Revisiting the Profitability of Slavery: Slave Hiring Rates and the Return on Investments in Slaves in the Antebellum US South

Klas Rönnbäck

doi:10.1163/2405836X-00801003

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Revisiting the Profitability of Slavery

Slave Hiring Rates and the Return on Investments in Slaves in the Antebellum US South

In: Journal of Global Slavery

Author:

Klas Rönnbäck

Klas Rönnbäck University of Gothenburg Sweden Gothenburg

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https://orcid.org/0000-0003-1347-0004

Online Publication Date:: 23 Feb 2023

Abstract

This article revisits the scholarly debate on the profitability of historical slavery. The article examines the case of the antebellum US South, using slave hire rates as a proxy for the net rent on investments in slavery. It employs empirical data and a more advanced methodological approach to the issue than in previous research. The results suggest that the profitability of slavery was much higher than what most previous research has shown, around 14–15 per cent per year on average after adjusting for mortality risk, but that the return also fluctuated over time. It was on average more profitable for Southern capital owners to invest in slaves than investing in many alternatives such as financial instruments or manufacturing activities in the US South, as long as slavery remained a legal institution.

Abstract

Keywords: profitability; slave hire rates; capitalism; slavery; United States; antebellum

1 Introduction

It was long held that slavery was a rather irrational institution in economic terms; slaves were thought to be expensive to purchase, and by many believed to be less productive than non-enslaved workers, and therefore could be quite unprofitable for many masters to own. This idea that slavery was unprofitable, and hence economically irrational, has generated a long debate on the profitability of businesses linked to slavery, ranging from companies and merchants involved in the transatlantic slave trade to the profitability of sugar plantations in the Caribbean or cotton plantations in the United States. This research has clearly refuted the idea that the exploitation of slaves was unprofitable in general. At issue in modern-day research is, instead, just how profitable slavery was in comparison with other relevant investment opportunities. Simply put, would an owner of slaves have gained more from selling the slaves and instead investing his capital in something other than the slaves, such as in corporate or government bonds, or in manufacturing industries?

This article contributes to this literature by studying the profitability of slavery in the case of the antebellum United States. This is arguably a critical case for our understanding of how profitable slavery could be, as this was one of the most important economic sectors in the nineteenth-century Americas. Methodologically, the present article extends upon previous research by Robert Evans, who used the cost of hiring a slave as a proxy for the net rent that a slave-owner could make from his ownership of the slave. While Evans’ method generally was well received by other scholars, his empirical research was highly criticized for possible biases in the sample of data collected on slave hire rates and has for that reason largely been dismissed in the historiography on the economics of slavery. This article makes four novel contributions to this field of research. Firstly, Evans’ empirical data on slave hires is complemented with data from three other datasets on slave hire rates to analyze whether critics of Evans’ estimates were right. The datasets have all been collected independently of each other, allowing for an analysis of the possible biases in them. Secondly, the gains and losses on the capital invested in the slaves—due to generally rising prices of slaves during the period under study, but also changes in the value of the individual slaves—is included in the estimates. Thirdly, the datasets employed allow for constructing a time-series (instead of point estimates from particular years as in much previous research), and thereby allow us to analyze how the profitability changed over time, from the early nineteenth century to the outbreak of the Civil War in 1860. It can thereby help settle the controversy over whether particular benchmark years studied in previous research were atypical or not. Fourthly, the estimates incorporate an analysis of the cost of slave life insurance in order to control for the mortality risk of slaves, when comparing the return on investments in slaves with other alternative economic opportunities.

2 Previous Research on the Profitability of Slavery in the Americas

In recent years, there has been an intensive interest in the role slavery played in the development of modern capitalism, in Europe as well as in the Americas. Some scholars have argued that slavery played a key role for the development of capitalism, most importantly in Southern United States during the nineteenth century.^¹ Other scholars, who in many cases have employed a broader geographical approach to the issue, have instead argued that slavery at most played a marginal, or perhaps even a negative role, for the development of modern capitalist societies.^² The recent controversies bring back several issues concerning slavery that have preoccupied scholars of historical slavery for decades. One such key issue, and the one that will be in focus in the present article, is how profitable slavery really was for the traders and masters involved. A classic idea held that slavery was (or at least could be) unprofitable. Slave masters did not necessarily have a capitalist mindset, or the intention of maximizing their profits, but owned slaves for other reasons such as embracing tradition or a hierarchical social order as important values.^³ But if slavery was an unprofitable relic of pre-capitalist societies, other scholars asked, why did it manage to survive for so long? While slavery was multifaceted, with social, cultural, religious factors all playing a part in the development of the institution, economic factors were certainly at the heart of the institution. This has spawned a wave of research into the profitability of the transatlantic slave trade, of slavery in general in the Americas, and in particular of slavery in the United States. I will here discuss this research in that order.

2.1 Transatlantic Slave Trade

Many scholars have attempted to study the profitability of the transatlantic slave trade. Most of these studies have been based on the returns from particular samples of ships involved in the slave trade during the eighteenth century. The estimated return on slave voyages varies greatly depending on the sample studied, ranging from –1 per cent to +30 per cent on average per voyage.^⁴ Other scholars have instead attempted to undertake a cost-revenue analysis on a macro-level. The variation between estimates is somewhat smaller using this method—the estimates are all in the range of 7 to 32 per cent per year—but the range is still large depending on the data employed and the assumptions made in these calculations.^⁵

2.2 Slave Labor Exploitation in the Americas Outside of the United States

William Sharp studied the profitability of exploiting slaves in mines in Colombia during the eighteenth century, finding that the profits varied greatly, but exceeded 10 per cent per year for most of the mines studied.^⁶ Most research has, however, focused upon the profitability of slave labor on plantations. Some of this research has then focused upon plantations cultivating sugar in the Caribbean and in Brazil, particularly during the eighteenth century. The results suggest that average rates of return around 5–10 per cent per year might have been quite normal.^⁷ Taking the changing market value of the plantations themselves into account, the total rate of return on investment in these plantations might have been in the range of 15–20 per cent per year during the eighteenth century.^⁸ Nicholas Radburn and Justin Roberts have also studied the practice of hiring out slaves in the form of “jobbing gangs” in the British Caribbean in the eighteenth century. Anecdotal evidence suggests that the profitability of owning and hiring out a slave could be very high, around 15 per cent or even higher per year.^⁹

2.3 Slave Labor Exploitation in the United States

Much research has finally been dedicated to studying the profitability of slave plantations in the antebellum United States in particular. The research was pioneered by Alfred Conrad and John Meyer.^¹⁰ Other scholars have later returned to this issue.^¹¹ A common thread in many of the studies in the field is that they attempt to estimate the profitability from the value of the output of cotton plantations. The results of the key estimates are all in the range of 4.5 to 10 per cent return per year.^¹² Estimates of the profitability of sugar plantations in antebellum Louisiana suggest an average profit of around 9–10 per cent per year.^¹³ If the estimates from many of the cotton plantations would be correct, the profits from exploiting slaves would many times have been lower than what an owner of capital could have gained from investing for example in financial instruments, such as corporate or government bonds, in the US South.^¹⁴ This begs the question of whether the slave masters were economically irrational, or whether some of these previous estimates of the profitability of slavery are misleadingly low. The estimates are in all cases based on a number of assumptions, for example about the productivity of the slaves, or the average price of the output. Much of the discussion on this previous research has thus been concerned with how realistic some of these assumptions really were.^¹⁵ Another problem with this previous research is that most of the studies only calculate data for one particular year (or at best for a couple of years). The cotton yields, and hence the profitability of the cotton plantations, for these particular years might be (and have by some critics indeed been claimed to be) very unrepresentative of average levels.

A completely different approach to studying the profitability of slavery in the antebellum US South was instead suggested by Robert Evans: to use data on slave hires as a proxy for the net rent that a slave owner could get from owning a slave.^¹⁶ The owner of a slave would not have hired out his/her slave if it would have been more profitable to exploit the slave’s labor on the owner’s plantation. If it, on the other hand, would have been highly profitable for owners to hire out their slaves, many other slave-owners would undoubtedly also have opted for this, so that an increased competition on the hiring market would have reduced the slave hire rates. Slave hire rates might thus be used as a proxy for the rent that an owner could expect from his/her ownership of a slave. Put relative to the capital investment in the slave (proxied for example by the purchasing price), it is possible to estimate the relative profitability of the investment in slavery. For this purpose, Evans collected a large sample of data on the cost of hiring a slave from the records of railroad companies and other similar institutions. Evans’ data suggests that the return on investments in male slaves was considerably higher than previous estimates based on plantation data, in the range of 9 to 17 per cent per year.^¹⁷ Sarah Hughes study, of a much smaller sample of slave hires, suggest an average annual return of 17 per cent of the appraised value of the individual slave for male slaves, and 9 per cent for female slaves.^¹⁸ Several scholars have agreed that Evans’ method essentially was sound, while others have criticized his empirical data.^¹⁹ Butlin for instance pointed out that most of Evans’ data date from the period 1852 to 1860, and that the sample is very limited for other years.^²⁰ More important is that there might be some systematic biases in Evans’ dataset. Firstly, the dataset might include some skilled slave laborers, so that the hire rates for average slaves might have been lower than what Evans estimated.^²¹ Secondly, the hire rates in Evans’ dataset most probably include a risk premium, as many owners might have considered it more risky to hire slaves out to railroad companies and similar (often urban) ventures than it would have been to have them work on plantations.^²² Criticism of Evans’ data was thus raised by several scholars, but was never substantiated by empirical evidence showing that the sample in reality was as biased as the critics claimed. Even though the criticism was unsubstantiated, Evans’ study has received very little attention ever since.^²³

