Can Slaves “Cost Less”?

Bush pronounces that yes, they can “cost less” than free labor. It’s not 100% clear what he means by this. But suppose that there was a large difference between the cost of an average slave and his productivity. Then it would pay current slave owners to sell and resell their slaves at higher prices until equilibrium were reached, and the discounted capitalized value of a slave would equal his productivity over his lifetime.

If, on the other hand, free workers demanded wages than were unjustified by their marginal value product, the competition between them would bid down the prices.

The purchase of a slave would yield no more profit to the owner than the hiring of a free man.

A slave regime might, however, enable the profession of slave hunters who would roam the realm profitably for themselves enslaving and selling free people.

The theoretical inefficiency of slave labor lies in the lack of incentives to the slave to improve his skills and accumulate his human capital: knowledge and experience with various tech and compatibility with complex capital goods. Bush himself writes that “slaves had their own devices for remedying the gross imbalance of advantage created by the slave-master relationship, notably feigned stupidity, working within limits and only to order, abiding by custom, malingering, petty theft, and so on.” (17)

A free man is far more likely to “feign intelligence” than stupidity in order to convince an employer to hire him, as is obvious from every self-glorifying resume!

Bush replies by pointing out that “masters could combat this array of negativity by dispensing rewards…” But insofar as there were rewards, the slave-based economy was no longer pure but blessed with some aspects of tax serfdom, a far superior system.

Thus, Mises argues that we the liberals

attack involuntary servitude, not in spite of the fact that it is advantageous to the “masters,” but because we are convinced that, in the last analysis, it hurts the interests of all members of human society, including the “masters.”

If mankind had adhered to the practice of keeping the whole or even a part of the labor force in bondage, the magnificent economic developments of the last hundred and fifty years would not have been possible. We would have no railroads, no automobiles, no airplanes, no steamships, no electric light and power, no chemical industry, just as the ancient Greeks and Romans, with all their genius, were without these things. (Liberalism, 22)

New Nobles

“The hardship to which the serfs were subjected… stemmed from… subjection to triple yoke, represented in contemporary cartoons by monarch, noble, and cleric riding on the peasant’s bent back.” (Servitude in Modern Times, 26)

So, we’ve formally gotten rid of the nobles: there are no slaves or serfs within any manorial system; churches have been divested of all coercive powers; but somehow we are loving our 3rd oppressor: the state. This needs to change ASAP: abolish the state (almost)!

At the same time, we can look at business firms within industries that are protected by the government from competition and therefore enjoy permanent profits as the new nobles. Again, Hayek points out:

There has never been a more cruel exploitation of one class by another than that of the less fortunate members of a group of producers by the well-established. This has been made possible by the “regulation” of competition.

Few catchwords have done so much harm as the ideal of a “stabilization” of particular prices or wages, which, while securing the income of some, makes the position of the rest more and more precarious. (The Road to Serfdom, 67)

The industries are regulated not for the greater good but for the sake of the dominant firms in them to ensure that they cannot be imitated as part of the market process. They are assured profits over long periods of time, even though they do not improve their products or business practices. Ultimately, however, these vicious and complacent firms sign their own death sentence. Other, less constricted, industries showing growth eventually attract both investors’ money and consumer demand. The privileged companies, grown lazy and bureaucratic through government protection, find their profits slipping away, may not be able to adapt, and eventually disappear.

Only if the entire economy is frozen in place will protection truly be forever. But the fact that no new enterprises are being started means that no new jobs are created. As a result, it becomes impossible for workers to change their occupations. They once again become bound to their employers, as though in serfdom. The nobles are back with a vengeance.

Slavery As an Economic System

Slavery is fundamentally a system of production.

It was humanity’s attempt to create wealth long before laissez-faire capitalism was invented.

It’s a very inefficient system, but it does not deserve its reputation as some sort of sadistic destruction of the slaves’ dignity for its own sake.

Consider the family of the Biblical Jacob. Jacob’s sons were not their father’s slaves. But do you really think Reuben or Joseph could up and say to him, “Dad, I quit tending the flocks for you. I found a new job with Canaanites, Inc. in the next town. It pays more, and there is less commute. My resignation letter is attached”?

A free worker has a powerful incentive to accumulate human capital: complex skills up to and including unique creativity to use with complex capital and methods of production.

