Among the economic myths firmly lodged in the heads of Ukrainians, there is also a charming one about slavery. A Ukrainian from a history textbook knows that “slave labor was inefficient.” And in some situations, he is even ready to repeat this line. But he doesn’t really believe it. Listen to him, read forums and the internet, and you will see and hear something completely different. “Aha,” says the Ukrainian, “you clever Romans and Greeks! Of course you had slavery, and your slaves built your entire civilization.” After all, if you don’t pay anything, what savings you enjoy! Instead of one Parthenon, you can build two and still have money left for a statue of Zeus!

Moreover, the Ukrainian boldly extends these arguments to our modern times. And he comes up with some very interesting reasoning. It turns out, for example, that wages depend entirely and completely on the employer. That is, the employer can pay whatever he wants without any damage to himself. And if it weren’t for the state and the trade union keeping the bourgeois in check, he wouldn’t pay anything at all. And generally, slavery doesn’t exist here only because it is prohibited. Without the state and its oversight, we would all have long since perished in forced labor.

There is one simple point I want to make in this column. But first, let me turn to Mr. Mises, who formulated the problem wonderfully: “The purchase price of a slave is determined by the net income expected from his use (both as a worker and as a producer of other slaves), exactly as the price of a cow is determined by the net income from its use. The slave owner receives no net benefit from exploitation because the slave’s work is not compensated, and the potential market value of the services he provides may exceed the costs of food, shelter, and protection. Whoever buys a slave must compensate the seller for this saving in his price, to the extent that it can be predicted; he pays for it in full, adjusted for time preference. Whether the master uses the slave on his own farm or business, or rents out his services to others, he receives no special benefit from the institution of slavery. The special benefit goes to the slave hunter—that is, the person who deprives people of their freedom and turns them into slaves.”

That is, slavery as an institution brings no special benefit. And here is where my point arises. “The income expected from the use” of a cow, a slave, an office worker, a plot of land, and so on is determined by the price of the future product, which in turn is determined by demand from other people. If a slave can produce a valuable product, that is certainly a find for the slave owner. But as a rule, slave labor is low-productivity for an obvious reason. No, of course, you can catch a jeweler, put him in a cage, and force him to make wonderful things under threat of death. But for this, he must have become a jeweler somewhere, must have acquired his skills. And this can only happen in a relatively free society with division of labor, where supply and demand function without spasms. That is, if we imagine that absolute slavery reigns over the entire Earth and any labor is performed only and exclusively by slaves, then we will have no jewelers at all. There won’t be any complex professions at all—there will only be a closed agrarian cycle of “sowed-reaped-gobbled.”

When Romans and Greeks are blamed for slavery, it is forgotten that all their numerous “barbarian” neighbors also practiced slavery and succeeded at it quite well. But for some reason, they didn’t become Greece or Rome. I think the point is not slavery at all, but quite the opposite—the existence and lack of regulation (especially in Rome’s case) of free labor. Greek poleis and ancient Rome emerged as communities of families and tribes, not chiefdoms. A community means that the foundation is a contract, a procedure, not arbitrary power. This state of affairs greatly promotes freedom. And free labor can increase wealth by creating ever new and ever more valuable goods. In such a situation, slavery loses. Greece and Rome show us that many slaves were such only in the legal sense—that is, they were disenfranchised and formally belonged to someone. Such slaves were bankers and entrepreneurs, not to mention philosophers. With free labor constantly increasing value, to get slaves to boost “the income expected from their use” can only be done in exchange for more and more freedom. The existence of free people and free labor is precisely what makes slavery unprofitable. And the growth of public wealth as a result of the activities of free people led to slavery becoming a rather marginal practice.

This conclusion is also supported by our own history. Truly hopeless and maximally cruel slavery is state slavery, totalitarian slavery. And the reason for this is the same. “The income expected from the use” of a state slave is speculative. It is determined not by the market, but by whether Comrade Stalin is pleased or not. Enterprises using slave labor work not for profit, but for reporting. Therefore, the life of a slave is worth nothing, and slaves die by the millions. This is worth remembering, especially when you hear about the urgent need to regulate the labor market.

