The economics of exploitation – Part I: the economic processes of slavery and colonialism

This series of articles in two parts will explore the economic aspects of slavery and colonization. The first part will explore how slavery and colonization was primarily motivated by the search for profits by capitalist imperialist societies and how the Sacro-saint ideology of private property and the fear of popular uprising dictated the terms of their abolition. The second part will explore a branch of literature named “counter-factual history”, asking the question of “What if slavery and colonialism never happened?”. This analysis will allow us to see the damages caused by decades, if not centuries of exploitation and how investments in public institutions generates long-term sustainable growth via multiple channels such as political stability.

The analysis provided in these two articles is mainly drawn from two sources; firstly, Thomas Piketty’s 2019 book “Capital and Ideology”, more specifically the second part of the book, titled “Slave and colonial societies” and secondly Walter Rodney’s 1972 book “How Europe underdeveloped Africa.” The analysis will be supplemented by passages from other books and multiple research papers written by (but not limited to) renown economists and experts in the field of institutional and historical economics, Daron Acemoğlu or Nathan Nunn.

Differences between slavery and colonialism

Before beginning our analysis, it is important to define the terms “slavery” and “colonialism”. When talking about slavery, we will mainly focus on the trans-Atlantic slave trade; that is, the abduction of Africans by Europeans and their transportation across the ocean to the Americas. We establish that it started in early 1500 and ended progressively between 1800 and 1850. It is a system of exploitation in its purest form that sees human being as mere cattle and has no consideration for their lives. Colonialism on the other hand, is a system of complete political domination in which the white masters operate as political rulers in another country. It relies on, as Piketty states: “highly sophisticated political, administrative, military and ideological organization as well as numerous local elites and multiple decentralized power structures.” For convenience’s sake, I will use the term “exploitation” when ideas apply to both slavery and colonialism.

While typical slave societies observe a significant proportion of white masters compared to black slaves (about 40% of whites in Southern USA, reaching highs of 80 to 90% of slaves in the French Antilles), colonialist societies usually observed 1% or less of white elite; an extreme minority allowed to thrive by a system rigged in their favor and the threat of military intervention from the metropoles. The two systems should however not be seen as two independent entities. The abolition of slavery was a gradual process lasting from late 1700 to around 1850 and gradually left place to colonialism which ended during the 1960’s for most colonies. While the two systems may have different characteristics, slavery evolved into colonialism when it became outdated and unsustainable. Slavery in particular was characterized by extreme violence, but that does not mean that colonialism was a soft or benevolent process: beatings, unjustified arrests and forced labor were an inherent part of colonialism, despite efforts of former colonial empires to paint history as less violent than what it really was.

Both systems were also characterized by levels of inequalities never observed before or after. As Thomas Piketty illustrates it, colonial or slave societies reached levels of inequalities such that the lowest classes (i.e., slaves) earned nothing more than the basic minimum required for subsistence. Research conducted by Burnard and al. (2017) also demonstrates that Jamaica, considered at the time one of the richest places on earth, owed its reputation to a small minority of white slave-owners hoarding most of the resources, while the rest of the population “lived at the very edge of subsistence.”

Greed-fueled exploitation

The idea that slavery or colonialism were primarily economic processes is supported by many scholars, among those stands Jamaican writer Walter Rodney, author of “How Europe Underdeveloped Africa”. According to Rodney, the motivations of European settlers to enslave and exploit African labor or natural resources was primarily that of profit. The racist sentiments and behaviors observed in colons and inhabitants of European metropoles, despite real and harmful, was only a veil used by the capitalists to motivate the exploitation of far-away lands; with time, the two notions became intertwined and indistinguishable from one another. As he states in his book:

“Occasionally, it is mistakenly held that Europeans enslaved Africans for racist reasons. European planters and miners enslaved Africans for economic reasons so that their labor power could be exploited. […]. Having become utterly dependent on African labor, Europeans at home and abroad found it necessary to rationalize that exploitation in racist terms as well. […]. Oppression of African people on purely racial ground accompanied, strengthened and became indistinguishable from oppression for economic reasons.”

A sentiment that is also shared by C. L. R. James, scholar from Trinidad-and-Tobago, quoted by Rodney:

“The race question is subsidiary to the class question in politics, and to think of imperialism in terms of race is disastrous. But to neglect the racial factor as merely incidental is an error only less grave than to make it fundamental.”