But with the economy at that primitive a stage, there was little individual use in being free, and little social benefit to free labor. Why be free when all the “jobs” out there are almost the same and unskilled? Perhaps the “security” of being a slave and a measure of a personal relationship with the master might be prized more.

This is why slavery had persisted for so long everywhere in the world. Its inefficiency was masked by the fact that free labor was not any more productive than slave labor and for that reason could not command higher incomes than slave labor.

Under capitalism, the employer spends his own money training an employee, but all the benefits accrue to the latter. The employer is particularly averse to providing training, because it makes the worker more valuable to his competitors. Thus, it happens all the time that a worker learns useful new skills at his boss’s expense and then unceremoniously dumps him to get a better job elsewhere. Slavery is especially suited to act as a transitional system, because the master has a direct incentive to invest into the slave’s training.

The abolition of slavery went hand-in-hand with increasing prosperity and complexity of the economy. The pressure to free the workers intensified as people came to realize the social benefits of this; as more workers were freed, this freedom itself contributed to economic improvement. The virtuous circle eventually led to the complete end of slavery as an economic institution. Slavery was destined to wither away without any violent upheavals.

It may be objected that slavery was often sustained by war, such as when the citizens of the defeated tribe or town were enslaved. However, regarding that, in a war, formerly free people are enslaved. That is a definite economic retrogression. I am arguing rather than in the ancient world, and even not-so-ancient, slavery was the default, unsurprising, and economically neutral condition of almost every worker.

It’s true, there existed somewhat skilled artisans even then. But without mass production and accumulation of great amounts of capital, only very few were needed by society.

Some people are further deluded into thinking that today minimum wage jobs are a type of slavery. This is emphatically not so, because in the modern economy, minimum wage workers are upwardly mobile and are made such precisely with the help of the basic skills and work-related virtues they learn on their very temporary minimum wage jobs.

A worker’s own professional growth over the course of his career, beginning perhaps indeed with washing the dishes at a fast food joint, is part and parcel of the market process itself.

Of course, no social system, including free-market capitalism, can remedy an individual’s lack of natural gifts. A hopelessly dull person may indeed end up working for low wages all his life. The point, however, is again that free workers face enormous incentives to improve their skills and thus their usefulness to society, even if a few people through some disability are unable to respond to this incentive adequately.

Summary of Economic Stages

I have described the 4 economic systems and compared the position of a “worker” under each.

I’ve also described the 2nd slave stage in some detail.

The first stage is characterized by the invention of the state. This signals an end to total war.

The second stage arises as soon as people recognize the benefits of specialization and trade between their tribes. Specialization between firms is distinct from division of labor within firms.

The latter develops during the third stage as part of purely technological progress. The complex capital goods require complex worker skills. 2nd-stage slavery is revealed as unsuitable for the task of the empowerment of workers, since it does not supply the proper incentives to workers; and is burst asunder, giving birth to feudalism.

The final capitalist stage arises when capital accumulation has reached a certain level. When capital is very scarce, there is no particular need for entrepreneurial freedom to easily shift capital from one project, factory, location, and purpose to another. It became necessary for goods to move easily from place to place and from owner to owner. Labor, too, needed to become highly mobile, an ideal which helped fully to abolish feudal serfdom. Lower transportation costs offer invaluable help. The development of economics as a science helps people to grasp the advantages of laissez-faire and market process, and the resulting ideological revolution at this stage releases all of society’s “productive forces.”

And that’s it. There is no “progress” past laissez-faire capitalism.

A Path from Slavery to Serfdom

Bush notes that “within Spanish America, large numbers of slaves worked for wages, the result of the common practice of hiring out slave labor, the wages earned being shared between master and slave.” (Servitude in Modern Times, 79)

Again, “another escape lay in the capability of slaves to pay the manumission price — the result of being able to earn money on their own account, thanks to the practice of hiring them out for wages, and because of the high proportion of slaves who were skilled craftsmen.” (80)

But this is just another way of saying that such slaves were not slaves at all; instead, they were feudal tax-serfs! The spectacular advantage of this arrangement to the master was that he no longer needed to worry that the slave would conceal his talents, feign stupidity, malinger, or perform only the absolute minimum required. How much better to let the (former) slave take full control of his own advancement and simply tax his wages! The master would earn more money, if technology and even economy had progressed so far that free labor was then inherently more productive than slave labor.

Mises put it this way:

The slave has no interest in exerting himself fully. He works only as much and as zealously as is necessary to escape the punishment attaching to failure to perform the minimum.

