Engerman on Slavery
Nov 21 2006

Stanley Engerman of the University of Rochester talks about slavery throughout world history, the role it played (or didn't play) in the Civil War and the incentives facing slaves and slave owners. This is a wide-ranging, fascinating conversation with the co-author of the classic Time on the Cross (co-authored with Robert Fogel) and the forthcoming Slavery, Emancipation, and Freedom (LSU Press, 2007). Engerman knows as much as anyone alive about the despicable human arrangement called slavery and the vastness and precision of his knowledge is on display in this interview.

Mailbag (Time mark 58:00)
    • On
Walter Williams on Life, Liberty and Economics
    • . Jeff of Ann Arbor asks: Can a country run out of reserves if it runs persistent trade deficits? Do trade deficits cost us jobs?
A: Merchandise Trade deficits--reflecting that U.S. citizens typically buy more physical goods than they sell--are balanced by Capital Account surpluses--foreigners typically invest even more in the U.S. Floating exchange rates in the U.S. since the 1970s adjust to take care of any imbalances in international currency demands. Jobs adjust in response.
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READER COMMENTS

Dennis Smith
Nov 23 2006 at 10:51am

Thanks for the explanation of trade deficits and its effects on American jobs and standard of living.

My question is, why does the annual capital account surplus so closely match the annual merchandise & service trade deficit?

You state on page 11 that the current account surplus and the trade deficit are determined simultaneously and that neither is the cause of the other. If that is so, why are they equal in magnitude year after year?

Thanks,

Dennis

Lauren
Nov 23 2006 at 12:59pm

Dennis asked with regard to the Mailbag question:

My question is, why does the annual capital account surplus so closely match the annual merchandise & service trade deficit?

It works out that way because every individual who buys any goods or services simultaneously contracts for or arranges any necessary payments. It doesn’t matter if it’s within the U.S. or abroad, or if the shipment and payment don’t happen the same day. Over time, while one thing–goods or services–travels in one direction, something else–payments–in goods, services, loans, investments, or money–travels the other way.

The payment arrangements are recorded in the capital account, while the transfer of goods is recorded in the merchandise trade or current accounts. They balance naturally because people have to pay for what they buy.

International accounts merely sum up the private accounts of individuals in the different countries.

No one sells anything to a buyer unless the buyer can pay for it. No buyer pays for anything unless it’s shipped or received for inspection. That’s the reality in a garage sale, on e-bay, and internationally. Ultimately, the shipments balance with the payments. The timing of the accounts may not match day to day, quarter to quarter, or even year to year, but ultimately it has to match up. If a good is purchased but not paid for simultaneously, it’s paid for in the future via a current loan or investment.

Alvin
Dec 2 2006 at 8:48am

Russ,

As usual, another fine show. I was disappointed with one thing. Many of us grew up watching the series Roots, which depicted the whippings and brutal treatment of slaves. I wish you’d have asked Engerman his thoughts on Roots and how much of Roots was fiction or true.


DELVE DEEPER


AUDIO HIGHLIGHTS

 

Time
Podcast Episode Highlights
2:27Indentured servitude v. slavery. What are the characteristics of slavery throughout history? What are the ways people historically became enslaved?
5:01What rationalizations do people give to live with themselves as slave owners?
6:48How do you give slaves incentives? Xenophon suggested differential payment in better clothing. Was offering freedom an incentive?
8:25Manumission defined. Manumission was part of keeping the slave system going, as opposed to attacks on the system itself, which didn't occur till the late 18th century
10:01Slavery in U.S.; Southern army in Civil War. Slavery outside the U.S. till 1970: Brazil, Cuba, slave trade into North Africa and Iraq. China, Thailand, Korea
14:55Serfdom in England. Landowners' cartel broke down.
15:47Economic effects of slavery. Adam Smith's argument that slavery is inefficient. (Smith considered sadism as an alternative hypothesis, using the phrase "will to domineer".) Smith had never seen a plantation, which may have affected his not addressing the incentive structure in place to reward good work. Cicero.
18:40Differential rewards. Were slaves ever paid cash historically? Smith himself not quite consistent: French v. British systems
20:45Time on the Cross discussed. Was slavery unprofitable v. book's argument that it was profitable. Northerners' lending to Southerners suggests they expected returns. Newsletters on slavery. Lincoln/Douglas debates highlighted that if slaves increased but no more land was permitted to slaveowners, slavery would ultimately fail, but only after a long time.
26:32What was the Civil War fought over? Was it slavery or was it nationalism?
33:41Should the North have compensated the South? Did slaves ever benefit throughout history from such compensation, which till the Civil War had traditionally been paid? Lincoln's awareness of the costs and benefits.
38:23Have the controversies over slavery generally weakened views of property rights? Sports, tenure, Hume, principle-agent problem.
41:23Controversies and objections to Time on the Cross. Nutrition, height. Better data versus more systematic use of data?
47:23Whippings, violence, threats of violence, breeding of slaves.
53:50Post Civil War: What was the impact of deaths on the U.S. economy? Bastiat's illumination of the broken window fallacy: destroying property fallaciously results in economic growth.

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