According to Rodney, Imperialism in the form of exploitation is the natural evolution of Capitalism. Since Capitalism seeks bigger and bigger profits, it is natural that capitalist nations such as France, the UK, Belgium or Portugal look beyond their established border for new economic opportunities, with no concern for the morality of their actions. Quoting Rodney once again:

“Imperialism meant capitalist expansion. It meant that European capitalists were forced by the internal logic of their competitive system to seek abroad in less developed countries opportunities to control raw material supplies, to find markets, and to find profitable fields of investment.”

The economic process of slavery:

“The process by which slaves were obtained on African soil was not trade at all. It was through warfare, trickery, banditry and kidnapping” –

Walter Rodney

As mentioned above, the trans-Atlantic slave started in the early 16^th century, as long-distance travel across the oceans became technologically feasible. This technological advance allowed world powers to develop trade relationships with previously inaccessible countries, notably the western coast of the African continent and the Americas. Using their advanced knowledge of the dynamics of world trade and military superiority, Europeans quickly took advantage of Africans by trading with them goods that were not fit for European markets, such as outdated firearms or worthless baubles in exchange for goods unobtainable in Europe, such as gold. Mainly due to Portuguese and Spanish exploration, Europe as a whole realized the enormous potential for gold and agricultural exploitation on the American continent. But gold mining was a labor-intensive process, and neither the Americas nor Europe could provide a sufficient workforce. European traders therefore realized that the African continent would be an ideal source of labor: Africans in general were used to physical labor such as agriculture, they were a perfect fit for physically demanding labor such gold extraction. It is after this realization that European traders began asking not for goods, but for slaves.

The methods by which European traders acquired slaves were multiple. Firstly, European traders re-ignited old political and ethnic conflicts; Africa at the time was for the most part composed of small, numerous political spheres with no central authority (a political system that Rodney calls communalism) while Europe had almost fully transitioned into feudalism, a system in which there are fewer, highly populated countries with a centralized authority. By plotting one community against another on the basis of ethnicities or old rivalries, European traders were able to buy prisoners of war once the conflict was over. As Rodney states when talking about Guinea-Bissau, formerly known as the slave trader’s paradise: “Any European trader could arrive on the coast of West Africa and exploit the political differences which he found there”. Europeans also resorted to trading poor quality goods that African accepted for the reason that they were unobtainable in Africa in exchange for slaves or by raiding and kidnapping on the African coasts. The table below composed by Nathan Nunn (2017) summarizes the way by which slaves were acquired by slave masters.

The logic of the acquisition of slaves was therefore driven by economic motivations: European traders were motivated to acquire slave labor in order to exploit gold mines and agricultural lands in newly conquered territories and did so by means of warfare or by exchanging commodities against human lives.

The economic impacts of slavery of European societies were substantial; in his 1944 book “Capitalism and Slavery”, Eric Williams claims that economic surplus generated by the exploitation of slave labor helped finance the Industrial Revolution in England, which subsequently transformed modern economies away from labor-intensive agriculture and towards capital-intensive industrialization, rendering slaves obsolete. This line of argumentation is more commonly known as the “Williams thesis” and is still debated today.

The acquisition of more comprehensive data has allowed 21^st century economists to put numbers on the economic contributions of slavery to European economies. In a 2018 study, Ellora Derenoncourt finds a positive association between the number of slaving voyages and port city population and economic development in the UK. Estimations of the contributions of the Triangular Trade complex to GDP have also been conducted, ranging from about 6% in the case of the 1770 Dutch economy (Brandon and al., 2019) to 11% in early 19^th century UK (Rönnbäck, 2018). Estimations by Thomas Piketty place the contribution of French slave colonies at around 7% of France’s GDP in 1790. Politicians at the time were perfectly aware of the economic advantage that slavery provided them but also of how dependent they had become on slave labor, which became a massive argument against its abolition; Bishop Maury of France summarized that sentiment in front of the National Assembly in 1791:

“If you were to lose each year more than 200 million livres that you now get from your colonies […], the kingdom would be irretrievably lost.”

The economic process of colonization: the French empire

The economic functioning of colonialism differs from that of slavery; while slavery captured Africans on the coasts and shipped them across the world to produce sugar, tobacco or gold, colonialism establishes political institutions with the primary objective of extracting resources for the good of the European metropoles; as such, the nature of the wealth extracted shifted from bags of crops and ore to stocks and bonds owned by private entities in colonial societies.

