Daily Archives: December 27, 2021

Slavery is one of humanitys great evils. Despite its ubiquity throughout human history, some forms were particularly abhorrent and vile. While all slavery was and is wrong on moral grounds, it also has economic problems. Taken together, these reasons suggest that slavery should end on its own, even if it never does in practice.

Slavery is economically inefficient. If slaveholders made decisions purely on economics and not corrupt emotion, the practice would likely cease to exist in many of its forms.

While modern defenders of slavery are hard to find, many nonetheless believe it is economically efficient. After all, slaveholders have no labor costs. Many people wrongly believe this simply means the twisted enterprise is an economic powerhouse, but limiting slavery to wages misses other costs that diminish the economic value of slavery to the slaveholder.

No single explanation is the key to the shackles. If a single inefficiency were so powerful and evident, slavery would never have taken hold in America or elsewhere, and modern slaves would be set free today. Instead, it is the totality of factors and costs that add up to be more expensive than free wages in many examples. It is also important to focus on accounting costs rather than purely economic value because some may gain such great utility from oppressing others that it is efficient for them, even if it means lower output.

Wages are about the only thing a slaveholder saves when compared to having employees. They may save on employment benefits (health, dental, retirement), as well, but these are optional even within competitive free markets. What the slaveholder saves in wages he does not necessarily make up for in revenue from his output.

A slaveholder has to pay for the room and board, food, clothing, and medical treatment of his slaves. Of course, this can be incredibly minimaleven dehumanizingbut costs nonetheless he would not incur if he did not treat them as living property. A wage reflects value added and is not meant to compensate workers for the food and board they need to survive. With slavery, instead of paying a low wage commensurate with the value created, the slaveholder pays for these living expenses directly.

Additionally, the slaveholder has to invest in near-24-hour security to keep his slaves from escaping. This may mean infrastructures like fencing, buildings, chains, locks, cameras, and more, and it could also include personnel to watch and keep slaves locked away. The revenue from the slave labor is thought to so exceed these costs that it is irrelevant. That is a shortsighted view.For setups where slave or sweatshop workers may not be housed in a prison-like location, the slaveholder still mustemploy security or enforcers to round people up and subdue them. When added together, these costs begin to have weight. They may decrease in the long run, but they are still ongoing costs that exceed the efficient investment for a free market workforce.

There is also an opportunity cost to consider. Not only does the slaveholder have to pay the actual accounting cost to maintain a worker population and secure them, but he also loses the things he could have if he did not pay for those things. He could have more capital, better quality inputs, and better facilities. The revenue from the slave labor is thought to so exceed these costs that it is irrelevant. That is a shortsighted view. Consider scale, as well; in American slavery, the slave population grew due to birth rates. A higher population costs more to feed and shelter, as well as secure and patrol. Eventually, the numbers could be so overwhelming that it is too expensive to prevent a revolt or escape. Thus inefficiency may grow worse over time.

In the free market, some are paid even above the equilibrium wage for an industry or job at a rate known as an efficiency wage. This wage is higher because it attracts exceptional workers who can do the job with greater skill and efficiency, more than justifying their wage. While this type of wage is mainly used in high skill sectors, and slavery is usually centered around low skills, the worker attitude is relevant. Slaves have no incentive to work harder or better. In fact, in all likelihood, they resent and hate their oppressors. This means they will not be working as efficiently as possible. This turns into inefficiency for a few reasons.

If the slaveholder forces them to work hard at a low-skill job, they can threaten pain or withhold food or comfort. This means the slave has no options and must keep up the output, but due to fear, pain, or exhaustion, is less likely to be operating at full capacity. The mental resistance likely drags this even further. A slaveholder demanding ten units of output could get them. But a motivated worker at full capacity may be able to put out far more units. And when slaves are harmed, they cannot produce as much. Any worker who is killed or incapacitated must be replaced, which is costly to the operator. Even for low-skilled work, as most slavery and sweatshop work is, some level of a learning curve is present that drags the efficiency of the operation.

Working for no pay will mean profit because revenue exceeds cost when wage is not included. But as with the efficiency wage, paying workers can actually bring in more revenue because it brings greater skill, harder work or better attitude, and more efficient labor to the enterprise.

