Can Slaves “Cost Less”?

Bush pronounces that yes, they can “cost less” than free labor. It’s not 100% clear what he means by this. But suppose that there was a large difference between the cost of an average slave and his productivity. Then it would pay current slave owners to sell and resell their slaves at higher prices until equilibrium were reached, and the discounted capitalized value of a slave would equal his productivity over his lifetime.

If, on the other hand, free workers demanded wages than were unjustified by their marginal value product, the competition between them would bid down the prices.

The purchase of a slave would yield no more profit to the owner than the hiring of a free man.

A slave regime might, however, enable the profession of slave hunters who would roam the realm profitably for themselves enslaving and selling free people.

The theoretical inefficiency of slave labor lies in the lack of incentives to the slave to improve his skills and accumulate his human capital: knowledge and experience with various tech and compatibility with complex capital goods. Bush himself writes that “slaves had their own devices for remedying the gross imbalance of advantage created by the slave-master relationship, notably feigned stupidity, working within limits and only to order, abiding by custom, malingering, petty theft, and so on.” (17)

A free man is far more likely to “feign intelligence” than stupidity in order to convince an employer to hire him, as is obvious from every self-glorifying resume!

Bush replies by pointing out that “masters could combat this array of negativity by dispensing rewards…” But insofar as there were rewards, the slave-based economy was no longer pure but blessed with some aspects of tax serfdom, a far superior system.

Thus, Mises argues that we the liberals



New Nobles

“The hardship to which the serfs were subjected… stemmed from… subjection to triple yoke, represented in contemporary cartoons by monarch, noble, and cleric riding on the peasant’s bent back.” (Servitude in Modern Times, 26)

So, we’ve formally gotten rid of the nobles: there are no slaves or serfs within any manorial system; churches have been divested of all coercive powers; but somehow we are loving our 3rd oppressor: the state. This needs to change ASAP: abolish the state (almost)!

At the same time, we can look at business firms within industries that are protected by the government from competition and therefore enjoy permanent profits as the new nobles. Again, Hayek points out:

There has never been a more cruel exploitation of one class by another than that of the less fortunate members of a group of producers by the well-established. This has been made possible by the “regulation” of competition.

Few catchwords have done so much harm as the ideal of a “stabilization” of particular prices or wages, which, while securing the income of some, makes the position of the rest more and more precarious. (The Road to Serfdom, 67)

The industries are regulated not for the greater good but for the sake of the dominant firms in them to ensure that they cannot be imitated as part of the market process. They are assured profits over long periods of time, even though they do not improve their products or business practices. Ultimately, however, these vicious and complacent firms sign their own death sentence. Other, less constricted, industries showing growth eventually attract both investors’ money and consumer demand. The privileged companies, grown lazy and bureaucratic through government protection, find their profits slipping away, may not be able to adapt, and eventually disappear.

Only if the entire economy is frozen in place will protection truly be forever. But the fact that no new enterprises are being started means that no new jobs are created. As a result, it becomes impossible for workers to change their occupations. They once again become bound to their employers, as though in serfdom. The nobles are back with a vengeance.

Slavery As an Economic System

Slavery is fundamentally a system of production.

It was humanity’s attempt to create wealth long before laissez-faire capitalism was invented.

It’s a very inefficient system, but it does not deserve its reputation as some sort of sadistic destruction of the slaves’ dignity for its own sake.

Consider the family of the Biblical Jacob. Jacob’s sons were not their father’s slaves. But do you really think Reuben or Joseph could up and say to him, “Dad, I quit tending the flocks for you. I found a new job with Canaanites, Inc. in the next town. It pays more, and there is less commute. My resignation letter is attached”?

A free worker has a powerful incentive to accumulate human capital: complex skills up to and including unique creativity to use with complex capital and methods of production.

But with the economy at that primitive a stage, there was little individual use in being free, and little social benefit to free labor. Why be free when all the “jobs” out there are almost the same and unskilled? Perhaps the “security” of being a slave and a measure of a personal relationship with the master might be prized more.

This is why slavery had persisted for so long everywhere in the world. Its inefficiency was masked by the fact that free labor was not any more productive than slave labor and for that reason could not command higher incomes than slave labor.

Under capitalism, the employer spends his own money training an employee, but all the benefits accrue to the latter. The employer is particularly averse to providing training, because it makes the worker more valuable to his competitors. Thus, it happens all the time that a worker learns useful new skills at his boss’s expense and then unceremoniously dumps him to get a better job elsewhere. Slavery is especially suited to act as a transitional system, because the master has a direct incentive to invest into the slave’s training.

