Financing Payments for Slavery Abolition

London’s financial community was involved in the Atlantic slave trade and slavery in the West Indies nearly from their start. Its involvement lasted until the day slavery was abolished in the British Empire in 1833. At the time of abolition, it was decided that slaveholders, and indirectly those who had financed them, would be compensated. In raising and distributing the money, London’s leading bankers and smaller trading and banking firms had a critical role.

Slavery Abolition Act 1833

Britain’s involvement in the Atlantic slave trade dated to the 1560s. Not long after, London’s mercantile and financial community financed slave trading and the development of plantations in the Caribbean, starting with Barbados. City financiers continued to maintain relationships with clients in the plantation economies of the West Indies all the way until the abolition of slavery in the 1830s. Plantations and slaves secured credit on which planters relied, and which was extended to them by London firms.

Image taken from ‘Ten Views in the Island of Antigua’ from drawings made by W. Clark (Published by Thomas Clay, 1823)

The Slavery Abolition Act, passed on August 28, 1833, freed more than 760,000 slaves. By that point, slavery was prevalent not only in the British Caribbean but also in African colonies, specifically Mauritius and the Cape of Good Hope. The practice also ranged in extent and structure. In some of these colonies, such as the Cape, slavery was not as large scale or oriented around growing a limited set of ‘cash crops’ as elsewhere, like Jamaica.

Together with the subsequent Slavery Compensation Act, the legislation spelled out terms for the compensation of slave owners in the colonies. In all, £20 million was allocated to compensate owners, about £2 billion in today’s money. Compared to the massive debts incurred during the Napoleonic Wars a couple of decades earlier, this sum was not massive but was nonetheless equivalent to 5% of British GNP and 40% of annual government revenues of the time.

Claims for compensation were handled colony by colony. Newer colonies like British Guiana and Mauritius had more productive plantations than older plantation colonies where soil exhaustion had taken a toll on the land. So, slaves in the former were valued at up to nearly twice as much as those in the latter.

Slave Compensation Commission

Distributing payments to planters was not straightforward. The process took years. A Slave Compensation Commission was formed to receive and review requests for compensation. Separate compensation commissions were established in the colonies to determine ownership. This was itself complicated at times.

Litigation between competing claimants for compensation over the same freed slaves was common, largely on account of disputes over mortgages and unpaid purchase financing for the slaves themselves. In Cape colony, 24% of slaves were subject to some dispute. This was a far higher proposition than in other colonies, likely due to the varied work for different owners that slaves performed in that place, with its less plantation crop oriented economy. Regardless though, whether there was a dispute or not, travelling to London to submit a claim and receive payment would have been expensive and undesirable for a former slaveowner in the colonies.

Assuming there was no dispute or that the issue had been settled, the Slave Compensation Commission assessed compensation based on the colony and by the age and occupation of slaves. Their decision with respect to a claim would be validated by the Secretary of State for War and the Colonies and then compensation would be paid by the Commissioners for the Reduction of the National Debt in the form of a certificate that could be withdrawn in cash or bonds at the Bank of England. Claims began to be paid in August 1835 for some colonies but the process continued until at least 1843, and 1844 for some litigated claims.

Bonds

Of the £20 million needed, £15 million was raised through a loan placed with investors by a syndicate led by financiers Nathan Mayer Rothschild and Moses Montefiore. This was known as the ‘West India Loan’ and was the largest floated in London in over a decade. Moses Montefiore was Nathan Rothschild’s brother-in-law and his stockbroker, dispatched where needed to conduct certain trades for Rothschild. These funds raised by the West India Loan went towards paying claims in cash. The first claims paid in cash were those in major Caribbean colonies of the British Empire, such as Jamaica and British Guiana.

Other colonies’ slaveholders were paid by a different process. The colonial governments in Barbados and the Virgin Islands were slow to ratify the Slavery Abolition Act of 1833 and the British government delayed implementation in Mauritius and the Cape of Good Hope on account of their distance from London. By the time these colonies were admitted to the process, much of the original £15 million raised by means of the West India Loan had already been disbursed.

The remaining £5 million was raised by increasing the size of an existing bond issue, the 3.5% Reduced Annuities. At least £3.4 million of this was given to slave owners in the form of the bonds themselves rather than in cash. This form of compensation was predominant for owners in the colonies where abolition was implemented on a delayed timeframe, particularly Mauritius. Claimants paid in bonds were given more in terms of the face value of these securities than the amount of compensation due, in order to make up for the discount at which these bonds traded in the markets.

Where the Money Went

Accepting these bonds and converting them into cash was not practical for most recipients to handle themselves. So, agents in London acted as intermediaries, collecting slaveholders’ compensation on behalf of recipients, their clients in the colonies. These agents were largely bankers or merchants with existing ties to the slaveholders. In some cases, slave owners employed their attorney to collect on their behalf rather than hire a banker as their agent. In any case, hiring an agent of some sort to handle this claim was convenient for planters located far away from Britain.

Robert Barclay Jr., a merchant and member of the famous banking family, was an agent responsible for intermediating £516,831 in compensation. He was also the junior partner in a Mauritian sugar trading firm, Barclay Brothers & Co. Barclay was particularly prolific in offering his services as an agent; one of the seven largest agents by volume of payments handled, at least when it comes to the £3.4 million given to slave owners in the form of 3.5% Reduced Annuities.

Together, these seven largest agents collected £1.9 million in payments though there were over two hundred smaller agents, some handling as few as two claims. For their services, these agents would have earned a commission of between 2% and 5% and typically focused on payments to just one colony; all of Barclay’s payments were to Mauritius planters for example.

The bonds were typically sold promptly by those who had received them or their agents. Most often, agents handled the sale of these bonds for cash on behalf of their clients. The incremental issuance of 3.5% Reduced Annuities thus entered the general market for such securities in London.

Generally, the former slave owners seemed disinterested in holding the securities themselves, likely needing liquid cash to hire indentured laborers to replace their slave labor and repay debts to their creditors. These creditors were the London bankers who had extended credit to planters secured by property, including slaves. No doubt, in many cases it was these creditors who also acted as agents for the receipt of the payments that would repay their loans. In any case, by repaying creditors through selling the securities, the slave compensation money could be reinvested into more desirable projects. As it happens, and probably no doubt enabled at least in part by the slaveholder compensation, there was a boom in railway company shares around the same time as claims were being paid, 1835-1836.

This reinvestment did help transition some parts of the British economy to the industrial era. Liverpool may have lost its relevance as a slave trading port when the slave trade, but not yet slavery itself, was abolished back in 1807. Nevertheless, it remained a trading city and became an industrial city too. Some of the money from slaveholder compensation may have financed this transition. Indeed, it seems that a disproportionate share of recipients hailed from areas adjacent to Liverpool.

Slaveholders tended to come from areas of Britain near slave trading ports. Investors in their slavery-enabled ventures, whether in trafficking slaves or in the New World plantations, also came from the same parts of Britain. As it happens, these places with larger slave wealth, and which presumably saw the greatest compensation upon abolition, overlapped with the productive centers in early Industrial Revolution-era Britain, as measured by industrial employment and other metrics.

Lesson

The abolition of slavery in the Atlantic world was one of the most significant events of the 19th century. To the extent that slaveholder compensation was reinvested in other industries, then the payments would have helped stimulate economic output within Britain itself. Financiers in London had a considerable role in raising this money and in redistributing it to investment elsewhere by means of the securities market.

More from the Tontine Coffee-House

Read about the interest of some British banking families in abolishing slavery and the securities of plantations in Dutch Suriname. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.