Businesses are always trying to cut costs to increase profit and also to save money to invest in development or expansion. An enterprise that does not innovate or expand will not remain profitable forever, and part of the incentive to innovate is in improving products.

Blinded by the short-term expediency of not paying for labor, slaveholders likely disproportionately favor labor.

Slave labor is unlikely to come to the boss with innovations, ideas, and tips for better products or techniques for saving time or resources, which is common in free markets. And bosses who already do not pay for labor are not likely to consider labor costs as part of the process of streamlining and improving. To this end, by blinding oneself to a huge cost, the slaveholder is likely blinded to costs as a whole and to improving things.

It also sacrifices the most efficient mix of capital and labor. Blinded by the short-term expediency of not paying for labor, slaveholders likely disproportionately favor labor. Although a machine could work for free, as well, slaveholders may not invest in capital, which could produce more efficiently, because they already do not pay the slaves, so buying the capital is expensive to them. Moreover, if competitors are innovating or using capital and commodity prices begin to fall, the price of the slaveholders product falls, and his revenue decreases.

A final drag on efficiency comes through opposition from the public or private actors. This looks different in different eras and locations. Abolitionists may be a thorn in the side of a slaveholder. They could persuade people not to do business with the slaveholder, condemn him in public as a bad person, or protest or physically intervene with things like supply shipments, product sales, or other.

In the modern era, many countries make slavery formally illegal. This means slaveholders have to undertake great costs to stay secret and hidden or pay bribes to authorities to overlook it. If it became known, the press would condemn it and shine a spotlight on it, which would likely lead to humanitarian groups and government bodies intervening.

Slavery is an old institution. If it were inefficient enough, it never would have taken root. Certainly, there is expediency, but expediency is not efficiency. While all decent people already abhor slavery, many fail to account for the many short-term and long-term economic costs that, taken as a whole, make most forms of slavery inefficient despite the seemingly intuitive belief to the contrary.

Economics is not a magic bullet to end modern slavery, just as it did not end historic slavery. It does reveal that slavery is difficult to sustain. There very well may be instances where slave labor happens to be efficient economically, but by and large, people who believe this are missing key factors. The practice of slavery is immoral and must be ended. Slavery is also inefficient. Hopefully, that inefficiency prevents it in some cases and can impede it in present and future instances. Using economics to make it even more costly may be one policy approach to consider.

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Actually, Slavery Was Never Economically Efficient ...

It allows employers to extend unlimited advances to workers and charge an unspecified interest rate on such loans

Debt bondage is a form of slavery that exists when a worker is induced to accept advances on wages, of a size, or at a level of interest, such that the advance will never be repaid. One of Indias hastily-passed Labour Codes the Code on Wages, 2019 gives legal sanction to this horrifically repressive, inhuman practice, by allowing employers to extend limitless credit advances to their workers, and charge an unspecified (and hence, usurious) interest rate on them.

Despite previously existing legal protections, vulnerable agricultural, informal sector and migrant workers were already becoming trapped in a vicious cycle of mounting debt and dwindling income, stripping them, their families and future generations, of their most basic rights. It remains one of the most pernicious sources of control and bondage in India, and is incompatible with democracy.

What is shocking is that instead of preventing such enslavement of workers and protecting their fundamental rights, the present government appears to openly abet the practice, by undoing even the weakest safeguards earlier in place under the Minimum Wages Act, 1948 (now subsumed in the Code).

Rule 21 of the Minimum Wages (Central) Rules, 1950 (corresponding to the Act) spelt out certain deductions permissible from the wages of workers. The sub-rule (2)(vi) allowed for deductions for recovery of advances or for adjustment of over payment of wages, provided that such advances do not exceed an amount equal to wages for two calendar months of the employed person.

Additionally, it stated, in no case, shall the monthly instalment of deduction exceed one-fourth of the wages earned in that month.

Compare this with Section 18(2)(f)(i) of the Code on Wages, which introduces two major changes to the foregoing.

This section allows deductions from wages for the recovery of advances of whatever nature (including advances for travelling allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of overpayment of wages.