The free worker, on the other hand, knows that the more his labor accomplishes, the more he will be paid. He exerts himself to the full in order to raise his income.

One has only to compare the demands placed on the worker by the tending of a modern tractor with the relatively small expenditure of intelligence, strength, and industry that just two generations ago was deemed sufficient for the enthralled ploughmen of Russia.

Only free labor can accomplish what must be demanded of the modern industrial worker.

At some point the serf might accumulate enough wealth to be able to pay a lump sum for his freedom. The lord would be careful to calculate the expected discounted sum of his tax revenues from the serf over the latter’s lifetime and set the price of full freedom to that. The serf, on the other hand, might have secret entrepreneurial plans to improve his productivity in the future so that his actual earnings would be higher than the lord believes, which would make paying the entire tax in advance worthwhile.

To be sure, both slavery and tax-serfdom are exploitative and unjust. The Spanish code for the regulation of slavery in Siete Partidas originally issued in 1263 proclaimed slavery to be “the most evil and the most despicable thing which can be found among men,” says Bush.

Nevertheless, slavery in the most general sense was a legitimate economic “stage” in the progress of the world. It disappeared when it became apparent how much it retarded development:

If mankind had adhered to the practice of keeping the whole or even a part of the labor force in bondage, the magnificent economic developments of the last hundred and fifty years would not have been possible. We would have no railroads, no automobiles, no airplanes, no steamships, no electric light and power, no chemical industry, just as the ancient Greeks and Romans, with all their genius, were without these things. (Liberalism, 21-22)

The modern welfare-warfare state that eats a great chunk of each (supposedly free) citizen’s income and spends it horribly badly was a huge economic and social retrogression from capitalism back to feudal tax-serfdom. And unlike old-time serfs, we can’t even pay the government off for our or our children’s freedom.

Duncan: Errors of Libertarianism

Duncan begins by making a distinction between positive law and natural law:

There is no illegal crime of stealing involved with taxation. Instead, Machan must argue that taxation is the moral equivalent of stealing.

Hence he must argue that people have a moral right to keep and control all their earnings — that is to say, a right that exists independently of any government-created laws or other conventions, much like the human rights not to be murdered, tortured, enslaved, and so on. (46)

I fully agree that taxation is illegal, if by “legal” we understand not an arbitrary and feeble mental spasm of a corrupt legislature but eternal and immutable natural law.

He counters by saying that the owner of a mall can charge the individual mall store owners rent, and “something similar is true of government taxes.” (46-7) But the analogy is spurious. First, libertarianism does not prohibit charging rent by a private property owner from a tenant. It’s a perfectly legitimate business arrangement. Unlike the mall owner, however, the government does not implicitly own all the land in the country as if some sort of feudal super-overlord with the concomitant ability to tax people while calling the taxes “rent.” For example, if the state were such an overlord, then no moral objection could be advanced to letting it own even the air close to the ground. It could then legitimately tax breathing. We might all have meters forcibly installed in our throats to measure the amount of oxygen we consume, and pay taxes proportionate to their output. How could Duncan argue from a deontological point of view against even a tax that monstrous?

Governments can claim to own both the land on which my house stands and vast untouched tracts of virgin land, but such an ambition is both vain and false according to libertarian theory. This point is relevant, because Duncan raises the question of initial appropriation: “How did the whole process [of voluntary exchange] get going? There must have once been a point where some unowned resource — a parcel of land, say — came to be owned by someone, in an act of initial acquisition. But how should this acquisition have happened ideally?” (49-50) Well, there is a canonical libertarian answer to this question: it happens through the act of mixing one’s labor with the land or natural resource. It will be sufficient to mention Rothbard’s exposition:

Crusoe, landing upon a large island, may grandiosely trumpet to the winds his “ownership” of the entire island. But, in natural fact, he owns only the part that he settles and transforms into use.

Or… Crusoe might be a solitary Columbus landing upon a newly-discovered continent. But so long as no other person appears on the scene, Crusoe’s claim is so much empty verbiage and fantasy, with no foundation in natural fact.

But should a newcomer — a Friday — appear on the scene, and begin to transform unused land, then any enforcement of Crusoe’s invalid claim would constitute criminal aggression against the newcomer and invasion of the latter’s property rights. (EoL, 64)

The government, in claiming allodial ownership over the entire realm in its dominion, as though an ultimate landlord, is acting illegitimately from the libertarian point of view.

