The Strong Economics of Debt Peonage

… and how the Japanese ended slavery in the US.

We all know that Lincoln freed the slaves with the Emancipation Proclamation in 1862. But that didn’t make slavery illegal. And clever “job creators” designed a replacement for chattel slavery with debt peonage and convict leasing. And the debt peonage/convict leasing regime had much better economics than the “original slavery”.

Under original slavery, the slave owner had capital tied up in an expensive asset and needed to make at least minimal efforts to keep the slave healthy and productive.

Under the debt peonage/convict leasing model, you could just grab someone off the street, charge them with a crime, and then have a “job creator” bail them out or pay their fine and have them sign a contract to work off the debt (often in a coal mine with poor workplace safety.) If the debtor died in the mine, you could grab someone else and repeat the process. It was really the sweet spot for “job creators” in US economic history and it continued until the 1940’s. Why buy the cow if the milk is close to “free”?

So how did the Japanese end slavery in America?

After Pearl Harbor, President Franklin Roosevelt was conferring with his War Cabinet and the discussion turned to what kind of propaganda the enemy could use against us. The Psych Ops specialists noted that the treatment of blacks in the South was tough to reconcile with the message of the “US being a beacon of Liberty & Freedom”. President Roosevelt agreed and ordered his Attorney General to do something about it. The Justice Dept quickly issued a memo to the US Attorneys in the 50th states saying the prosecution of debt peonage and convict labor scams was now a priority and here are parts of the US Code you can use to enforce it’s prohibition.

An that’s how the Japanese ended slavery in America.