Unfreedom in the times of Freedom: How The British political Economy justified indentureD labour

The 19^th and early 20^th centuries was an interesting era for the ideas of freedom, liberty, and sovereignty. The ideas of economic freedom, free trade and individual liberty were hugely influential amongst thinkers in Great Britain, leading eventually to the abolition of slavery in August 1834. However, these ideas co-existed with other forms of unfreedom. While free trade was encouraged between European nations, the colonies lacked sovereignty and colonial subjects barely saw the gains from free trade. Similarly, while slavery was made illegal in the colonies, other forms of unfree labour relations, especially in the form of Indian indentured labour migration was tolerated, even encouraged by Great Britain and other European powers. In this blog post based on a paper co-authored with Professor Uma Kambhampati, I look at what the contentions against Indian indentured labour were, and how and why it was rationalized in an era when the rhetoric of freedom was strong in the intellectual circles.

This act was strongly opposed by individuals in the British political circles who had plantation interests in the British colonies who now, quite ironically, used the language of individual freedom to argue against the Sugar Act. William Gladstone for example argued that “the clear effect of the present motion [i.e. the Sugar Duties Bill] would be to encourage slave labour and the slave trade” (Debate on Sugar Duties Bill, 25^th June 1840, Hansard vol 55).

However, the Act was supported by liberal politicians and the manufacturing political lobby using the language of economic freedom and free trade. Whig politicians who rallied behind Act on the grounds that the Act would ensure lower sugar prices for consumers in Great Britain, and the burden of supporting free labour through differential tariffs on sugar from non-British Colonies was effectively a tax on consumers in Britain. The other argument made was that the manufacturing class in Great Britain would benefit from raw materials from abroad and reduction in tariffs on sugar was necessary for reciprocity in trade relations with slave owning colonies. For example Robert Peel, who had famously overseen the repeal of the Corn law as the Prime Minister of Great Britain was particularly concerned that Brazil, which was at this point an exporter of slave produced cotton and sugar and a major importer of British fabric, would take umbrage to a tariff regime that disadvantaged its slave-produced sugar against sugar produced by free labour. He was concerned that this would instigate Brazil to impose tariffs on British fabrics thereby hurting British manufacturing.

Thus, a solution was needed that would keep the Plantation lobbies happy while not hurting the interests of the British manufacturing. One way around was to facilitate cheap labour from other sources, and the labour force from India seemed like a reasonable solution.

The supporters of indentured labour migration also used racially problematic vocabulary of docility and reliability for the Indian labour force, as against the “slow and indolent temperament of the African Race” residing in the islands(The Economist, Saturday, July 16, 1859. Vol 017, Issue 827, p 785). They argued for the need for an easily controllable labour force to undermine the newly increased bargaining position of the recently emancipated former slaves. The argument by one plantation owner was that “the mild temper and cautious habits of the Hindoo, with the increased energy which the fine climate produces, renders him much superior character to the African Negro”. (Letter from Thomas A Wise, MD, 19^th September 1838)

While most classical political economists did not write about indentured labour migration, imbalance of bargaining power between workers and employers was widely recognized and seen as problematic. Adam Smith for example argued in Wealth of Nation that the collective bargaining power of landlords or capitalists (the ‘masters’) is greater than that of the workers because “the law authorises, or at least does not prohibit ,... combination [of capitalists colluding to bring wages down], while it prohibits those [i.e.. unionisation] of the workmen”. Similarly, Alfred Marshall, often considered the father of neoclassical economics, also noted that workers had disadvantaged position because labour power is “perishable” and, as the workers are “commonly poor and have no reserve fund, they cannot easily withhold it from the market”. This ‘disadvantage in bargaining’, according to classical political economists, resulted in wages being lower than ‘real value of labour’ or the marginal productivity of labour, which was seen as particularly problematic by the Classical Political Economists for whom wage isn’t just an incentive for innovation, but is also a mode to reproduce labour power by providing for future generation of workers.