Duncan’s argument is then distinct from this obviously unhappy analogy. The government can tax, he says, because “the existence of our economic opportunity is highly dependent on the government’s activities of enforcing contracts, protecting legal property rights, keeping the peace, maintaining the national defense, printing currency, insuring bank deposits, preventing monopolies, fighting inflation, negotiating trade agreements, maintaining transportation infrastructure, and so on.” (47)

Duncan has bought into the interventionist fraud that is modern statism. How, for example, can the government both print currency and fight inflation at the same time, when printing currency (through fiat money and credit expansion) is what generates inflation?!

Government on the local level may have a few legitimate functions — libertarianism is not synonymous with anarcho-capitalism — but they are far smaller in number and ambition than Duncan imagines. For example, they hardly involve insuring bank deposits — a pathetic and dishonest attempt to instill into the populace confidence in the state’s vicious money and banking regime; negotiating trade agreements, when economic theory recommends that each country adopts unilateral free trade, regardless of the trade policies of other nations; or for that matter maintaining national defense, when the correct policy of each state is unconditional pacifism in foreign affairs and absence of any standing military forces, again regardless of what other states do.

Further, he argues that “to insist that one has a moral right to all of one’s income earnings is to ignore the efforts of one’s fellow citizens who work in government or who as taxpayers contribute to the support of the government. … The exploitative nature of this is obvious…” (47) But asserting that I’m obligated to other people who are paying taxes begs the question of whether they, too, are obligated to pay taxes. And even if they have via an explicit contract agreed to contribute to a common treasury, it ought still to be my choice whether similarly to agree or not. Finally, that other people are held in serf-like bondage to the state does not entail that I, too, ought by duty to join them.

However, I like Duncan’s point that even if the kinds and amounts of taxes are arbitrary decisions of the legislators, once taxes have been extracted, it is possible for the after-tax income to be spent freely by the sovereign consumers. “How many of us, after all, currently have our lives blighted by uncertainty as to whether the actions we take with our possessions are legal or illegal?” (48) Legal uncertainty and taxation can merge to the extent that future changes in tax policies are hard to predict which can affect the entrepreneurs’ longer-term business plans. Nevertheless, these are separate issues.

Compared to the owner of a field, says Duncan, “other people lack the negative liberty to use the field except by her permission.” In a fully privatized society, “a poor person who could not afford road tolls, admission charges, and the like, might have no negative liberty to go anywhere whatsoever.” (49) But the meaning of “negative right” is freedom from violent interference by other people with one’s use of his body or justly acquired property. Since “other people” do not own the field, this freedom is simply inapplicable to them. Smith has negative rights to his, Smith’s property; Jones has similar rights to Jones’ property. It is true, further, that a bum would have to find some charitable relief or become a drifter who would move from one private property to another until in each case he’s chased out when he’s outstayed his welcome. But why is that a bad thing?

Duncan has an answer. “There is after all such a thing as economic power over others. The power to hire a person (or not) is obviously a significant form of power. Additionally, being fired from one’s job can be a serious disruption to one’s life. A failure to be promoted as expected can also seriously disrupt one’s plans.” Etc. This economic power “can be abused.” (51) No, it cannot be abused, because there is no such thing as economic power. The situations of every member of the economy are 100% symmetrical. Everyone, be he a worker, an entrepreneur, or consumer, simply exchanges goods and services for money.

There is no right, not just under libertarianism but in any sane system, to be hired or to receive a wage for services not wanted or to be promoted. I mean, is Duncan serious? Has he never worked in the private sector? Does he imagine that “promotions” like, I guess, from assistant professor to associate professor in the academia, are guaranteed?

Our author fears that employees will be “threatened with job loss or lack of promotion unless they dispense sexual favors, perform unreasonably dangerous tasks, work an insane number of hours, or do other humiliating things they would never do but for their employer’s power over them.” (51) Suppose a consumer demanded that a businessman perform a sexual favor in exchange for the consumer’s buying her product. (The consumer with money stands in the same relation to the entrepreneur with a product as the entrepreneur with money to the worker with his labor.) Would that be objectionable, too? Even if it is, why must the businessman obey the demand and agree to “humiliate” herself?