3 Historical Context: Slave Hiring in the Americas

The practice of slave hiring was by no means novel in the nineteenth-century United States, nor was it unique to this country. Nicholas Radburn and Justin Roberts have traced the origin of slave hiring in the British Caribbean to the early eighteenth century, finding the first piece of evidence from Barbados in 1708.^²⁴ The practice seems to have developed in the United States around the same period of time. Jonathan Martin has traced the origin of the practice within the United States to the early eighteenth century. In 1712, the institution was prevalent enough in South Carolina to merit legislation. Evidence of the practice can also be found in Virginia from 1718. In Georgia, slave hiring can at least be dated to 1733.^²⁵

Slave hiring was initially a response to a demand for temporary labor, particularly for the harder or more dangerous tasks on a plantation. Slave hiring did not, however, become very important in many parts of the United States, such as the Chesapeake, until the 1750s. This shift has been attributed the growing importance of slave hiring in this particular region to a structural change in the Chesapeake economy at the time when many farmers switched from growing tobacco to growing wheat. As wheat cultivation has greater seasonal fluctuations in labor demand than tobacco cultivation, it became increasingly common for planters to hire slaves during the labor-intensive harvest.^²⁶ Farmers in the Chesapeake might also have pioneered the emergence of annual slave hires.^²⁷ This practice then spread across the South, and in many counties became the most common type of slave hiring contract.^²⁸ Slaves were then often hired starting on 1 January, New Year’s Day, in auction-like settings. Other contracts were entered into privately with family, friends, neighbors or business partners at various times of the year. Newspapers carried ads both from people wanting to hire, as well as from owners wanting to hire out, slaves.^²⁹ By the late eighteenth century, hiring agents start to appear in the primary sources, brokering contracts between hirers and owners. The agents also helped spread the practice of slave hiring geographically and socially, so that owners no longer needed to hire out slaves only through their own private networks.^³⁰ The slaves could be hired to perform a wide range of tasks, varying from domestic work, or working on plantations, to woodcutting, mining or railroad construction.^³¹ During the nineteenth century, slave hires became increasingly common in Southern United States. Estimates differ, but scholars have suggested that from 5 to 15 per cent of the total US slave population might have been hired out every year.^³² Estimates from the British Caribbean suggest that a similar share of the slaves might have been hired out annually there.^³³

While the practice might have developed in response to temporary (often seasonal) demands for labor, over time it developed into a much more complex institution. One of the key advantages for the hirers was that it remained a more flexible way of acquiring labor than purchasing a slave.^³⁴ At the same time, hiring a slave was in practice much cheaper than hiring a free laborer in the antebellum South, even when the costs for goods that a master was to provide to the hired slave (such as clothes or food) is taken into account.^³⁵ The practice could also be beneficial for financially strained small farmers or entrepreneurs, as they then would not have had to put up all the capital necessary to purchase a slave all at once.^³⁶ Clement Eaton has also found examples of persons who refused to own a slave because of “antislavery convictions”, but at the same time had no qualms hiring a slave from another master.^³⁷ The practice of slave hiring could even be found in ostensibly free states, such as Illinois.^³⁸

From the slave-owners’ perspective, flexibility was also a key advantage. Slave hiring was a means of reducing expenses for or earning money from slaves that—for shorter or longer periods of time—were superfluous to the owner’s own labor needs.^³⁹ Several scholars have also stressed how investing in slaves to be hired out could be a part of a lifecycle investment for non-planters, perhaps most importantly for overseers; investing first in slaves so that they, by hiring out the slaves, could accumulate enough capital to eventually also invest in a plantation of their own.^⁴⁰ Slaves could also be hired out by guardians administering estates on behalf of minors who had inherited slaves.^⁴¹ Other agents simply found that investing in a slave was a way of supplementing their own income from other types of work, or to fund their retirement, without having any intention of ever becoming planters themselves.^⁴² For some owners, hiring out a slave could also be a means of getting rid of slaves that they had troubles managing themselves, while still making a profit from the slave’s labor.^⁴³ A predominant motivation for many owners to hire out slaves throughout the antebellum South simply was, however, as Martin for example has put it, “to increase returns on their slave capital. […] Hiring out slaves made good economic sense, by providing returns that could rival those on other business ventures in the South.”^⁴⁴

4 Method

Estimating the profitability of any economic or business venture is fraught with problems. In focus here is the private profitability for the slave-masters, not including what some have called the “external effects” of slavery in the form of social costs (such as institutions for the surveillance and repression of slaves) nor the huge economic, social and psychological costs for the slaves themselves.^⁴⁵ In this article, the private profitability of slavery to the slave masters will be estimated via the total rate of return on investments in slavery. This rate of return will be estimated using data on slave hires as a proxy for the net rent earned from the capital investment in slaves. The method was pioneered long ago by Robert Evans. The method thus uses these net rents to estimate the annual return on investments by calculating the ratio of the net rent to the capital investment in the slave (for example proxied by the purchase price of slaves).

The main advantage of the method, Evans himself argued, is that the estimates are based directly on market data rather than being residuals, and that it requires observations of comparatively few variables, compared to alternative methods employed in the literature.^⁴⁶ An additional factor worth emphasizing is that the method allows for constructing annual time-series, in contrast to previous research, which only has been based on one or a few benchmark years. This allows for estimating changes in the profitability of slavery over business cycles (taking inflation into account).

Methodologically, the current article will make some key contributions to this literature. First, the total rate of return will be calculated, including not only the net rent on the capital invested (proxied by the slave hire rates), but also the capital gains or losses made by the slave-owner. And second, four different datasets on slave hire rates will be employed as proxies of the net rent from owning a slave. The four different datasets are employed in order to try to control for the possible biases in the individual datasets, suggested in previous critique of Evans’ estimates. Including both capital gains/losses and net rent in the calculation is in line with how the return on investments generally is calculated in modern research on financial history.^⁴⁷ Put in the form of an equation, the return on investments—or shorter, the profit—will be estimated in the following way:

Profit

4.1 Capital Investment in Slaves

In order to know the return on investment in slaves for the slave-owners, we first need to know how high the capital investments in slaves were. The purchase price of slaves in the antebellum South will here be used as a proxy for this. This has been studied empirically by several scholars previously. A key series of data, summarized by Richard Sutch, refer to the price of “prime male field hands” in New Orleans.^⁴⁸ Attempts have also been made to estimate the price of the average slave population throughout the South, taking the gender and age-profile of slaves into consideration.^⁴⁹ In line with this research, the price of an average male slave is here assumed to have been 90 per cent of the price of a “prime field hand,” based on previous research on the valuation of slaves, and the price of female slaves is assumed to have been 75 per cent of the price of a male slave.^⁵⁰ There were also geographical differences between the Upper and Lower South. Here, the price ratio between the Upper and Lower South has been calculated for benchmark years reported in previous research, and the ratio has been interpolated for the years between these benchmarks.^⁵¹

4.2 Capital Gains/Losses

Secondly, the capital gains or losses in one year is calculated as the product of the change in slave prices because of fluctuations on the market for slaves, the change in capital value due to slaves born during the year, and the change in the capital value due to ageing of the individual slaves. The yearly changes in the price of slaves on the market is gathered from the same sources as discussed above. The change in the capital invested in slavery due to the birth of slave children has been included in some previous research.^⁵² For simplicity, an assumption will be made that the capital invested in female slaves (only) increased equivalent to the annual growth of the of the slave population.^⁵³ The owner of a slave would, on the other hand, experience that the value of capital invested in slaves decreased due to ageing (and/or eventual death) of the individual slaves. In general, mortality rates were not particularly high among adult slaves.^⁵⁴ The mortality rates among slave children were certainly much higher than among non-slave children, but the average mortality rates among adult slaves was on par with the mortality rates of non-slaves of the same age.^⁵⁵ The mortality rates did, however, depend upon location and type of work, so that mortality rates among slaves forced to work on sugar plantations in the antebellum South for example was much higher than among the slave population in general.^⁵⁶ The estimates here will not take such differences into account, but only work with more general estimates of mortality rates. Previous research on the age-profile of slave prices allows for calculating some rough proxies for this change in the valuation of slaves.^⁵⁷ Judging from this data, a slave was in general considered to be in the prime of his life from the age of 20 to the age of 40. As their labor could be exploited for many years, it is presumed that the category of “prime” slaves was valued 1 per cent less per year of age on average relative the prime valuation. If we include all (male) slaves, the prices of older slaves (particularly 50 years and older) quickly dropped towards zero, so it is assumed that the valuation of a slave decreased 3 per cent per year of age when all (male) slaves are studied. Female slaves seem to have been valued to have a much shorter prime period of their life, from the perspective of the masters, so it is here expected that the value of female slaves dropped 5 per cent per year of age.

