American Capitalism Is Brutal. You Can Trace That to the Plantation. (Published 2019) (2022)

A couple of years before he was convicted of securities fraud, Martin Shkreli was the chief executive of a pharmaceutical company that acquired the rights to Daraprim, a lifesaving antiparasitic drug. Previously the drug cost $13.50 a pill, but in Shkreli’s hands, the price quickly increased by a factor of 56, to $750 a pill. At a health care conference, Shkreli told the audience that he should have raised the price even higher. “No one wants to say it, no one’s proud of it,” he explained. “But this is a capitalist society, a capitalist system and capitalist rules.”

This is a capitalist society. It’s a fatalistic mantra that seems to get repeated to anyone who questions why America can’t be more fair or equal. But around the world, there are many types of capitalist societies, ranging from liberating to exploitative, protective to abusive, democratic to unregulated. When Americans declare that “we live in a capitalist society” — as a real estate mogul told The Miami Herald last year when explaining his feelings about small-business owners being evicted from their Little Haiti storefronts — what they’re often defending is our nation’s peculiarly brutal economy. “Low-road capitalism,” the University of Wisconsin-Madison sociologist Joel Rogers has called it. In a capitalist society that goes low, wages are depressed as businesses compete over the price, not the quality, of goods; so-called unskilled workers are typically incentivized through punishments, not promotions; inequality reigns and poverty spreads. In the United States, the richest 1 percent of Americans own 40 percent of the country’s wealth, while a larger share of working-age people (18-65) live in poverty than in any other nation belonging to the Organization for Economic Cooperation and Development (O.E.C.D.).

Or consider worker rights in different capitalist nations. In Iceland, 90 percent of wage and salaried workers belong to trade unions authorized to fight for living wages and fair working conditions. Thirty-four percent of Italian workers are unionized, as are 26 percent of Canadian workers. Only 10 percent of American wage and salaried workers carry union cards. The O.E.C.D. scores nations along a number of indicators, such as how countries regulate temporary work arrangements. Scores run from 5 (“very strict”) to 1 (“very loose”). Brazil scores 4.1 and Thailand, 3.7, signaling toothy regulations on temp work. Further down the list are Norway (3.4), India (2.5) and Japan (1.3). The United States scored 0.3, tied for second to last place with Malaysia. How easy is it to fire workers? Countries like Indonesia (4.1) and Portugal (3) have strong rules about severance pay and reasons for dismissal. Those rules relax somewhat in places like Denmark (2.1) and Mexico (1.9). They virtually disappear in the United States, ranked dead last out of 71 nations with a score of 0.5.

The 1619 Project is an ongoing initiative from The New York Times Magazine that began in August 2019, the 400th anniversary of the beginning of American slavery. It aims to reframe the country’s history by placing the consequences of slavery and the contributions of black Americans at the very center of our national narrative. Read all the stories.

Those searching for reasons the American economy is uniquely severe and unbridled have found answers in many places (religion, politics, culture). But recently, historians have pointed persuasively to the gnatty fields of Georgia and Alabama, to the cotton houses and slave auction blocks, as the birthplace of America’s low-road approach to capitalism.

Slavery was undeniably a font of phenomenal wealth. By the eve of the Civil War, the Mississippi Valley was home to more millionaires per capita than anywhere else in the United States. Cotton grown and picked by enslaved workers was the nation’s most valuable export. The combined value of enslaved people exceeded that of all the railroads and factories in the nation. New Orleans boasted a denser concentration of banking capital than New York City. What made the cotton economy boom in the United States, and not in all the other far-flung parts of the world with climates and soil suitable to the crop, was our nation’s unflinching willingness to use violence on nonwhite people and to exert its will on seemingly endless supplies of land and labor. Given the choice between modernity and barbarism, prosperity and poverty, lawfulness and cruelty, democracy and totalitarianism, America chose all of the above.

American Capitalism Is Brutal. You Can Trace That to the Plantation. (Published 2019) (1)

Women and children in a cotton field in the 1860s. J. H. Aylsworth, via the Smithsonian National Museum of African American History and Culture

Nearly two average American lifetimes (79 years) have passed since the end of slavery, only two. It is not surprising that we can still feel the looming presence of this institution, which helped turn a poor, fledgling nation into a financial colossus. The surprising bit has to do with the many eerily specific ways slavery can still be felt in our economic life. “American slavery is necessarily imprinted on the DNA of American capitalism,” write the historians Sven Beckert and Seth Rockman. The task now, they argue, is “cataloging the dominant and recessive traits” that have been passed down to us, tracing the unsettling and often unrecognized lines of descent by which America’s national sin is now being visited upon the third and fourth generations.

[Listen to an episode of the “1619” podcast with Matthew Desmond and Nikole Hannah-Jones about the economy that slavery built.]

They picked in long rows, bent bodies shuffling through cotton fields white in bloom. Men, women and children picked, using both hands to hurry the work. Some picked in Negro cloth, their raw product returning to them by way of New England mills. Some picked completely naked. Young children ran water across the humped rows, while overseers peered down from horses. Enslaved workers placed each cotton boll into a sack slung around their necks. Their haul would be weighed after the sunlight stalked away from the fields and, as the freedman Charles Ball recalled, you couldn’t “distinguish the weeds from the cotton plants.” If the haul came up light, enslaved workers were often whipped. “A short day’s work was always punished,” Ball wrote.

Cotton was to the 19th century what oil was to the 20th: among the world’s most widely traded commodities. Cotton is everywhere, in our clothes, hospitals, soap. Before the industrialization of cotton, people wore expensive clothes made of wool or linen and dressed their beds in furs or straw. Whoever mastered cotton could make a killing. But cotton needed land. A field could only tolerate a few straight years of the crop before its soil became depleted. Planters watched as acres that had initially produced 1,000 pounds of cotton yielded only 400 a few seasons later. The thirst for new farmland grew even more intense after the invention of the cotton gin in the early 1790s. Before the gin, enslaved workers grew more cotton than they could clean. The gin broke the bottleneck, making it possible to clean as much cotton as you could grow.

[To get updates on The 1619 Project, and for more on race from The New York Times, sign up for our weekly Race/Related newsletter.]