All in Defense of Domestic Producers of Southern Borshchahivka!

One of the favorite arguments of defenders of the “domestic producer” is that they care about protecting jobs. Supposedly, “cheap imports” force unfortunate domestic producers to close and fire poor workers.

This argument is based on the true assertion that in a competitive environment, whoever produces a cheaper product, all else being equal, drives out of the market whoever produces a more expensive one. That is, the producer of an expensive product suffers damage in this case, as buyers prefer the cheaper one. Is this good or bad? Undoubtedly, good. Only the unlucky producer loses, while buyers win. You can feel sorry for the poor fellow, of course, but a simple question arises—who is the doctor for whom, and who exists for whom—consumers for producers, or the other way around? It is also important that the loser and everyone in this business gain experience, they learn, and once again, consumers benefit from this.

Now let’s look at what changes because the producer is “foreign.” Actually, nothing changes. “Foreignness,” as we found out in ‘91, is an acquired characteristic, and for the economy it doesn’t mean anything at all. A producer from the next street takes away jobs just as much as a “foreigner.” If you take the arguments of defenders of domestic producers to their logical conclusion, they need to be protected not only from foreign producers, but from each other. Jobs should in this case be considered an inviolable national value and protected by the state.

The difference between “our own” and “foreign” exists only for the state, which has declared some territory its property and graciously permitted competition within that territory. If Southern Borshchahivka suddenly separated from Ukraine, it would also begin “protecting its market” because the government of Southern Borshchahivka would need reporting, trade balance calculations, and other meaningless activities that governments engage in.

Now let’s look at what changes for us from “protecting the producer.” Let’s say we have a certain collective farm market where apples are sold, for example. Ivan and Mykola sell apples for 20 hryvnias, and Petro for 30. Ivan and Mykola work better, or they have better technologies, or their orchards are simply in a more suitable location for horticulture—it doesn’t matter. What matters is that their product, with the same quality, is cheaper. However, Petro has connections—for example, he’s the godfather of the market director. He convinces the director to introduce “protective tariffs” on Ivan’s and Mykola’s apples, so that the price of their apples would be “fair.” As a result, all apples are sold for 30 hryvnias. Question—who pays the tariff? Answer—the buyers at the market. Question—who benefits from this? Answer—Petro. In effect, buyers pay for his existence from their own pockets. Moreover, they suffer losses from being forbidden to buy apples at the price the seller agrees to, that is, for 20 hryvnias. Moreover, if there were no tariff, Petro would have had to improve his production, find out what allows Ivan and Mykola to be more productive. From this, too, only we would benefit. As it is—everyone loses, Petro wins.

All of this, of course, is about the question of another round of tariffs on used imported cars. It is impossible to directly assess the damage from introducing a 15% tariff (which applies to used cars as well). The estimate of such damage will inevitably be greatly understated, since it is difficult to assess the damage to society caused by marginal buyers—that is, those who will refuse to buy a car due to the increase in its price. For example, you were planning to buy a car because it would allow you to get a higher-paying job. For “society as a whole,” the growth of your salary means growth of your contribution to “public wealth.” Now this growth won’t happen. Someone planned to use the car for deliveries in a small business or as a taxi. Now these services won’t exist. And so on. How much we all lose from this is unknown. Therefore, the damage can only be estimated very approximately. The Ukrainian market consumes about 200,000 new cars. The used car market is harder to estimate—let’s say, the same number. Let’s say the average car costs 10,000 dollars. The 15% tariff in this case amounts to 600 million dollars a year. It can be said that this sum is lost profit (more precisely, its visible part). You can divide this sum by the number of people working in our automotive industry (we are, after all, talking about “protecting jobs”). This gives an average of about two and a half thousand dollars a month. That is, the 15% tariff will cost us more than if we simply paid these people their current salaries and didn’t make them produce anything at all.