4.3 Net Rent

The hiring rates of slaves will be considered as proxy for the net rent that an owner of a slave could make from his ownership. As was noted above, critics have argued (but never substantiated with evidence) that Evans’ own dataset might suffer from biases in the form of skill and/or risk premia. Four different datasets of slave hire rates will for that purpose be employed in this study, in order to try to control for such biases. The data has been collected independently of each other and from different sources by Robert Evans, Robert Fogel and Stanley Engerman, Claudia Goldin and Robert Margo, respectively.

The sample of data collected by Robert Evans includes 5,768 observations of year-long contracts. Virtually all observations (94 per cent) come from the Upper South.^⁵⁸ Evans also collected data on monthly slave hires (in total 883 observations, 61 per cent of which are from the Upper South). There are only male slaves in Evans’ dataset. Most of the observations are from institutions such as railroad companies hiring slaves from the owners. The dataset does not report the occupation of the slaves hired, so Evans eventually included data on slave hires when “the source indicated that it probably represented a healthy adult male performing relatively unskilled labor.”^⁵⁹

The dataset collected by Robert Fogel and Stanley Engerman is made up of 20,253 observations, collected from probate records of slave-owners. The observations come primarily from rural areas of the South; 39 per cent from the Lower South and 61 per cent from the Upper South.^⁶⁰ 62 per cent of the slaves hired out were male, and 36 per cent female (the remainder of unknown gender). Most of the observations (89 per cent) are for yearly hires, a tiny fraction of the contracts covers a period longer than one year, and the remainder are for shorter terms (from one to eleven months). The dataset does include variables for the occupation and age of the slaves hired, but data is missing on these variables for the overwhelming majority of the observations (99.8 per cent and 97.2, respectively). The dataset also includes a variable with information on whether the slaves had a handicap in some way (e.g. aged, disabled, or sick). The vast majority (87 per cent) were not reported to have any handicaps, and were thus presumably able-bodied adults. Chad Dacus has noted that the dataset includes some observations where the reported hire cost is negative, speculating over whether these in reality might have been gifts rather than actual slave hires.^⁶¹ Outliers such as these have been excluded from the sample used in this article.

Claudia Goldin’s dataset is based on data from urban agents in cities in Virginia hiring slaves from the owners, for five benchmark periods from 1820 to 1860. The dataset is much smaller than the three other datasets (in total 381 observations, 65 per cent male and 35 per cent female).

Robert Margo’s dataset, finally, is based on contracts from US government forts hiring slaves from the owners for civilian work at the fort. All slaves hired by these forts were male. The sample is made up of 5,006 observations of slave-hires, out of which 66 per cent were for monthly slave hires and 34 per cent for daily slave hires. The vast majority of the observations (86 per cent of the sample) come from the Lower South. This is particularly the case for monthly slave hires, where 98 per cent of the observations are from the Lower South. In contrast to the other datasets, Margo’s data contain information on the occupational categories of all the slaves hired. The largest group (48 per cent of the sample) were simply categorized as “laborer.” Other important occupations among the slaves hired by the forts included carpenters and teamsters.

The annual data is the most direct measure to use in order to estimate the return that an owner could realize from owning a slave, for two reasons. First, the annual data shows what an owner actually received for hiring out a slave for a whole year, making it easy to calculate the annual net rent from the investment. Hiring rates for shorter periods as a rule seem to have been higher than for annual contracts, so a slave owner could temporarily earn even higher rates of return than the ones estimated in this study. These temporarily high returns could, however, come at the price of not being able to hire out a slave all the time. There might in addition have been seasonal fluctuations in the slave hiring rates.^⁶² Secondly, the annual slave hire contracts also seem to be the most standardized, so that someone hiring a slave for a full year as a rule would have to pay for the subsistence cost of the slave, including food, housing and medical bills. For shorter hires—daily or weekly—these costs would instead often (but not necessarily always) fall upon the owner of the slave.^⁶³

The data from the four datasets are all unbalanced time-series. 97 per cent of all observations in Evans’ dataset are dated from the period 1852–1860.^⁶⁴ 92 per cent of the data in Margo’s dataset on the other hand comes from the period 1835–1842. Fogel and Engerman’s dataset is the least concentrated to one particular sub-period, and as a rule has fair samples of data (more than 20 observations per year) from the 1810s onwards, and large samples of 100 observations or more from the 1830s onwards. Geographically, the data is reported by state in the antebellum South in three of the datasets, and by broad region—the Upper and the Lower South—in the fourth (by Evans). Due to the comparatively limited sample sizes, the data has in this article been aggregated by broad region in all datasets. Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, and South Carolina are then included in the Lower South, whereas Arkansas, Kentucky, Maryland, Oklahoma, Tennessee, and Virginia are included in the Upper South.

Finally, a very important issue is whether the slave hire rates in the samples were representative of average slave hire rates, and whether the slaves hired were representative of the total slave population. This includes several aspects, including risk and skill premia, possible discounts, and selection effects among slaves hired.

Risk premia. Claudia Goldin have pointed out that slave-owners might have considered hiring slaves out to railroad companies and similar ventures (constituting Evans’ dataset) to be very risky, and therefore demanded a risk premium for such hires.^⁶⁵ The risk of slaves running away might, however, have been much higher in urban areas, so Goldin’s dataset might also suffer from such a risk premium, compared to the profit a slave-owner could expect to make in rural parts of the antebellum South. Having slaves work in government forts might likewise have been perceived as riskier for the owner than exploiting their labor on plantations, so it is not possible to rule out the possibility that Margo’s dataset on slave hire rates, too, includes a certain risk premium.
Skill premia. Previous scholars have noted that Evans’ dataset might contain some more highly skilled individuals, as Evans was unable to always control for this, so that the slave hire rates also include a certain skill premium.^⁶⁶ Several of the urban slaves in Goldin’s study were also skilled, so it is also possible that these hire rates also include a certain skill premium.^⁶⁷ It is not possible to rule out that this might be an issue in Fogel and Engerman’s dataset, too, as data on the occupation of the slaves hired out in this dataset is missing for the overwhelming majority of the observations in the sample. The only dataset where a skill premium can be ruled out with certainty is the one collected by Margo, as the occupations are clearly recorded for all entries in this dataset, allowing for selecting to use only (unskilled) laborers.
Discounts. While many of the hiring contracts were entered into by parties with little or no social relations outside of the market, for example via hiring agents, some slaves were hired by relatives, friends, or neighbors of the owner. In such cases, the person hiring the slaves might have received a discount on the hiring rate, thus exhibiting a downward bias compared to going market hiring rates. This is potentially the case primarily in the dataset of rural hiring rates collected by Fogel and Engerman. Indeed, as was noted above, the dataset contains some outliers with extremely low (in some cases thus even negative) hiring rates, supporting the hypothesis that this might have been the case at least for some observations. Primarily, the institutional hirers underlying the datasets collected by Margo and Evans, respectively, in contrast probably suffer little from such bias.
Selection effects. The slaves hired out were not necessarily representative of the total slave population. Selection effects might have worked in opposite directions for the different datasets. Agents hiring slaves would have wanted to hire as productive slaves as possible, so the samples of data based on such sources (the datasets by Evans, Goldin, and Margo) might all suffer from such a positive selection effect. The selection effect might have been the strongest in the case of the sample assembled by Margo, as the government most probably only would have wanted to hire less rebellious slaves to work in the military forts. Fogel and Engerman’s dataset, based on probate records of the slave-owners, would on the other hand potentially show a negative selection effect: previous research has for example shown that some owners preferred to hire out slaves they had problems managing themselves, and keep the best and most productive slaves to work on the own plantation.

Comparing the slave hire rates in the four different samples of data shows little support for Butlin’s critique of Evans’ sample of data: Evans’ monthly hire rates exhibit comparatively similar hire rates to the hire rates for unskilled slave laborers in Margo’s dataset (see appendix figure A2). Since we can be quite certain that there is no skill premium involved in the observations used from Margo’s dataset (as the occupation of the slaves are known for all these observations, and the selected observations in the figure only include unskilled laborers), it seems reasonable to conclude that there is little or no skill premia involved in Evans’ dataset, either. It is, on the other hand, not possible to rule out Goldin’s critique of Evans’ data, that there might be a risk-premium included in these series of hire rates.

Another issue is whether the slaves hired were representative of the broader slave population, or if they were positively or negatively selected in either sample? It is not possible to tell this for certain in any case, but if that would have been the case for the sample of data collected by Fogel and Engerman, the cost of hiring unskilled free laborers in the antebellum South on average would have been around 200 per cent higher than the cost of hiring a slave.^⁶⁸ That the labor markets for free and enslaved labor would have been so badly integrated seems improbable. It seems more plausible to assume that the slave in this particular sample might have been negatively selected to some extent, or that there might have been certain discounts involved when hiring out slaves to relatives or neighbors. The slave hire rates in this dataset could then suffer from a quite substantial downward bias compared to what a slave-owner could expect to profit from exploiting an average slave. The cost of hiring (and what a slave-owner thus could expect to profit from hiring out) an average slave would then plausibly have fallen somewhere between the estimates by Fogel and Engerman on the one hand, and by the three other scholars on the other hand.