The Limits of Banking Regulation

By Mehrsa Baradaran

At the start of the Civil War, only states could charter banks. It wasn’t until the National Currency Act of 1863 and the National Bank Act of 1864 passed at the height of the Civil War that banks operated in this country on a national scale, with federal oversight. And even then, it was only law in the North. The Union passed the bills so it could establish a national currency in order to finance the war. The legislation also created the Office of the Comptroller of the Currency (O.C.C.), the first federal bank regulator. After the war, states were allowed to keep issuing bank charters of their own. This byzantine infrastructure remains to this day and is known as the dual banking system. Among all nations in the world, only the United States has such a fragmentary, overlapping and inefficient system — a direct relic of the conflict between federal and state power over maintenance of the slave-based economy of the South.

Both state regulators and the O.C.C., one of the largest federal regulators, are funded by fees from the banks they regulate. Moreover, banks are effectively able to choose regulators — either federal or state ones, depending on their charter. They can even change regulators if they become unsatisfied with the one they’ve chosen. Consumer-protection laws, interest-rate caps and basic-soundness regulations have often been rendered ineffectual in the process — and deregulation of this sort tends to lead to crisis.

In the mid-2000s, when subprime lenders started appearing in certain low-income neighborhoods, many of them majority black and Latino, several state banking regulators took note. In Michigan, the state insurance regulator tried to enforce its consumer-protection laws on Wachovia Mortgage, a subsidiary of Wachovia Bank. In response, Wachovia’s national regulator, the O.C.C., stepped in, claiming that banks with a national charter did not have to comply with state law. The Supreme Court agreed with the O.C.C., and Wachovia continued to engage in risky subprime activity.

Eventually loans like those blew up the banking system and the investments of many Americans — especially the most vulnerable. Black communities lost 53 percent of their wealth because of the crisis, a loss that a former congressman, Brad Miller, said “has almost been an extinction event.”

(Video) Historic Slavery and the Making of American Capitalism

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The United States solved its land shortage by expropriating millions of acres from Native Americans, often with military force, acquiring Georgia, Alabama, Tennessee and Florida. It then sold that land on the cheap — just $1.25 an acre in the early 1830s ($38 in today’s dollars) — to white settlers. Naturally, the first to cash in were the land speculators. Companies operating in Mississippi flipped land, selling it soon after purchase, commonly for double the price.

Enslaved workers felled trees by ax, burned the underbrush and leveled the earth for planting. “Whole forests were literally dragged out by the roots,” John Parker, an enslaved worker, remembered. A lush, twisted mass of vegetation was replaced by a single crop. An origin of American money exerting its will on the earth, spoiling the environment for profit, is found in the cotton plantation. Floods became bigger and more common. The lack of biodiversity exhausted the soil and, to quote the historian Walter Johnson, “rendered one of the richest agricultural regions of the earth dependent on upriver trade for food.”

As slave labor camps spread throughout the South, production surged. By 1831, the country was delivering nearly half the world’s raw cotton crop, with 350 million pounds picked that year. Just four years later, it harvested 500 million pounds. Southern white elites grew rich, as did their counterparts in the North, who erected textile mills to form, in the words of the Massachusetts senator Charles Sumner, an “unhallowed alliance between the lords of the lash and the lords of the loom.” The large-scale cultivation of cotton hastened the invention of the factory, an institution that propelled the Industrial Revolution and changed the course of history. In 1810, there were 87,000 cotton spindles in America. Fifty years later, there were five million. Slavery, wrote one of its defenders in De Bow’s Review, a widely read agricultural magazine, was the “nursing mother of the prosperity of the North.” Cotton planters, millers and consumers were fashioning a new economy, one that was global in scope and required the movement of capital, labor and products across long distances. In other words, they were fashioning a capitalist economy. “The beating heart of this new system,” Beckert writes, “was slavery.”

Perhaps you’re reading this at work, maybe at a multinational corporation that runs like a soft-purring engine. You report to someone, and someone reports to you. Everything is tracked, recorded and analyzed, via vertical reporting systems, double-entry record-keeping and precise quantification. Data seems to hold sway over every operation. It feels like a cutting-edge approach to management, but many of these techniques that we now take for granted were developed by and for large plantations.

American Capitalism Is Brutal. You Can Trace That to the Plantation. (Published 2019) (2)

African-Americans preparing cotton for the gin at a plantation on Port Royal Island, S.C., in the 1860s. Timothy H. O’Sullivan, via the Library of Congress

When an accountant depreciates an asset to save on taxes or when a midlevel manager spends an afternoon filling in rows and columns on an Excel spreadsheet, they are repeating business procedures whose roots twist back to slave-labor camps. And yet, despite this, “slavery plays almost no role in histories of management,” notes the historian Caitlin Rosenthal in her book “Accounting for Slavery.” Since the 1977 publication of Alfred Chandler’s classic study, “The Visible Hand,” historians have tended to connect the development of modern business practices to the 19th-century railroad industry, viewing plantation slavery as precapitalistic, even primitive. It’s a more comforting origin story, one that protects the idea that America’s economic ascendancy developed not because of, but in spite of, millions of black people toiling on plantations. But management techniques used by 19th-century corporations were implemented during the previous century by plantation owners.

Planters aggressively expanded their operations to capitalize on economies of scale inherent to cotton growing, buying more enslaved workers, investing in large gins and presses and experimenting with different seed varieties. To do so, they developed complicated workplace hierarchies that combined a central office, made up of owners and lawyers in charge of capital allocation and long-term strategy, with several divisional units, responsible for different operations. Rosenthal writes of one plantation where the owner supervised a top lawyer, who supervised another lawyer, who supervised an overseer, who supervised three bookkeepers, who supervised 16 enslaved head drivers and specialists (like bricklayers), who supervised hundreds of enslaved workers. Everyone was accountable to someone else, and plantations pumped out not just cotton bales but volumes of data about how each bale was produced. This organizational form was very advanced for its time, displaying a level of hierarchal complexity equaled only by large government structures, like that of the British Royal Navy.

