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labor is often used for work that is less valuable than its alternative
uses. A chemist may be drafted into the army and then used as a
clerk handling clothing supplies in the quartermaster corps. In an
all-volunteer army, it would be cheaper for the military authorities
to hire a civilian to perform such clerical duties than to pay enough
to attract chemists or other highly skilled people to do this routine
work.
If military personnel were used for such work in a volunteer
army, these would more likely be individuals whose civilian skill
levels were low enough that the army could attract them at consid-
erably lower pay than would be required to attract people like
chemists. Such financial considerations taken into account by mil-
itary authorities would reflect more fundamental underlying reali-
ties from the standpoint of the economy as a whole: Involuntary
labor is a less efficient way to allocate scarce resources which have
alternative uses.
People summoned to jury duty may have great amounts of their
time wasted waiting around to be told whether they will in fact be
seated as jurors for pending cases on a given day or ordered to keep
coming back on subsequent days until their tour of jury duty has
been served. Moreover, what they are paid is usually far below
what they earn in their regular occupations. More fundamentally,
they may sit on cases whose importance to the larger society may
be less than the value of what they would be contributing other-
wise in their regular lines of work. Such considerations tend to lead
people in higher paid professions to seek to avoid jury duty by uti-
lizing whatever exemptions or excuses may be available, while re-
tirees or people in lower-level occupations may find jury duty less
of a burden, and perhaps more interesting than alternative uses of
their time.
As with the service of military draftees, the cost of involuntary
labor to decision-making authorities understates its cost to the
Free and Unfree Labor 53


economy as a whole, and thereby results in misallocation of scarce
resources. In the case of juries, the lesser likelihood of people from
higher occupations ending up serving as jurors can also reduce the
quality of jury decisions, to the detriment of justice.


Forced Labor Camps

One of the largest and longest lasting systems of involuntary labor
in the twentieth century was that of the forced labor camps”the
gulags”in the Soviet Union. As of 1949, for example, there were
well over 2 million prisoners in Soviet forced labor camps. Because
of turnover, due both to releases and incarceration of new prison-
ers, as well as substantial numbers of deaths within the gulags, the
total number of forced laborers over a period of decades was many
times that.
Both inhumanity and inefficiency were hallmarks of these
camps. Deaths averaged more than 50,000 prisoners per month in
the particularly bad year of 1942, from a combination of over-
work, malnutrition, mistreatment, and harsh climatic conditions
with inadequate clothing. During the war years as a whole, more
than 2 million people died in Soviet prison camps”more than the
number of Soviet citizens and soldiers who died as prisoners of the
invading Nazis and their allies.
Despite the long hours of work and inadequate food, clothing,
housing, and medical care that contributed to staggering death
rates, the forced labor of the inmates still did not cover the costs of
the gulags. Shortly after Stalin's death, the head of the Soviet se-
cret police”hardly a humanitarian”began closing the camps
down for economic reasons. Those who ran the gulags had unbri-
dled power over the inmates but did not own them or their output
as property, so they had no incentives to be efficient. As a Soviet
official described it:
54 APPLIED ECONOMICS

As a rule, the plans are unrealistic, the requests for workers exceed
that required for the plan severalfold, but the Gulag grants these re-
quests, that is, in other words, the branch administration do not
value their workforce; they believe that, since the Gulag is right
there with a ready reserve of workers, they can be wasteful with the
workforce, to use it at any time and in any way they wish.