The source of Duncan’s confusion is revealed in the section entitled “Insufficiency of Charity.” He posits a “race to the bottom” within the unhampered market, apparently some sort of Marxian-style immiseration of the workers:

Suppose you are a charitably disposed factory owner who wants to make his or her factory safe.

The problem is that safety devices often cost a significant amount of money, and safe procedures may be slower at producing goods. Hence your goods will be more expensive to produce, and you will be unable to sell them as cheaply as your competitor, Joe Sleazo, who cares nothing for the safety of his workers except insofar as this affects his profits margins. Thus you will likely lose sales to Joe Sleazo, forcing you eventually to choose between cutting your factory’s safety standards or going out of business. …

As a factory owner you may wish to pay your workers a decent wage, give them decent working hours, avoid polluting the environment, and so on, but if Joe Sleazo pays his workers subsistence wages, works them ragged, and pollutes, then decent behavior on your part may make your enterprise uncompetitive and put you out of business.

His remedy?

What a society needs to avoid this pernicious downward spiral is a change of the rules of the game, in the form of workplace safety regulations, minimum wages laws, overtime regulations, anti-pollution laws, and so on. (59)

Now first of all, no appeal to “charity” whatsoever is made by the libertarian in regard to employment. Therefore, Duncan has erected a straw man which he then proceeds to knock down that charity is “insufficient” to raise wages or improve working conditions.

Charity is not even part of the libertarian argument. We fully admit that no businessman wishes to pay his workers a decent wage or give them decent working hours. He wishes to keep his costs as low as possible. No charitable intentions need to be assumed.

However, it is precisely through the competition between entrepreneurs in the free market, including Joe Sleazo, however selfish he may be, that incomes to workers are bid up. The workers are free and mobile; they are not attached to any business firm as slaves or even permanent serfs. If they were slaves, then competition would indeed bring about immiseration. For free workers, competition between wage-offering entrepreneurs for labor raises wages and equilibrates the economy while diminishing profits. Workers are always on the lookout for better offers elsewhere in the economy.

Further, higher wages can be offered in multiple ways. A businessman who has an opening for a risky job has a choice: he can either try to attract workers by offering higher monetary compensation while keeping the job dangerous, or invest directly into safety to decrease the risks to the future employee. By doing the latter he loses some money directly but gains indirectly because the supply of labor for the now safer job increases and the wage he needs to offer declines. In different situations his calculations will support different courses of action, but his self-interested profit seeking, if correctly estimated, will conduce to the greatest good for the greatest number.

In short, entrepreneurs compete for workers including by advertising better working conditions, such as safety and shorter workday. No government interventions are needed to encourage such improvements; economic progress takes care of that adequately.

Pollution is a separate issue, but libertarians have generally interpreted it as a violation of one’s neighbors’ property rights. It is simply unjust to dump one’s factory’s industrial waste onto another man’s property. Complications arise for water and air pollution, but I think that very little really can or should be done about such externalities.

In the market, Duncan proposes, many exchanges “are not appropriately reciprocal; in them, one party is treated more as an instrument for another’s private gain, rather than as a person in his own right.” (51) I reject both parts of this statement. First, all voluntary exchanges are fair and properly reciprocal. Second, the free market is the preeminent institution in which we all use each other for our “private gains.” I use society; society uses me; under laissez-faire, such use reaches the peak of its possible efficiency:

Everybody acts on his own behalf; but everybody’s actions aim at the satisfaction of other people’s needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself, an ultimate end for himself and a means to other people in their endeavors to attain their own ends. (Mises, HA, 257)

Let me end on a positive note. Duncan is correct in denying that taxation is like forced labor. “Under a scheme of taxation, and unlike a scheme of forced labor, you get to choose what sort of career you will pursue and where you will live. You can choose whether you value material goods more than leisure time, or vice versa, and choose between more demanding and less demanding jobs accordingly.” Yes, a tax state does not keep slaves but paying taxes is still like feudal serfdom, as long as the costs of moving out of the state’s jurisdiction are high. Duncan concludes: “It surely shows a serious lack of proportion to think of some multimillionaire — who may well at this moment be sipping scotch on the deck of his yacht in the ocean waters near his second home — as anything like an indentured servant.” (57) I see. Well, our author really despises the rich. He caricatures and dehumanizes them. Fine. But even he should realize that if a poor person robs a rich one, our sympathy should still be with the latter. An unjust act like robbery or taxation does not become Ok if the person who suffers the injustice is rich.