Like today’s titans of industry, planters understood that their profits climbed when they extracted maximum effort out of each worker. So they paid close attention to inputs and outputs by developing precise systems of record-keeping. Meticulous bookkeepers and overseers were just as important to the productivity of a slave-labor camp as field hands. Plantation entrepreneurs developed spreadsheets, like Thomas Affleck’s “Plantation Record and Account Book,” which ran into eight editions circulated until the Civil War. Affleck’s book was a one-stop-shop accounting manual, complete with rows and columns that tracked per-worker productivity. This book “was really at the cutting edge of the informational technologies available to businesses during this period,” Rosenthal told me. “I have never found anything remotely as complex as Affleck’s book for free labor.” Enslavers used the book to determine end-of-the-year balances, tallying expenses and revenues and noting the causes of their biggest gains and losses. They quantified capital costs on their land, tools and enslaved workforces, applying Affleck’s recommended interest rate. Perhaps most remarkable, they also developed ways to calculate depreciation, a breakthrough in modern management procedures, by assessing the market value of enslaved workers over their life spans. Values generally peaked between the prime ages of 20 and 40 but were individually adjusted up or down based on sex, strength and temperament: people reduced to data points.

This level of data analysis also allowed planters to anticipate rebellion. Tools were accounted for on a regular basis to make sure a large number of axes or other potential weapons didn’t suddenly go missing. “Never allow any slave to lock or unlock any door,” advised a Virginia enslaver in 1847. In this way, new bookkeeping techniques developed to maximize returns also helped to ensure that violence flowed in one direction, allowing a minority of whites to control a much larger group of enslaved black people. American planters never forgot what happened in Saint-Domingue (now Haiti) in 1791, when enslaved workers took up arms and revolted. In fact, many white enslavers overthrown during the Haitian Revolution relocated to the United States and started over.

(Video) How Slavery Laid The Foundation For American Capitalism

Overseers recorded each enslaved worker’s yield. Accountings took place not only after nightfall, when cotton baskets were weighed, but throughout the workday. In the words of a North Carolina planter, enslaved workers were to be “followed up from day break until dark.” Having hands line-pick in rows sometimes longer than five football fields allowed overseers to spot anyone lagging behind. The uniform layout of the land had a logic; a logic designed to dominate. Faster workers were placed at the head of the line, which encouraged those who followed to match the captain’s pace. When enslaved workers grew ill or old, or became pregnant, they were assigned to lighter tasks. One enslaver established a “sucklers gang” for nursing mothers, as well as a “measles gang,” which at once quarantined those struck by the virus and ensured that they did their part to contribute to the productivity machine. Bodies and tasks were aligned with rigorous exactitude. In trade magazines, owners swapped advice about the minutiae of planting, including slave diets and clothing as well as the kind of tone a master should use. In 1846, one Alabama planter advised his fellow enslavers to always give orders “in a mild tone, and try to leave the impression on the mind of the negro that what you say is the result of reflection.” The devil (and his profits) were in the details.

Fiat Currency and the Civil War

By Mehrsa Baradaran

The Constitution is riddled with compromises made between the North and South over the issue of slavery — the Electoral College, the three-fifths clause — but paper currency was too contentious an issue for the framers, so it was left out entirely. Thomas Jefferson, like many Southerners, believed that a national currency would make the federal government too powerful and would also favor the Northern trade-based economy over the plantation economy. So, for much of its first century, the United States was without a national bank or a uniform currency, leaving its economy prone to crisis, bank runs and instability.

At the height of the war, Lincoln understood that he could not feed the troops without more money, so he issued a national currency, backed by the full faith and credit of the United States Treasury — but not by gold. (These bills were known derisively as “greenbacks,” a word that has lived on.) The South had a patchwork currency that was backed by the holdings of private banks — the same banks that helped finance the entire Southern economy, from the plantations to the people enslaved on them. Some Confederate bills even had depictions of enslaved people on their backs.

In a sense, the war over slavery was also a war over the future of the economy and the essentiality of value. By issuing fiat currency, Lincoln bet the future on the elasticity of value. This was the United States’ first formal experiment with fiat money, and it was a resounding success. The currency was accepted by national and international creditors — such as private creditors from London, Amsterdam and Paris — and funded the feeding and provisioning of Union troops. In turn, the success of the Union Army fortified the new currency. Lincoln assured critics that the move would be temporary, but leaders who followed him eventually made it permanent — first Franklin Roosevelt during the Great Depression and then, formally, Richard Nixon in 1971.

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The uncompromising pursuit of measurement and scientific accounting displayed in slave plantations predates industrialism. Northern factories would not begin adopting these techniques until decades after the Emancipation Proclamation. As the large slave-labor camps grew increasingly efficient, enslaved black people became America’s first modern workers, their productivity increasing at an astonishing pace. During the 60 years leading up to the Civil War, the daily amount of cotton picked per enslaved worker increased 2.3 percent a year. That means that in 1862, the average enslaved fieldworker picked not 25 percent or 50 percent as much but 400 percent as much cotton than his or her counterpart did in 1801.

Today modern technology has facilitated unremitting workplace supervision, particularly in the service sector. Companies have developed software that records workers’ keystrokes and mouse clicks, along with randomly capturing screenshots multiple times a day. Modern-day workers are subjected to a wide variety of surveillance strategies, from drug tests and closed-circuit video monitoring to tracking apps and even devices that sense heat and motion. A 2006 survey found that more than a third of companies with work forces of 1,000 or more had staff members who read through employees’ outbound emails. The technology that accompanies this workplace supervision can make it feel futuristic. But it’s only the technology that’s new. The core impulse behind that technology pervaded plantations, which sought innermost control over the bodies of their enslaved work force.

The cotton plantation was America’s first big business, and the nation’s first corporate Big Brother was the overseer. And behind every cold calculation, every rational fine-tuning of the system, violence lurked. Plantation owners used a combination of incentives and punishments to squeeze as much as possible out of enslaved workers. Some beaten workers passed out from the pain and woke up vomiting. Some “danced” or “trembled” with every hit. An 1829 first-person account from Alabama recorded an overseer’s shoving the faces of women he thought had picked too slow into their cotton baskets and opening up their backs. To the historian Edward Baptist, before the Civil War, Americans “lived in an economy whose bottom gear was torture.”