5 Results

Figures 1a–b show the results for the total return on investments in slaves in the Lower and Upper South, respectively, using the data from Fogel & Engerman as a lower boundary, and the data from Evans as an upper boundary for the estimates.

Figure 1a

Total real return on investment in slaves in the United States, 1806–1860, by year

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Figure 1b

Total real return on investment in slaves in the United States, 1806–1860, by year

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Sources: slave hires rates; Evans = Evans, “The Economics of American Negro Slavery, 1830–1860”; F&E = Fogel and Engerman, “Slave Hires, 1775–1865”. Capital gains from price changes based on Sutch, “Slave Prices, Value of the Slave Stock, and Annual Estimates of the Slave Population: 1800–1862”, tables Bb209–211. Capital gains for female slaves due to population growth based on Sutch, table Bb214. Capital losses due to ageing based on Fogel and Engerman, Time on the Cross, fig. 18; adjusted for inflation based on consumer price index from Peter Lindert and Robert Margo, “Consumer Price Indexes” in Historical Statistics of the United States (Cambridge University Press, 2006), table Cc2

As can be seen in the figures, the return on investment fluctuated substantially between the years. This is primarily due to changes in the purchase price of the slaves. These changes were clearly related to business cycles in the antebellum Southern economy. Cotton had, for example, increased in price for several years until 1818, due to increasing demand from Britain in particular. In 1819, however, cotton prices dropped drastically, leading to the “Panic of 1819,” with repercussions for several years after.^⁶⁹ This would also have repercussions on the market for slaves, so that the prices for slaves tumbled in the following years—having peaked at more than $ 1,000 for a prime male field hand in 1818, the price of such slaves dropped to less than $ 600 some five years later. The same pattern would repeat itself some two decades later, with the “Panic of 1837.” This panic was not solely driven by the cotton market, but has been attributed to many different factors. The effects nonetheless lasted for several years.^⁷⁰ These effects again had major repercussions for the market for slaves: the price of a prime male field hand peaked at around $ 1,300 in 1837, but was some five years later again below $ 600. In terms of the return on investment, these drastic price-drops would mean a substantial capital loss for any slave-owner who during these depressed times, for one reason or another, had to realize the capital that they had invested in the slaves. The rent that a slave-owner could gain from exploiting the labor of a slave—here proxied by the slave hire rates—were in contrast much more stable over time. The slave hire rates in general moved in tandem with the development of the purchase price of the slaves—possibly with a slight lag. The effect was that the net rent from slave hiring normally was in the range of 8–10 per cent per year on the capital invested in the slave.

It is also noteworthy that the gender differences are minor: male and female slaves seem to have provided the owner with quite similar total return on investment. The minor differences that do occur on an aggregate level (see table 1, panel A) mainly occur because of missing data either for male or female slaves some particular years—for years of comparable data, there are only very small gender-differences in the estimated figures. This lends credibility to the different assumptions and proxies employed when estimating the total return on investment by gender (discussed further in the methods section above).

Table 1

Total real return on investments in slaves in the antebellum South, total for the period 1806–1860 (per cent per year)

Gender	Upper/	Source	Sample	Average return		S.d.	Min	Max
	Lower	of	size	(per cent per year,
	South	hire		geo. mean)
		rates
				Whole	1830–
				period	1860
Panel A: plain hiring rates
Male	Upper	F&E	5,747	+10.3	+11.1	14.5	–19.7	+57.8
Male	Lower	F&E	3,005	+7.5	+8.6	11.5	–22.0	+31.3
Female	Upper	F&E	3,307	+7.8	+8.7	13.6	–21.6	+47.0
Female	Lower	F&E	1,504	+6.5	+7.4	11.3	–22.7	+30.4
Male	Upper	E	5,420		+18.3	12.8	–15.6	+39.1
Male	Lower	E	348		+19.2	11.4	–2.9	+44.3
Panel B: including a purchase of life insurance
Male	Upper	E	5,420		+14.1	12.3	–18.2	+33.7
Male	Lower	E	348		+15.1	11.1	–6.2	39.5

Sources: see figures 1–2

There is, on the other hand, a quite substantial difference in the estimated total return on investment between the upper- and lower-boundary estimates. As was discussed above, this is possibly due to biases in the respective datasets, with an upward bias in the former, and a downward bias in the latter. The hire rates that can be found Evans’ dataset are more or less on par with the annual rates found in the datasets assembled by Goldin, or the monthly rates assembled by Margo (see appendix to this article). That these three datasets exhibit quite similar hiring rates does—as was argued above—probably reflect the higher risks that the owners believed such hires entailed for them (both in terms of risk of injury or death, or the risk that the slave might run away).

We can control for this individual-level risk when estimating the return on investments in slavery, due to the institution of slave life insurance. Masters could thus purchase slave life insurance, whereby the master would be reimbursed in case the slave died. As the market for hiring out slaves grew, so did a market for such insurance.^⁷¹ Most slave life insurance was also purchased exactly for slaves that were hired out for working in urban settings.^⁷² Slave life insurance was primarily purchased when the owners perceived that there was some extraordinary risk involved in the task that the slaves was to undertake.^⁷³ There were even some companies offering runaway slave insurance, and developed means by which to pursue runaways using the dues paid for the insurance.^⁷⁴

Data on the premia for slave life insurance allow us to calculate what the return on investment in a slave, controlling for mortality risk, would look like.^⁷⁵ The responsibility for illness and/or death of a hired slave was many times stipulated in the hiring contracts. Courts did furthermore many times hold the hirers of the slaves liable for such losses, and as a rule did so in particular if it could be shown that the hirer had been negligent, in order to minimize moral hazard when hiring slaves.^⁷⁶ The risks might therefore in effect often have been carried by the agents hiring the slaves. Many of the owners did, nonetheless, themselves take out an insurance on the slaves they hired out.^⁷⁷ Annual basic premia for slave life insurance was then in the range of $ 1.2–2.0 per $ 100 of insurance for adult slaves in the ages 15–30 years old.^⁷⁸ There was in addition a particular risk premium for particularly risky occupations, such as working for railroads, on steamboats or in mines, but also an additional climate risk for slaves working in the Lower South.^⁷⁹ Formally, insurers were as a rule only able insure a slave to 75 per cent of the value of the slave in order to counter moral hazard, but this was often easily circumvented as there was no objective external valuation of the slaves.^⁸⁰ For the estimates here, we assume that the owners were able to acquire a slave life insurance equivalent to the full value of the slave. As slave life insurance was primarily purchased exactly in such cases as in the hire contracts underlying Evans’ dataset, we here use this data as the proxy for the net rent possible from slave hires, from which the insurance premium was deducted. In addition to the basic insurance premium, the risk premium is then added to the equation to reflect the fact that the occupations that these slaves might have had might have been particularly risky, and the particular premium for insurance for slaves working in the Lower South is also added for that sample of the data. The results are shown by year in figure 2, and in aggregate in panel B of table 1.

Figure 2

Total real return on investment in slaves in the United States, including cost of slave life insurance, 1830–1860, by year

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Sources: in addition to sources for figure 1, slave life insurance premia based on Savitt, “Slave Life Insurance in Virginia and North Carolina”, table 2; Murphy, “Securing Human Property”, table 4; Ryder, “Permanent Property”, table 3.1; ROI from financial instruments from Bodenhorn and Rockoff, “Regional Interest Rates in Antebellum America”, table 5.2

The return on investments in slaves (controlling for mortality risk) can then be compared to the return on investment in financial instruments, such as corporate or government bonds. Data on such return has been assembled in previous research by Howard Bodenhorn and Hugh Rockoff from five states in the antebellum South.^⁸¹ For the comparison undertaken here, a simple arithmetic average is calculated for each year from the states in the Lower and Upper South, respectively. The results are shown in figure 2. The total return on investment in slaves was certainly fluctuating much more than the return on investing in financial instruments, and was from that perspective certainly riskier than investing in financial instruments. That fluctuation did, however, pay off in terms of considerably higher average return over the period under study. While the average return on investing in financial instruments in the antebellum South at the time was around 5–6 per cent per year, the average total return on investment in slaves, after adjusting for insurance costs, was on average around 14–15 per cent per year.^⁸² Only during a few odd years, such as following the panic of 1837, did the return on investments in slaves fall significantly below the return on investments in financial instruments. The estimated figures are well in line with anecdotal evidence from a contemporary observer, Johann Schoepf, who claimed that owners could make a profit of around 15–20 per cent per year on hiring out a slave.^⁸³ Financial instruments were certainly not the only alternative investment opportunity. Another opportunity was to invest in Southern manufacturing. The profitability of such ventures has been highly debated in previous research. Fred Bateman, James Foust and Thomas Weiss have suggested that capital invested in Southern manufacturing could yield a return in the range of 20–30 per cent per year.^⁸⁴ Other scholars have, however, noted that these estimates are highly biased upwards due to the methodologies employed by Bateman and co-authors, suggesting that the true return on investments in Southern manufacturing might have been significantly lower, probably around 10–12 per cent per year.^⁸⁵ It is beyond the scope of the current article to evaluate that research in-depth. Suffice to say here that investing in slaves was a highly profitable business—on average much more profitable than investing in financial instruments, and most probably also higher than investing in manufacturing industries in the antebellum South. Investing in slaves might therefore have been most rational for an investor looking to diversify his or her portfolio.