The subtle manipulations introduced have huge implications. One, it has done away with the cap of not more than two months of a workers wages under the earlier Act, that an employer can give as advance. This allows employers to lend unlimited advances to their workers, tightening their grip.

Two, it has legalised the charging of an interest rate by the employer on such advances, by adding the clause on interest, and with no details on what might be charged. The net impact is an open sanction for the bonded labour system to flourish.

Moreover, the Code increases the permissible monthly deduction towards such recovery, up to one-half of the workers monthly wage, as compared with one-fourth under the earlier Act.

Not that the presence of any law under our Constitution even before the Labour Codes such as The Bonded Labour System (Abolition) Act, 1976 or various Supreme Court judgments, have ever deterred the bonded labour system from being widespread across sectors, from agriculture to quarrying, spinning, and more.

In Baran district, Rajasthan (2011-12), a series of Sahariya (a primitive tribal group) families boldly came out one after the other and spoke of their harrowing experiences of violence and even rape at the hands of Sikh, caste Hindu, and Muslim landlords, for whom they had worked as halis for generations. The mostly upper-caste government officials from the Collector onwards put up a wall of resistance in acknowledging them as bonded labourers as per the Act, thereby denying them any sort of relief or rehabilitation, till pressure was mounted.

In a large-scale primary survey in a mining cluster of Nagaur district, Rajasthan for the Mine Labour Protection Campaign (2015), we found that one in three workers interviewed had taken advances from their employers ranging from 1,000-1,50,000 at the time of joining work. Of them, about 50% said they took the amount to pay off the earlier employer or a moneylender.

But in Parliament, the existence of bonded labour has simply been denied among elected representatives, or grossly understated.

Debt bondage and forced labour flourish because the Government has done nothing to ensure the economic security of labourers. And it is set to worsen if this labour code provision is allowed to take shape.

It is no coincidence that the disproportionate effect of this huge regression in the Labour Code will fall on Dalits and the landless. In the Nagaur study, for instance, we found that 56% of the workers were Dalits, as contrasted with only 3% of the mine owners.

The vast proportion of landless agricultural labourers in India, to date, are Dalits.

Anand Teltumbde powerfully writes in Republic of Caste, The dominant castes understood that if dalits came to own the means of survival, they would repudiate their servile status and its attendant social bondage... Economic independence is an aspect of liberty and its absence, as a corollary, spells slavery.

Indeed, this is exactly what B.R. Ambedkar feared would play out in India, and hoped to prevent, through his pamphlet, States and Minorities, released in the 1940s (see Article 2). In her Ambedkar Lecture, 2018 at the University of Edinburgh, Rupa Viswanath, Professor of Indian Religions at the Centre for Modern Indian Studies, University of Gttingen, expounds on Ambedkars later-age line of reasoning that what makes the translation of one-man-one vote to one-man-one-value possible, is the workers economic freedom.

Ambedkar understood that economic enslavement was an extreme form of coercion that rendered political freedom meaningless, and that democracy itself required state intervention in the economic structure to prevent such practices, she says.

While he proposed a complete recast of rural and agrarian land structures, and state ownership of land as crucial to this, she explains, he also defined democracy as resting on two premises that required the existence of economic rights.

The first, relevant to the present discussion on Labour Codes, was that an individual must not be required to relinquish his Constitutional rights as a condition precedent to the receipt of any privilege. But that is exactly what the unemployed are forced to do merely for the sake of securing the privilege to work and to subsist, she notes.

The larger picture we must keep in mind, therefore, is this. Government after government, under the garb of being pro-worker, has schemed to intervene in exactly the opposite direction as desired by maintaining and deepening economic inequality to the advantage of the privileged castes and classes, thereby keeping true political freedom out of the workers reach. And it is this line that the Central government has pursued with even more gusto, in the recasting and passing of these retrogressive labour codes.

If the farm laws could be repealed, then these anti-labour codes, with numerous other dilutions that snatch away the mostly non-existent rights of the far more vulnerable class of workers, must surely go.

Sowmya Sivakumar is an independent writer

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How the Code on Wages 'legalises' bonded labour - The Hindu