Because of the sheer size and scope of the gulag system, it made
huge contributions to various parts of the Soviet economy, but
usually at far higher costs than those of comparable enterprises in
the general economy. In its heyday, forced labor in the Soviet
Union produced one-fourth of all the country's timber, 40 percent
of its cobalt, 60 percent of its gold and 76 percent of its tin. Forced
labor also produced coal, oil, and gas, and built many canals and
even apartment buildings in Moscow, among many other eco-
nomic activities. But just the purely economic costs”quite aside
from the staggering human costs”were typically higher than the
cost of doing the same things outside the gulags. For example, the
cost of producing bricks in a facility with forced labor was more
than double the cost of producing them in a nearby Soviet brick
factory. In addition, the gulags were "notoriously reckless in their
use of natural resources," according to a scholar at the Russian
Academy of Sciences in Moscow. All of this was consistent with
the incentives and constraints facing them, however much it vio-
lated both economic and humanitarian principles.
With the opening of the government's secret archives in the last
years of the Soviet Union, the extent of the inefficiencies of forced
labor were more fully revealed. The building of railroads was an
example:

By 1938 the length of railroads on which construction had been
started but had been suspended was approaching 5,000 km (not
Free and Unfree Labor 55


counting railroads that had been completed but were unused or par-
tially used because they were unneeded). Meanwhile, the total in-
crease in the USSR's railroad system between 1933 and 1939
amounted to a mere 4,500 km. A considerable portion of the "dead
railroads" was built at the cost of many prisoners' lives.


Slavery

Slavery has existed on every inhabited continent and among peo-
ple of every race for thousands of years. The very word "slave" de-
rives from the word for Slav, not only in the English language but
also in other European languages and in Arabic. That is because
so many Slavs were enslaved for centuries before the first African
was brought to the Western Hemisphere in bondage.
The roles played by slaves have covered an enormous spectrum.
Some were used as human sacrifices by the Aztecs of Central
America or in Indonesia or in parts of Africa, among other places.
In the Roman Empire, some slaves were forced to fight each other
to the death as gladiators, for the entertainment of crowds in the
Coliseum. After Europeans took over the Western Hemisphere,
most African slaves brought there were used for routine manual
labor, such as growing sugar cane in tropical countries or cotton in
the American antebellum South. Yet, in various parts of the world
and in various periods of history, slave roles have ranged all the
way up to that of imperial viceroys and commanders of armies in
the Ottoman Empire.
As a general pattern, the more highly skilled, the more intellec-
tually demanding, and the more responsible the roles filled by
slaves, the less they were treated with the brutality and contempt
inflicted on slaves doing arduous manual labor. In short, although
freedom and slavery are a stark contrast in principle, in practice
there were degrees of slavery. In countries around the world, slaves
56 APPLIED ECONOMICS


who were domestic servants tended to be treated better than those
who were field hands or other manual laborers, and those in higher
level occupations tended to be less and less treated as slaves, while
for some at the highest levels their bondage was nominal.
Slaves used as divers in the Carolina swamps, for example, had
to exercise skill and discretion and were accordingly treated differ-
ently from plantation slaves, being rewarded with both financial
incentives and with greater personal freedom on and off the job.
Similarly with slaves in lumbering operations or the processing of
tobacco, which likewise required skill and discretion. In one re-
markable case, a slave was made captain of a river boat, with a crew
of both black and white sailors under his command. These more
responsible jobs often also offered more opportunities for escape,
which in turn meant that severe treatment of such slaves would
have been counterproductive and was therefore much less common
than on plantations where slaves performed routine manual labor.
Urban slaves in general were also treated less harshly for the
same reason and Frederick Douglass described the typical urban
slave in the antebellum South as "almost a free citizen." But being
almost free was not the same as being free. Some, like Douglass
himself, decided to become fully free citizens by escaping. While
permanent escape from a slave plantation was very rare”perhaps
two percent of the slaves made good their escapes without being
recaptured”escapes by urban slaves were far more often perma-
nently successful. Slaveowners who thought beyond stage one had
to take into account the increased possibilities of escape, as well as
other costs such as financial incentives and better working condi-
tions for slaves doing higher level work. Obviously, the increased
value of that work had to be great enough to cover these additional
costs and risks.
These modifications of slavery implicitly recognized the ineffi-
ciencies of pure unmitigated slavery. For routine work that was
Free and Unfree Labor 57