One major systemic risk that remained throughout the antebellum period—and a risk which eventually also was realized—was that slavery as a whole would be abolished, without compensation to the owners. Once that political risk started to become more acute during the late 1850s and early 1860s, the price of slaves also started to drop substantially.^⁸⁶ This is also reflected in the returns estimated in this article for the final year under study (see figures 1a–b). Following the outbreak of the Civil War, the returns on such investments were presumably also negative, as the prices of slaves continued to drop. When the Confederate States lost the Civil War, and slavery was legally abolished without any compensation to the former owners, the capital that had been invested in purchasing these slaves was null and void. The systemic shift thus eventually created huge capital losses for the former slave owners. The Southern economy was in the aftermath of the war left with a much lower capital stock than the US North, which undoubtedly retarded its further development. This would then have worked in tandem with other factors retarding further economic development in the U.S. South. These factors suggested in previous research include the low cost of labor attributable to disincentives that slavery had created in investment in the mechanization of agriculture or limited in the educational attainment of enslaved individuals.^⁸⁷

6 Conclusion

Today, there is a widespread consensus that slavery was a brutal and highly exploitative system. By contrast, the question over how profitable slavery and the slave trade really was for the masters or slave-traders remains a subject of a heated debate among historians. While some argue that slavery and/or the slave trade were extraordinarily profitable for the masters or slave-traders, others have argued that the profits were low—and in some instances even might have been lower than the profits possible from alternative economic opportunities. The latter perspective begs the question of why so many masters then would have kept investing in slaves, and struggled to uphold the system.

This article contributes to this field of research by studying the case of slavery in the antebellum United States. Previous research has suggested that Southern slave-owners might not have cared too much about (or even been hostile towards) maximizing their profits, but owned slaves primarily as part of a conservative, Southern tradition. The results of this study would instead suggest that, while slave-owners certainly might have been conservative traditionalists, they nonetheless made substantial return on their investments in slaves. The results of this study suggest that the average return on investment in slaves, after adjusting for insurance costs against mortality risk, amounted to 14–15 per cent per year. Such a return was substantially higher than what a capital-owner could make from alternative Southern investment opportunities.

The data presented in this article shows that the idea that slavery exhibited low profits is incorrect. Exceptions to this occurred in the immediate wake of the two major economic “panics,” in 1819 and 1837, as the purchase prices of slaves then also tumbled, and thereby might have created real losses for slave-owners who—for one reason or another—were forced at precisely this time to realize the capital they previously had invested in slaves. As long as the institution remained legal, this investment was undoubtedly more lucrative than alternatives such as investing in financial instruments in the antebellum South. It is therefore not surprising that enslaved people came to make up an ever-increasing share of the total wealth in the US South all the way until the Northern victory in the Civil War.

Appendix. Slave Hire Rates in the Antebellum US South

Figure A1 shows data on annual slave hire rates using three different datasets; those collected by Evans, by Fogel and Engerman, and by Goldin, respectively. A couple of things are worth noticing. Firstly, the hire rates collected by Evans are substantially higher than the ones collected by Fogel & Engerman in all but some exceptional years, but for several of the benchmark years only slightly higher than the hire rates collected by Goldin. Secondly, the time-series seem to follow the same pattern over time, particularly so in the case of the Upper South where we have comparatively large samples of data in all datasets. The latter fact is reassuring of the general reliability of the data. The fact that the levels of the hire rates are significantly different also confirm the discussion in the main article about possible biases in the data, where it was pointed out that Evans’ and Goldin’s datasets might suffer from an upward bias in particular due to a risk premium being incorporated into the hire rates recorded in the sources employed, whereas the dataset by Fogel and Engerman might suffer from a downward bias, due to the sample being made up of a negative selection from the total slave population.

Figure A1a

Annual hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per year, current prices)

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Similar patterns can also be seen in the data on monthly hire rates, shown in figure A2. Here data is also reported from three different datasets; in this case collected by Evans, by Fogel and Engerman, and by Margo, respectively. Again, Fogel & Engerman’s hire rates are substantially lower than the hire rates exhibited in the two other datasets for the Lower South, where we have comparatively larger samples of data. The pattern is not as clear-cut in the case of the Upper South, but the samples of monthly data from this region are very small, so this data should be interpreted with great caution. In the main, the monthly data seem to exhibit the same characteristics as the annual data.

Figure A1b

Annual hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per year, current prices)

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Sources: Evans, “The Economics of American Negro Slavery, 1830–1860”, tables 29–42; Goldin, Urban Slavery in the American South 1820–1860: A Quantitative History, table 24; Fogel and Engerman, “Slave Hires, 1775–1865”

Figure A2a

Monthly hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per month, current prices)

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Figure A2b

Monthly hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per month, current prices)

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Sources: Goldin, Urban Slavery in the American South 1820–1860: A Quantitative History, table 24; Fogel and Engerman, “Slave Hires, 1775–1865”; datasets underlying Robert A. Margo and Georgia C. Villaflor, “The Growth of Wages in Antebellum America: New Evidence,” The Journal of Economic History 47, no. 4 (1987): 873–895; Robert A. Margo, Wages and Labor Markets in the United States, 1820–1860 (Chicago: University of Chicago Press, 2000)

It is beyond the scope of the present article to provide an exhaustive review of this literature, but for some key publications, see Seth Rockman, “The Unfree Origins of American Capitalism,” in Cathy Mason, ed., The Economy of Early America: Historical Perspectives & New Directions (University Park: Pennsylvania State University Press, 2006), 335–362; Walter Johnson, River of Dark Dreams: Slavery and Empire in the Cotton Kingdom (Cambridge, Mass.: Harvard University Press, 2013); Edward Baptist, The Half Has Never Been Told: Slavery and the Making of American Capitalism (New York: Basic Books, 2014); Sven Beckert, Empire of Cotton: A New History of Global Capitalism (London: Penguin, 2014); Calvin Schermerhorn, The Business of Slavery and the Rise of American Capitalism, 1815–1860 (New Haven: Yale University Press, 2015); Sven Beckert and Seth Rockman, Slavery’s Capitalism: A New History of American Economic Development (Philadelphia: University of Pennsylvania Press, 2016).

Eric Hilt, “Economic History, Historical Analysis, and the ‘New History of Capitalism,’ ” The Journal of Economic History 77, no. 2 (2017): 511–536; Alan L. Olmstead and Paul W. Rhode, “Cotton, Slavery, and the New History of Capitalism,” Explorations in Economic History 67 (2018): 1–17; Gavin Wright, “Slavery and Anglo-American Capitalism Revisited,” The Economic History Review 73, no. 2 (2020): 353–383; Trevor Burnard and Giorgio Riello, “Slavery and the New History of Capitalism,” Journal of Global History 15, no. 2 (2020): 225–244.

This idea has a long history, but for some recent contributions on the theme, see for example Eugene D. Genovese, The Slaveholders’ Dilemma: Freedom and Progress in Southern Conservative Thought, 1820–1860 (Columbia, S.C.: University of South Carolina Press, 1992); Elizabeth Fox-Genovese and Eugene D. Genovese, The Mind of the Master Class: History and Faith in the Southern Slaveholders’ Worldview (New York: Cambridge University Press, 2005).

Joseph Inikori, “English Trade to Guinea” (PhD diss., University of Ibadan, Ibadan, 1973), 424; Roger Anstey, The Atlantic Slave Trade and British Abolition 1760–1810 (London: Macmillan, 1975), table 2; David Richardson, “Profitability in the Bristol-Liverpool Slave Trade,” Outre-Mers. Revue d’histoire 62, no. 226 (1975): 301–308; David Richardson, “Profits in the Liverpool Slave Trade: The Accounts of William Davenport, 1757–1784,” in Roger Anstey and P.E.H. Hair, eds., Liverpool, the African Slave Trade, and Abolition (Historical Society of Lancashire and Cheshire, 1976), 60–90; Robert Stein, “The Profitability of the Nantes Slave Trade, 1783–1792,” Journal of Economic History (1975): 779–793, table 2; Robert Louis Stein, The French Slave Trade in the Eighteenth Century: An Old Regime Business (Madison: University of Wisconsin Press, 1979), table 10.3; Joseph E. Inikori, “Market Structure and the Profits of the British African Trade in the Late Eighteenth Century,” Journal of Economic History (1981): 772; Johannes Menne Postma, The Dutch in the Atlantic Slave Trade 1600–1815 (Cambridge: Cambridge Univ. Press, 1990), appendix table 25; David Hancock, Citizens of the World: London Merchants and the Integration of the British Atlantic Community, 1735–1785 (Cambridge: Cambridge University Press, 1995), table AIV.3; Guillaume Daudin, “Profitability of Slave and Long-Distance Trading in Context: The Case of Eighteenth-Century France,” Journal of Economic History (2004): 144–171, table 2; Guillaume Daudin, Commerce et Prospérité : La France Au XVIIIe Siècle (Paris: Presses de l’Université Paris-Sorbonne, 2005), tables 25 & 44; Cheryl S. McWatters, “Investment Returns and La Traite Négrière: Evidence from Eighteenth-Century France,” Accounting, Business & Financial History 18, no. 2 (2008): 161–185; Nicholas Radburn, “William Davenport, the Slave Trade, and Merchant Enterprise in Eighteenth-Century Liverpool” (Wellington: University of Wellington, 2009), tables 7–10; Gerhard de Kok, “Walcherse Ketens: De Trans-Atlantische Slavenhandel En de Economie van Walcheren, 1755–1780” (PhD diss., University of Leiden, Leiden, 2019), chap. 3.

