Piketty & Slave Wealth

A quick note on Piketty, slave-wealth, and US capitalism.

Matthew Yglesias had a Vox article entitled “American prosperity was built on slavery and torture” as part of his reaction to Edward Baptist’s book on slavery and American capitalism. Yglesias reproduced a chart from Piketty’s Capital in the Twenty-First Century to illustrate how valuable slaves were as capital :


[Update 5 Feb. 2016: Olmstead & Rhode take issue with Piketty’s calculations of wealth held as slaves in the antebellum. You can compare Piketty’s and their version. But this makes no substantive difference to this post.]

To which Scott Sumner at Economics & Liberty responded by arguing “ending slavery made America richer” :

…[Piketty’s chart is] very deceptive, as Piketty classifies (or should I say mis-classifies) slaves as “capital.” It’s true that they were legally considered capital, but in a functional sense they were obviously labor. Slaves don’t stop being people just because the government treats them like animals.Now here’s where mislabeling slaves as capital comes into the equation. At first glance it looks like America’s capital stock was unaffected by the abolition of slavery. But the actual capital stock rose by over 100% of GDP—an industrial revolution. If you insist on treating slaves as “capital” it doesn’t change the basic story. Because in that case a separate ledger of “labor resources” would have soared after 1865. Former slaves would now be classified as “labor,” and hence the labor stock would rise dramatically, even on a per capita basis. Either way, abolishing slavery made America a much more productive, and hence richer country.

Sumner kind of buries his point, but he’s basically saying the chart plays accounting tricks. If you treated all labour resources in the same way, there wouldn’t be any (or much) change in the trajectory of American capital assets before and after emancipation.

But that’s the same thing Piketty says, except he said it an economically more compelling way ! A chart from earlier in Chapter 4 of his book doesn’t even mention slave-wealth :

Capital in the 20th Century :


Since labour, whether free or slave, receives flows of income, you could value labour just as you would a bond or an annuity or other assets with returns.

Some economists, including the authors of a recent series of World Bank reports on “the wealth of nations,” choose to calculate the total value of “human capital” by capitalizing the value of the income flow from labor on the basis of a more or less arbitrary annual rate of return (typically 4– 5 percent). These reports conclude with amazement that human capital is the leading form of capital in the enchanted world of the twenty-first century. In reality, this conclusion is perfectly obvious and would also have been true in the eighteenth century: whenever more than half of national income goes to labor and one chooses to capitalize the flow of labor income at the same or nearly the same rate as the flow of income to capital, then by definition the value of human capital is greater than the value of all other forms of capital.

In fact, without the above reasoning, the irrelevance of emancipation to the economic growth of the United States would be a little puzzling in a micro sense. The wealth that had been held in the form slaves did not disappear into thin air, but was partially (*) transferred to the slaves themselves. Except nobody counts the present value of returns to human capital as “wealth”.

So ultimately, aren’t Piketty and Sumner saying the same thing ?

( * I say “partially” only because emancipated slaves did supply less labour than before.)

But still the slave-owners surely made a killing. Slave-cotton was certainly profitable year by year, but another question is, where did all the expropriated value of slave labour go ? Slave prices from Baptist :

baptist slave prices

You have to think of these prices as you might with those of tech stocks or housing prices. Just as high stock prices incorporate high expected returns, so the run-up in slaves prices incorporated expectations of profit from using slaves in production. People who owned slaves from early in the cotton era, or those few contrarians and “value-investors” who bought them when prices were low, must have made a killing. But investors and speculators who bought high might not have been able to amortise their investments.

Anyway, since both Southern raw cotton and British cotton textiles approximated perfectly competitive markets, the biggest beneficiaries of the value extracted from slave labour were almost certainly the consumers of British cotton textiles, i.e., tens of millions of people not just in Europe and North America but around the world. Even India had become a net importer of British textiles.

EDIT : A reader pointed me to this piece by Brad DeLong which makes a much more textbook case for the distribution of the expropriated value of slave labour amongst the pioneers in slave cotton as well as the world’s consumers of British cotton textiles.


About pseudoerasmus

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10 Responses to Piketty & Slave Wealth

  1. I think that Piketty is right to treat slaves as capital or more accurately as wealth. He clearly says that wealth is defined as everything that is marketable and brings an explicit or implicit return (without owner having to work). This is as true for slave labor as for machinery; in both cases, there are of course costs of depreciation and maintenance (food for slaves), but both are marketable wealth. The thing is obvious when we consider that to slave-owner loss of slaves was no different from the loss of land. (I find it funny that those who do not object to calling labor “human capital” object to slaves being treated functionally the same as machinery, as indeed Aristotle and Marx did too.)

    Liked by 1 person

  2. Hello ! But I think it’s still just a matter of definitions. Piketty treats slave capital in a de facto appendix to chapter 4, both in the English and French versions. In his full discussion of US capital stock the chart has no slaves.

    Sumner and Piketty emphasise different aspects of the same thing. Sumner says emancipation just moved the improperly included “slave labour” into the “free” column so there was no substantive change in capital stock values. Piketty says you can value any labour like an income-earning asset.

    Of course, after emancipation, sharecroppers freely supplied less labour than before, so maybe the “valuations” would be different…


  3. Plain Jane says:

    In college classes, sharecropping was presented as something that only black freemen did. In fact, after Confederate money became worthless, a helluva lot of people had to sharecrop to stay alive. If you can get a copy, take a look at the biography of Jim Clayton for a firsthand account of sharecropping in the early 1900s. http://www.jimclayton.com/
    Clayton’s mom had a really good hand for cotton picking, and they all worked hard, but unfortunately the soil on their land wasn’t very rich. They were poor poor poor, and so were plenty of other people, white as well as black. Clayton’s father did well during WWII when he managed to get a tractor, while most people were either away at war, or only had mules.


  4. Plain Jane says:

    Right after the Civil War, a lot of Northern industrialists and generals/military men bought up Southern assets at cheap cheap prices. One of these was the Wilder coal mine, site of a famous strike in the 1930s. The people who worked there were mostly white, but conditions were miserable. It’s not always about race. Some people will take advantage of others because they can





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  9. JCRC says:

    So the fact “ending slavery made America richer” makes “American prosperity was built on slavery and torture” a lie? How so?

    Because automation made industrial world more productive and richer we should say no wealth was built on labor?


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