Finally, unfree labour was considered inefficient by Classical political economists. Slavery and indentured labour were very expensive because the workers had to be maintained and could not be laid off when they were inefficient or if demand was low. The system of indenture, while superior to slavery in seeing labour power as being owned by the individual, remained problematic because this ‘ownership’ was limited during the period of the indenture. Scottish abolitionist Lord Brougham argued that, despite what the West-Indian confederates may claim, the indenture system was “nothing but slave trading is, and that nothing but slave trading can be, the meaning and the result of all that is thus doing.” While Adam Smith wrote before Indian indentured labour migration started, he stated his strong opposition against slavery in Wealth of Nations, not only from the perspective of ‘civility’ as mentioned earlier, but also because slavery was expensive and didn’t encourage innovation. Marshall also argued that freedom was essential to production and unfreedom was inefficient “All history,” he wrote in his famous Principles of Political Economy, “is full of the record of inefficiency caused in varying degrees by slavery, serfdom, and other forms of civil and political oppression and repression.”

While Indian indentured workers were given a wage, something that would be considered an absolute incentive in Smith’s work, the workers were paid a flat rate and weren’t allowed to change employers. The Marginalist School of Thought, which became increasingly influential in the late 19^th and Early 20^th century, exactly coinciding with the era of Indian indentured labour, hypothesised that it wasn’t wages so much as variable wages that were for essential for efficiency. Efficient allocation of labour was where marginal productivity was equal to the wage rate (Stanley Jevons, 1871, Theory of Political Economy). This marginal productivity was determined by the ‘degree of painfulness of labour’ or, what later economists called disutility of labour. Given that indentured workers were paid a low fixed wage, they could not increase commodity consumption with this. This meant that they had no incentive to work harder. The wage was an ex-ante constant wage (that varied only according to age: adults were paid more than children and sex: men were paid more than women and not according to productivity, which wasn’t observed at the time of contract formation) and hence didn’t achieve the marginalist efficiency condition of being equal to the marginal productivity of labour. Similarly, Marshall also argued that the chances of reaching efficient equilibrium conditions was “stronger, the greater is the mobility of labour, the less strictly specialised it is..”, a condition that by definition didn’t characterise the Indian indentured worker.

Indenture: A Compromise between freedom and Unfreedom?

So, in spite of the distrust for unfreedom, why did the system of indenture flourish for more than half a century resulting in the migration of millions of Indians across the globe? The reason for its acceptance and encouragement may have been that it was a compromise between slavery and free labour.

For one thing, a free worker is paid a wage for her labour, while a slave isn’t. Indentured labourers fell between these extremes with more cash wages than slaves but less than free workers and more benefits in kind than free workers (usually food, boarding, and on occasions, including a free passage home). Liberal political economists might well have seen this as a compromise. The wages provided more incentive than in the case of slavery but, by being fixed, they were not especially effective in bringing forth increased effort. Archival evidence indicates that the wages paid to Indian indentured labour, though positive, were less than would be paid to free labour in the colony.The gap between free worker wages and coolie wages varied over time and according to location, and even as late as 1875 Goeghegan documented in his report that “The class of Indian immigrants at present in the Colony cannot, as a rule, earn more than half as much in the same time as the negro”.

The second aspect of indenture labour that put it ‘in-between’ slavery and free labour was in terms of mobility. In the context of free labour, mobility is expected to bring about a situation in which labour is paid its true value, with labour exiting if wage is less than its marginal product, and being made redundant if wage was greater than the marginal product. A slave, on the other hand has no mobility- they have no choice in free entry into or exit from the contract. An indentured labourer wasn’t allowed to leave the contract before the end of the indentured period but was theoretically free to enter the contract, and was free to return to their native country.

Finally, the system of indenture saw a compromise on how effort was extracted. In a free labour regime, the means to extract effort is by providing monetary incentives and penalties. In slavery, where there can be no monetary incentives and penalties, the method to extract maximum effort is to use physical coercion. In indenture, there was a combination of both. Evidence suggests significant use of physical coercion to avoid worker shirking. However, plantation owners could not rely exclusively on physical punishments to ensure compliance and prevent shirking as then the system would become too similar to the system of slavery. Monetary penalties were instated. For example, most plantations had instated the system of “double cut” whereby workers were fined an amount equivalent to two days wages if they missed one day of work. Additionally, plantations were able to deduct part of the worker’s monthly wage as security for ‘good conduct’. Similarly, unlawful absence from plantations were punishable with fine and imprisonment. Most colonies also had strict vagrancy laws applicable whereby immigrant workers were expected to carry permission slips to leave their plantations and identity cards, failing which they were liable to be arrested or fined.