easily monitored, such as growing sugar cane or cotton, slavery
could extract the necessary efforts under the threat of the lash. But
for anything requiring judgment, initiative, and talent, other in-
centives must be invoked, simply because it is hard for someone
else to know how much potential for judgment, initiative, or talent
any other given individual has. Economic and other rewards cause
the individual to reveal those qualities in exchange for being
treated less like a slave and rewarded in other ways.
Where slave populations were large enough to have a serious
potential for social disruption and danger to the lives of the free
population, the need to minimize such dangers limited the extent
to which the slave population could be educated for higher roles,
since such education could also facilitate organized disruptions,
escapes, and uprisings among the enslaved people. Therefore edu-
cating slaves was forbidden by law throughout the Western Hemi-
sphere in post-Columbian times. From an economic standpoint,
this meant that, in addition to inefficiencies in using people of a
given capability, slavery also limited the capabilities that could be
developed among people of a given potential. Put differently, free-
dom has not only personal and political benefits, but economic
benefits as well.


Markets for Involuntary Labor
The wasteful use of unowned involuntary labor can be contrasted
with the more careful allocation of involuntary labor that is owned
and sold, since both buyer and seller in free market economies
have financial incentives to weigh the productivity of the labor in
alternative uses. However, the desire of those held involuntarily to
be free imposes costs to keeping them in bondage, and these costs
must be deducted from whatever gains their owners receive from
their involuntary labor.
58 APPLIED ECONOMICS


Slaves are not the only involuntary labor that is bought and sold.
The services of German mercenaries, such as those who were used
by the British in their attempt to suppress the American revolu-
tion, were sold or rented collectively by heads of the various Ger-
man principalities of the time, who treated these soldiers as if they
were property. Serfs were bought and sold as part of the land
traded among medieval European landowners. Prison labor has
been used by both public organizations and private individuals in
the United States, well into the twentieth century.
Much of the white population of seventeenth-century colonial
America”more than half in colonies south of New England”
arrived as indentured servants, sometimes having contracted indi-
vidually to work a specified number of years for those who had
paid their passage across the Atlantic, and more often having
indentured themselves to the owners of the ships that brought
them to America, so that the captains of these ships then auc-
tioned them off after reaching land, much as slaves were auctioned.
Another variation on these arrangements was that the passengers
would pay as much of the fare as they could and would then de-
pend on family or friends to pay the rest when they arrived in
America”failing which, they would then be auctioned off with
other indentured servants.
Indentured labor was common in the Caribbean as well as in
the American colonies and continued to be an important source
of labor from India and China to various parts of the world, well
into the nineteenth century. By 1859, only the Portuguese port of
Macao on the south China coast continued to ship indentured
servants from that country”but they shipped large numbers. In
the quarter century beginning in 1849, approximately 90,000
Chinese indentured laborers were shipped from Macao to Peru
alone. Another 125,000 were shipped to Cuba during the period
from 1847 to 1874. Most of the Chinese shipped to these coun-
Free and Unfree Labor 59


tries never saw China again and the brutal conditions of their la-
bor in Cuba were such that most died before completing the
eight years of their labor contracts. Things were not much better
in Peru, where guards were posted to prevent suicide among the
Chinese shovelling bird manure into sacks for export as fertilizer,
under conditions of stifling heat and stench. Suicides were com-
mon, beginning in the holding pens back in Macao, where some
of these prisoners were seen "dripping with blood" as a result of
punishments meted out to them. The suicides continued during
the months-long voyages across the Pacific. Many of these Chi-
nese had been tricked, drugged, or otherwise forced into these in-
dentures”as had also been true of many seventeenth-century
Britons, including children, who were brought to the Western
Hemisphere involuntarily.
Indentured laborers and other forms of contract labor were usu-
ally a result of initially free choices, however, even if their subse-
quent assignments to individual purchasers or to particular tasks
were no longer a matter of individual free choice on their part.
The Portuguese trade in indentured”often coerced”labor from
China was, fortunately, exceptional. Many, if not most, of the mil-
lions of emigrants from India to various parts of the world in the
nineteenth century left as indentured laborers under contract. The
fact that they not only completed these contracts but often re-
newed their contracts, either immediately or after returning to In-

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