover the years with the minimum wage now pegged at around $ 9/hcompare that to China $ 2.13/h (Fenske, James and Kala 64).Therefore, American made products are uncompetitive in terms ofprices compared to goods manufactured in China. Imagine a situationwhere the labor cost was zero. Firms would be able to make cheapproducts and earn more profits. In my opinion, the slave trade wasbeneficial to the America economy and global trade.
In the 18thcentury, sugar and rum were among the most valuable products in theworld market (Dalton, John and Tin 413). Countries that producedlarge quantities of these products controlled the global trade.However, the methods of production at the time were primitive andrequired intensive labor input. The only way to increase productionwas to utilize more workforces. At this period, Europeans weresettling in the newfound lands in South and North America (Fenske,James and Kala 63). However, to make any substantial impact theyrequired labor, which could not be provided by the white settlers.The American plantations owners turned to slave trade for theworkforce.
The majority ofthe slaves working on sugar plantations in the Caribbean islands wereblack, with a small number of whites from Russia and Balkans states(Dalton, John and Tin 412). However, many of the plantation ownerspreferred the blacks because of their endurance in farmlands. Infact, blacks became the most priced slaves in the internationalmarket (Fenske, James and Kala 64). Slaves played a significant rolein the global economy. Countries in Europe and America that dominatedslave trade were richest at the time and remain so to date. Slaveryin the past may have helped these economies to prosper.
The Americaswere the leading producers of sugar at the time thanks to the highnumber of slaves working in the plantations. The large volumes ofsugar exports made the America economy to boom. Data shows thatsouthern states that were leading in slave ownership achieved higherper capita income than countries such as Spain at the time (Dalton,John and Tin 413). The low cost of labor also enabled the plantationsowners to expand their acreage and increase the output. The pointhere is that slave trade accelerated development and growth in thesouthern states.
Cotton wasanother product that dominated global trade. The cotton plantationsin America supported textiles industry in England. However, cottonproduction was limited due to the massive labor demand required toseparate seeds from the fibers. The availability of African slaveshelped these plantations to not only produce cotton faster but alsoincrease the output (Borucki, Alex, Eltis, and Wheat 435). Thedemand for slaves was good news to the slave merchants as theydemanded higher prices for their “commodities”. Therefore, onecannot doubt the significant role slaves played in helping Americadominate the global cotton market and improve the overall domesticeconomy. At this point, slaves were essential for the economicstability of America.
Tobacco grown inthe southern states was also a major commodity in the internationaltrade. America held more than 50% of the tobacco global market share(Dalton, John and Tin 419). The primary reason why America was ableto dominate the market was the large tobacco plantations in thesouthern states and the enormous supply of free slave labor.Logically, American companies made a lot of money from tobacco trade.The companies invested their earnings in other sectors of the economyincluding steel, helping to create wealth and employmentopportunities for American citizens (Fenske, James and Kala 69). Onecannot forget to mention the revenues the federal government earnedfrom levies applied on the product. Therefore, slaves Americantobacco companies dominate the global market and reap huge profits.
In modernAmerica, a domestic worker is paid as much as a middle levelsupervisor in developing countries of Africa and Asia. The money usedto pay for the services of the domestic worker could be used topurchase other household items. The implication is that suchincurrences increase the cost of living and reduce the disposableincome of the Americans middle class. Low disposable income isassociated with a poor economic performance of a country (Dalton,John and Tin 423). Typically, economy boom when the levels ofdisposable incomes are high. In addition, a citizen living incountries where disposable income is high enjoys better standards ofliving. People in these countries can purchase more items from theirearnings.
Slaves inAmerica did not only work in the plantations but also as domesticservants`, nursemaids and so on. Therefore, families incurred nothingcompared to what current households use to pay for such services. Theuptick of the slavery is that the disposable income of familiesincreases due to lower expenses. Therefore, the slave owner enjoysbetter standards of living (Dalton, John and Tin 422). In addition,he could invest the excess money in other sectors of the economy suchas banking and help spur economic growth. Therefore, the involvementof the slaves in improving the standards of living of a whiteAmericans cannot be overemphasized.
Slave trade inthe southern states supported service industries in the north. Forexample, banks encouraged the exchange of people with money.Furthermore, slave owners could use slaves as the collateral to applyfor bank loans (Fenske, James and Kala 70). Notably, the plantationowners needed loans to expand their acreage. Therefore, slaves playeda considerable role in supporting and spurring the growth of thebanking sector.