There is some comfort, I think, in attributing the sheer brutality of slavery to dumb racism. We imagine pain being inflicted somewhat at random, doled out by the stereotypical white overseer, free but poor. But a good many overseers weren’t allowed to whip at will. Punishments were authorized by the higher-ups. It was not so much the rage of the poor white Southerner but the greed of the rich white planter that drove the lash. The violence was neither arbitrary nor gratuitous. It was rational, capitalistic, all part of the plantation’s design. “Each individual having a stated number of pounds of cotton to pick,” a formerly enslaved worker, Henry Watson, wrote in 1848, “the deficit of which was made up by as many lashes being applied to the poor slave’s back.” Because overseers closely monitored enslaved workers’ picking abilities, they assigned each worker a unique quota. Falling short of that quota could get you beaten, but overshooting your target could bring misery the next day, because the master might respond by raising your picking rate.

American Capitalism Is Brutal. You Can Trace That to the Plantation. (Published 2019) (3)

A photograph taken at a medical examination of a man known as Gordon, who escaped from Mississippi and made his way to a Union Army encampment in Baton Rouge, La., in 1863. McPherson & Oliver, via the Library of Congress

Profits from heightened productivity were harnessed through the anguish of the enslaved. This was why the fastest cotton pickers were often whipped the most. It was why punishments rose and fell with global market fluctuations. Speaking of cotton in 1854, the fugitive slave John Brown remembered, “When the price rises in the English market, the poor slaves immediately feel the effects, for they are harder driven, and the whip is kept more constantly going.” Unrestrained capitalism holds no monopoly on violence, but in making possible the pursuit of near limitless personal fortunes, often at someone else’s expense, it does put a cash value on our moral commitments.

Slavery did supplement white workers with what W.E.B. Du Bois called a “public and psychological wage,” which allowed them to roam freely and feel a sense of entitlement. But this, too, served the interests of money. Slavery pulled down all workers’ wages. Both in the cities and countryside, employers had access to a large and flexible labor pool made up of enslaved and free people. Just as in today’s gig economy, day laborers during slavery’s reign often lived under conditions of scarcity and uncertainty, and jobs meant to be worked for a few months were worked for lifetimes. Labor power had little chance when the bosses could choose between buying people, renting them, contracting indentured servants, taking on apprentices or hiring children and prisoners.

(Video) The Business of Brutality: Slavery and the Foundations of Capitalism (BABF 2019)

This not only created a starkly uneven playing field, dividing workers from themselves; it also made “all nonslavery appear as freedom,” as the economic historian Stanley Engerman has written. Witnessing the horrors of slavery drilled into poor white workers that things could be worse. So they generally accepted their lot, and American freedom became broadly defined as the opposite of bondage. It was a freedom that understood what it was against but not what it was for; a malnourished and mean kind of freedom that kept you out of chains but did not provide bread or shelter. It was a freedom far too easily pleased.

In recent decades, America has experienced the financialization of its economy. In 1980, Congress repealed regulations that had been in place since the 1933 Glass-Steagall Act, allowing banks to merge and charge their customers higher interest rates. Since then, increasingly profits have accrued not by trading and producing goods and services but through financial instruments. Between 1980 and 2008, more than $6.6 trillion was transferred to financial firms. After witnessing the successes and excesses of Wall Street, even nonfinancial companies began finding ways to make money from financial products and activities. Ever wonder why every major retail store, hotel chain and airline wants to sell you a credit card? This financial turn has trickled down into our everyday lives: It’s there in our pensions, home mortgages, lines of credit and college-savings portfolios. Americans with some means now act like “enterprising subjects,” in the words of the political scientist Robert Aitken.

As it’s usually narrated, the story of the ascendancy of American finance tends to begin in 1980, with the gutting of Glass-Steagall, or in 1944 with Bretton Woods, or perhaps in the reckless speculation of the 1920s. But in reality, the story begins during slavery.

Cotton and the Global Market

By Mehrsa Baradaran

Cotton produced under slavery created a worldwide market that brought together the Old World and the New: the industrial textile mills of the Northern states and England, on the one hand, and the cotton plantations of the American South on the other. Textile mills in industrial centers like Lancashire, England, purchased a majority of cotton exports, which created worldwide trade hubs in London and New York where merchants could trade in, invest in, insure and speculate on the cotton—commodity market. Though trade in other commodities existed, it was cotton (and the earlier trade in slave-produced sugar from the Caribbean) that accelerated worldwide commercial markets in the 19th century, creating demand for innovative contracts, novel financial products and modern forms of insurance and credit.

Like all agricultural goods, cotton is prone to fluctuations in quality depending on crop type, location and environmental conditions. Treating it as a commodity led to unique problems: How would damages be calculated if the wrong crop was sent? How would you assure that there was no misunderstanding between two parties on time of delivery? Legal concepts we still have to this day, like “mutual mistake” (the notion that contracts can be voided if both parties relied on a mistaken assumption), were developed to deal with these issues. Textile merchants needed to purchase cotton in advance of their own production, which meant that farmers needed a way to sell goods they had not yet grown; this led to the invention of futures contracts and, arguably, the commodities markets still in use today.

From the first decades of the 1800s, during the height of the trans-Atlantic cotton trade, the sheer size of the market and the escalating number of disputes between counterparties was such that courts and lawyers began to articulate and codify the common-law standards regarding contracts. This allowed investors and traders to mitigate their risk through contractual arrangement, which smoothed the flow of goods and money. Today law students still study some of these pivotal cases as they learn doctrines like forseeability, mutual mistake and damages.

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Consider, for example, one of the most popular mainstream financial instruments: the mortgage. Enslaved people were used as collateral for mortgages centuries before the home mortgage became the defining characteristic of middle America. In colonial times, when land was not worth much and banks didn’t exist, most lending was based on human property. In the early 1700s, slaves were the dominant collateral in South Carolina. Many Americans were first exposed to the concept of a mortgage by trafficking in enslaved people, not real estate, and “the extension of mortgages to slave property helped fuel the development of American (and global) capitalism,” the historian Joshua Rothman told me.

Or consider a Wall Street financial instrument as modern-sounding as collateralized debt obligations (C.D.O.s), those ticking time bombs backed by inflated home prices in the 2000s. C.D.O.s were the grandchildren of mortgage-backed securities based on the inflated value of enslaved people sold in the 1820s and 1830s. Each product created massive fortunes for the few before blowing up the economy.