Anstey, The Atlantic Slave Trade and British Abolition 1760–1810, table 1; Roger Anstey, “The Volume and Profitability of the British Slave Trade, 1761–1807,” in Stanley Engerman and Eugene Genovese, eds., Race and Slavery in the Western Hemisphere: Quantitative Studies (Princeton: Princeton University Press, 1975), 3–31, table 6; William Darity, “The Numbers Game and the Profitability of the British Trade in Slaves,” The Journal of Economic History 45, no. 3 (1985): 693–703, table 3; Stephen D. Behrendt, “The British Slave Trade, 1785–1807: Volume, Profitability, and Mortality” (PhD diss., The University of Wisconsin-Madison, Madison, 1993), 108.

William F. Sharp, “The Profitability of Slavery in the Colombian Chocó, 1680–1810,” Hispanic American Historical Review 55, no. 3 (1975): 468–495, table VI.

R. Keith Aufhauser, “Profitability of Slavery in the British Caribbean,” The Journal of Interdisciplinary History 5, no. 1 (1974): 45–67; John R. Ward, “The Profitability of Sugar Planting in the British West Indies, 1650–1834,” The Economic History Review 31, no. 2 (1978): 197–213, table 9; Alex Dupuy, “French Merchant Capital and Slavery in Saint-Domingue,” Latin American Perspectives 12, no. 3 (1985): 92; Stuart B. Schwartz, Sugar Plantations in the Formation of Brazilian Society: Bahia, 1550–1835 (Cambridge: Cambridge University Press, 1985), 226; Robert Louis Stein, The French Sugar Business in the Eighteenth Century (Baton Rouge: Louisiana State University Press, 1988), 85; Richard Sheridan, Sugar and Slavery: An Economic History of the British West Indies, 1623–1775 (Kingston: Canoe Press, 1994), 381–384; Seymour Drescher, Econocide—British Slavery in the Era of Abolition (Chapel Hill: University of North Carolina Press, 2010), 44; Trevor Burnard, Planters, Merchants, and Slaves Plantation Societies in British America, 1650–1820 (Chicago: University of Chicago Press, 2015), 16, 126, 131, 141.

Karl B. Koth and John E. Serieux, “Sugar, Slavery and Wealth: Jamaica Planter Nathaniel Phillips and the Williams Hypothesis (1761–1813),” Capitalism: A Journal of History and Economics 1, no. 1 (2019): 59–91, tables 1–2.

Nicholas Radburn and Justin Roberts, “Gold versus Life: Jobbing Gangs and British Caribbean Slavery,” The William and Mary Quarterly 76, no. 2 (2019): 223–256.

Alfred H. Conrad and John R. Meyer, “The Economics of Slavery in the Ante Bellum South,” Journal of Political Economy 66, no. 2 (1958): 95–130, table 9.

Edward Saraydar, “A Note on the Profitability of Ante Bellum Slavery,” Southern Economic Journal (1964): 325–332; Richard Sutch, “The Profitability of Ante Bellum Slavery: Revisited,” Southern Economic Journal, (1965): 365–377; James D. Foust and Dale E. Swan, “Productivity and Profitability of Antebellum Slave Labor: A Micro-Approach,” Agricultural History 44, no. 1 (1970): 39–62; Noel George Butlin, Ante-Bellum Slavery: A Critique of a Debate (Canberra: Department of Economic History, Australian National University, 1971); Robert William Fogel and Stanley L. Engerman, Time on the Cross: The Economics of American Negro Slavery (Boston: Little, Brown, 1974); Richard K. Vedder, David C. Klingaman, and Lowell E. Gallaway, “The Profitability of Ante Bellum Agriculture in the Cotton Belt: Some New Evidence,” Atlantic Economic Journal 2, no. 2 (1974): 30–47; Richard K. Vedder and David C. Stockdale, “The Profitability of Slavery Revisited: A Different Approach,” Agricultural History 49, no. 2 (1975): 392–404; Roger Ransom and Richard Sutch, One Kind of Freedom: The Economic Consequences of Emancipation (Cambridge: Cambridge University Press, 1977).

Richard Sutch, “African-American Slavery and the Cliometric Revolution,” in C. Diebolt and M. Haupert, eds., Handbook of Cliometrics (New York: Springer, 2019), 661–706, table 1.

David O. Whitten, “Tariff and Profit in the Antebellum Louisiana Sugar Industry,” Business History Review 44, no. 2 (1970): 233.

Howard Bodenhorn and Hugh Rockoff, “Regional Interest Rates in Antebellum America,” in Claudia Goldin and Hugh Rockoff, eds., Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel (Chicago: University of Chicago Press, 1992), 159–187.

Yasukichi Yasuba, “The Profitability and Viability of Plantation Slavery in the United States,” The Economic Studies Quarterly (Tokyo. 1950) 12, no. 1 (1961): 60–67; Harold D. Woodman, “The Profitability of Slavery: A Historical Perennial,” The Journal of Southern History 29, no. 3 (August 1963): 303; M.M. Leiman, “A Note on Slave Profitability and Economic Growth: An Examination of the Conrad-Meyer Thesis,” Social and Economic Studies (1967): 211–215; Stanley Newding, “Profitability of Slavery: A Study in the Methodology of Historical Inference” (PhD diss., Texas Tech University, 1968); Butlin, Ante-Bellum Slavery—a Critique of a Debate, chap. 2; Vedder and Stockdale, “The Profitability of Slavery Revisited.”

Robert Evans, “The Economics of American Negro Slavery, 1830–1860,” in Aspects of Labor Economics (Princeton: Princeton University Press, 1962), 185–256.

Evans, table 21.

Sarah S. Hughes, “Slaves for Hire: The Allocation of Black Labor in Elizabeth City County, Virginia, 1782 to 1810,” The William and Mary Quarterly: A Magazine of Early American History (1978): tbl. III; see also Lynda J. Morgan, Emancipation in Virginia’s Tobacco Belt, 1850–1870 (Athens, Ga.: University of Georgia Press, 1992), 62.

See for example Robert William Fogel and Stanley L. Engerman, Time on the Cross: Evidence and Methods: A Supplement (London: Wildwood House, 1974), 74; Butlin, Ante-Bellum Slavery—a Critique of a Debate, 78.

Butlin, Ante-Bellum Slavery—a Critique of a Debate, 90–93; see also Mark Stelzner and Sven Beckert, “The Contribution of Enslaved Workers to Output and Growth in the Antebellum United States” (Working Paper, Washington Center for Equitable Growth, Washington, D.C., 2021), 7.

Alfred H. Conrad, “Slavery as an Obstacle to Economic Growth in the United States: A Panel Discussion,” The Journal of Economic History 27, no. 4 (1967): 522; Butlin, Ante-Bellum Slavery—a Critique of a Debate, 90.

Claudia Goldin, Urban Slavery in the American South 1820–1860: A Quantitative History (Chicago: University of Chicago Press, 1976), 69.

For some recent studies that do refer to it, see for example Chad Dacus, “Essays on the Economic History of Slavery” (Houston: Rice University, 2008), chap. 1; Stelzner and Beckert, “The Contribution of Enslaved Workers to Output and Growth in the Antebellum United States”; Rajesh P. Narayanan and Jonathan Pritchett, “Financial Economics of United States Slavery,” in Oxford Research Encyclopedia of Economics and Finance (2021), 2–3.

Radburn and Roberts, “Gold versus Life,” 232.

Jonathan D. Martin, Divided Mastery: Slave Hiring in the American South (Cambridge: Harvard University Press, 2004), 21–27.

Morgan, Emancipation in Virginia’s Tobacco Belt, 1850–1870, 71.

Martin, Divided Mastery, 29–30.

Hughes, “Slaves for Hire,” 261; Keith C. Barton, “ ‘Good Cooks and Washers’: Slave Hiring, Domestic Labor, and the Market in Bourbon County, Kentucky,” The Journal of American History 84, no. 2 (1997): 440.

Martin, Divided Mastery, 47–48; John J. Zaborney, Slaves for Hire: Renting Enslaved Laborers in Antebellum Virginia (Baton Rouge: Louisiana State University Press, 2012), 23.

Morgan, Emancipation in Virginia’s Tobacco Belt, 1850–1870, 59; see also Clement Eaton, “Slave-Hiring in the Upper South: A Step Toward Freedom,” The Mississippi Valley Historical Review 46, no. 4 (1960): 664; Barton, “Good Cooks and Washers,” 441–442; Martin, Divided Mastery, 33.

Morgan, Emancipation in Virginia’s Tobacco Belt, 1850–1870, 59; Barton, “Good Cooks and Washers”; Michael Kennedy, “The Hidden Economy of Slavery: Commercial and Industrial Hiring in Pennsylvania, New Jersey and Delaware, 1728–1800,” Essays in Economic & Business History 21 (2003): 117; Zaborney, Slaves for Hire, 120–125.

