One pernicious myth about capitalism is the notion that slavery was essential to its early development. This idea can be traced back to Marx, who believed that modern capitalism was kickstarted by Europeans’ worldwide theft of land, property and lives during the colonial era. By stealing from the world, Europe accumulated enough capital to invest in large-scale industries, thus launching the West into the modern era.
Marx believed that the initial infusion of capital had to come from outside the market system. He couldn’t see how capital is accumulated within the market through processes inherent to it. No infusion from outside the system is necessary— once European governments began liberalizing their economies during the Enlightenment era, capital began to accumulate within the market through the multiplying effects of specialization and trade, eventually reaching a critical point at which modern industries could be supported.
When individuals specialize in productive activities— becoming blacksmiths, butchers, and so on— and trade their skills and products with one another, more of everything is produced than if each person had to make everything for him or herself. The result is a surplus of the essential goods and services, freeing some individuals to dedicate themselves to non-essential vocations, and even to create new ones. Society becomes wealthier as a wider variety and greater quantity of goods and services are available to all, as well as a wider range of options and opportunities for individuals to explore in their own lives. When the market reaches a certain size and complexity, businesses have room to scale up from one-shop operations to regional, national and international enterprises. It is a process of quantitative increase that produces qualitative changes at key thresholds, and it can utterly transform a society within two or three generations.
Now, imagine how the scenario above would differ if much of the population was enslaved. Workers who don’t earn money and aren’t free to direct their own lives aren’t participating in the marketplace. The marketplace is shrunken; it can’t reach the same size and complexity as it would with full participation, and won’t achieve the qualitative improvements possible at higher thresholds. The economy remains underdeveloped. Slavery could not, therefore, have aided in the accumulation of capital, but could only have held it back.
That’s why the southern United States has always been poorer than the North. Any student of the Civil War knows that the South lost because it lacked the resources that the North had: weapons, railroads, even clothing and food. The South was poor because of slavery; the North was comparatively rich because its laborers worked for wages. If you could wave a magic wand and turn all the slaves of the South into millions of consumers who spent their wages at local businesses, there would not be such a gap between the two regions (and, of course, the war never would have occurred).
Similarly, compare Spain and Portugal to the rest of Western Europe. The Iberian nations are underdeveloped by European standards. They were among the last to industrialize. And yet, they were the first to colonize the New World and they plundered their colonies more voraciously than anyone else. Spain was the most successful in finding gold and silver. Portugal enslaved the most Africans. But neither country was able to turn their colonial enterprises into capital for industrialization.
If slavery and imperialistic plunder lead to industrial development, why aren’t the most culpable nations also the most developed? As it turns out, of all the ways to exploit and utilize the world’s economic resources, conquest, plunder and enslavement are among the least efficient. The economy benefits more from free workers who spend their wages on goods and services than from slaves who have no money to spend. Likewise, it is more cost-effective to trade for resources than to fight over them.
Critics of capitalism often argue that if we in America enjoy freedom and prosperity, it is only made possible through the exploitation of others, whether the workers who make cheap products in third-world sweatshops, or the slaves upon whose backs our nation was erected. It is true that, because of historical differences in development, wealth and power are unevenly distributed in the world, and unscrupulous people do exploit the weak out of ignorance and greed. The critics’ mistake, however, is to assume that because injustice and exploitation exist alongside our freedom and prosperity, the two must be related.
The truth is, not only is our prosperity not built upon the exploitation of others, but we would all be more prosperous if we were all free. With more free participants, the global marketplace would reach a higher threshold of size and complexity, allowing qualitative changes that would produce a variety of opportunity beyond that which we enjoy today. All prosperity is built upon freedom, and where freedom is less than total, all members of society, even the free ones, are less prosperous than they could be.