While many countries had colonial empires, the two dominant forces in that regard were the UK and France, the latter of which we are going to observe in this part. In the case of the French colonial empire, colonies had to be financially self-sufficient; the taxes levied on the African population had to cover the expenses of the French colonial state, no more and no less. As Martin Meredith states in his 2011 book “The State of Africa, a history of the continent since independence”:

“Colonial governments were concerned above all to make their territories financially self-supporting. Administration was thus kept to a minimum; education was placed in the hands of Christian missionaries; economic activity was left to commercial companies. The main functions of governments were limited to maintaining law and order, raising taxation and providing an infrastructure of roads and railways.”

In other words, the colonized populations had to finance the lavish lifestyle of all those who came to dominate them politically and militarily. But that does not mean that there was no colonial extraction to the benefit of the metropoles. Indeed, if we put aside the financing of the luxurious lifestyles of the white masters by the local population, the main exploiters of African labor and natural resources were private companies, which was facilitated by the colonial government. Rodney defines the three main functions of the colonial government as follows:

1. To protect national interests against competition from other capitalists.
2. To arbitrate the conflicts between their own capitalists.
3. To guarantee optimum conditions under which private companies could exploit Africans.

Rodney also identified many large companies whose business operations consisted of exporting African output, such as the Compagnie Francaise d’Afrique Occidentale, the Société Commerciale Ouest-Africaine, the British-controlled United Africa Company amongst many others and will dedicate an entire subchapter of his book to denounce the practices of Unilever. As he himself states:

“Colonialism was not merely a system of exploitation, but one whose essential purpose was to repatriate the profits to the so-called mother country. From an African viewpoint, that amounted to consistent expatriation of surplus produced by African labor out of African resources.”

This phenomenon of extraction by private entities is well documented by Piketty who illustrates the level of foreign assets (assets owned by private entities of a country in the rest of the world – assets owned by the rest of the world in the country of interest) of France and the UK, reaching never-seen-before-or-again highs of 135% and 190% of annual national income respectively.

Forced labor was also an essential component of the French colonial empire. Every citizen had to pay their share of taxes; however, some individuals were paid so little that they did not have the means to cover their most basic needs and pay taxes. As a consequence, these individuals were required by the colonial state to work without compensation, so as to reimburse the taxes they could not pay. On paper, forced labor was limited to 12 days per year. In reality, that number was substantially higher, between 30 and 60 days per year. Most of the time, the chores consisted of infrastructure work, such as building roads and railways, which proved to be dangerous and fatal in more than one occasion and forced the international scene to put pressure (although unsuccessfully) on French colonial governments to put an end to their practices of prolonged forced labor, which only ended with the independence of the colonies.

Economic process of freeing slaves: the case of Haiti and the fear of popular uprising

In order to analyze the economic processes of abolition, we will primarily study the case of Santo Domingo, renamed Haiti after independence and formerly home of some 450’000 slaves. Haiti is a significant case not only because it represents the first case of a slave colony obtaining their freedom from a colonial empire but also because it perfectly exemplifies the careful calculations of colonial leaders when it came to deciding the terms of independence. After a general revolt of slaves on the island in 1794, the French government decided to abolish the practice of slavery on all territories; a practice that will be re-established by Napoleon in 1802 and abolished a second and final time in 1848. After claiming independence in 1804, the French government decided to grand Haiti full independence in 1825 on one condition; that the newly established country reimburse the losses occurred to slave owners as a result of their loss of property, a deal that was sealed by the threat of military intervention. The amount? 150 million francs, or 40 billion euros today, or 300% of Haiti’s GDP and to be repaid in 5 years. In other words, Haiti had to pay in 5 years the equivalent of three years of income for their own freedom.

Reimbursing an amount this important was obviously unfeasible, and both Haiti and France knew it. In order to fulfill their end of the contract, Haiti resorted to borrowing the money to French banks at 5% interest rates. In total, it took until 1950 for Haiti to repay their debt. Once we add to that the damages caused by rebellions, the embargo measures imposed by France and the US occupation between 1915 and 1934 after the country bought the debt to the French, it is easy to see how Haiti’s colonial past has a direct effect on its present state.

It would have been justified to demand of the slave owners some type of contribution to compensate the slaves, either in the form of money or lands. But doing so would have required to also demand some contribution from those who became wealthy by exploiting slaves but did not own any, such as import-export companies. Doing so was problematic for colonial governments because it would have required to question the notion of private property itself, which was to be avoided at all costs. As Piketty states:

“The abolition of slavery brought severe ideological problems to 19^th century capitalist societies who feared that an abolition without compensation would end up questioning the entirety of their system of private property.”