Martin, Divided Mastery, 8; see also Hughes, “Slaves for Hire,” 265; Zaborney, Slaves for Hire.

Radburn and Roberts, “Gold versus Life,” 235.

Hughes, “Slaves for Hire,” 261; Barton, “Good Cooks and Washers,” 444; Kennedy, “The Hidden Economy of Slavery,” 119; Martin, Divided Mastery, 18–19.

Klas Rönnbäck, “Were Slaves Cheap Laborers? A Comparative Study of Labor Costs in the Antebellum U.S. South,” Labor History 62, no. 5–6 (2021): 721–741.

Eaton, “Slave-Hiring in the Upper South,” 676; Martin, Divided Mastery, 31; Zaborney, Slaves for Hire, 12.

Eaton, “Slave-Hiring in the Upper South,” 667–668.

Thomas Bahde, “ ‘I Would Not Have a White Upon the Premises’: The Ohio Valley Salt Industry and Slave Hiring in Illinois, 1780–1825,” Ohio Valley History 15, no. 2 (2015): 49–69.

Barton, “Good Cooks and Washers,” 444; Kennedy, “The Hidden Economy of Slavery,” 116; Martin, Divided Mastery, 18–19, 74–75; Zaborney, Slaves for Hire, 150.

Martin, Divided Mastery, 40; Radburn and Roberts, “Gold versus Life,” 227; Laura R. Sandy, The Overseers of Early American Slavery: Supervisors, Enslaved Labourers, and the Plantation Enterprise (New York: Routledge, 2020), 161–166; Trevor Burnard, Mastery, Tyranny, and Desire: Thomas Thistlewood and His Slaves in the Anglo-Jamaican World (Chapel Hill: University of North Carolina Press, 2004), table 2.2.

Barton, “Good Cooks and Washers,” 437; Zaborney, Slaves for Hire, 14.

Martin, Divided Mastery, 75; Zaborney, Slaves for Hire, 19.

Eaton, “Slave-Hiring in the Upper South,” 667; Martin, Divided Mastery, 78–79.

Martin, Divided Mastery, 80; see also Eaton, “Slave-Hiring in the Upper South,” 663; Barton, “Good Cooks and Washers,” 439; Zaborney, Slaves for Hire, 160.

Robert E. Wright, The Poverty of Slavery How Unfree Labor Pollutes the Economy (Cham: Springer International Publishing, 2017).

Evans, “The Economics of American Negro Slavery, 1830–1860,” 191.

Elroy Dimson, Paul Marsh, and Mike Staunton, Triumph of the Optimists: 101 Years of Global Investment Returns (Princeton: Princeton University Press, 2002).

Richard Sutch, “Slave Prices, Value of the Slave Stock, and Annual Estimates of the Slave Population: 1800–1862,” in Susan B. Carter, et al., eds., Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, (New York: Cambridge University Press, 2006), table Bb, 209–214.

Roger Ransom and Richard Sutch, “Capitalists without Capital: The Burden of Slavery and the Impact of Emancipation,” Agricultural History 62, no. 3 (1988): 133–160, table A.5.

Assumptions based on age and sex profile of slave values in Ransom and Sutch, table A.5. The assumptions are intentionally conservative to not overestimate the return on profits. If we assume a lower figure for the ratio between the values of average and prime male slaves, the corresponding estimates for the average return on investment increases.

Ransom and Sutch, table A.3. Benchmark years are 1800, 1810, 1813, 1819, 1828, 1837, 1843, 1848, 1853, 1859 and 1860.

Vedder, Klingaman, and Gallaway, “The Profitability of Ante Bellum Agriculture in the Cotton Belt.”

Sutch, “Slave Prices, Value of the Slave Stock, and Annual Estimates of the Slave Population: 1800–1862,” table Bb214.

Richard H. Steckel, “Slave Mortality: Analysis of Evidence from Plantation Records,” Social Science History 3, no. 3–4 (1979): 86–114, table 2.

Richard H. Steckel, “A Dreadful Childhood: The Excess Mortality of American Slaves,” Social Science History 10, no. 4 (1986): 427–465, table 3.

Michael Tadman, “The Demographic Cost of Sugar: Debates on Slave Societies and Natural Increase in the Americas,” The American Historical Review 105, no. 5 (2000): 1534–1575.

Fogel and Engerman, Time on the Cross: The Economics of American Negro Slavery, fig. 18.

Evans, “The Economics of American Negro Slavery, 1830–1860,” tables 29–42.

Evans, “The Economics of American Negro Slavery, 1830–1860,” 196.

Robert William Fogel and Stanley L. Engerman, “Slave Hires, 1775–1865,” 1976; Fogel and Engerman, Time on the Cross.

Dacus, “Essays on the Economic History of Slavery,” 12.

Butlin, Ante-Bellum Slavery—a Critique of a Debate, 88.

Evans, “The Economics of American Negro Slavery, 1830–1860,” 194–196; Barton, “Good Cooks and Washers,” 442–443; Martin, Divided Mastery, 97–99.

Butlin, Ante-Bellum Slavery—a Critique of a Debate, 90–93.

Goldin, Urban Slavery in the American South 1820–1860, 69; Hiring out slaves to steamboat companies was apparently also seen as highly risky for the owner of the slave, and was likewise associated with a risk premium Eaton, “Slave-Hiring in the Upper South,” 664.

Conrad, “Slavery as an Obstacle to Economic Growth in the United States,” 522; Butlin, Ante-Bellum Slavery—a Critique of a Debate, 90.

Goldin, Urban Slavery in the American South 1820–1860, table 11.

Rönnbäck, “Were Slaves Cheap Laborers? A Comparative Study of Labor Costs in the Antebellum U.S. South”, table 1.

Andrew H. Browning, The Panic of 1819: The First Great Depression (Columbia: University of Missouri Press, 2019), 112–125.

Jessica M. Lepler, The Many Panics of 1837: People, Politics, and the Creation of a Transatlantic Financial Crisis (New York: Cambridge University Press, 2013).

Todd L. Savitt, “Slave Life Insurance in Virginia and North Carolina,” The Journal of Southern History 43, no. 4 (1977): 583–584.

Sharon Ann Murphy, “Securing Human Property: Slavery, Life Insurance, and Industrialization in the Upper South,” Journal of the Early Republic 25, no. 4 (2005): 615–652; Sharon Ann Murphy, Investing in Life: Insurance in Antebellum America (Baltimore: The Johns Hopkins University Press, 2010), 188–198; Karen Kotzuk Ryder, “Permanent Property”: Slave Life Insurance in the Antebellum Southern United States, 1820–1866 (Wilmington: University of Delaware, 2012), 105.

Ryder, “Permanent Property,” 3–4.

Ryder, 44–47.

In addition to mortality, a further risk within the system of slavery was that slaves could—and sometimes did—run away, and this was not in all cases covered by the life insurance policies. Southern courts routinely held the hirer responsible for the value of a slave who had run away Martin, Divided Mastery, 124., but taking a case to court nonetheless entailed a certain risk, and actually winning the case could take time. These heroic acts of resistance against the system of slavery have received deservedly much attention in scholarly research. The total number of runaway slaves in the antebellum South were, however, probably very low. Census figures from 1850 and 1860, respectively, suggest that around one thousand slaves in total were on the run in both of these years John Hope Franklin and Loren Schweninger, Runaway Slaves: Rebels on the Plantation (New York: Oxford Univ. Press, 1999), 279–280., J. Blaine Hudson has provided some very crude guesstimates, based on contemporary claims of the capital losses due to runaway slaves, of a total of 135,000 runaways for the whole period from 1810 to 1860, so less than 3,000 per year J. Blaine Hudson, Encyclopedia of the Underground Railroad (London: McFarland & Company, 2015), 9., i.e. perhaps one per one thousand enslaved persons. John Hope Franklin and Loren Schweninger mistrust the available data, and instead collected data of their own from Southern newspaper notices about runaway slaves into the Runaway Slave Database. The newspaper notices record even fewer runaways than the census data—in total they find 4,084 runaways over a period of 50 years studied Franklin and Schweninger, Runaway Slaves, appendix 7., i.e. less than 100 runaways per year on average (from five states of the antebellum South, with a slave population of around 1.5–1.8 million people enslaved in total). Despite arriving at such low figures, these two authors speculate boldly that the number of runaways might have been vastly higher—possibly exceeding 50,000 persons annually Franklin and Schweninger, 282. Even if it would be true that there were such gigantic underestimates both in the available quantitative sources and by contemporary observers, the number of runaways that Franklin and Schweninger speculate about would still only be around one per cent of the total Southern slave population per year. So, while the risk of slaves running away might have worried many individual Southern slave-owners as the losses for a single master would be great, the real impact upon the private profitability for slavery on an aggregate level was most probably very limited.

Evans, “The Economics of American Negro Slavery, 1830–1860,” 195; Martin, Divided Mastery, 124; Ryder, “Permanent Property,” 127–128, 149.

Martin, Divided Mastery, 103.

Savitt, “Slave Life Insurance in Virginia and North Carolina,” table 2; Murphy, “Securing Human Property,” table 4; Ryder, “Permanent Property”, table 3.1.

