How Capitalism Helped End Slavery

The development of capitalism and the rise of humanitarianism occurred around the same time – from the mid-18th century continuing into the present day. Clearly there is some sort of causal connection that historians and economists have attempted to describe and identify. Recently, some academics have argued that, while slavery obviously contributed to the growth of industrializing economies and capitalism as a mode of production, capitalism was ultimately the system that was able to finally end slavery and the slave trade.

What many fail to realize when examining capitalism in an historic context is that it is more than a system of economic production. Sure, much of what capitalism is boils down to a how it organizes markets – but the mode of production it creates is necessarily informed by the philosophical side of capitalism as an ideology.

From Friedman to Krugman, many economists have agreed that capitalism is more than just economic – it is informed by classical liberalism ideas, such as property rights. This small distinction can easily change the narrative of capitalism throughout history but is lost on many academics. There can be various forms of capitalism but all proper definitions are derived from the central ideas of property rights and individual liberty.

Capitalism was a force that was able to push the moral boundaries of society better than any government or revolution prior. The existence of relatively free markets in the 17th, 18th, and 19th century allowed for the expansion of moral responsibility and for individuals to address society’s values while providing an avenue for others to listen. The expansion of markets and moral boundaries encouraged promise keeping (strengthening contract law) and engaged individuals with the consequences of their actions.

Thomas Haskell has argued that if there was a technology, such as a button, which individuals around the world could use at no cost to the end the suffering or negative utilities of others, most individuals would use that button. He was illustrating the idea that, while we are passively aware of suffering around the globe, we don’t act because we are not confronted with how our actions affect the situation of others. Likewise, free markets forced individuals to contemplate their role in the slave trade.

Take for example, Mr. John Wollman – a Quaker on the Eastern Seaboard of the United States. Born in the 18th century, Mr. Wollman owned many businesses spanning across different industries. What ultimately drove him to oppose the slave trade was his direct dealings with the bills of sale for slaves. He abhorred the dehumanization of others, even if they were not Quakers, and ultimately decided to join the clergy and travel the United States to oppose the slave trade. Increased globalization and free markets ultimately enabled Mr. Wollman to be exposed to the horrors of the slave trade and help inform him of his fellow man.

Put simply, capitalism compounded enlightenment thinking and provided more avenues to end slavery. Capitalism, at is core, is a system that promotes free exchange and voluntary association with other parties. Countries have twisted this system to suit their own political needs, like modern day China, but ultimately lack the core tenants that are necessary in a capitalist system. As a system of production and political thought, capitalism enabled the end of slavery and can be used to end similar systems of oppression around the world today.

New Brunswick’s Fiscal Challenges and the Argument for Public Sector Restraint

New Brunswick Premier Brian Gallant announced recently that he is voluntarily reducing his pay by 15 per cent and members of his cabinet will endure a 10 per cent reduction in their wages. He also officially opposed any recommendations to increase the pay of elected officials.

Gallant’s promise is a good sign for the province, which is in desperate need of leadership, particularly in light of the economic issues facing the region. Despite the provincial government’s willingness to examine the salaries of its highest ranking employees, Danny Legere, who is the President of the New Brunswick Canadian Union of Public Employees, says he and his members will not consider wage reductions. Furthermore, he warned that the provincial government “will get the strongest possible resistance if they try to roll back wages in the public sector.”

In New Brunswick, wherein economic and political problems have plagued the province for quite some time, average public sector compensation increased 20 per cent between 2009 and 2013 (as per Statistics Canada), while inflation averaged roughly 8 per cent during that same period. In comparison, average private sector compensation rose 9 per cent between 2009 and 2013. Yet, the labour movement refuses to accept its role in public finance issues in Canada. Data available in the CANSIM Table 383-0030 shows that public sector spending in New Brunswick averages roughly $4.5 to 4.7 billion annually. Additionally, sub-national government sector employees comprise nearly 19 per cent of New Brunswick’s labour market. One thing is clear, therefore, which is that the federal government and its provincial counterparts are not spending less on the public sector. In fact, public sector salaries constitute the largest expense for every government in Canada.

There must be some consensus among New Brunswick’s elected officials if the province is to emerge from its economic woes. Moreover, the provincial government and the province’s labour representatives must cooperate if both parties wish to stimulate the provincial economy. It might be true that some members of the Canadian Union of Public Employees cannot make ends meet, as Legere claims, and although that is unfortunate, they are ultimately beholden to the provincial government, and more importantly, the province’s taxpayers.

Rationalizing the public sector is another option available to governments in Canada that wish to reduce their expenditures and align them with current economic realities. Although this process may entail eliminating public sector positions that are redundant and unnecessary, reducing public sector employment rates through attrition is a more palatable alternative. Since 2010, attrition has resulted in 10,000 less public sector positions annually and, in a growing economy, prospective employees should be able to identify other opportunities in the private sector. (In economics, the “crowding out” effect explains how reducing the public sector, or government involvement in the market, can create new job opportunities in the private sector.) Importantly, however, as argued frequently by former Nova Scotia Finance Minister Graham Steele, attrition is an imperfect solution because some departments will have much larger outflows of retirees and simply eliminating those positions would be incongruous with departmental demands. In any case, although this solution is less than ideal, it is a step in the right direction.

