The link between the transatlantic slave trade and industrial growth in Britain is a recurring theme in public discussions. There is a widespread assumption that the slave trade’s profitability required Britain to compensate the descendants of Africans, since it helped to enrich some institutions. It is true that the slave trade made profits, but its contribution to the economy was marginal. Technological change rather than the slave trade was the force that propelled the Industrial Revolution.
Studies examining the slave trade’s profitability fail to account for the impact of British human capital and institutional innovations on its viability. Slave trades have been ubiquitous throughout history, yet we know considerably less about how non-Westerners deployed human capital to increase its viability. Without leveraging human capital and institutions, the transatlantic trade would have delivered meager returns for Britain and her peers in Europe.
Economists are wrong to assume that all regions could efficiently entertain trade on a global scale. Before the eighteenth century, shipping in Europe was already a high-tech industry employing quality labor. Maritime workers were known for having higher levels of human capital, and the English were particularly talented. Europe not only constructed sophisticated ships, but the quality of shipboard personnel was also relatively high.
In England, Stephen D. Behrendt opines that human capital was a seminal factor in Liverpool’s emergence and eventual dominance in the British slave trade. The availability of experienced personnel made it easier for merchants to organize ventures and expand market options in Africa. Suffering from a shortage of human capital could severely derail the slave trade’s productivity. For example, the paucity of trained personnel in London limited opportunities in Africa and restricted the volume of its trade to 15-25 voyages annually.
Success in the slave trade was inextricably linked to human capital and organization. Africans and Arabs were involved in trading slaves for centuries, but they failed to build formal structures like Europeans that could increase competitiveness beyond a non-trivial level. Institutions like the Dutch East India Company, the Dutch West India Company, and the Royal African Company were launched to aid the efficiency of European trades. Europeans applied an economic approach to the business of exploitation, and the British were the most successful.
Literature on the Dutch, Danish, and French slave trades suggests that these countries’ merchants were less equipped to minimize problems linked to the slave trade. Unlike Britain, her closest competitor, France, did not modernize its entrepreneurial and banking practices during the seventeenth and eighteenth centuries, and as a result the lack of innovation in the financial sector impeded industrial expansion. Britain, however, pursued several strategies to boost the performance of the slave trade.
Nicholas Radburn credits Britain’s success in the trade to the “Bills in the Bottom” credit mechanism:
First introduced by Liverpool merchants in the 1750s, merchants received bills of exchange for the proceeds of their American slave sales in the ship or “bottom” that delivered the captives, in lieu of produce or the planters’ own bonds. These bills were drawn upon and guaranteed by British bankers, a departure from earlier credit arrangements, which had only been between a captain and a planter or factor.
By deemphasizing personal networks that relied on family and kinship ties, these bills fostered broader collaborations that led to the emergence of modern financial institutions. Quoting the research of Robin Pearson and David Richardson, Radburn purports that the use of such bills explains the difference in performance between the French and the British:
Bills in the bottom, argue Pearson and Richardson “promoted the unprecedented expansion of [the British slave trade] between 1750 and 1807,” and enabled British slavers to escape the pitfalls of colonial debt security, which had plagued the trade in the 1730s. French slave traders, by comparison, employed the “triangular trade” method of remittance throughout the eighteenth century, in which slaver captains brought home a portion of the sales in tropical commodities, and the balance as credit extended directly to the planters.
Furthermore, insurance was another key mechanism that stimulated the British slave trade. The availability of insurance for ships and human cargoes incentivized the slave trade by mitigating risks in the event of a loss. The British slave trade gained profits due to the incorporation of mechanisms that made it feasible to trade humans. Discussing the slave trade evokes emotions, but it was also a commercial activity, and in business, better organized and smarter people will evidently outperform their rivals.
Indeed, the slave trade was horrible, but logic should temper emotions. By analyzing the issue, it becomes obvious that the slave trade yielded profits due to the human capital and institutional advantages of Britain and her European peers. The slave trade was not unique to Europeans, but it was relatively successful there because of their human capital. Moreover, if people require apologies for past atrocities, they must also demand atonement from Africans and Arabs for their participation in slavery and the slave trade.
Some might argue that Europe’s success stems from exploitative activities like the slave trade and colonialism to comfort themselves, but the truth is that Europe’s prosperity is largely a result of human capital and European institutions.
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