Insurancecompanies grew as demand to cover the investment of the slave ownersincreased. Consequently, the insurance providers invested the moneyin securities helping to spur other sectors of the economy (Borucki,Alex, Eltis, and Wheat 449). Shipment services also sprung up inthe northern states to transport slaves from West Africa to America.Notably, slaves were used in settling debts, demonstrating thesignificant role they played in enhancing commerce.
The southernstates gained a political and economic advantage from the slavetrade. For example, the 3/5 rule allowed the states to have higherlegislative seats on the national level. Taxes were also levied usingthe 3/5 fifth rule meaning local governments received higher revenuescompared to their counterparts in the North (Genovese and Eugene 33). Consequently, the southern states were able to offer betterservices to the residents. Therefore, slave trade improved theeconomic welfare of the people.
Historians notethat even before the Europeans landed on the shores of West Africa,African leaders at the time were already capturing slaves and sellingthem to the Arabs. However, the arrival of the Europeans meant abigger market for the “commodity“, consequently, the number ofraids in villages and kingdoms increased (Borucki, Alex, Eltis, and Wheat 454). The point here is that African economies too benefitedfrom the slave trade. Furthermore, the Europeans were introduced toother products such as ivory further improving trade with Europeancountries. Therefore, slave trade opened the gateway for theparticipation of Africa in the global trade.
The economicimportance of slave trade can be seen from the resistance by Southernstates to abolish it. Majorities of states in America at the start ofthe 1880s were abolishing servitude, and some slaves were allowed tointegrate (Dalton, John and Tin 424). Many territories in the northsaw slave trade as an impediment to technological advancement andinnovation. Notably, slave ownership in these states wassignificantly lower compared to the south. The primary reason is morepeople lived in the urban centers, where services of a slave wereless required. Therefore, the economic importance of slaves waslower. In the south, many states refused to abolish the slave trade(Borucki, Alex, Eltis, and Wheat 457). The fact that plantationsowners in the south viciously objected to the abolition because ofpossible loss show the significant role slave trade played in theeconomy.
Following theabolition of the trade, many plantations recorded reducing earnings,and the economy performed poorly. Luckily, by this time, new farmingtechniques were being adopted across the nation. However, the cost ofthe new technologies was too high, and plantations owner had to takehuge debts to finance their acquisition (Fenske, James and Kala 72).Furthermore, they had to incur the cost of labor, which previouslywas free. Consequently, the price of farm produces increasedsignificantly. For a short period, economies in England and Americawent into recession following the abolition of the slave trade(Genovese and Eugene 35). Equally, African economies performed poorlyin the aftermath of the removal of the slave trade.
Slave tradenever actually ended, it was replaced with exploitation. Laborexploitation is a growing concern globally. Typically, this type ofmodern slavery is rampant in developing countries of Africa and Asia.However, emerging markets such as Mexico and Brazil are not free fromthe vice. In many instances, it manifests in the forms of low wages,poor working conditions, and intimidation by the management (Genoveseand Eugene 37). The main reason why companies are developing thesestrategies is to cut on labor costs and improve the bottom-line. Thefact that slavery is still practiced but masked in different formsshows its economic significance.
The underlyingissue regarding slave trade relates to ethics. In other words, is itethical to sell/buy human beings? The answer is no. Slavery was wrongthen and now. Utilitarianism holds that using people as an end toyour goals is morally wrong (Fenske, James and Kala 75).
In conclusion,there is no doubt slave trade played a considerable role in globaleconomy. The main advantage of free labor is the reduction in thecost of production. Furthermore, the end consumer enjoys cheapergoods. Low prices of goods and services allow the user to make moresavings. Consequently, the savings can be used to support othersectors of the economy and improve the general welfare of theconsumer. However, the human cost of forced labor outweighs itsbenefit. Therefore, though slavery makes economic sense, it should beabolished.
WorksCited
Borucki, Alex, Eltis, and Wheat. "Atlantic history and theslave trade to Spanish America." The American HistoricalReview 120.2 (2015): 433-461.
Dalton, John T., and Tin. "Dispersion and distortions in thetrans-Atlantic slave trade." Journal of InternationalEconomics 96.2 (2015): 412-425.
Fenske, James, and Kala. "1807: Economic shocks, conflict andthe slave trade." Journal of Development Economics 126(2017): 66-76.
Genovese, Eugene D. The political economy of slavery: Studiesin the economy and society of the slave South. WesleyanUniversity Press, 2014. 32-38
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