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The Financial Meltdown of the New Orleans Slave Market

As you watch 12 Years a Slave recall that the market in humanity really was a market—with dizzying asset price changes, speculative bubbles, and a fear of volatility greater than a fear of civil war.
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One of the many wrenching scenes in the acclaimed new movie 12 Years a Slave takes place in the New Orleans slave market, where, in 1841, Solomon Northup—a free black man from New York state who was kidnapped and stripped of his identity during a visit to Washington, D.C.—is sold to a wealthy plantation owner. A slave trader played by Paul Giamatti is utterly unmoved by the cries of a woman who begs not to be separated from her small children. For him, this is a commercial transaction—nothing less, nothing more—and he was going to get the best price, whether or not they sold as a package deal.

It’s the first of several times the film reminds us that, to their owners, slaves were not only property, but valuable property.

But how valuable?

Now Columbia business prof Charles W. Calomiris and Tulane economist Jonathan Pritchett, continuing their investigation of data from New Orleans’ slave market, report that as the War Between the States became a reality, what had been a bull market in humans turned, well, south.

In a new paper from the National Bureau of Economic Research, the duo argue that the South—or at least the slave-obsessed aristocracy of the Deep South—made a bet that they could either secede in peace, defeat any effort by Abraham Lincoln to re-unite the nation without slavery, or at worst would see some sort of compensated emancipation. We’ve known since 1865 that they were wrong on all counts, but Calomiris and Pritchett show that the realization was setting in even as the South was winning the first big battle of the war.

They do this by examining the actual sales of slaves between 1856 and 1861, then comparing that to a speculative backdrop of what prices might have been without the political upheavals—the Dred Scott decision, “bloody Kansas,” John Brown’s raid, Lincoln’s election, and then war. And when war came—by no means a foregone conclusion given that a novice Union president in a newish political party might not have the guts to start shooting—the price of slaves started falling.

We show that prior to 1860, few political events seemed to affect slave prices, and even the Dred Scott decision had only a small and temporary effect. After Lincoln’s nomination for the Presidency, slave prices fell, and they continued to fall once the war commenced. The overall decline in slave prices was large (more than a third from their 1860 peak) and occurred prior to any battle losses by the South.

They quote G.W. Chrisp, a Memphis slave trader, writing in February 1861 that the secession crisis “will have a very bad affict on the negro market [.] what we are coming two the lord onely noes [.] We think our state might to be in Hell”

While his grammar was spotty, Chrisp’s political sensibilities were spot on.

Calomiris and Pritchett are partisans of cliometrics, a data-driven approach to history that has seen its greatest use in studying American slavery and the U.S. Civil War. (It’s much like cliodynamics, which we’ve mentioned in studying war itself.) The approach pushes some interesting economic data to front, interesting in large part because it’s about human beings. Drawing on other scholars’ work, the authors suggest that slaves accounted for 44 percent of the South’s—or at least the cotton-growing area’s—wealth in 1859, and that the dollar values was between $2.7 billion and $3 billion in 1860 dollars. Federal spending in 1860, by the way, was $78 million.

New Orleans was the South’s biggest city at the time, and its largest slave market. Louisiana treated human property the same as it did land property and so transactions had to be legally recorded and notarized for the new owner to have title, a boon for today’s research. Sales tracked in the duo’s study period suggest an already shrinking market—6,200 slaves were sold in New Orleans in 1830, compared to an average of 3,600 a year between 1856 and 1860. Buying on credit was possible; the average interest rate was eight percent.

Solomon Northup himself went through the city’s slave market, in 1841, despite having been abducted originally in D.C. He later wrote about the “mournful scene” in New Orleans:

The very amiable, pious-hearted Mr. Theophilus Freeman, partner or consignee of James H. Burch, and keeper of the slave pen in New-Orleans, was out among his animals early in the morning. With an occasional kick of the older men and women, and many a sharp crack of the whip about the ears of the younger slaves, it was not long before they were all astir, and wide awake. Mr. Theophilus Freeman bustled about in a very industrious manner, getting his property ready for the sales-room, intending, no doubt, to do that day a rousing business.

The first time Northup sold, Freeman asked for $1,500 but settled for $900. In general, the price of slaves had some correlation to the price of cotton. “King Cotton,” after all, was by far the South’s biggest cash crop and the magnet for cheap field labor. It's been said that without cotton slavery might have faded away, but then the cotton gin made the fiber a money spinner. As cotton became ever more dominant, ever smaller incremental gains in its price produced ever higher prices for slaves. A speculative bubble, termed “the Negro fever” at the time, arose as supply constricted.

Officially, the importation of slaves from Africa had been outlawed since 1808, which meant any new slaves had to be born from the old ones. Perhaps slaveholders—eyeing Cuba, Mexico, and the U.S. West for expansion—were looking for labor to work those new lands. And maybe slaveholders wanted to get their hands on as many slaves as possible before any new laws got in the way, much like the bubble the United States has seen in the gun trade.

