Developing Freedom

This report was written over eighteen months (2019-2020) by Professor James Cockayne, drawing on research undertaken by a team operating out of and managed by the United Nations University Centre for Policy Research (UNU-CPR). It attempts to answer the deceptively simple question: How can fighting slavery contribute to sustainable development? It offers a reset, or a reframing, of answers to that question, and seeks to provide a conceptual and programming approach to underpin more effective development sector engagement with the anti-slavery agenda.

Synopsis:

Slavery, agency and development

Economic agency is the ability to make choices, for yourself, about how to develop and use your own capabilities. That includes choices about savings, consumption and investment, and about how to use factors of production such as land, labour and capital. Contemporary economic theory and development discourse assumes people make these choices for themselves. Yet, modern slavery involves some people treating others as if they own them, preventing them exercising agency over their own labour – as well as, in some cases, their own consumption, savings and investment choices. It involves an intentional restriction or denial of economic agency, even as victims and survivors find other, creative ways to assert their agency. This intentional denial of agency ripples through the economy, creating significant negative externalities that impose costs not only on victims but on the economy as a whole. Our study identifies 10 ways that slavery impedes development.

1. Slavery reduces productivity Coercion in labour relations demotivates workers, encouraging them to leave the job – if they can. If they cannot, productivity drops. Coercion also allows employers to set wages below the value of the marginal product of labour, capturing resulting rents. This leads to an inefficient allocation of labour at the economy-wide level, and capital moves to these rent-taking industries. This depresses the equilibrium wage: all workers, both free and unfree, are left worse off. Slavery thus drives economic stagnation. Historically, slavery has only led to long-term development when rents from slavery were used to invest in moving the economy away from a predatory pathway towards a more developmental one.

2. Slavery creates inter-generational poverty Slavery injures the physical and mental health of its victims and deprives them of educational and human capital formation opportunities. The resulting impacts last for the rest of their lives and can have inter-generational impacts. Slavery skews demography, hurts agricultural production, increases gender discrimination and violence, and increases disease burdens. Slavery has had inter-generational impacts in Africa, Latin America, North America and Eastern Europe, reducing income, health outcomes, and national income, and even regional economic performance. Transatlantic slavery may account today for 72 per cent of income disparity between African nations and the rest of the world – and 99 per cent of the disparity between these nations and other developing countries.

3. Slavery institutionalizes inequality If one person controls another’s economic agency, it allows them to capture the value from that person’s agency, while socializing the resulting costs. Slavery thus operates as an extractive system that enriches and empowers exploiters while also reducing prices for consumers. Those who benefit may lean on legal forms and narratives such as race, caste, gender and ‘free capital’ to entrench this inequality. Slavery is consequently more likely where political freedoms are more constrained (as Landman and Silverman have recently shown), and where societies are vertically unequal (as Piketty has shown). Efforts to end slavery thus require not only financial incentives but also political power. Buying off those who benefit from slavery can be expensive: it cost the UK a payment of 5 per cent of Gross Domestic Product (GDP), paid off over 180 years, to buy out British slavers in the 1830s. Haiti spent over two hundred years paying off the debt her former French slave-masters demanded to accept Haitian independence. And Russia’s former serfs paid the bill for their own emancipation for 49 years.

4. Slavery weakens multiplier effects Victims of slavery, forced labour and human trafficking frequently have their control over their own consumption, savings and investment choices restricted or denied. Employers may withhold wages altogether, or force wages to be spent at company stores or on mandatory ‘fees’. Victims cannot make their own choices about nutrition, healthcare, education or business. This reduces economic multipliers. Once victims’ agency is restored through emancipation, significant economic bumps usually follow.

5. Slavery discourages innovation in production Slaves have no reason to innovate, since they know they will not enjoy the fruits of innovation. And those who use slavery also have disincentives to innovate, since it may actually reduce rent income, for example because exploitation becomes harder as workers’ skill levels increase. These disincentives for innovation can lead industries that rely on slavery and forced labour to stagnate and become uncompetitive.

6. Slavery produces a capital market failure Slavery invites the collateralization of people. Although it is illegal today to treat people as capital, the introduction of coercion after people enter employment, debt or marriage contracts leads to people being treated like low to zero cost factors for capital formation and accumulation. Those at the top of value chains use their power to capture the value developed, through multiple levels of mark-ups, securitization and leveraging, out of the seed of workers’ collateralized freedom. Capital markets reward firms that operate on this model, since they seem to have low labour costs. Those apparent low costs are a product of these firms’ being permitted to externalize the true costs of coerced labour. Market regulation does not yet properly factor social costs into labour pricing, just as markets have historically failed to price in environmental costs. This is a classic market failure. Enterprises relying on unlawful forced labour have an unfair advantage on capital cost over those that do not. In effect, capital markets are subsidizing illegality, leaving us all worse off.

7. Slavery hits the public purse Slavery reduces public revenue and increases public expenses. It reduces income tax receipts because wages are unpaid and reduces consumption tax receipts because those unpaid wages are unspent. Slavery also increases public expenditure, on enforcement, criminal justice, health services and victim services. UK Home Office researchers estimated direct and victim costs in the UK from modern slavery to be around GBP 3.3 to 4.3 billion per year.

8. Slavery weakens governance We found that slavery corrodes social trust, increases social stratification, ethnic fractionalization, violence and conflict. It also seems to impede State formation and investment in public goods and infrastructure. This all generates negative economic impacts over multiple generations. To succeed, anti-slavery interventions may need to address governance questions (SDG 16) and not only decent work (SDG 8).

9. Slavery fuels corruption and illicit financial flows Slavers bribe and corrupt officials to protect the slavery system, further weakening governance. Where value is captured in a country other than where the labour is sourced – for example in the case of exploitation of migrant workers – this may represent an illicit transnational financial flow. The development sector’s response may need to include use of stolen asset recovery tools.

10. Slavery harms the environment Slavery skews production to unsustainable labour-intensive methods, and frequently coincides with illegal deforestation, fishing and land use. This reduces space for carbon sequestration, increases carbon emissions, and often leads to loss of biodiversity and natural capital stock. All of this connects slavery to unsustainable production and consumption practices, suggesting a need to develop interventions that combine work on SDG 8 with SDG 12

To read the entire synopsis, click here.

To read the key findings, click here.

To read the full book, click here.