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Prosperity Is Not Rooted in Slavery

In my latest column for AIER I report a recent conversation that I had with one of my principles-of-microeconomics students about the connection (or lack thereof) of slavery with our prosperity today. A slice:

Sarah to Don: “Yes, but these things were made possible by the wealth that whites extracted from slaves. Without the wealth produced by slaves and then stolen from them, we wouldn’t have had the foundation to produce what we did after slavery ended.”

Don: “American slaves worked overwhelmingly in agriculture. How did, say, cotton picked by slaves in Louisiana in 1860 turn 160 years later in Michigan into middle-class homes equipped with wi-fi, Google Home, and refrigerators stuffed with orange juice from Florida, pineapples from Hawaii, and sauvignon blanc from New Zealand?”

Sarah: “The wealth stolen from slave labor was eventually invested in factories that produced all these things.”

Don: “Not so. Consider, for example, Henry Ford. He was born into modest means on a Michigan farm in 1863 to a family with no history of slave-owning. What made him successful in business?”

Sarah: “You’re asking me?”

Don: “I am.”

Sarah: “I’m not sure. I don’t know the specifics.”

Don: “Henry Ford had entrepreneurial ideas. He also had the gumption and the freedom, as the economist Deirdre McCloskey says, ‘to have a go’ at putting his ideas into practice. Ford, like countless other lesser-known entrepreneurs, created wealth. Ford grew rich by dramatically increasing the efficiency of producing automobiles that the masses eagerly bought. His business success owed nothing to slavery.”

Sarah: “I get that he didn’t use slaves. But I feel that the capital to start his company probably came from wealth that had earlier been produced by slaves.”

Me: “First, the capital that first backed Ford came from a man named William H. Murphy. Born in 1855 in Maine, Murphy moved to Detroit where he and his father were successful in the lumber business. I’m pretty sure that post-Civil War Michigan lumbermen didn’t earn any income from slavery. Murphy, like Ford after him, created his wealth by running a successful business.

“Second, regardless of the source of the capital that Murphy invested in Ford’s new business, that investment would have been worth diddlysquat if Ford hadn’t had the vision, energy, and freedom to use those resources in ways that produced outputs that the masses wanted to buy and at costs low enough to make it worthwhile for Ford to continue to produce. This is what I mean when I say that Ford created wealth – wealth, obviously, for himself, but also for his customers in the form of automobiles that were worthwhile to purchase, and for his workers in the form of opportunities to earn incomes higher than they could have earned by working elsewhere.”

Sarah: “But I still feel that the seed money for all these later companies like Ford’s came from the slave economy that lasted in this country for centuries.”

Don: “Sarah, don’t feel. Think! Don’t you see that Ford created wealth? Don’t you see that he created value that didn’t exist until he put his entrepreneurial ideas into action? If Henry Ford could, without slavery – as you admit – turn some amount of wealth into a larger amount of wealth, why can’t other people have done the same, before and after Ford? Even if – contrary to fact – all of the seed money for the Ford Motor Co. happened to come from former slave owners, what created Henry Ford’s wealth and the valuable goods that he produced for millions of Americans was Henry Ford’s entrepreneurial vision and effort put into operation in an economy that permitted him to act entrepreneurially. No amount of resource-value grows into a larger amount of resource-value automatically.

“The ability of an entrepreneur to turn some amount of resource-value into greater resource-value doesn’t depend upon the source of the initial funding that the entrepreneur used to launch his or her venture. What matters is the entrepreneurship and the freedom of markets, which emphatically has nothing to do with slavery.”