Still, higher prices assumed some sort of status quo. The inevitability of conflict, or the impossibility of buying our way out of the peculiar institution, were not the historical dead ends we might perceive them to be today.

In 1833 the British spent £20 million in public money compensating slave owners after Parliament granted freedom to their “property” held in Britain’s colonies. And no, their newly freed property didn’t get a pence. Lincoln repeatedly floated ideas of compensating slave owners, even if that fell on deaf ears. Only in the District of Columbia were slaves freed, with owners receiving an average of $300 per slave. That occurred in April 1862, the same month New Orleans, and its slave markets, were captured by the Union. It’s worth remembering that the Emancipation Proclamation was a very limited decree. It only freed slaves in areas still rebelling—not slaves in Union states (Delaware, Kentucky, Missouri, and Maryland all were slave states) nor in areas of the Confederacy then under blue suzerainty.

If this doesn’t sound like the Great Emancipator of misty memory, recall that Lincoln was a pragmatic Illinois politician. While he was on record as opposing slavery, he was more on record as wanting to prevent secession, as he explained to Horace Greeley:

My paramount object in this struggle is to save the Union, and is not either to save or to destroy slavery. If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that. What I do about slavery, and the colored race, I do because I believe it helps to save the Union; and what I forbear, I forbear because I do not believe it would help to save the Union.

Calomiris and Pritchett argue that slavery nonetheless was the issue of the day.

There is no doubt that the key issue in the minds of the advocates of secession was the future of slavery. Secessionists saw the risk that President Lincoln and the newly resurgent Republican Party posed to maintaining slavery as a labor system in the existing South, and to being able to expand the reach of slavery into the territories and possibly other areas including Cuba. But if the goal of secession was preserving the slave system, what were slaveholders’ expectations regarding the cost of the war and its possible outcome?

They start by looking at the Dred Scott decision, in which the U.S. Supreme Court ruled that taking a slave into an area where slavery was not legal did not confer freedom on that slave, that Congress had no power to regulate slavery, and to add insult to injury, no person of African descent, slave or free, could even be a U.S. citizen. It was both the high-water mark of states’ rights, and the beginning of the end of slavery. Amid the rejoicing in the South, there were notes of caution. Calomiris and Pritchett cite the LouisianaCourier of March 19 of that year: “Black Republican lamentations” over Dred Scott might “succeed in electing Ethiopian presidents....”

Tremors from the ruling damped down exuberance. Slave prices in New Orleans rose less than five percent after Dred Scott, a statistically insignificant increase, according to the researchers. Some argue the court’s decision set the stage for a national recession in 1857, a panic which largely left the South’s banking sector untroubled.

Two more events shook the nation but not the New Orleans market—the rejection of a pro-slavery constitution for Kansas at the end of 1857 (less than five percent price gain) and abolitionist John Brown’s violent raid on the Army arsenal at Harper’s Ferry, Virginia (up one percent). Not until Abraham Lincoln was nominated as his party’s presidential contestant did the going price of a slave rise a statistically significant amount, a full five percent. “This is a somewhat puzzling result,” the authors write, “unless one interprets it to mean that observers initially believed that Lincoln’s nomination would reduce the chance of Republican victory.”

One more event–the quick secession of seven states before Lincoln’s inauguration—pushed prices up two percent. But after Lincoln took office in March 1861, the bull market in black flesh stalled. In April, when Confederates attacked the U.S. installation Fort Sumter in South Carolina, prices started to fall, a little at first, and even more after the South thrashed the main Union army in Virginia in July at Manassas Creek. Manassas, or Bull Run, showed Lincoln’s mettle: “Despite the southern victory, this northern attack demonstrated that Lincoln intended to invade the South to preserve the Union which caused slave prices to decline markedly by nearly 17 percent.”

It wasn’t fear of losing slaves that drove the price down, the professors have determined. Child slaves—like a sort of call option—continued to be valuable, which wouldn’t have been likely if buyers expected a bleak future for slavery. No, much like today’s stock market, the rich mostly feared volatility in the marketplace. After all, another form of property, railroad shares, traced the downward trajectory in both the North and the South.

“The slave price decrease in 1860-1861 seems not to have been driven primarily by fears of emancipation without compensation for slaveholders,” the researchers argue. “Rather, the price decrease was more generally the result of rising fear of war and its economic consequences for slaveholders—something that slave-owning advocates of secession had bet against.”

What if their human property was taxed to support the war effort? What if slaves were conscripted to menial work for the ‘cause’? “Even if the war was expected to end in a stalemate or a southern victory, a large and costly Civil War would have hurt slaveholders and reduced the market value of their slaves.”

They were right.