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Donald J. Boudreaux

Josh Billings famously quipped, “The trouble ain’t what people don’t know; it’s what they know that ain’t so.” He was correct, especially as this keen observation applies to history.

Everyone knows, for example, that minimum-wage legislation is meant to help the working poor. A study of history, however, shows that this just ain’t so.

What is so is that the Fair Labor Standards Act of 1938 — the legislation that created the national minimum wage in America — was designed to protect the higher wages of Northern textile workers, and the profits of Northern mill owners, from the intensifying competition unleashed by Southern textile mills in the Carolinas and Georgia.

The competitive advantage enjoyed by Southern mills over their Northern rivals was access to lower-wage labor. Even at 15 cents per hour, these jobs were attractive to poor Southern workers, many of whom would otherwise have earned even less as sharecroppers.

But being insensitive to the plight of poor Southern workers, Congress and FDR in 1938 outlawed jobs that paid less than 25 cents per hour. The purpose was to stifle competition and protect the profits of politically powerful producer groups in the North.

Another historical myth is that Southern slavery harmed only the blacks who were enslaved. There’s no doubt that those who suffered most grievously from slavery were the slaves themselves. But slavery also inflicted great economic harm on non-slave-owning whites in the South.

Most obviously, slavery artificially reduced the supply of workers available to work in whatever factories and businesses might have been established by non-slave-owning whites. Therefore, these whites — who outnumbered slave-owning whites, even in the South — suffered reduced opportunities to launch their own businesses. In the South, chattel slavery stymied the single greatest force for widespread and sustained economic growth: market-directed entrepreneurship.

Also, by curbing entrepreneurship in the South, slavery reduced the rate of introduction of new goods and services that would have enriched consumers’ lives.

There was yet another way that slavery kept the antebellum American South economically infantile. Here’s the late economic historian Stanley Lebergott writing about the United States before the Civil War:

“British vessels began to concentrate their voyages to New York, Boston and Philadelphia. For in these ports they could both deliver a full cargo of manufactured goods (to be consumed in the cities or sent along to the West) and also pick up return cargoes. The demand for manufactured goods and such luxuries as tea and coffee, however, grew far more slowly in such Southern centers as Charleston, Savannah, and Wilmington. One reason was that much of the nearby population were slaves, consuming little in the way of manufactured goods.”

Lebergott sensibly argues that, had slavery not existed, Southern ports such as that at Charleston, S.C., would have gotten a great deal more shipping business. But because slavery artificially kept most Southerners — unfree and free — poor, it kept the South from being a strong market for European manufactured goods.

These historical realities should be kept in mind by anyone attracted to the argument that capitalism was fathered by slavery.

Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.

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