Quotation of the Day…

by Don Boudreaux on May 22, 2017

in Competition, History, Myths and Fallacies, The Profit Motive, Work

… is from pages 258-259 of the late Wesleyan University economic historian Stanley Lebergott’s great 1984 book, The Americans: An Economic Record (footnotes deleted; asterisk note added; link added; first two brackets added by Boudreaux; third bracket original to Lebergott):

The deeper answer is implicit in the Reconstruction legislation that defined the criminal.  He was “not the black man who left his plantations, but the planter who sought a free market in labor.”  The “criminals” were in fact those white planters who offered higher wages to attract labor.  They included white landowners who offered [share]croppers a better share, to get croppers, and thereby profit from their land ownership.  They also included white lenders who loaned freedman money to buy land.  They even included corporations building railroads, who bid black labor away by offering higher wages.  Moreover, and importantly, they included planters in other states, who couldn’t care less about the need for “docile” labor in a given state.

As early as 1864*, planters in other states began seeking labor in Georgia.  As General [Davis] Tillson (then head of the Freedman’s Bureau in that state) observed, Georgia planters were offering farmhands only $2 a month.  But: “Men from Alabama, Mississippi, Arkansas say that [labor] is worth fifteen dollars, and stand reading to give it”….  Throughout Reconstruction the freedman moved to those areas where planters sought labor to work their lands.  The “feverish excitement” of the 1867 boom led Mississippi planters to pay wages 50 percent greater than South Carolina and 27 percent greater than Alabama….  In a later year “some four or five thousand colored laborers” left South Carolina for “Arkansas, Alabama, Mississippi, where wages were much higher.”  Between 1870 and 1880 alone about 20,000 freedmen moved into Mississippi.  Equal numbers migrated to Texas and to Arkansas.  Alabama lost over 35,000.

Owners of the old South, therefore, had to increase their wages and their share offers if they were to keep their entire labor supply from drifting away.

DBx: Lebergott’s historical account – which reinforces the important findings of Robert Higgs about the postbellum economic trajectory of blacks in America – reveals the equalizing powers of economic competition.  Contrary to popular myth, even racist southerners put their own economic well-being ahead of their irrational prejudices by competing with offers of higher wages for blacks’ labor and with offers of low prices for blacks’ business.  This competition, in turn, increased blacks’ geographic and economic mobility and raised their incomes.  The reason southerners – whether racists or rent-seekers (or both) – turned to government to get Jim Crow legislation is that market forces were undermining their racist preferences and competing away their uncompetitively high profits, rents, and wages.

Lebergott’s account also further reveals the utter implausibly of the claims of those who assert that today’s market in America for low-skilled workers is infected with monopsony power.  While this market isn’t textbook perfect (no real-world market is), and while this market would be improved by making it even freer (for example, by eliminating occupational-licensing statutes and zoning restrictions), the ability of low-skilled workers today throughout the U.S. to move from job to job is surely better than was the ability of low-skilled blacks 150 years ago throughout the American south to move from job to job.  And yet, as Lebergott documents,  low-skilled American blacks of 150 years ago in the American south did indeed enjoy such mobility that economic competition raised their wages.  Similarly, the ability today of entrepreneurs and business owners to discover and compete for under-priced labor is surely greater than was the ability of employers 150 years ago to do the same – and yet, again as Lebergott documents, such competitive initiative by employers was common 150 years ago and served to increase low-skilled workers’ mobility and wages.

If there was, as there was, vigorous economic competition for the labor services of black former slaves in the war-ravaged American south of the mid- to late-19th century, it is completely ludicrous for anyone to insist that minimum wages, whether national or local, are required to protect low-skilled workers in today’s America from the effects of monopsony power.  Such monopsony power is nothing more than the phantasm of minds that neither understand the nature of economic competition nor know much, if any, economic history.


* “1864” is a typo in Lebergott.  He almost surely meant 1865, for 1865 is the year that Gen. Tillson was appointed to this post.


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