Monday, September 7, 2009

exploring the causal link between labor institutions and productivity

This may sound a bit strange but I developed an argument while writing my economi history comp that I am somewhat interested in taking up in a more serious fashion. There was a question on the relationship between institutions and productivity, specifically the link between "free" labor and slavery generally.

You can do a simple comparison of Southern and Northern GDP growth prior to the Civil War to test this theory. And, I would argue that you can more than simply show a correlation (which may or may not imply causation!). Specifically, after testing for a correlation you could analyze the micro-evidence on the (firm- and institution-specific) sources of productivity in the North and South. The story goes as follows.

Before the Revolution, indentured servitude was a pretty common labor contract form in the North. Basically, a worker would sell anywhere from 2 to 7 (or more) years of his labor power in exchange for wages and food, shelter, training in some skill or craft, etc. The Revolution changed this institution. The Revolution was carried by the bourgeois but also represented a set of ideas of freedom that were fundamentally incompatible with indentured servitude, especially in the case of white males. Thus, in the North we saw a gradual shift from this "unfree" labor to a more "free" labor where the employer did not have complete control over the worker: contracts were freely entered into and, increasingly, workers could leave before a contract's terms were up (say, a stipulation that the worker must stay with the employer for a year). This gradual shift really was gradual, encompassing 4-5 decades of post-Revolutionary U.S. history.

Indeed, this is one very important part of this story, of this shift from unfree to free labor: it was not an "overnight" phenomenon. To use, Steinfeld's characterization, it was bound in the political, legal and cultural struggles of the post-Revolutionary northeast, as workers came to terms with their own freedoms and the extent of those freedoms at the same time that new modes of organization of work were being introduced by entrepreneurs. A rough marker of the official change over to free labor is the case of Mary Clark in 1821 who was not required to serve out the full term of her contract and received compensation for the time she did seve; this is covered by Steinfeld. But throughout the 1820s and 1830s, what free labor really meant was still being debated. For example, if a worker in a northeast textile mill agrees to work for one year but quits after six months, is he or she entitled to compensation for these six months? The answer was not so clear cut during this time. But things did gradually change, and disputes such as this were not very common in the 1840s and afterward.

So if we can establish that labor contracts in the North were in a kind of limbo for the first part of the 19th century, while in the South slavery as an institution contineued to survive and perform well, our next question is: what was the performance like of the two economies during this period? We have an answer, and although it would be nice to have earlier numbers they are difficult to come by:

GDP per capita 1840 1860

North 109 141

Northeast 129 181
North Central 65 89

South 74 103

S.Atlantic 66 84
E.South Central 69 89
W.South Central 151 184

(Data taken from Fogel and Engerman, Time on the Cross p. 248.)

Northern economic performanace was clearly outstripping the South by the 1840s, but two additional points should be made from this table. First, the Northeast experienced the greatest boost in growth between 1840 and 1860. This is in conjunction with the rise of "free" labor as a contractual norm. Second, the West South Central had some of the highest levels of per capita growth in any region. This outlines the movement of slavery from first along the coasts (Virginia, South Carolina) into the "cotton belt" by the 1840s, as soil was being exhausted and more land was being taken from the Native Americans.

What I would argue that this shows is the relation between labor markets/institutions and productivity growth. The South had always been ahead of the North since the first decades of colonization, due to the thriving plantation economy and trade with the West Indies and Africa. Slavery, it is argued, was a very productive institution given the South's emphasis on agriculture. When compared to a "mixed" institution of some unfree, some free labor (as was the case following the Revolution and into the 1830s) it is clearly superior. But, the birth of the proletarian and all that comes with it (capitalism: the employer owning the means of production; labor organized in increasingly large and centralized factories; various forms of regulation of labor's behavior; and so on) is the engine of the rapid economic growth that gripped the U.S. economy in the second quarter of the 19th century.

So, in the end we find more than a simple correlation: homogeneous institutions provide the best performance within any one economic system, but capitalism is the mother of them all in terms of being able to harness the full productive capacity of the worker and turn out the greatest profits and change possible.


  1. By the way, just wanted to say it's great to be back after a week of stressed preparation for the second of my two comps :)

  2. So a question...I am somewhat familiar with indentured labor as a concept but.. If a worker leaves and breaks his contract what was the legal status? For instance if I was working for someone in exchange for room and board and learning to be a blacksmith, I decide to leave half way through a contract do I owe the person for the room and board that they have provided for the first half of the contract does work performed count as payment? What I am asking is does breaking a contract make me liable for benefits already received under American law?