The abolition of slavery went hand-in-hand with increasing prosperity and complexity of the economy. The pressure to free the workers intensified as people came to realize the social benefits of this; as more workers were freed, this freedom itself contributed to economic improvement. The virtuous circle eventually led to the complete end of slavery as an economic institution. Slavery was destined to wither away without any violent upheavals.

It may be objected that slavery was often sustained by war, such as when the citizens of the defeated tribe or town were enslaved. However, regarding that, in a war, formerly free people are enslaved. That is a definite economic retrogression. I am arguing rather than in the ancient world, and even not-so-ancient, slavery was the default, unsurprising, and economically neutral condition of almost every worker.

It’s true, there existed somewhat skilled artisans even then. But without mass production and accumulation of great amounts of capital, only very few were needed by society.

Some people are further deluded into thinking that today minimum wage jobs are a type of slavery. This is emphatically not so, because in the modern economy, minimum wage workers are upwardly mobile and are made such precisely with the help of the basic skills and work-related virtues they learn on their very temporary minimum wage jobs.

A worker’s own professional growth over the course of his career, beginning perhaps indeed with washing the dishes at a fast food joint, is part and parcel of the market process itself.

Of course, no social system, including free-market capitalism, can remedy an individual’s lack of natural gifts. A hopelessly dull person may indeed end up working for low wages all his life. The point, however, is again that free workers face enormous incentives to improve their skills and thus their usefulness to society, even if a few people through some disability are unable to respond to this incentive adequately.

Summary of Economic Stages

I have described the 4 economic systems and compared the position of a “worker” under each.

I’ve also described the 2nd slave stage in some detail.

The first stage is characterized by the invention of the state. This signals an end to total war.

The second stage arises as soon as people recognize the benefits of specialization and trade between their tribes. Specialization between firms is distinct from division of labor within firms.

The latter develops during the third stage as part of purely technological progress. The complex capital goods require complex worker skills. 2nd-stage slavery is revealed as unsuitable for the task of the empowerment of workers, since it does not supply the proper incentives to workers; and is burst asunder, giving birth to feudalism.

The final capitalist stage arises when capital accumulation has reached a certain level. When capital is very scarce, there is no particular need for entrepreneurial freedom to easily shift capital from one project, factory, location, and purpose to another. It became necessary for goods to move easily from place to place and from owner to owner. Labor, too, needed to become highly mobile, an ideal which helped fully to abolish feudal serfdom. Lower transportation costs offer invaluable help. The development of economics as a science helps people to grasp the advantages of laissez-faire and market process, and the resulting ideological revolution at this stage releases all of society’s “productive forces.”

And that’s it. There is no “progress” past laissez-faire capitalism.

A Path from Slavery to Serfdom

Bush notes that “within Spanish America, large numbers of slaves worked for wages, the result of the common practice of hiring out slave labor, the wages earned being shared between master and slave.” (Servitude in Modern Times, 79)

Again, “another escape lay in the capability of slaves to pay the manumission price — the result of being able to earn money on their own account, thanks to the practice of hiring them out for wages, and because of the high proportion of slaves who were skilled craftsmen.” (80)

But this is just another way of saying that such slaves were not slaves at all; instead, they were feudal tax-serfs! The spectacular advantage of this arrangement to the master was that he no longer needed to worry that the slave would conceal his talents, feign stupidity, malinger, or perform only the absolute minimum required. How much better to let the (former) slave take full control of his own advancement and simply tax his wages! The master would earn more money, if technology and even economy had progressed so far that free labor was then inherently more productive than slave labor.

Mises put it this way:





At some point the serf might accumulate enough wealth to be able to pay a lump sum for his freedom. The lord would be careful to calculate the expected discounted sum of his tax revenues from the serf over the latter’s lifetime and set the price of full freedom to that. The serf, on the other hand, might have secret entrepreneurial plans to improve his productivity in the future so that his actual earnings would be higher than the lord believes, which would make paying the entire tax in advance worthwhile.

To be sure, both slavery and tax-serfdom are exploitative and unjust. The Spanish code for the regulation of slavery in Siete Partidas originally issued in 1263 proclaimed slavery to be “the most evil and the most despicable thing which can be found among men,” says Bush.

Nevertheless, slavery in the most general sense was a legitimate economic “stage” in the progress of the world. It disappeared when it became apparent how much it retarded development:


The modern welfare-warfare state that eats a great chunk of each (supposedly free) citizen’s income and spends it horribly badly was a huge economic and social retrogression from capitalism back to feudal tax-serfdom. And unlike old-time serfs, we can’t even pay the government off for our or our children’s freedom.

Duncan: Errors of Libertarianism
























His remedy?