Enslavers were not the first ones to securitize assets and debts in America. The land companies that thrived during the late 1700s relied on this technique, for instance. But enslavers did make use of securities to such an enormous degree for their time, exposing stakeholders throughout the Western world to enough risk to compromise the world economy, that the historian Edward Baptist told me that this can be viewed as “a new moment in international capitalism, where you are seeing the development of a globalized financial market.” The novel thing about the 2008 foreclosure crisis was not the concept of foreclosing on a homeowner but foreclosing on millions of them. Similarly, what was new about securitizing enslaved people in the first half of the 19th century was not the concept of securitization itself but the crazed level of rash speculation on cotton that selling slave debt promoted.

As America’s cotton sector expanded, the value of enslaved workers soared. Between 1804 and 1860, the average price of men ages 21 to 38 sold in New Orleans grew to $1,200 from roughly $450. Because they couldn’t expand their cotton empires without more enslaved workers, ambitious planters needed to find a way to raise enough capital to purchase more hands. Enter the banks. The Second Bank of the United States, chartered in 1816, began investing heavily in cotton. In the early 1830s, the slaveholding Southwestern states took almost half the bank’s business. Around the same time, state-chartered banks began multiplying to such a degree that one historian called it an “orgy of bank-creation.”

American Capitalism Is Brutal. You Can Trace That to the Plantation. (Published 2019) (4)

An 1850 inventory of enslaved people from the Pleasant Hill Plantation in Mississippi. From Louisiana and Lower Mississippi Valley Collections, Louisiana State University Libraries, Baton Rouge, La.

(Video) Transatlantic Slavery Symposium: Capitalism and Slavery

When seeking loans, planters used enslaved people as collateral. Thomas Jefferson mortgaged 150 of his enslaved workers to build Monticello. People could be sold much more easily than land, and in multiple Southern states, more than eight in 10 mortgage-secured loans used enslaved people as full or partial collateral. As the historian Bonnie Martin has written, “slave owners worked their slaves financially, as well as physically from colonial days until emancipation” by mortgaging people to buy more people. Access to credit grew faster than Mississippi kudzu, leading one 1836 observer to remark that in cotton country “money, or what passed for money, was the only cheap thing to be had.”

Planters took on immense amounts of debt to finance their operations. Why wouldn’t they? The math worked out. A cotton plantation in the first decade of the 19th century could leverage their enslaved workers at 8 percent interest and record a return three times that. So leverage they did, sometimes volunteering the same enslaved workers for multiple mortgages. Banks lent with little restraint. By 1833, Mississippi banks had issued 20 times as much paper money as they had gold in their coffers. In several Southern counties, slave mortgages injected more capital into the economy than sales from the crops harvested by enslaved workers.

Global financial markets got in on the action. When Thomas Jefferson mortgaged his enslaved workers, it was a Dutch firm that put up the money. The Louisiana Purchase, which opened millions of acres to cotton production, was financed by Baring Brothers, the well-heeled British commercial bank. A majority of credit powering the American slave economy came from the London money market. Years after abolishing the African slave trade in 1807, Britain, and much of Europe along with it, was bankrolling slavery in the United States. To raise capital, state-chartered banks pooled debt generated by slave mortgages and repackaged it as bonds promising investors annual interest. During slavery’s boom time, banks did swift business in bonds, finding buyers in Hamburg and Amsterdam, in Boston and Philadelphia.

Some historians have claimed that the British abolition of the slave trade was a turning point in modernity, marked by the development of a new kind of moral consciousness when people began considering the suffering of others thousands of miles away. But perhaps all that changed was a growing need to scrub the blood of enslaved workers off American dollars, British pounds and French francs, a need that Western financial markets fast found a way to satisfy through the global trade in bank bonds. Here was a means to profit from slavery without getting your hands dirty. In fact, many investors may not have realized that their money was being used to buy and exploit people, just as many of us who are vested in multinational textile companies today are unaware that our money subsidizes a business that continues to rely on forced labor in countries like Uzbekistan and China and child workers in countries like India and Brazil. Call it irony, coincidence or maybe cause — historians haven’t settled the matter — but avenues to profit indirectly from slavery grew in popularity as the institution of slavery itself grew more unpopular. “I think they go together,” the historian Calvin Schermerhorn told me. “We care about fellow members of humanity, but what do we do when we want returns on an investment that depends on their bound labor?” he said. “Yes, there is a higher consciousness. But then it comes down to: Where do you get your cotton from?”

Banks issued tens of millions of dollars in loans on the assumption that rising cotton prices would go on forever. Speculation reached a fever pitch in the 1830s, as businessmen, planters and lawyers convinced themselves that they could amass real treasure by joining in a risky game that everyone seemed to be playing. If planters thought themselves invincible, able to bend the laws of finance to their will, it was most likely because they had been granted authority to bend the laws of nature to their will, to do with the land and the people who worked it as they pleased. Du Bois wrote: “The mere fact that a man could be, under the law, the actual master of the mind and body of human beings had to have disastrous effects. It tended to inflate the ego of most planters beyond all reason; they became arrogant, strutting, quarrelsome kinglets.” What are the laws of economics to those exercising godlike power over an entire people?

How Slavery Made Wall Street

By Tiya Miles

While “Main Street” might be anywhere and everywhere, as the historian Joshua Freeman points out, “Wall Street” has only ever been one specific place on the map. New York has been a principal center of American commerce dating back to the colonial period — a centrality founded on the labor extracted from thousands of indigenous American and African slaves.

Desperate for hands to build towns, work wharves, tend farms and keep households, colonists across the American Northeast — Puritans in Massachusetts Bay, Dutch settlers in New Netherland and Quakers in Pennsylvania — availed themselves of slave labor. Native Americans captured in colonial wars in New England were forced to work, and African people were imported in greater and greater numbers. New York City soon surpassed other slaving towns of the Northeast in scale as well as impact.

Founded by the Dutch as New Amsterdam in 1625, what would become the City of New York first imported 11 African men in 1626. The Dutch West India Company owned these men and their families, directing their labors to common enterprises like land clearing and road construction. After the English Duke of York acquired authority over the colony and changed its name, slavery grew harsher and more comprehensive. As the historian Leslie Harris has written, 40 percent of New York households held enslaved people in the early 1700s.

