“Never let your sense of morals prevent you from doing what is right” – Isaac Asimov, Foundation

In 2019 and 2021, New Zealand used a unique policy to ensure equitable treatment of people during a time of transition between rules. Where previously there were certain firearms that could be bought, owned, possessed and used in this country, later they would become illegal weapons. Possession of these specified types of firearms would, after the new rules were implemented, carry a punishment of five years in prison. Transitioning between these two states posed an equity problem; people who had operated under the previous legal market did not anticipate the sudden policy change (it was not signaled), and may have spent considerable amounts of their money on products that would soon become contraband. Because in the previous legal state these products were allowed to be traded, then the loss of assets that these people were to suffer from the law change was an unforeseeable and unstoppable result of Government intervention.

The transitional policy used to ensure both compliance from the gun owners and an equitable outcome was the New Zealand Police Gun Buyback scheme; a period of time where owners of the soon-to-be illegal weapons could surrender them to the Police in exchange for money. The valuations of the firearms were heavily scrutinised, and gun owners complained that they weren’t getting the fair market price, however the scheme itself was also criticised, as opponents declared that any compensation is too much. The weapons in question were always ethically ambiguous, the opponents argued, and traders in these killing machines shouldn’t be rewarded in engaging in a hobby that facilitated mass killings. It is important to note here that the policy change was in response to the Christchurch shootings, where 51 people were killed. It should also be noted that not all guns were being banned.

Compensation for the release of products that will be made illegal by the Government is a pragmatic solution to encourage compliance, and the Gun Buyback scheme of New Zealand is considered by many to be a successful policy. However every time this type of compensation is used, it is heavily criticised. In history, there was a time when this policy was used in the freedom of slaves, and it is this context that will be explored here.

Compensated emancipation involves the Government effectively buying slaves off of slave-owners and then immediately freeing them. The same pragmatism is pitched against an ethical dilemma as the Gun Buyback scheme. This slave freeing policy must be analysed in the context of the time; like the now illegal firearms, slaves were a legal-to-own asset which provided income for their owners. This asset would, through Government intervention, become contraband in the future, and those who had invested in flesh markets would be financially punished due to an unforeseeable and unstoppable change. Compensated emancipation was only used in a single District of the USA, but was more widely popular among colonial powers. Below I will briefly explore the United Kingdom’s and United States of America’s compensated emancipation schemes, although it must here be acknowledged that the context of these policies are complex and I will be using an admittedly narrow economic paradigm to cover a single policy through-line.

The United Kingdom passed the Slave Compensation Act in 1837, which followed from the Slavery Abolition Act of 1833. These policies freed slaves owned in the British colonies and involved a payment from the Government to the slave-owners. The compensation was expensive and contributed to financial instability at the time, and today many people have decried the policy as unethical. Some have suggested that reparations to the slaves should have occurred rather than compensation to the slave owners. While these outcries are completely understandable, it must be acknowledged that compensated emancipation was seen as a required concession in order to get the Acts passed in parliament. Slave-owners were part of the voter (and capital) base and had their own interests to protect, and the nature of democracy required an equitable transition for the change to be effected. It could be that insisting on no compensation would have caused the Acts to fail in parliament, causing slaves to continue in their lack of freedom for longer than otherwise. If that were the case, the cost of refusing to compensate the slave owners could be measured in continued suffering of the slaves. Unfortunately we cannot ever know for sure if the compensated emancipation policy really was required to ensure compliance and an earlier emancipation date, and while it is suggested here it may not be the case. The United Kingdom’s abolition of slavery took many decades to be completed, and the Acts mentioned here were near the end of this transition away from a slave economy. Although the transition can’t be considered a smooth one, in contrast to the United States of America the UK’s policies were fast, equitable and efficient.

The USA did occasionally have advocates for compensated emancipation, however history did not play out with this particular policy as the prominent solution. In 1861 the American Civil War began, with the military conflict originating in a disagreement about slavery between the Northern and Southern States. The Union (the Northern States) wanted slavery to be abolished, and most Union States at the outset of the war had already emancipated their slaves. The Confederates, however, were largely slave owning States which wanted to maintain the status quo and seceded from the Union and began a civil war in an attempt to achieve this. The war has a detailed and complicated history, and its reasons for starting, continuing and ending cannot be summarised succinctly with only the paradigms of slavery policy and economic conditions.

With regards to transitioning from a slave based economy to a free labour economy, however, it is reasonable to see the Civil War as the price paid for this transition. With that framing in place we may see how compensated emancipation would be a substitute policy for military conflict. Perhaps if the Union had offered to buy every slave in the Confederacy for a fair price and have them freed, the war may have been avoided. This assumption comes with complications, as it is possible that the military conflict was inevitable, however an attempt at paying for the cost of the Confederates economic losses form emancipation just might have reduced the cost of war. This leads us to the purely academic question of whether the cost of compensated emancipation would be greater or less than the total cost of the Civil War. It has been suggested that a transfer payment would have been more cost efficient as long as this payment were a fair valuation of the slaves and the entire Civil War was avoided.

As with all speculations of alternate history, we will never know for sure the outcomes of different decisions. Instead, we can look at where compensated emancipation was actually used, and in regards to the USA, only the District of Columbia (DC) paid slave owners for their losses of human assets. The context of this decision is that although the Union was fundamentally abolitionists, it included four slave owning States; Delaware, Maryland, Kentucky and Missouri. The District of Columbia borders Virginia, an enemy Confederate State, and Maryland, a slave owning Union State. DC is the capital territory/city of the USA, and therefore houses the nation’s Congress. Outside of these four States, the Northern States were already without slaves, and these border slave owning Union States were all in a strange circumstance at the outset of the Civil War. Invariably all four of these border States had freed slaves in their territory by the end of the war, and none of them used compensated emancipation excepting DC (which is not a state; its territory was previously donated by Maryland and Virginia to be the capital of the USA).

The Compensated Emancipation Act of 1862 enabled slave owners in DC to claim money based on a valuation of their slave assets, much like the transaction described in England above. At this point in DC’s history slave ownership was already rare; abolition sentiment was rife and it was morally and religiously taboo to partake in the market. It is important to note that legal emancipation came long after the market was considered repugnant by most people. The transition to a free State was financially supported by the Government for a couple of important reasons: Firstly, there were people who had already been freed that had subsequently purchased their family/friends who deserved compensation, and secondly, there were also people that had inherited their slave assets and used their income to fund their advanced age retirement. These retirees would become instantly impoverished if their retirement income source were confiscated without compensation. This negative outcome was eventually enacted on the slave owning Confederate States and enforced when they lost the war. To ensure continued loyalty, the Union used compensated emancipation in DC so that the unionists wouldn’t be punished like the confederates. As a condition of claiming compensated emancipation, the soon to be ex-slave owners were required to state their loyalty to the Union, which reveals to us the political aspect of this transfer payment.

Those that insist compensated emancipation was an erroneous policy are welcome to that opinion. I contend that the policy was pragmatic at the time and may have been the most cost efficient method of transition away from slavery. The New Zealand Gun Buyback scheme is the same policy applied to firearms, and this was enacted in the 21st century; I suggest that despite being controversial, it was appropriate given the context of transition. Economics often defies common sense, and it is difficult to reconcile the two. Usually common wisdom, general ethics and sensibility are the best heuristics we have to assess the optimal course of action, however there are exceptions, and economics lives in the exceptional space.