Hi and welcome to Ones and Twos, FP's economics podcast. Every week we take a couple of data points, use them to try to explain the world. I'm Cameron Abati, FP's deputy editor with you in Berlin, Germany. Joining us as always is FP's economics columnist and Columbia University professor Adam Tooze, this week in Beijing. Hi Adam.
So, we have one data point for you all today. It's not a particularly surprising one. It is 250, as in 250 years since the founding of the United States of America. That will be the case as of Saturday, July 4th, one day after this episode is being released. Of course, if you do the math, 250 years traces back to 1776, which is not only when Thomas Jefferson wrote his famous Declaration of Independence or, you know, took responsibility as the primary author of that document. It's also the year that Adam Smith published the Wealth of Nations, widely attributed as the sort of first work describing the workings of international capitalism. Whether that was a coincidence or providence in some sense, I guess it depends on maybe how American you're feeling. But what's not ambiguous is that the United States has risen to become not only a country but a powerful empire over these two and a half centuries. The United States has been a slave economy, a free labor economy, a debtor nation, a creditor nation.
We thought we'd try to dig into the United States from an economic perspective, its significance, what's at stake in the United States from this point in time. But Adam, I thought we could start off with some historical perspective. And if we're discussing the United States chronologically, that brings us back to a kind of foundational debate of American history, which largely is an economic debate that American school children are taught as a kind of, you know, an original debate about the direction of the country. That is a debate between Alexander Hamilton and Thomas Jefferson. They each took opposite sides in trying to sketch a future for the country. Today it's largely thought of as Hamilton sort of winning that debate, so to speak. And I'm curious if you could sort of sketch what the terms of the debate were. And you know, is there any scenario in which the Jeffersonians could have actually been the victors?
Yeah, this is a—I mean I am an American citizen now, but as an outsider to the US, one of the real surprises is that, you know, what you say is true that this struggle in the late 18th century culminating in Jefferson's presidency in 1800 could still be seen exactly as you say as this kind of foundational moment in the history of the United States that truly shapes America all the way down to the present day. Hence also the salience of, you know, the myth of Alexander Hamilton and the wildly successful Broadway musical about him. Apart from, you know, the talent of the playwright and the song composition and so on, it's the story itself that is compelling because it pits these two founding fathers of America against each other with really starkly different visions of the future of the country. Alexander Hamilton is seen as the father of the powerful American nation state. He's an artillery officer. He was born out of wedlock, as people will know, and in the Caribbean. Both Jefferson and Hamilton are products of the settler colonial 18th century vision of America. Jefferson was born in Virginia into the planter class. And whereas Hamilton pushes this vision of a relatively centralized, powerful nation state, also considering, despite America's war of independence against Britain, Britain as the natural ally of the United States as it emerges, pushes the formation of a national bank.
On the other hand, you have Jefferson who, coming out of the planter class, represents a vision of the republic along more kind of classical lines as a republic of liberty founded on the independence of a settled planter, independent farmer class. And the two struggle for the future of the republic. And on the one hand, you could say, you know, over the course of the 19th and 20th century, it's the Hamiltonian vision of the power state that wins out. And of course, by the 20th century, America has this Federal Reserve, which all the way down to the 21st century is the most powerful central bank on earth. And America becomes this power state which bridges the world from the mid-20th century onwards. But in the immediate moment in 1800, it's Hamilton that has to rally his troops, the so-called Federalist party, to hand the presidency to Jefferson—he's the third president of the United States—and doing so destroys Hamilton's party. And most of Hamilton's projects anyway fail in the early 19th century. And at the end of the 19th century, people like Woodrow Wilson are still in their own mind struggling to free the United States from the legacy of Jefferson, who he sees as a classic addict not of the British power state model that was Hamilton's image perhaps, but of the French model to which Jefferson was addicted. And you could easily point, I think, to cultural legacies of Jefferson. The notional separation of church and state is a Jeffersonian idea. Jefferson is the founder of the University of Virginia, and with that a particular vision of American higher education which is quite different from that in Europe and a more liberal vision of higher education. There's a sense in which America remains overshadowed by both images, and certainly in the late 19th, 20th century, that generation you might call them neo-Hamiltonians still think they haven't quite laid the ghost of Jefferson. So it's a battle, I think, in which—I mean, one shouldn't though, one might ultimately say obviously that the 18th century Jeffersonian vision has been obsoleted by history, and I'm not sure the victory came that early. Maybe let's put it that way.