New Amsterdam’s and New York’s enslaved put in place much of the local infrastructure, including Broad Way and the Bowery roads, Governors Island, and the first municipal buildings and churches. The unfree population in New York was not small, and their experience of exploitation was not brief. In 1991, construction workers uncovered an extensive 18th-century African burial ground in Lower Manhattan, the final resting place of approximately 20,000 people.

And New York City’s investment in slavery expanded in the 19th century. In 1799 the state of New York passed the first of a series of laws that would gradually abolish slavery over the coming decades, but the investors and financiers of the state’s primary metropolis doubled down on the business of slavery. New Yorkers invested heavily in the growth of Southern plantations, catching the wave of the first cotton boom. Southern planters who wanted to buy more land and black people borrowed funds from New York bankers and protected the value of bought bodies with policies from New York insurance companies. New York factories produced the agricultural tools forced into Southern slaves’ hands and the rough fabric called “Negro Cloth” worn on their backs. Ships originating in New York docked in the port of New Orleans to service the trade in domestic and (by then, illegal) international slaves. As the historian David Quigley has demonstrated, New York City’s phenomenal economic consolidation came as a result of its dominance in the Southern cotton trade, facilitated by the construction of the Erie Canal. It was in this moment — the early decades of the 1800s — that New York City gained its status as a financial behemoth through shipping raw cotton to Europe and bankrolling the boom industry that slavery made.

In 1711, New York City officials decreed that “all Negro and Indian slaves that are let out to hire ... be hired at the Market house at the Wall Street Slip.” It is uncanny, but perhaps predictable, that the original wall for which Wall Street is named was built by the enslaved at a site that served as the city’s first organized slave auction. The capital profits and financial wagers of Manhattan, the United States and the world still flow through this place where black and red people were traded and where the wealth of a region was built on slavery.

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We know how these stories end. The American South rashly overproduced cotton thanks to an abundance of cheap land, labor and credit, consumer demand couldn’t keep up with supply, and prices fell. The value of cotton started to drop as early as 1834 before plunging like a bird winged in midflight, setting off the Panic of 1837. Investors and creditors called in their debts, but plantation owners were underwater. Mississippi planters owed the banks in New Orleans $33 million in a year their crops yielded only $10 million in revenue. They couldn’t simply liquidate their assets to raise the money. When the price of cotton tumbled, it pulled down the value of enslaved workers and land along with it. People bought for $2,000 were now selling for $60. Today, we would say the planters’ debt was “toxic.”

Because enslavers couldn’t repay their loans, the banks couldn’t make interest payments on their bonds. Shouts went up around the Western world, as investors began demanding that states raise taxes to keep their promises. After all, the bonds were backed by taxpayers. But after a swell of populist outrage, states decided not to squeeze the money out of every Southern family, coin by coin. But neither did they foreclose on defaulting plantation owners. If they tried, planters absconded to Texas (an independent republic at the time) with their treasure and enslaved work force. Furious bondholders mounted lawsuits and cashiers committed suicide, but the bankrupt states refused to pay their debts. Cotton slavery was too big to fail. The South chose to cut itself out of the global credit market, the hand that had fed cotton expansion, rather than hold planters and their banks accountable for their negligence and avarice.

Even academic historians, who from their very first graduate course are taught to shun presentism and accept history on its own terms, haven’t been able to resist drawing parallels between the Panic of 1837 and the 2008 financial crisis. All the ingredients are there: mystifying financial instruments that hide risk while connecting bankers, investors and families around the globe; fantastic profits amassed overnight; the normalization of speculation and breathless risk-taking; stacks of paper money printed on the myth that some institution (cotton, housing) is unshakable; considered and intentional exploitation of black people; and impunity for the profiteers when it all falls apart — the borrowers were bailed out after 1837, the banks after 2008.

During slavery, “Americans built a culture of speculation unique in its abandon,” writes the historian Joshua Rothman in his 2012 book, “Flush Times and Fever Dreams.” That culture would drive cotton production up to the Civil War, and it has been a defining characteristic of American capitalism ever since. It is the culture of acquiring wealth without work, growing at all costs and abusing the powerless. It is the culture that brought us the Panic of 1837, the stock-market crash of 1929 and the recession of 2008. It is the culture that has produced staggering inequality and undignified working conditions. If today America promotes a particular kind of low-road capitalism — a union-busting capitalism of poverty wages, gig jobs and normalized insecurity; a winner-take-all capitalism of stunning disparities not only permitting but awarding financial rule-bending; a racist capitalism that ignores the fact that slavery didn’t just deny black freedom but built white fortunes, originating the black-white wealth gap that annually grows wider — one reason is that American capitalism was founded on the lowest road there is.

(Video) Is the 1619 Project Good History?

FAQs

Was the plantation system capitalist? ›

The plantation system was an early capitalist venture. England's King James had every intention of profiting from plantations. Tobacco and cotton proved to be exceptionally profitable. Therefore, cheap labor was used.

What is plantation capitalism? ›

We define plantation capitalism as a social and economic management system in Southern cities where the descendants of planter families maintain political and economic dynasties largely by keeping Black workers in extreme poverty, landless, and without political power through extractive policies and police terrorism.

What is the main problem with capitalism? ›

Prominent among critiques of capitalism are accusations that capitalism is inherently exploitative, alienating, unstable, unsustainable, and creates massive economic inequality, commodifies people, and is anti-democratic and leads to an erosion of human rights while it incentivises imperialist expansion and war.

What is the relationship between slavery and capitalism? ›

European and colonial American societies considered them property, rather than people. These enslaved people were part of a capitalist economic system we call the plantation system, in which they were forced to work, without pay, in terrible conditions, in order to generate profits for people who legally owned them.

Who put their capitalism in my slavery? ›

Eric Williams put the question most directly in his book Capitalism and Slavery, first published in 1944. Slavery, he argued, depended on capitalist competition. An international capitalist market put slavery and freedom in competition, and slavery usually won.

What is an example of capitalism in the US? ›

Wall Street and the stock market embody capitalism. Large, publicly-traded companies sell stock to raise capital, which is bought-and-sold by investors via a system in which prices are directly impacted by supply and demand. Everyone can participate, from individual investors to major financial investment firms.