Aligning benefits, wages, and pensions with the private sector is another positive step forward. In New Brunswick, on average, federal, provincial, and municipal employees earn 43, 25, and 34 per cent more than their private sector equivalents when calculating both wages and benefits. The Canadian Federation of Independent Businesses has also calculated that New Brunswick defined benefit plans have unfunded liabilities of roughly $500 million. Lastly, the average retirement age for public sector workers is 60, whereas in the private sector it is 63, and for the self-employed it is 66–and the government actually provides early-retirement incentives.

Recent developments in New Brunswick pertaining to public finances are positive. Premier Gallant is positioning himself to reduce government expenditures and place the province on a sturdy foundation from which to grow the economy. Although he will still receive nearly $152,000 annually, down 15 per cent from $164,000, his gesture demonstrates a serious willingness to consider deep reforms for the sake of New Brunswick’s future.

Corey Schruder is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in history at Cape Breton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

Nova Scotia’s Tourism Ferry Tales

Nova Scotia has historically relied on sound marine infrastructure to move goods, services, and people around the province, the country, and other countries. Travel and transportation from Nova Scotia to the United States and other jurisdictions in Atlantic Canada is quicker by sea than by land and investing in such infrastructure is useful, but sometimes politically motivated.

Such is the situation surrounding the Nova Star Cruises in Yarmouth, Nova Scotia

First and foremost, the provincial government has invested millions of taxpayer dollars into the ferry despite several problems plaguing it since the 1970s. Moreover, negotiations surrounding it have not been transparent and elected officials who support the ferry, which connects Yarmouth to Portland, Maine, more than likely do so for political, rather than economic, reasons.

Initially, the Nova Scotia government approved a seven-year $21 million subsidy to the ferry operator, Nova Star Cruises, which that company spent wholly in its maiden season. Following the initial subsidy, the provincial government forwarded to Nova Star Cruises an additional $5 million to cover expenses, and shortly after, it sent another $2.5 million for staffing fees and transportation costs.

It remains unclear why, or how, Nova Star Cruises spent $21 million that was meant to last for seven years and it is possible that the provincial government has given the ferry operator additional funds that have not been disclosed publicly. Economic and Rural Development Minister Michel Samson, for example, initially and unequivocally stated that the provincial government had only paid out a total of $26 million, but later, following a government report on the ferry expenses, it forked out an additional $2.5 million, raising the total to $28.5 million. This discrepancy may appear minor, however, the fact that Nova Scotia’s government is mum about these expenses is concerning.

Aside from issues of transparency and government accountability, investing in the ferry service seems to have been misguided. The Nova Scotia Tourism Agency, for instance, attempted to quantify how impactful the ferry has been on the Nova Scotia economy and found that it may have contributed to an $11 million increase in hotel revenue. In other words, for every dollar the government spends to use the ferry as a means of attracting tourists to the province, they get less than half of a dollar in return, which even Keynesians would agree is a terrible multiplier.

The provincial government will announce its plans for the 2015 Nova Star Cruise ferry service within a few days, and although I suspect the announcement will include additional subsidies for the ferry operator and a “feel good” plan to attract more tourists, the provincial government should rethink its tourist strategy in southwest Nova Scotia. Tourism numbers have been increasing steadily in Nova Scotia recently and it is doubtful that the ferry service is having a large enough effect on the local economy to warrant such large cash injections. Moreover, the operator employs only 20 individuals from the province.

Instead, the government should focus on increasing the presence of short-distance ferries for transportation. One major problem facing local fisherman and processors is not having the ability to transport their fish to markets outside of Nova Scotia at a low-cost and before their product expires. Reefer trailers, which fishermen use to transport their product from the point of processing to consumers in other jurisdictions in Canada and the United States, are costly and time-consuming; increasing ferry capacity for trucks and trailers transiting to Portland and New Brunswick would better service the community than focusing solely on tourism.

Provincial governments in Nova Scotia focus on promoting tourism because residents in that province have bought into the idea that it is a tourist destination constrained by a lack of accommodating and appealing services, i.e. if the provincial government simply invests in tourism infrastructure, Nova Scotia will shine as a tourist destination. This perception of the issue compels elected officials to lobby for projects that do not necessarily provide real benefits to Nova Scotians. A fair compromise would be to follow the Marine Atlantic approach in Newfoundland and Labrador, which is to ferry passengers and transport goods and services.

In the end, this issue is another example of how government can mismanage an issue that has a clear and simple solution.

Corey Schruder is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in history at Cape Breton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies