I am greatly bothered by an
article that
AVI linked to at his place with some additional discussion. I left a comment there outlining my objections, but I want to expand with at least one example I know well from personal experience and education.
The comment I left may be helpful in clarifying where I'm going with the historical discussion, so here is the relevant part.
Even granting that the real source of the increase is the free market -- things like the miracle of compound interest, or the ability to invest in growing industries and factories and the like -- the premise leaves out something very important about how one obtains the capital to make such initial investments. Let's say that, due to these economic miracles, we could become rich with an investment of merely $100,000 -- that this will produce an increase like she's discussing, so that it will become worth $2,500,000 in time (and that will continue to grow).
Yet I do not have an extra $100,000 to invest. If, however, there is a legal and successful way for me to rob another man for it -- taking it out of him in labor, or a legally contrived way of stealing his house, or whatever else -- then I can make the investment. And then I will become rich, and my descendants even richer! He will become destitute, and his descendants will not enjoy the increase in wealth that mine do. They may become better off if 'a rising tide lifts all boats,' as they may become well-paid servants of my descendants. Nevertheless, the initial theft really matters and produces long-term differentials in wealth and power.
The particular example I'm going to discuss is the economic history of the American South, but I think the general issues outlined here apply also to the other examples the original author gives, e.g., British India, the West African slave trade, and so on. To quickly outline one of these examples: The West African slave trade enriched a lot of West African slavers, as the author notes; they did not become nearly as wealthy as some of the others it enriched because they did not plug that wealth into the new industrial-age free market and investment system like the owners of the slave ships in Boston and New York had done. Even granting her point about the importance of the free market and investment systems, though, the initial investment that made Boston and New York so wealthy compared to other places was provided at least in part by inputs from slaving in the famous Triangle Trade.
I. Antebellum Theft
America's South has long been its poorest and most benighted region, but this was not always the case. Before the Civil War, it was a tremendously prosperous region. This was driven by one of these forms of stolen wealth too, the slave system, whereby a man's whole life of labor was plugged into investments by another man who stole it.
This combination of theft and the new systems of compound interest and investment in emerging industries worked extremely well. Plantation houses built in the South were some of the finest homes being built anywhere in the world, and they were accompanied by beautiful gardens, fine churches, elegant cotton shipping cities like Savannah or Charleston or Mobile, colleges and education. One of the highlights of this period was the poet Sidney Lanier of Georgia. In addition to his own poetry, he was a scholar of music and a translator of works out of Middle French and Middle English. He was especially interested in popularizing the high civilization of the Middle Ages for boys, and one of his works --
The Boy's King Arthur -- was illustrated by N. C. Wyeth and is still in print today. (I highly recommend both this and
The Boy's Froissart for anyone with boys old enough to read longer works.)
Now this land, so rich and prosperous, had been a positive wilderness not very long before. Indeed, parts of Alabama and Mississippi were still in the process of being settled and transformed even as the civilization was flourishing. Just a few decades earlier, at the time of the Revolutionary War, most of it was unsettled; King's Mountain in North Carolina was the site of a battle in which a militia of outright frontiersmen had defeated the British Army.
II. The Effects of Post War Theft
Just as illustrative of the principle of stolen wealth's effect on the system, though, is the story of what happened after the Civil War -- the transformation of this region from wealth and education into poverty and a lack of education that made it the mockery of America for generations (indeed, one sees it still). The war itself was devastating, but what really destroyed the South for generations was the economic system imposed upon it after the war. This was a form of economics also used in colonialist economies in South America and India, and will help to illustrate those cases too.
I've written about this before, for example in 2013 when discussing
a mystery that bothers historians -- why were the slave narratives captured by the CCC in FDR's day inclined to describe the antebellum South as a happy time?
There are some other theories about why the former slaves had such positive things to say about their lives on the plantation. The one to which I am most inclined is that they were all much older when they gave the interviews, and spoke with the natural nostalgia of the old for the sunny days of youth. Memory paints the memories of those days, in nearly all of us, with rose colors.
But there are other possibilities too. For one thing, economic conditions in the South cratered after the war, so that life after the war was markedly harder for everyone -- especially, as is usual, those on the bottom. The traditional market for Southern cotton was lost, as the English mills had turned to India during the war's blockade. The South's mills were destroyed, so it was relegated to being a producer of raw materials for Northern mills at rates set by Northern banks. The economic system imposed by the North was a brutal colonial-style monoculture built around cotton production, and colonial monocultures are notoriously harsh places to live (here as in Latin America, India, and elsewhere). Until the boll weevil collapsed the cotton economy in the late 1920s, the South was ground down by the usual effects of such economies: the price of the monocultural good (cotton, here) dropped every year, because supply increased every year as those commanding the economy forced ever-greater production of the single cash crop. Under those circumstances, quality of life dropped, again especially for the poorest and those most dependent on agriculture. Naturally those who had been slaves who had only known how to work cotton farms, or who were directly descended of slaves who had, were very likely to be a part of the very lowest agricultural classes tied to the cotton monoculture. They would have endured the worst conditions imposed by the economic system.
So it is possible (indeed it doesn't seem unlikely) that happiness is greatly influenced by economic realities. When the interviews were conducted from 1936-8, the boll weevil had collapsed the cotton economy, and the Great Depression had followed on its heels. While the boll weevil eventually allowed the South to escape the monoculture economy, at first it meant a severe economic depression for the region, which was then followed on by a severe depression worldwide. The former slave speaking in 1937 would be looking back on a life that had, in economic terms, ground ever worse each year of his or her life, capped by ten years' complete economic failure. The pre-war plantations may really have seemed like a better place by comparison to that. They may really have been, if not a better place, a happier place.
Another thing the CCC was doing at that time was reforesting Warwoman Dell in northeast Georgia, which had been denuded by this system so the land could be used for cotton production -- required by the banks in order to obtain the loans, at interest. Warwoman Dell is in the mountains in land completely unsuited for cotton, but the system was totalizing and grinding.
All that money -- all that interest -- impoverished almost everyone in the South, black and white, except a few robber barons called the Bourbon Democrats who managed to sit atop the misery in comfort. The invented the deep racism and the Jim Crow system to keep the poor whites afraid of the poor blacks, with whom they shared almost every practical and political interest. Instead, they spun narratives -- two exemplars of this being Birth of a Nation and Gone With the Wind -- out of the bones of the old civilization, still widely visible a hundred years ago in ruined plantation houses and the remains of old mills. That civilization was indeed gone with the wind, destroyed not so much by the war as by the effects of seven decades of economic theft activity by northern banks and the aforementioned robber barons.
Nevertheless a lot of wealth was extracted from this system, even though it led to an ever-increasing decline in the price of the cotton it was over-producing (the ever-increasing supply being the reason for the ever-decreasing price). The ever-cheaper cotton went north to be turned into finished goods and sold at a profit. The interest on the loans went north and was added to the banks' capital, to be invested in emerging industries. Between the one form of extraction and the other, a great deal of investment was available to be invested for the miracles of the free market, from compound interest to new forms of technology. This partly explains how the United States became the richest nation in the world in the same period, capable of raising armies and navies that would be victorious in two World Wars.
These investments may eventually have produced a rising tide that lifts all boats; things are better in the South economically than they once were (although the last two years have reversed many recent gains). Yet the reason the South has long been the poorest and most benighted region of the United States is because of this economic theft; and the reason it was once extremely wealthy and profitable was because of another economic theft. The free market and these economic miracles it produces may well drive the vast increases in wealth; but whose children become wealthy is very much informed by acts of extraction.