What is capitalism pros and cons? ›

Top 10 Capitalism Pros & Cons – Summary List
Capitalism ProsCapitalism Cons
Fewer frictions in an economyBad for low-skilled workers
Higher level of freedom through capitalismPromotes unequal chances in life
May lead to lower pricesHigher rents
Capitalism may lead to better product qualityHigher property prices
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Who benefits from capitalism? ›

Individual capitalists are typically wealthy people who have a large amount of capital (money or other financial assets) invested in business, and who benefit from the system of capitalism by making increased profits and thereby adding to their wealth.

What is capitalism in simple terms? ›

Capitalism is often thought of as an economic system in which private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society. The essential feature of capitalism is the motive to make a profit.

What are the 5 problems with capitalism? ›

In short, capitalism can cause – inequality, market failure, damage to the environment, short-termism, excess materialism and boom and bust economic cycles.

Does capitalism benefit the poor? ›

By assuming the autonomy of the individual, capitalism grants dignity to the poor. By affirming people's right to their own labor, regardless of their position on the economic ladder, capitalism offers the poor the means to improve their own well-being.

Why is capitalism bad for the environment? ›

Capitalism also leads to the pollution of our air and water, soil degradation, deforestation, and the destruction of biodiversity. According to one study, the size of vertebrate populations has decreased by an average of 60 percent between 1970 and 2014.

What is the importance of capitalism? ›

Capitalism, undoubtedly, is a major driver of innovation, wealth, and prosperity in the modern era. Competition and capital accumulation incentivize businesses to maximize efficiency, which allows investors to capitalize on that growth and consumers to enjoy lower prices on a wider range of goods.

What are examples of capitalism? ›

One of the examples of capitalism has been the creation of mega-corporations owned by a set of private individuals and institutions. Minimal government intervention and protection of private property rights have enabled the creation of humongous companies.

Is socialism better than capitalism? ›

Socialism and capitalism are the two main economic systems used in developed countries today.
...
Key Takeaways: Socialism vs. Capitalism.
CapitalismSocialism
Efficiency and InnovationFree market competition encourages efficiency and innovationGovernment-owned businesses have less incentive for efficiency and innovation
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11 Apr 2022

How does capitalism exploit the poor? ›

Capitalist exploitation thus consists in the forced appropriation by capitalists of the surplus value produced by workers. Workers under capitalism are compelled by their lack of ownership of the means of production to sell their labor power to capitalists for less than the full value of the goods they produce.

Who started capitalism? ›

Who invented capitalism? Modern capitalist theory is traditionally traced to the 18th-century treatise An Inquiry into the Nature and Causes of the Wealth of Nations by Scottish political economist Adam Smith, and the origins of capitalism as an economic system can be placed in the 16th century.

How does capitalism benefit society? ›

Capitalism is the greatest economic system because it has numerous benefits and creates multiple opportunities for individuals in society. Some of these benefits include producing wealth and innovation, improving the lives of individuals, and giving power to the people.

What are the 5 main characteristics of capitalism? ›

Capitalism has many unique features, some of which include a two-class system, private ownership, a profit motive, minimal government intervention, and competition.

Which country is the best example of capitalism? ›

The United States is arguably the most well-known country with a capitalist economy, which many citizens see as an essential part of democracy and building the "American Dream." Capitalism also taps into the American spirit, being a more "free" market when compared to the more government-controlled alternatives.

What is the biggest disadvantage of capitalism? ›

One of the disadvantages of capitalism is that wealth and the control of the means of production is concentrated in the hands of very few individuals. The rich families always control the wealth of the society.

How does capitalism allow freedom? ›

Capitalism promotes individual freedom by providing choices, the right to private property, and allowing people to set the price of goods. Capitalism promotes political freedom by limiting the power of the government. Capitalism promotes equal opportunity by rewarding hard work and innovation.

What are 3 benefits of capitalism? ›

Capitalism encourages innovation.

This occurs at every level. Businesses invest into research and development to create better products. Employees focus on improving their best practices so they can remain as productive as possible. Services are improved to solve more problems.

What is opposite of capitalism? ›

At the opposite end of the spectrum from capitalism, communism is an economic theory favoring a classless society and the abolition of private property. Communism derives from the French commun (common).

Why capitalism is better than communism? ›

While pure capitalism in a country represents a free market economy, the elements of communism are easily seen in command economies. Furthermore, capitalism motivates entities to work hard and innovate to make a profit, whereas communism does not emphasize or focus on providing an incentive to trigger hard work.

Why is it called capitalism? ›

"Capitalism" is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning "head"—which is also the origin of "chattel" and "cattle" in the sense of movable property (only much later to refer only to livestock).

Is capitalism good or bad Who benefits from capitalism explain this statement? ›

Capitalism is good

Capitalism ensures efficiency because it is self-regulated through competition. It promotes innovation, freedom, and opportunity. Capitalism meets the needs of the people and is beneficial to societies as a whole.

What was the impact of capitalism on the working class? ›

Loss of Traditional Jobs: The movement of people away from agriculture and into industrial cities brought great stress on the labour force. Women in households, who had earned income from spinning, found the new factories taking away their source of income.

What is the biggest advantage of capitalism? ›

One of the biggest benefits of capitalism is healthy competition. Competition makes everyone better. When companies compete for business, they're forced to provide a better variety of services or expanded services and give better customer service. Competition encourages growth.

How does capitalism lead to inequality? ›

Because workers are free to change jobs, employers have diminished incentives to invest in the skills of their workforce. Especially as capitalism becomes more knowledge-intensive, this can create an unskilled and low-paid underclass and further exacerbate inequality, unless compensatory measures are put in place.

How does capitalism solve economic problems? ›

Under capitalistic economy, allocation of various resources takes place with the help of market mechanism. Price of various goods and services including the price of factors of production are determined with help of the forces of demand and supply. Free price mechanism helps producers to decide what to produce.

Does capitalism only benefit the rich? ›

No, it is not true. For many decades, the myth that in a capitalist country the rich become richer while the poor become poorer has been spreading all over the world – despite the fact that a quick glance over the facts would show that the economically freer the country, the less poor it is.

How does capitalism affect the rich? ›

The capitalist system is a system whereby the rich get richer and the poor get poorer, the rich can reinvest their capital whilst the poor have to continue to work and spend every penny they have on living costs. These living costs, including utility bills and food, are profits for the rich.

