Across the Pond in the Southern Seas

By the beginning of the Civil War in 1861, more millionaires per capita lived in the Mississippi Valley than in any other part of the United States. Cotton grown and picked by enslaved workers was America’s most valuable export. Slaves were worth more than all the country’s railways and industry put together. There were more financial institutions per square mile in New Orleans than in New York City. What made the cotton economy boom in the United States, and not in all the other far-flung parts of the world with climates and soil suitable to the crop, was a combination of the UK and America’s unflinching willingness to use violence on nonwhite people to exploit seemingly endless supplies of land and labor. Given a choice between modernity and barbarism, prosperity and poverty, lawfulness and cruelty, democracy and totalitarianism, America chose all of the above. By the eve of the Civil War, slave laborers, on average, picked 400% more cotton than their counterparts did 60 years earlier. Undeniably an incredible amount of productivity, the system was pulling as much out of its enslaved workforce as it possibly could.*

Enslavers expanded their operations aggressively to capitalize on economies of scale inherent to maximizing crops in America and the Caribbean, buying more enslaved workers, investing in better tools, and experimenting and iterating products to achieve optimal outputs. They established convoluted organizational structures, with a central office staffed by owners and lawyers in charge of resource allocation and long-term planning, and multiple divisional units accountable for different operations. Punishments rose and fell based on the demands of the market—the price of goods in the UK was directly correlated with the level of discipline inflicted on the enslaved to keep their work rates high.

To expand their operations and make more money, they needed more capital. So they took mortgages. The way in which mortgages work is a bank lends the money to buy a house, and against that loan, the asset (typically the house itself) is leveraged. If the loan is not paid in full, the house is seized by the creditor. The concept of mortgages is not new to either the UK or America, yet, the concept of bricks, mortar, or land being leveraged is not where mortgages started. The industry began with enslaved people. Plantation owners approached banks for loans to procure further land, resources, and slave labor, using the slaves they already owned as collateral.

A newly formed banking industry was used by enslavers to mortgage their slaves to finance the scaling of their operations. The bundling of these debts created bonds that are still used today, and investors were paid dividends from profits made on the mortgaged enslaved people. Today, this is called securitizing debt, and at the time, it ostensibly allowed global markets to invest into the business of slavery. State-chartered banks took slave-backed mortgages from plantation owners, bundled the collective debts into bonds, and sold those bonds to investors throughout the Western world. Thus, when owners made payments on their mortgages, investors received a return. Securitizing debt in this way became an incredibly efficient way of pumping global capital into the American slave economy at the time. Historians have shown that most of the credit powering the American slave economy came from the London money market.

Between 1820 and 1860, approximately 875,000 enslaved people were transported to the western frontier via the domestic slave trade.* As men moved westward, credit played a crucial role in their economic success. As shrewd managers of their financial portfolios, planters could profit from the cotton produced by their slaves and use this human property to acquire more land and slaves. Slaveholders frequently pledged the same human property to multiple creditors. The securitization of enslaved people brought these men one step closer to the fortunes that drove them westward in the first place.

Similarly to slaveholders in the Upper South and factory owners or merchants in the North, settlers in the Southwest relied on loans to finance their speculative endeavors and the day-to-day operations of their plantations, such as the purchase of shoes for their slaves, seed for the upcoming season, or new tracts of land. However, this credit system was not as standardized or regulated as it is in the modern day. For elite planters, local merchants known as “factors” provided the necessary loans for cotton production, typically “advances” on the following season’s harvest, which elements would sell on commission in the Atlantic market.*

Britain officially abolished the African slave trade in 1807, yet Britain and much of Europe continued to fund slavery in the United States until the 1860s. The total slave population in the Americas was around 330,000 in 1700, it was just shy of three million by 1800, and it finally peaked at over six million in the 1850s. Slave-backed mortgage bonds can be traced back to the UK recipients of slave-owner compensation payments. Reparations to the tune of £20M (approximately £15B in today’s money) were made by the British government and funded until 2015 by the British taxpayer to those “adversely affected” by the abolition of slavery.

Yes, you read that correctly. The people who were compensated at the abolition of slavery were those who had been enslavers rather than those who had been enslaved. The proceeds of these compensation payments were then used to make investments in railroads, railways, and slave-backed mortgage bonds that provided significant returns and the intergenerational wealth that those associated with the enslavement of people indigenous to Africa and the Americas have benefited from ever since.

In the early 19th century, one in six non-landowning British people derived their wealth from the slave trade. Former slave owners and their descendants were prominent Bank of England directors throughout the 19th century. Merchants in the West Indian trade then evolved into bankers as they responded to the need for credit instruments to facilitate the flow of slaves and tropical produce.*

Conversely, enslaved people were subjected to 12 years of further indentured labor and were not compensated in the Caribbean. In just as macabre a reality, their American counterparts were used as mortgage collateral in which enslaved individuals financed the system that perpetuated their subjugation while perversely creating intergenerational wealth for their enslavers and the institutions that enabled them.

“At the height of slavery, the combined value of enslaved workers exceeded that of all the railroads and factories in the nation.”*