The case of the UK shares some similarities with the Haitian case, in the sense that it is not the slave masters who paid the price of freedom, but the general public, this time UK citizens. It will also be copied almost to the letter by the French in 1848. After several revolts in slave colonies such as Jamaica, the UK parliament voted in 1833 to gradually abolish slavery over a period of 10 years under two conditions; firstly, that the owners were fully compensated for their losses; secondly, that former slaves were obligated to enter long-term work contracts with their former owners. In total, more than 20 million pounds were redistributed to the slave masters, which is roughly 120 billion euros today, financed by public debt and ultimately by taxes on the general public.

Only in the US did the former masters not obtain compensation for their losses. In their case, abolition was attained by war, mainly due to the fact that compensating slave masters would have been too expensive: about 100% of the country’s GDP at the time. The important takeaway here is that in no case were the victims of slavery every compensated for their suffering; in most cases, only former masters were considered on the topic of retribution, often at the expense of former slaves or the public, if not both. This nonsensical logic is the perfect illustration of the powerful economic forces that ruled colonial governments and the process of exploitation as a whole, as Piketty argues when talking about the UK:

“The abolition of slavery was a cost for slave owners and the political choice of the UK consisted in making the public pay for it, which illustrates the political power of the owners and the power of the ideology of private property.”

Besides the fear of popular uprising, the most important motive for the abolition of slavery was profitability, the main argument of the Williams thesis. After the invention of the steam engine in mid-18^th century, developed countries saw their economies evolve from agriculture to industry, which meant that capital slowly caught up to labor as primary factor of production. As a consequence, labor intensive work done by slaves became less and less profitable, which meant that slavery became less and less profitable. This natural development in the economic fabric of European countries became an argument to convince slave owners reluctant to give up their property; a free worker is often more productive than a slave, slave owners would therefore be better off employing free workers (provided they were graciously compensated for their losses beforehand). In addition, a free worker poses no risk of starting revolts and declaring independence.

We therefore see that the argument of morality was never invoked when debating the abolition of slavery; it was fear, greed and primarily self-interest that motivated the political elite at the time. There may have been individuals who genuinely protested against slavery because they saw it as immoral and cruel, such as Adam Smith, who will argue in The Wealth of Nations:

“Folly and injustice seem to have been the principles which presided over and directed the first project of establishing those colonies; the folly of hunting after gold and silver mines, and the injustice of coveting the possession of a country whose harmless natives, far from having ever injured the people of Europe, had received the first adventurers with every mark of kindness and hospitality.”

Unfortunately, the argument never caught on.

Economic process of decolonization: more of the same

“A wind of change is blowing across Africa”

– Harold Macmillan, UK Pime Minister, 1960

The process of colonization followed a logic similar to that of the abolition of slavery, namely the fear of popular uprising. By the end of WWII, colonial empires suffered heavy damages in terms of human lives but also of infrastructures. Given the unvaluable help provided by soldiers and resources coming from the colonies, it was natural that the status of the colonies would have to change; in 1946, the French ministry of colonies was renamed “the ministry of overseas France”, a move that was supposed to give credit to the efforts made by the colonies to support the metropole. In exchange, colonies would be asked to contribute to the reconstruction effort, with for example Morocco who would be required to supply construction goods such as manganese, cobalt, lead or food.

But African colonies (rightly so) wanted more than being second class citizen and declared their independence one after the other, some countries being forced to fight for it, such as Algeria. Between 1945 and 1980, more than 50 countries (mostly from Africa or the Middle East) declared their independence from the British empire only. That desire for independence did not stop colonial empires from having a grasp on these countries’ future. In most cases, rulers placed at the head of the newly independent countries were part of the local elite, but also a product of colonial education and therefore sympathetic to their cause. In other cases, independence was progressively granted over time. Such is the case of Sudan, who obtained their right to independence in 1953 and became independent in 1956. A timespan that, according to Meredith, “was determined not by any notion of Sudan’s readiness for independence but by the exigencies of Britain’s Middle East policy.”

This concludes the first part of my series; I hope you liked it. The second part will come out on April 10^th and will pick up where we left off; we will study the long-term consequences of slavery and colonialism and the role of strong instructions for economic prosperity and political stability.

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