Why reparations for slavery could help boost the economy

By Michael Maiello
June 4, 2014

A man is silhouetted in the "Door of No Return" at the House of Slaves on Goree Island near Senegal's capital Dakar

In the May 21 issue of The Atlantic, Ta-Nehisi Coates re-opened the question of whether the United States government should pay reparations to African-Americans for the crimes of two and a half centuries of slavery, 60 years of Jim Crow-style segregation and decades more of racist housing policies, zoning and community development. His conclusion — that a great accounting of wrongs must take place, as well as a decision about how to make amends for them– has inevitably sparked disagreement. But set that aside. Imagine we have decided yes, as a society we must pay a price for these injustices, and it must be large. Those payments could well constitute the stimulus that the U.S. economy needs to take it into the next century.

To the economy, stimulus is stimulus, as long as it’s done right. Whether it is paid to a group of people based on where they live, their ethnicity or their religion might matter to politics, but to the economy, it doesn’t matter –  as long as the money is put to work through either consumption or investment. The reparations-as-stimulus idea gets a short mention from Coates, who writes that:

“In the 20th century, the cause of reparations was taken up by a diverse cast that included the Confederate veteran Walter R. Vaughan, who believed that reparations would be a stimulus for the South.”

Vaughan, a former confederate soldier turned Idaho politician, recognized that “pensions would financially benefit former slaves and would indeed be a semblance of justice for their years of forced labor,” according to an article in the summer 2010 issue of Prologue magazine, a publication of the National Archives.  But the outcome Vaughan looked for involved “ex-slaves spending their pensions in the South in order to give the devastated southern economy a financial boost.”

Vaughan’s vision is too simplistic to apply to modern times. Today reparations would affect 44.5 million Americans, most of whom are in a position, or could eventually be in a position, to do far more than spend. The stimulus would lead to both entrepreneurship and investment and potential direct poverty alleviation for 3.2 percent of the total population, assuming that cash-based reparations payments would be large enough to lift even the poorest recipient above the poverty line.  This would affect the roughly 27 percent of African-Americans who were below the poverty line in 2012.

Put those elements together and there is a prime case for stimulus that would both alleviate poverty directly, and provide payments to people who can either grow their investments or start or expand businesses.

A bird flies past a statue commemorating the liberation of slaves on Goree Island near Senegal's capital DakarAny reasonable program would start with direct cash payments of sufficient largess that it should be able to eliminate any reasonable consumer debts and allow the recipient access to retail banking services (the poor are notoriously under served by financial institutions). This assistance could immediately affect more than 30 percent of the participants in the Temporary Assistance for Needy Families program, boosting them in such a way that they no longer need to receive benefits, according to figures from the Urban Institute. The payments would be a huge boon for the states who administer the block grants behind these programs. Imagine similar reductions in the number of users of food stamps and medical programs.

The drawback is that one-time payments are temporary and we do not want to find ourselves, one or two years down the line, back where we started. Coates spends a good part of his essay talking about the development of major cities and how African-American communities developed within them. This is where reparations can have a more lasting effect. All of these historically blighted neighborhoods need to be modernized. Universal broadband and Wi-Fi Internet access is a great start, and should be combined with transferable tax credits to encourage new business formation, particularly if new businesses start with local ownership. By making the tax credits transferable, with some limitations, these programs would encourage outside investment so that these new businesses can expand and more easily access capital markets.

Coates has given us a lot to think about. The temptation is to argue about what is ethically “right.” But in doing so, we shouldn’t ignore the also interesting possibility that we could be looking at a pilot program for a new America.

TOP PHOTO: A man is silhouetted in the “Door of No Return” at the House of Slaves on Goree Island near Senegal’s capital Dakar, March 16, 2007. REUTERS/Finbarr O’Reilly

PHOTO: A bird flies past a statue commemorating the liberation of slaves on Goree Island near Senegal’s capital Dakar, March 16, 2007. REUTERS/Finbarr O’Reilly

 

48 comments

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Weren’t the deaths of 596,670 men to right the wrong payment enough? Have not the lessons of Versailles given pause enough for what true misery can be created? Progressive thought’s fundamental flaw is the rejection of historical guidance; which allows extreme forces to come to the surface as its direct or indirect influence grows on a society, because it impedes conservative thought and action, and uses those very forces to continue its argument for greater power and social restructuring.

Posted by ANZUS | Report as abusive

78% of NFL players, 60% of NBA players . . . file bankruptcy within five years of retirement

Sounds like a plan.

Posted by OKane | Report as abusive

Seriously!?!?!? Whites have been slaves too. Think the Ottomans will give me some cash?

Posted by violetcc | Report as abusive

If paying blacks would stimulate the economy wouldn’t cities like Detroit, Philly, Jackson be economic powerhouses? The fact that this debate has been given the slightest thought disappoints me and I suspect every other ethnicity out there that has suffered hardships. The fact is that blacks disproportionately receive more government handouts anyway (nearly 50% to 13% of our population), add this to our prison population that we house, feed and supply medical care we are already in over our head. Cities with more blacks take extra resources. I am just convinced people who give thoughts to such idiotic ideas are very anti-American.

Posted by Caligal | Report as abusive

Sure, prove your from a family of slaves. Prove how your family was harmed and how much. Prove that you didn’t already receive benefits equalling far more due to AA programs and welfare programs aimed at minorities.

IF you qualify then we’ll start looking for those who are descendents of former slavers and see if they have still profited from it or haven’t loss power/money due to programs such as AA, welfare, and other programs designed around helping minorities.

But news flash. The VAST majority of Americans today are NOT descended from former slave owners. The VAST majority have gone through the same form of prejudices based on their nationality, accent, religion, or other factors and have risen above it.

Posted by Syanis | Report as abusive

Yes Yes shame on Reuters for printing this OP-ED piece that has sparked 40 plus comments. God forbid Americans have an honest discussion about the topics of slavery past and racism today. We don’t want to talk to each other about our feelings. Honestly I think the worst thing about it is trying to use economics to have what should be discussion about our feelings.

Posted by notnews | Report as abusive

I’m 100% with you, cause finding ANY reason, with at least minimum credibility, to pump more money into US economy is desperately looked for in this period of desperate economic policy.
My idea is, FED should organize national contest (with prizes paid in newly printed dollars and/or wheelbarrows for their transport) for the brightest exponential printing solutions.
To level the playing field only US citizens can take part. (Creative minds of Europeans with their recent negative interest rates out of the box thinking are competition of their own).

Posted by Wantunbiasednew | Report as abusive

The oil rich countries of west Africa–especially Nigeria–whose tribal chiefs and “alpha” tribes delivered their countrymen to the slave ships should start paying.

Posted by bluepanther | Report as abusive