That is interesting, yeah. I mean, and in some extent it's hard to sort of align the terms entirely, especially if we're framing this as an economic debate, because Hamilton had such sort of—was filtering his ideas of politics seemingly through this kind of economic lens, and it's hard for me to say what Jefferson's vision of a kind of continental economy would have been. Yeah, it seems like it was a sort of political theory founded on liberty as you're describing. But what was the kind of immaterial economic vision that—
He made the Louisiana Purchase, right? So he organized the Louisiana Purchase from the French, which after all was key to the de facto expansion of the United States. So that's a key element that we should add into the picture. Whereas Hamilton is famous, of course, as the much invoked now father of American industrial policy, of the project of strengthening the United States as a productive vehicle. But I mean, what's really striking is not so much, I would say, the kind of direct continuity, it's the fact that American history and American politics insistently reinvokes and summons again and again these figures from what is a quarter of a millennium ago. It's—to a European, it's really—one thinks of, I don't know, the English as perhaps addicted to an ancient constitution, but in fact the idea of invoking 18th century precedent for anything happening in Britain in 2026 would seem bizarre.
No, this was certainly the case when I was a school child. I mean, repeatedly this Jeffersonian-Hamiltonian question, you know, in different contexts was brought up over the years. And in fact I have a distinct memory in eighth grade—and I'll move on in a second—but it was just that we had a new student who had arrived from China. Obviously this is fitting you being in Beijing right now, but his—the sort of anglicized name he was given was Frank. He was introduced to all of us as Frank Yang, and he was in our American history class the first period of the first day of 8th grade. He didn't speak—barely spoke any English, and he was sitting there with a Chinese translator-like machine in his hand. At the time there were no, you know, other kinds of internet smartphones or anything, but it was like a kind of single-task little calculator machine. And the teacher made us all go around and say whether we thought of ourselves as Hamiltonians or Jeffersonians.
And being asked to take a position on an internal dispute on the Qing dynasty.
No, precisely. And I remember, because I was in the first seat, as Cameron Abati—we were alphabetical—so Abati, I'm in the front seat, and I don't remember which, I think I probably went with Hamiltonian, I think. And then, you know, I looked over to the far corner, poor Frank Yang is sitting there and he's furiously typing into his translator, and I just know that syntax error is coming up on his machine: Jeffersonian—he's typing in Hamiltonian and he has no idea. Meanwhile, the line is getting closer and closer to him. I forget which one he said, but I think he was just terrified to be in trouble if he said the wrong thing. I think he said Hamilton, if I recall. But anyway, Frank, wherever you are right now, it's nice to think of you.
But entirely kind of separate from this debate, and what was not brought up in my sort of school years, was potentially another defining economic debate about the United States, namely about slavery. I mean, slavery was repeatedly brought up in American history classes ultimately, but treated as a political, moral, civic question with very high stakes. But I wonder whether we should also be thinking of it as an economic phenomenon, or is that too coarse a way of thinking about slavery? I mean, it does strike me that ultimately it was justified perhaps in economic terms. It had material effects. And so yeah, I guess from that perspective, was slavery peripheral or central to American economic life at the beginning of the country's history? And frankly, is that traceable today as well?
I mean, the short answer is surely yes. I mean, what was slavery if not an economic institution? The perversity of slavery consists precisely in the reduction of human beings to economic commodities. All the other issues you mentioned—political, moral, civil—result from that original obscenity, right? And so undoubtedly, and in the historiography, in the writing of the history of the United States, this question is absolutely central. And apart from anything else, of course, because it explodes as an economic question in American history in the 1860s in the form of the Civil War, because the Civil War isn't about, you know, anti-racism. There are anti-racist abolitionists and there are racist slaveholders, but it's fundamentally a political economy question about whether, as new states in the West are added to the United States, they're added as slave labor or free labor states. And to put it crudely, the central project of challenging the slave institutions is to limit the extension of unpaid, coerced chattel slavery to further than the states in the South to which it already pertains. That's the whole thing. And it's only once that logjam is broken that then the railway build-out and the full integration of the rapidly expanding Western territories can be accomplished.