Murphy, “Securing Human Property,” 619, 637; Murphy, Investing in Life, 188–198; Ryder, “Permanent Property,” 75–76.

Ryder, “Permanent Property,” 150.

Bodenhorn and Rockoff, “Regional Interest Rates in Antebellum America,” table 5.2.

It is here noteworthy that the return on investments, even if relying upon Fogel and Engerman’s possibly downward biased dataset on slave hire rates, is in the range of 7–11 per cent per year (see table 1), and hence in all cases also substantially higher than the return on investments in Southern financial instruments.

Martin, Divided Mastery, 27.

Fred Bateman, James Foust, and Thomas Weiss, “Profitability in Southern Manufacturing: Estimates for 1860,” Explorations in Economic History 12, no. 3 (1975): 211–231, table 2; Fred Bateman and Thomas Joseph Weiss, A Deplorable Scarcity: The Failure of Industrialization in the Slave Economy (Chapel Hill: University of North Carolina Press, 1981) tables 5.1 & 5.3.

Richard K. Vedder and Lowell E. Gallaway, “The Profitability of Antebellum Manufacturing: Some New Estimates,” Business History Review 54, no. 1 (1980): 92–103; Albert W. Niemi, “Industrial Profits and Market Forces: The Antebellum South,” Social Science History 13, no. 1 (1989): 89–106; see also Robert S. Starobin, “The Economics of Industrial Slavery in the Old South,” Business History Review 44, no. 2 (1970): 131–174.

Charles W. Calomiris and Jonathan Pritchett, “Betting on Secession: Quantifying Political Events Surrounding Slavery and the Civil War,” American Economic Review 106, no. 1 (2016): fig. 2.

Richard Hornbeck and Suresh Naidu, “When the Levee Breaks: Black Migration and Economic Development in the American South,” American Economic Review 104, no. 3 (2014): 963–990; Graziella Bertocchi and Arcangelo Dimico, “Slavery, Education, and Inequality,” European Economic Review 70 (August 1, 2014): 197–209.

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Title:: Revisiting the Profitability of Slavery

Article Type:: Research Article

DOI:: https://doi.org/10.1163/2405836X-00801003

Language:: English

Pages:: 83–118

Keywords:: profitability; slave hire rates; capitalism; slavery; United States; antebellum

In:: Journal of Global Slavery

In:: Volume 8: Issue 1

Publisher:: Brill

E-ISSN:: 2405-836X

Print ISSN:: 2405-8351

Subjects:: Global History, History, General, American Studies, General, Social Sciences

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Figure 1a

Total real return on investment in slaves in the United States, 1806–1860, by year

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Figure 1b

Total real return on investment in slaves in the United States, 1806–1860, by year

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Figure 2

Total real return on investment in slaves in the United States, including cost of slave life insurance, 1830–1860, by year

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Figure A1a

Annual hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per year, current prices)

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Figure A1b

Annual hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per year, current prices)

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Figure A2a

Monthly hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per month, current prices)

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Figure A2b

Monthly hire rates of slaves in the Lower and Upper South, 1803–1806 (USD per month, current prices)

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Revisiting the Profitability of Slavery

Slave Hiring Rates and the Return on Investments in Slaves in the Antebellum US South

In: Journal of Global Slavery

Author:

Klas Rönnbäck

Klas Rönnbäck University of Gothenburg Sweden Gothenburg

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Online Publication Date:: 23 Feb 2023

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Abstract

Keywords: profitability; slave hire rates; capitalism; slavery; United States; antebellum

1 Introduction

2 Previous Research on the Profitability of Slavery in the Americas

2.1 Transatlantic Slave Trade

2.2 Slave Labor Exploitation in the Americas Outside of the United States

2.3 Slave Labor Exploitation in the United States

3 Historical Context: Slave Hiring in the Americas

4 Method

Profit

4.1 Capital Investment in Slaves

4.2 Capital Gains/Losses

4.3 Net Rent

Risk premia. Claudia Goldin have pointed out that slave-owners might have considered hiring slaves out to railroad companies and similar ventures (constituting Evans’ dataset) to be very risky, and therefore demanded a risk premium for such hires.^⁶⁵ The risk of slaves running away might, however, have been much higher in urban areas, so Goldin’s dataset might also suffer from such a risk premium, compared to the profit a slave-owner could expect to make in rural parts of the antebellum South. Having slaves work in government forts might likewise have been perceived as riskier for the owner than exploiting their labor on plantations, so it is not possible to rule out the possibility that Margo’s dataset on slave hire rates, too, includes a certain risk premium.
Skill premia. Previous scholars have noted that Evans’ dataset might contain some more highly skilled individuals, as Evans was unable to always control for this, so that the slave hire rates also include a certain skill premium.^⁶⁶ Several of the urban slaves in Goldin’s study were also skilled, so it is also possible that these hire rates also include a certain skill premium.^⁶⁷ It is not possible to rule out that this might be an issue in Fogel and Engerman’s dataset, too, as data on the occupation of the slaves hired out in this dataset is missing for the overwhelming majority of the observations in the sample. The only dataset where a skill premium can be ruled out with certainty is the one collected by Margo, as the occupations are clearly recorded for all entries in this dataset, allowing for selecting to use only (unskilled) laborers.
Discounts. While many of the hiring contracts were entered into by parties with little or no social relations outside of the market, for example via hiring agents, some slaves were hired by relatives, friends, or neighbors of the owner. In such cases, the person hiring the slaves might have received a discount on the hiring rate, thus exhibiting a downward bias compared to going market hiring rates. This is potentially the case primarily in the dataset of rural hiring rates collected by Fogel and Engerman. Indeed, as was noted above, the dataset contains some outliers with extremely low (in some cases thus even negative) hiring rates, supporting the hypothesis that this might have been the case at least for some observations. Primarily, the institutional hirers underlying the datasets collected by Margo and Evans, respectively, in contrast probably suffer little from such bias.
Selection effects. The slaves hired out were not necessarily representative of the total slave population. Selection effects might have worked in opposite directions for the different datasets. Agents hiring slaves would have wanted to hire as productive slaves as possible, so the samples of data based on such sources (the datasets by Evans, Goldin, and Margo) might all suffer from such a positive selection effect. The selection effect might have been the strongest in the case of the sample assembled by Margo, as the government most probably only would have wanted to hire less rebellious slaves to work in the military forts. Fogel and Engerman’s dataset, based on probate records of the slave-owners, would on the other hand potentially show a negative selection effect: previous research has for example shown that some owners preferred to hire out slaves they had problems managing themselves, and keep the best and most productive slaves to work on the own plantation.

5 Results

Figure 1a

Total real return on investment in slaves in the United States, 1806–1860, by year

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Figure 1b

Total real return on investment in slaves in the United States, 1806–1860, by year

Citation: Journal of Global Slavery 8, 1 (2023) ; 10.1163/2405836X-00801003

Table 1

Total real return on investments in slaves in the antebellum South, total for the period 1806–1860 (per cent per year)

Gender	Upper/	Source	Sample	Average return		S.d.	Min	Max
	Lower	of	size	(per cent per year,
	South	hire		geo. mean)
		rates
				Whole	1830–
				period	1860
Panel A: plain hiring rates
Male	Upper	F&E	5,747	+10.3	+11.1	14.5	–19.7	+57.8
Male	Lower	F&E	3,005	+7.5	+8.6	11.5	–22.0	+31.3
Female	Upper	F&E	3,307	+7.8	+8.7	13.6	–21.6	+47.0
Female	Lower	F&E	1,504	+6.5	+7.4	11.3	–22.7	+30.4
Male	Upper	E	5,420		+18.3	12.8	–15.6	+39.1
Male	Lower	E	348		+19.2

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Revisiting the Profitability of Slavery

Slave Hiring Rates and the Return on Investments in Slaves in the Antebellum US South

Abstract

Abstract

1 Introduction

2 Previous Research on the Profitability of Slavery in the Americas

2.1 Transatlantic Slave Trade

2.2 Slave Labor Exploitation in the Americas Outside of the United States

2.3 Slave Labor Exploitation in the United States

3 Historical Context: Slave Hiring in the Americas

4 Method

4.1 Capital Investment in Slaves

4.2 Capital Gains/Losses

4.3 Net Rent

5 Results

Figure 1a

Figure 1b

Table 1

Figure 2

6 Conclusion

Appendix. Slave Hire Rates in the Antebellum US South

Figure A1a

Figure A1b

Figure A2a

Figure A2b

Works Cited

Figure 1a

Figure 1b

Figure 2

Figure A1a

Figure A1b

Figure A2a

Figure A2b

Figure 1a

Figure 1b

Figure 2

Figure A1a

Figure A1b

Figure A2a

Figure A2b

Revisiting the Profitability of Slavery

Slave Hiring Rates and the Return on Investments in Slaves in the Antebellum US South

Abstract

1 Introduction

2 Previous Research on the Profitability of Slavery in the Americas

2.1 Transatlantic Slave Trade

2.2 Slave Labor Exploitation in the Americas Outside of the United States

2.3 Slave Labor Exploitation in the United States

3 Historical Context: Slave Hiring in the Americas

4 Method

4.1 Capital Investment in Slaves

4.2 Capital Gains/Losses

4.3 Net Rent

5 Results

Figure 1a

Figure 1b

Table 1