April 7, 2004
Jobless RecoveryPosted in · 5 comments ·
In this modern world of hyper-competition, instantaneous communication, mobile capital and large faceless corporations, nothing so underlines the problems facing governments as an economic recovery without the jobs. The American economy is motoring ahead but is not creating jobs. Where have the jobs gone? Mexico, China or India maybe? Now politicians are talking about protection and argue that America’s jobs problem, evidenced again on Friday, is a function of too much competition and too many large companies with no loyalty to flag or country simply taking advantage of lower labour costs. Well they are right. But it has ever been this way and when all the political showboating is over, capital will seek out the lowest costs and migrate towards that area to the detriment of workers in the home country whether that is the USA or Ireland.
History suggests that the political status quo will be changed profoundly by the emergence of cheap labour. Nowhere is this more evident than during the golden age of international trade that also coincided with the dark ages of slavery. It is extreme to compare the emergence of dirt-cheap labour in China and India with slavery, but its economic impact on us will be similar.
Officially, slavery ended at the close of the 19th century but the money that built Merrion Square, Farmleigh House and the Bank of Ireland on College Green came indirectly from the proceeds of slavery. It was only in 1873 when, under huge pressure at home from Christian campaigners and influenced by Darwin’s scientific discoveries which changed the tone of humanist debate in England, that the British government persuaded the Sultan of Zanzibar (the home of slavery) to abandon slavery. Just in case the Sultan was not impressed by moral argument, seven British warships anchored themselves off the island.
In the event, gunboat philanthropy worked to the extent that slavery was only driven underground. Because slavery is so profitable, it continues to exist – whether in the fields of Africa and India or the brothels of Europe. Indeed, for a long period, slavery was the cornerstone of a trading arrangement called the Atlantic system, which financed fine buildings in Liverpool, Bristol, Dublin and London. The Atlantic system emerged from discoveries in the New World which resulted in an explosion in the trade of new goods, foods and medicines. Goods flowed north and people south. Initially the Caribbean was seen as ideal for settlers emigrating from Europe for religious and economic reasons. In 1640 (a decade after the first settlers arrived) the population of Barbados was 30,000 — much greater than Cork at the time.
But the Caribbean islands proved to be a hellhole of insects and mosquitoes. Their tobacco and cotton plantations fell foul of tropical weather and many settlers returned home or headed for the more favourable climate of Georgia and Mississippi. Sugar was one crop that could grow in the Caribbean but no free man would endure the hardship of harvesting it.
The demand for sugar exploded in tandem with the addiction to the new drinks – tea and coffee. These bitter drinks had to be sweetened for European tastes and sugar did the trick. Unfortunately, sugar was difficult. It was labour-intensive to harvest and the machinery in plantations was expensive to install. But the climate of the Caribbean was perfect for cultivation and as long as there were enough workers, sugar could be processed profitably.
By the late 17th century the native people of the Caribbean had either been killed off by the Spaniards or had died as a result of coming into contact with European diseases. There was no way that even the most destitute European would emigrate to a sugar plantation, so landowners had to look elsewhere for labour.
This is where Africa came in. African slave traders helped to round up people from the African hinterland and sell them to the British, Dutch, Portuguese and French traders at selected African ports. Possibly as many as 10 million souls were transported.
Because the Caribbean was the first port of call to both North and South America, slaves were usually disembarked in Havana, Kingston and Port-au-Prince. The townsfolk of these ports always knew when a slave ship was in port because of the smell and many ports barred slave ships from docking directly, compelling them to moor in the bay and transport slaves in small boats for the final part of their journey. To lose one slave in every six en route was considered normal.
The Atlantic system was a triangle: its three points were the Caribbean, England and Africa. The slaves toiled in the plantations of the Caribbean producing sugar that generated extraordinary profits. Because the plantations had grown to cover most of the arable land of the islands, some of the sugar was exported to Mississippi and the Carolinas in exchange for food.
Most of the sugar and rum (along with tobacco and cotton) was exported to England, where it was either processed or sold. Goods such as nails, copper pots and cheap fabric were re-exported to the Caribbean. Cash, guns and gunpowder were sent to Africa.
This was used to pay for more slaves, who were then shipped to the Caribbean, completing the triangle. The demand for slaves remained almost insatiable, not because the demand for sugar, cotton, coffee or tobacco rose but because the appalling records show that Caribbean slaves died faster than they reproduced. The system lasted for over two centuries before anyone in enlightened Europe began to question the morality of slavery.
Fast-forward to today and we see a similar system of international trade based on a triangle: cheap labour in Asia will attract capital from the USA and the goods will be sold in Europe. (Obviously, we are talking here about a metaphorical triangle but the system is the same.) The cheapness of labour forces technological change to make the more expensive workers in the home country more productive and this always has victims. And, from time to time, those badly affected by the innovation will rebel. The ultimate historic example is the Luddittes. The Luddittes led by Ned Ludd captured the imagination in 1812, leading Byron to write “down with all Kings but King Ludd”. The Luddites were skilled weavers who smashed hundreds of weaving machines that were threatening the livelihood of the skilled weaver artisan class.
Modernity regards the Luddittes as the ultimately symbol of futility. But this is because history is only seeing one side of the equation. Far from being atavistic, anti progressive protectionists, the Luddites were logical, rational people who saw financial ruin staring them down the barrel. And today all over the world the demand for cheap and even free labour is still phenomenal.
It will ever be thus. The golden rule of commerce is: if a country can get cheap labour, land or capital, it will flourish. This rule has kept the US motoring for years and it was an extreme form of this commercial principle that drove the slave trade. So I laugh when I hear John Kerry complaining about American jobs disappearing to Asia. I can understand what he means but you have to ask Mr Kerry about his relatives, the Cabots of Boston and the Heinz family both of whom finance his Presidential campaign. What made them rich? It was old fashioned slavery and the unemployment of today’s Luddites.