  3. I've never come across a case like that. It's a really good question. I'll look it up and get back to you... thanks man!

  4. Dan,

    This is a really interesting post so I must apologize ahead of time for my unenlightened comment. I have been recently trying to revisit the concept of hegemony by rereading some stuff by Laclau, Gramsci, and Butler. What exactly do you mean by homogeneous institutions when you are comparing and contrasting economic growth in a plantation oriented economy and bourgeois economy? And I'm curious if I'm just reading into your conclusion too much and not focusing enough upon how your argument is relating to economic growth, but does a capitalist actually achieve the position of harnessing the full productive capacity of the proletariat, or does it organize it in a particular fashion in order to maximize profits given its constraints. I'm just thinking of the way workers slack off, malinger, steal, or sabotage the work place, other ways workers demonstrate examples of unorganized resistance. Or do work places where workers have greater control of the work place, and collectively share in the fruits of their labor, have a better productive capacity in the sense of the labor power workers perform and the way the means of production are organized. Let me know if I'm not being clear. You have an awesome blog by the way man!!! Most of it is over my head though.

  5. Shaun,

    I apologize for taking so long to get back to you regarding your very interesting questions.

    First, by "homogeneous labor institutions" I mean a relatively standard contractual relationship defining the social relations of production. In the South prior to the Civil War this means slavery as a standard way of organizing agricultural production. In the North, this means the wide presence of "free" wage labor: workers are able to move from employer to employer, but they work for these employers for a wage, they no longer own the means of production, etc.

    Second, your thoughts regarding whether there are more productive ways of organizing work are well taken. Perhaps I do go too far in the end by asserting that capitalism is the "mother of all systems of production", when I really only wanted to make the point that relative to slavery, capitalism generates faster and higher growth. I do think the evidence on the productivity of socialist and cooperative modes of production is convincing, so I agree with your central concern here.

    Thanks again for the post and I apologize again for the belated response~!

  6. What is interesting here though Dan, especially considering the topic of your study group, is the relationship between hegemonic modes of production and revolutionary changes in the political economy. For instance if we look at the political landscape during the period that you are talking about. We have all sorts of things going on on the fringes of what was hegemonic in the North and South.

    In the North we see Abolitionists organizing against slavery and racist policies being enacted such as the fugitive slave act. In the South there are scores of slave uprisings and other modes of resistance. The Abolitionists in the North, from the Garrisons, Douglas, other Black Nationalist churches and civic organizations that are turning inward racially in order to solve the "Negro Question", are varying on their degree of resentment to the entire Union to a sole focus on slavery; they were all nonetheless on the fringes of the political landscape trying to have their ideology transform the hegemonic order of the day. The transformation of the Southern economy from plantation based to still pretty much plantation based economy that slowly transformed into a more bourgeois economy had changes in modes of production that effected GDP that you pointed out.

    However, I'm just thinking out loud here in terms of your study group and how social transformations effect the political economy. What does this mean for today. We have the hegemony of global capitalism that seems to be in some sort of crisis. Then we have the political landscape of modern America. We have a sort of radical right fringe that is becoming more and more militant , the Minutemen patroling the southwest border, increased recruitment into white supremacist organizations.

    Then there is also a more vocal radical right making their way into the mainstream with these sort of tea bag parties and town hall meetings. I think part of the tea bag parties grievances against big government are legitimate in a sense. Also a lot of it is working class people who are sick of ideological liberals and their culturally superior attitude toward the south or everyday working class alleged apolitical peoples. But probably the most notable aspect of the teabag parties is pissed off white people at Obama because a Black man is taking away their liberties. This racist reaction I think is related to a declining significance in white privilege in the US. This is not to say that the US is post racial, but it is to say that over the past 15 years or so we have seen a lot of changes in the racial dynamics of US society that are going to impact the landscape of political organizing. I'm going to stop here but I think this is the central question that Marxists should be dealing with today and always. What does the political landscape look like, where is capitalism most vulnerable, how is the working class organizing against capital, where do these movements have revolutionary potential, if there are reactionary or fascist elements how do we take these threats seriously while still keeping a strategic focus upon destroying capital? Guess I went way off topic here.

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