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Updated February 11, 2023Slave trading was a risky and perilous business. In addition to the dangers posed by the sea in the 18th century, there was always the possibility of a slave revolt. While insurance for suppressing rebellions at sea did not cover losses owing to deaths caused by suppressing the rebellion if fewer than 10% of the enslaved cargo were killed, the insurance industry was established to spread these risks.
Slavery is the most extreme manifestation of the insurance principle of placing a high value on human life. In 1790, the slave trade and the transportation of slave-grown produce from the West Indies accounted for at least one-third of the premiums collected by the London Assurance Company. In the 18th century, insurance flourished and developed its capital accumulation logic, playing a significant role in the rise of finance capitalism in London. The 1720 Act of Parliament, which permitted the formation of two joint-stock insurance companies heavily involved in insuring the slave trade, facilitated the formation of Royal Exchange Insurance, later the Guardian Royal Exchange, and now a subsidiary of AXA, and the London Insurance, which was subsequently merged with Royal and Sun Alliance. The most important business for Lloyd’s of London was the West Indian slave trade.*
The 1781 tragedy of the British slave ship Zong is conspicuously absent from histories of capitalism and venture capital. However, scholars have argued convincingly that the need to insure against losses in the slave trade was a crucial factor in the development of the modern insurance industry, which led to the establishment of the venture capital industry as we know it today.
From Liverpool’s docks, the Zong sailed to the African coast, where slaves were loaded and transported to Jamaica. The small Dutch ship was purchased by Richard Hanley for William Gregson and others. Gregson had long invested in slavery, and they purchased insurance to cover the shipment of their slaves. For a successful voyage, a capable and seasoned captain was required to manage the crew, cargo, and commercial activities. Luke Collingwood’s appointment as Zong captain marked the beginning of a series of poor choices. Collingwood had completed nine to ten Atlantic voyages, but never as captain.* When the surgeon-turned-captain assumed command in Africa, he assembled his crew and loaded slaves using unorthodox methods.
In Africa, crew recruitment was even more difficult than in England. Prior to an already perilous voyage, Captain Collingwood knew few of his crew members. The majority of captains carefully inspected each slave and loaded them in small numbers. Collingwood was inherited by 244 slaves. He had neither chosen nor known them, and they had occupied the ship for months without his knowledge or consent. Collingwood loaded the 110-ton ship with 459 enslaved individuals, despite the fact that ships of that size typically carried only 193.
The voyage across the Atlantic was difficult. First, water containers began to leak, depleting the crew’s supply. This complicated their extensive journey. Jamaica was, on average, 61 days away. The Zong was at sea for over a hundred days. The captain fell ill, began hallucinating, and lost control of the ship. The crew threw one-third of the chained Africans into the ocean and condemned them to die out of fear that the ship’s water supply would run out and the entire cargo would perish without recourse to insurance. James Walvin, author of The Zong: A Massacre, the Law and the End of Slavery, argues that the Zong’s crew was conducting the slave trade as usual. Consequently, this crime initially received little attention. However, Gregson and the other Liverpool cargo owners later filed a claim with their insurance provider for the 132 Africans who had died.
The subsequent trial combined sentimentality and humanism to foster abolitionist views in the 19th century, resulting in many Britons viewing the murder of 132 Africans aboard the Zong as cruel and immoral. This marked the beginning of the abolition of slavery in the United Kingdom.*
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.