No, it's absolutely central. And in the historiography of the United States, that is, in the thinking about the history of the United States, this question of how historians have read slave institutions has been absolutely fundamental and has rocked back and forth over the last 120, 130 years. From an original kind of liberal preconception that slavery was a backward, fossilized institution that had to be overturned by the more progressive North, and that doing so unleashed rapid economic growth, to a revisionist reading that set in in the mid-20th century really, which emphasized the fact that slavery could in its own terms be economically rational, to a really doubling down on that in the most critical versions of recent historiography, which insists that, you know, the foundation of American prosperity and American wealth is the violence of slavery, the racial violence of slavery, the anti-Black racism of slavery—all else follows from that initial moment, which, with the dating of the 1619 Project, points to the fact that it wasn't just free people coming from Western Europe that settled the United States, but that slavery came in. It's drained to another line now, which is arguing that perhaps actually the functionality and the efficiency of slavery has been exaggerated, and emancipation was in fact itself a driving force of further economic growth. The pendulum has swung back and forth. I come from—in some sense I have a great debt to the quantitative side of the economic history divide, and the kind of earnest, serious-minded efforts to quantify this point to the fact that of the population of the United States in the 19th century—so the census of 1800 counts 17% of the population as Black slaves; by 1860, it's 12.6% of the population, which is roughly speaking the percentage of African Americans in the United States today. If you look at the labor force, because slaves, all of them, worked, their share is higher. So it's closer to 30% of the labor force in 1800, falling to a fifth by 1860 because of white migration. In agriculture, where 90% of slave labor was employed—not exclusively, but 90%—the share is in the order of 37 to 40% of the agricultural labor force was slaves.
So American—North American, United States slavery is somewhat different from Brazil, for instance, the other great slave society of the Americas, where slaves were employed across the board in virtually every profession. In the US they were above all concentrated in the agriculture of the Southern plantation economies, and we can then do the math on what their output likely was, and you arrive at conclusions which suggest that roughly the same percentage of American GDP as slaves' share of the population is contributed by slave labor—about 12, 13, 14%, something like that, of the total economic activity. Which is huge. This is a giant sector—it's like the manufacturing sector in industry in the United States today. So it's everywhere in various forms. It's not the whole economy, except if you're in the plantation South, but it's a very substantial slice. It pervades society because of the prevalence of crops like cotton. The slaves were not just a stationary workforce employed in existing plantations, but it was slave labor that extended the plantation frontier into the Mississippi Delta, for instance. And in one of the most grotesque aspects of this, because human beings were productive capital, they could also be mortgaged. So you could build essentially securitized products on the basis of humans. Monticello, Jefferson's beautiful mansion, was paid for in part by a mortgage raised on his slaves.
So in every respect they were a key part of the American economy, and it remains one of the besetting forms of violence that runs through American society all the way down to the present day. It's completely inescapable as a reality if you live in the United States. Even if you live in the North, like in New York City, the reality of the consequences of anti-Black racism running through American society all the way down to the 2020s, and most manifestly with regard to the criminalization and incarceration of African American men. It is shocking if you come from other places of white racism like Britain or Europe—to encounter the American variety is a whole different beast. It is one of the great besetting curses of American society. This undigested legacy, which in its origins is fundamentally economic—never just that, because it takes a bunch of other supplementary arguments to justify this institution—but at its core clearly rooted in economic logic.
And I will admit, it still feels uncomfortable for me to think about the question of whether it's economically rational to enslave human beings, and yet I can see why—
It's precisely important to do that, because it is amazing what one can justify on that basis. You know, what kind of horrific things one can then go on to justify on the basis of a kind of narrow idea of rationality. But yeah, I mean, we should probably do—I think it would make a great miniseries actually to do primitive accumulation as a theme, because there's no question—is it the optimal strategy, is it the strategy that generates, you know, highest rates of long-term productivity growth? I mean, those are questions of almost the philosophy of history. But can you make a system of coerced labor work as a profit-generating mechanism? I mean, in a sense the answer is of course, because almost all labor to some degree—the only the most privileged pockets of labor have no element of coercion in them at all, right? And the norm of various types of labor is some degree of unfreedom and subjection to various types of discipline. And yeah, I mean, Marx, you know, made hay after all with the fact that there was all this pious liberal outrage in Britain about slavery precisely at the moment that children, pre-teen kids, were being pressed into labor in cotton mills in the UK. So no doubt. And obviously with the work that I used to do on Nazi Germany, all the way down to the 20th century and on into the 21st century, various types of coerced labor can be employed even in quite sophisticated factory settings. So it was crucial in the 20th century for the radical historians of the mid-century, the '50s and '60s, to insist on this point that one couldn't—that slavery and coercion didn't simply belong to a past that America had overcome.
That does sound like a potentially fascinating topic that we perhaps could return to. Yeah, it reminds me also of a kind of—I don't know—Aristotelian distinction almost between labor and freedom. You know, there is a kind of basic distinction there. You're either laboring or you're engaging in the kind of freedom of politics. But it's hard to imagine doing both, I guess. But what this discussion also reminds me of is a long-running debate about how America is distinct in another way, namely its tradition—or to be more specific, lack of tradition—of socialism among Western industrialized nations. The United States seems to stand out in lacking a kind of strong mass movement of socialism. I mean, it has clearly had periods of managed capitalism, embedded liberalism, of various kinds, but I'm curious what is distinct about America's periods of those kinds of managed capitalism versus perhaps other industrialized nations?
