Econ 210a: Inequality Week: Stray Readings

On Domar

Paul Krugman:

The Causes of Slavery or Serfdom: A Hypothesis: Domar was motivated by his knowledge of Russian history. Serfdom in Russia, he knew, wasn't an institution that dated back to the Dark Ages. Instead, it was mainly a 16th-century creation, contemporaneous with the beginning of the great Russian expansion into the steppes. Why? He came up with a simple yet powerful insight: there's no point in enslaving or enserfing a man unless the wage you would have to pay him if he was free is substantially above the cost of feeding, housing, and clothing him.

Imagine a pre-industrial society where population is pressing on limited land supplies, and the marginal product of labor - and hence the real wage rate under competitive conditions - is barely at subsistence. In that case, why bother establishing property rights in human beings? It costs no more to hire a free worker than to feed an indentured laborer. Indeed, by 1300 - with Europe very much a Malthusian society - serfdom had withered away from lack of interest. But now suppose that for some reason land becomes abundant, and labor scarce. Then competition among landowners will tend to push up wages of free workers, and the ruling class will try, if it can, to pin peasants down and prevent them from bargaining for a higher standard of living. In Russia, it was all about gunpowder: suddenly steppe nomads were no longer so formidable, and the rich lands of the Ukraine were open for settlement. Serfdom was an effort to keep peasants from taking advantage of this situation. (And if I've got it right, those who were venturesome enough to run away and set up outside the system became Cossacks.)

Meanwhile, the New World opened in the west. Sure enough, the colonizing powers tried various forms of indentured servitude - making serfs of the Indians in Spanish territories, bringing over indentured servants in Virginia. But eventually they hit on a better solution, from their point of view: importing slaves from Africa...

Brad DeLong:

The Causes of Slavery or Serfdom: A Hypothesis: Domar's contribution is truly one of the most effective and powerful pieces of synthetic social science I have ever read. It isn't perfect. He has more predecessors than he realizes (Marx, for example, especially Marx's observations on the Swan River Colony in Australia, and the whole section on primitive accumulation and the creation of agrarian capitalism in Britain). And Domar misses one big cause of serfdom and slavery. During the formation of the Roman Empire, in Poland at the end of the Middle Ages, and in the Caribbean islands during the early modern period, slavery and serfdom did not emerge because a high land-labor ratio meant that the ruling elite could not afford to bid for labor in a free labor market. Slavery and serfdom emerged, instead, because high demand for staple products (grain, sugar, tobacco...) greatly lowered the gap between the productivity of free and the productivity of bound workers. Staple production is easier for gang-bosses to monitor than more diversified farming. Staple production also has lower skill requirements for workers. When demand for staple products is very high--to feed the proletariat of imperial Rome, to feed the growing cities of late-Medieval Flanders, or to supply the cheap luxuries demanded by early modern England--slavery or serfdom can emerge even without an extraordinarily high land/labor ratio.

But Krugman is right in ending his piece by asking two big questions: First, why didn't the Western European nobility re-enserf the peasantry after the Black Death and the resulting big rise in the land/labor ratio? Domar wrestles with this question unsuccessfully in his paper. And I have to say that it is still largely a mystery. Second, why hasn't bound labor reemerged in the modern world? Elites in developing countries can no longer be confident in their ability to earn hefty incomes by employing workers and paying them much less than their average product: an elite monopoly of land ownership is no longer worth much. So why haven't they responded to the potential erosion of their collective economic edge by turning to politics and force to bind workers. One answer is that, to some extent, they have: Consider that modern states are surprisingly effective as tax-collection machines, and in large chunks of the world the elite's power and (relative) prosperity is rooted in its "new class" control over the flow of resources from the state. Consider, also, the Communist Party of Vietnam--what is it but a gang labor boss for unfree labor deployed to produce shoes for Nike?

Very good questions, a very good paper, and I cannot feel but that my 210a class would have gone better this year had I kept Domar on the reading list, canned the "labor scarcity and interchangeable parts" part of the course, and spent not half a class on American slavery but a whole class on Unfree Labor in Historical Perspective.

---

On Marx and Engels:

Karl Marx (Capital, ch. 6):

Capital Vol. I: The price of labor-power is fixed by the bargain.... The money-owner buys everything necessary... and pays for it at its full value.... Accompanied by Mr. Moneybags and Mr. labor power-owner, we take leave of this noisy [market] sphere.... This [noisy market] sphere that we are deserting, within whose boundaries the sale and purchase of labor-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents.... Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.

As we leave this [market] sphere... which furnishes freetraderus ulgaris with his ideas... we see the persons in our drama change. He, who before was the money-owner, now strides in front as capitalist. He, who before was labor-power owner, now follows behind, as laborer. The has an air of importance, smirking, intent on business. The other is timid and holding back, like one who has nothing to bring to market but his own skin and has nothing to expect but--to be skinned...

Comments

[Nathan Myers]

You touched on the answer: Whole 3rd world countries are enslaved, instead. You might say shipping improvements have allowed slavekeeping to be oursourced. Why chain them here when their government will keep them chained there, and only send over their excess value?

[Bob Mullen]

Why bother enslaving or enserfing others? The answer is pretty much this: It is nearly always cheaper to provide the bare necessities than a living wage.

The real question is, why do people let themselves be enserfed or enslaved? A moment of desperation, one with only inferior options, for example starvation or extermination. Or an imperceptible descent, think sharecropping or "the company store". There may be asymmetrical information. It seems like a good idea at the time. Economists should model those those dynamics, that choice.

And it is a timely problem.
We are in the position of the consumer who thinks believes he is beating the company store by being a little deeper in debt at the end of each year.