Economic Theory

Book review: “Slavery, Capitalism and the Industrial Revolution” by Maxine Berg and Pat Hudson (Part 2)

…continued from Part 1 


Between the 17th and the 19th century, some people in Britain made a lot of money from the slave trade, and from the Caribbean plantations powered by slave labour. But this system also relied heavily on indirect government subsidies. As Berg and Hudson point out:

“The state supported overseas trading activity with military force throughout the eighteenth century, especially in the Americas. Between 1660 and 1815, Britain was at war for seventy of the 155 years. Most wars […] involved trading rights and colonial possessions in the Atlantic. […]  

Wars in defence of the American colonies and naval action to enforce the Navigation Acts relied on increased government spending and taxation. Tax revenues rose […], making the British second only to the Dutch as the most heavily taxed population in Europe” (p. 21).

I initially thought Berg’s and Hudson’s argument was going to be that even though the costs of propping up slavery were considerable, they were dwarfed by the gains. But that is not quite what they are arguing. What they do, instead, is to treat the cost of propping up the slavery economy as an economic stimulus package:

“Spending on the navy, from shipbuilding and munitions to the provisioning of voyages, stimulated the economy” (p. 21).

And elsewhere:

“The ‘cost’ of colonial defence was […] largely offset by the […] stimulus it created for the economy, in the demand for munitions, ships, ships’ provisions and uniforms” (44).

This is the kind of über-Keynesianism that would have made Keynes blush. The revenue from slavery is treated as a benefit, while the cost is… also treated as a benefit.

If we accept this logic, of course slavery must, by definition, have been profitable. If an activity has only benefits, but no real costs, this could not be otherwise. But imagine the current government used the same logic to claim that the “cost” of HS2 was not really a cost, because it was offset by the stimulus it creates for the economy in the demand for construction workers, civil engineers, surveyors and urban planners. I doubt Berg and Hudson would accept that argument.

A lot hinges on this, because if the net gains from slavery were small or even negative, they cannot have financed the Industrial Revolution. Berg and Hudson dispute this point by arguing:

“Were the returns from the Caribbean colonies worth the high costs of their defence and administration? Adam Smith thought not, as did a number of economic historians of the 1960s and 1970s. But this misses the point because as long as high net private returns were made, the potential was there for the proceeds to flow into the industrializing economy” (p. 44).

It does not “miss the point” at all. If those high net private returns were offset by high net losses elsewhere in the economy, then yes, the former may well have flown into the industrialising economy – but at the same time, the latter must have flown out of the industrialising economy.

To a lesser extent, the authors even apply this über-Keynesianism to the slave ownership compensation programme of the 1830s. When slavery was made illegal across the British Empire, the former slave owners were entitled to sizeable compensation payments. It should be obvious that this cannot have made Britain any richer: it was a pure zero-sum redistribution from non-slaveowners to slaveowners. The authors themselves, at one stage, describe it as a “subsidy from British wage earners and consumers of basic commodities to […] ex-slave owners” (p. 195).

But they then go on to claim that the compensation money “aided the mid-Victorian investment boom in British and overseas railways and public utilities. Some was invested in industry” (p. 197).

The macroeconomics, however, is not Berg’s and Hudson’s main focus. They also argue that while the profits earned from the slave trade and the plantations may have been small in relation to Britain’s GDP or other macroeconomic aggregates, they benefited the British economy in many other, more indirect ways. For example, the slavery economy stimulated the development of the financial sector by creating a demand for more complex and long-term financial instruments (Chapter 8). It led to innovations in agronomics, which were then transferred back to the British Isles (Chapter 4). It led to the development of more sophisticated methods of corporate governance and accounting, in order to make globe-spanning operations possible (p. 89-92). And so on.

Let’s call this the Reconstructed Williams Thesis. The unreconstructed Wiliams Thesis says that Britain made tons of money on the back of slave labour, and used that money to industrialise itself. The Reconstructed Williams Thesis says that while slavery itself may not have made Britain rich, the mere act of being involved in it had a number of domestic repercussions, which helped Britain industrialise.

However, in trying to reconstruct the Williams Thesis in this way, the authors turn it into something very different.

To see why, let’s use an individual-level equivalent. For the unreconstructed Williams Thesis, this would be:

My grandpa robs your grandpa. As a result, my grandpa is rich, and yours is poor. My grandpa uses that stolen wealth to buy a house in Mayfair. I have since inherited that house, and it is now worth millions. You inherited nothing.

The Berg-Hudson version would be more like this:

An IT worker runs an online scam operation on the side. He never makes much money from it, so on its own terms, the operation cannot be considered a success. However, as a side-effect of running that operation, he also picks up new IT skills, which later turn out to be valuable, enabling him to obtain a better-paid position.

It would then be fair to say that having run that scam has, indirectly, contributed to the living standard he enjoys today. Had he not done it, he might not have picked up those IT skills. But it would not be fair to say that the wealth he enjoys today is stolen from the people he once scammed.

Berg’s and Hudson’s critique of conventional accounts of the Industrial Revolution is that those accounts overemphasise domestic institutional factors in Britain, and underemphasise what happened in the colonies and around them. However, the indirect ways in which Britain, in their version of events, benefited from slavery are also, ultimately, about domestic institutional factors in Britain. Slavery, they argue, indirectly improved the financial sector in Britain, corporate governance in Britain, farming practices in Britain, and so on. These are domestic factors, even if they had an external stimulus. In trying to modify the Williams Thesis, the authors really end up with a modified version of the conventional account, in which the Industrial Revolution was caused by domestic factors – not slave money pouring in from abroad.

I have learned a lot from this book, and none of the above subtracts from that. But I won’t start pulling down statues any time soon.


Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

2 thoughts on “Book review: “Slavery, Capitalism and the Industrial Revolution” by Maxine Berg and Pat Hudson (Part 2)”

  1. Posted 07/12/2023 at 11:40 | Permalink

    Fascinating review. Thanks Kristian.

    It’s so interesting the way based on a single argument different people will reach entirely different conclusions, usually based on their existing beliefs (or absence of them). I would love to know what the authors make of your note at the end (that the cause of the industrial revolution was based on domestic factors though these received stimulus from external factors).

    It seems to be consistent with their statement that they do not claim that slavery is the cause of the industrial revolution but then in writing the book they must have wanted to demonstrated some kind of guilt by association or why write it?

  2. Posted 13/12/2023 at 16:41 | Permalink

    An interesting review. I haven’t (yet) read the book, but I wonder whether it mentions that slavery and slave-based commerce were even more important to France (especially due to their possession of Saint-Domingue), and that French governments were trying hard to copy Britain’s technological innovations (including by industrial espionage). So logically, slavery should have advanced industrialization in France at least to the same degree as in Britain, if not more so. Slavery and slave trading also persisted longer in the French empire. Yet French industrialization lagged behind the British by several generations. Belgium was the most advanced economy on the Continent in the first half of the 19th century, yet as far as I know Belgium was at that time very little involved in slavery or empire. I hope the authors of the book look at these comparative elements; but the tendency in many works of this kind is systematically to ignore other countries’ experience in an attempt to show Britain as unique — in this case, uniquely exploitative.

Leave a Reply

Your email address will not be published. Required fields are marked *