How did people live before capitalism? ›

Before industrialization and the rise of financial capitalism, the predominant mode of life was agricultural, and the average mode of production was farm labor. In previous eras moreover, land capital or wealth, was often immobile.

What is the relationship between capitalism and our natural world? ›

Capitalism operates on the basis that the earth's resources are there for limitless exploitation, and that market forces will always find a (benign) solution to a crisis. A society and economy that meets the true needs of both humans and nature will value different 'commodities': such as greater leisure time.

Is capitalism the main cause of climate change? ›

Global warming is human-caused and the culprit is industrial capitalism and its addiction to fossil fuels. The burning of fossil fuels (coal, oil, and natural gas) releases carbon dioxide and other greenhouse gases which trap heat in the atmosphere and contribute to temperature increases.

Is capitalism a cause of global warming? ›

Global capitalist economies are a root cause for increased greenhouse gas emissions, leading to rising global temperatures and sea levels, as seen within the fictional novel 120 years into the future.

Who is a capitalist person? ›

1 : a person who has capital especially invested in business industrial capitalists broadly : a person of wealth : plutocrat Charitable organizations often seek help from capitalists. 2 : a person who favors capitalism. capitalist. adjective. variants: or capitalistic \ ˌka-​pə-​tə-​ˈli-​stik , ˌkap-​tə-​ \

Is USA a capitalist country? ›

The United States has a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism.

How does capitalism affect the government? ›

Political capitalism is an economic and political system in which the economic and political elite cooperate for their mutual benefit. The economic elite influence the government's economic policies to use regulation, government spending, and the design of the tax sys- tem to maintain their elite status in the economy.

What are the 3 types of capitalism? ›

The main types of capitalism listed here range from those with strong government power (state-guided capitalism) to those without (laissez-faire capitalism), and from those with powerful private interests (corporate capitalism) to those with decentralised markets (entrepreneurial capitalism).

What are the 2 types of capitalism? ›

The two forms of capitalism: developmentalism and economic liberalism.

When did capitalism start in America? ›

The Age of Commerce

Levy structures his book around four “ages.” The first, Commercial Capitalism, emerged in the colonial seventeenth century and broadly persisted until the Civil War.

How did capitalism cause the Industrial Revolution? ›

​Capitalism caused the Industrial Revolution because industrialization required significant work and investment from individuals and not necessarily the government.

What are examples of capitalism? ›

One of the examples of capitalism has been the creation of mega-corporations owned by a set of private individuals and institutions. Minimal government intervention and protection of private property rights have enabled the creation of humongous companies.

How did the Industrial Revolution give rise to capitalism? ›

The Industrial Revolution brought capitalism, in which a country's trade and industry are controlled by private owners for profit, rather than controlled by the state. Industrialization leads to population growth and urbanization, as more and more people move to urban centers in search of work.

Is mercantilism a capitalism? ›

Definition. Capitalism is an economic system in which private owners control the country's trade and industry, rather than by the state, while mercantilism is an economic theory and practice that advocates governmental regulation of the nation's economy to generate wealth and augment national power.

How did capitalism change the world? ›

Capitalism enabled the United States to mobilise and efficiently allocate its resources, as well as, create far more efficient hospitals than its rival and was able to show a clear health benefit to its population as a result.

What is capitalism in simple terms? ›

Capitalism is often thought of as an economic system in which private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society. The essential feature of capitalism is the motive to make a profit.

What are the effects of industrial capitalism? ›

Industrial capitalism affected the bourgeoisie and the working class. Although the bourgeoisie gained money and power, the working class suffered through poor working conditions. The bourgeoisie, also known as the middle class, gained money and power as the industrial capitalism got stronger.

How does capitalism affect society? ›

In short, capitalism can cause – inequality, market failure, damage to the environment, short-termism, excess materialism and boom and bust economic cycles.

Who benefits from capitalism? ›

Individual capitalists are typically wealthy people who have a large amount of capital (money or other financial assets) invested in business, and who benefit from the system of capitalism by making increased profits and thereby adding to their wealth.

How does capitalism benefit society? ›

Capitalism is the greatest economic system because it has numerous benefits and creates multiple opportunities for individuals in society. Some of these benefits include producing wealth and innovation, improving the lives of individuals, and giving power to the people.

What are the 5 main characteristics of capitalism? ›

Capitalism has many unique features, some of which include a two-class system, private ownership, a profit motive, minimal government intervention, and competition.

What is the role of industrial capitalism in society? ›

Industrial capitalism saw the rapid development of the factory system of production, characterized by much more rigid, complex, and intricate divisions of labor, both within and between production processes, to which reference has already been made.

What factors contributed to the growth of capitalism? ›

From the 16th to the 18th century in England, the industrialization of mass enterprises, such as the cloth industry, gave rise to a system in which accumulated capital was invested to increase productivity—capitalism, in other words.

How is capitalism different from communism? ›

In a capitalist economy, production is determined by free market forces such as supply and demand. In a communist economy, the government determines which goods and services get produced and how much is available at any given time. When the government controls supply and demand, it also controls prices.

Is capitalism better than mercantilism? ›

Is Capitalism Better Than Mercantilism? Capitalism and capitalist trade theory is generally considered both more accurate and more stable than mercantilism. Mercantilism has two core problems that have made it an unreliable form of economic theory.

When was capitalism created? ›

Modern capitalist theory is traditionally traced to the 18th-century treatise An Inquiry into the Nature and Causes of the Wealth of Nations by Scottish political economist Adam Smith, and the origins of capitalism as an economic system can be placed in the 16th century.

Videos

1. The Half Has Never Been Told: Slavery and the Making of American Capitalism
(US National Archives)
2. The Economy That Slavery Built
(Podcast for work better)
3. Legacy of Slavery in American Medicine and Psychiatry
(UW PBSCI)
4. Joshua Rothman: John Armfield, Slave Trader Lecture
(Roberson Project)
5. The Half Has Never Been Told: Slavery and the Making of American Capitalism (w/ Edward E. Baptist)
(The Majority Report w/ Sam Seder)
6. Sexuality and Slavery: Reclaiming Intimate Histories in the Americas
(American Historical Association)

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