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Reparations would shake up American capitalism – and that’s a good thing
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To find out what reparations might mean in practice, I spoke to William Darity, an economist at Duke University, and his wife Kirsten Mullen, a folklorist, who are co-authors of the book ‘Reparations for Black Americans in the 21st Century’. I asked them what a comprehensive reparations agenda in the US might look like, starting with the question of who should pay for them.

In contrast to recent reparations delivered by local governments and private institutions, Darity and Mullen assert that the invoice for reparations must go to the federal government, which bears responsibility “for sanctioning, maintaining and enabling slavery, legal segregation, and continued racial inequality”.

From the failure to grant 40 acres and a mule while many white families received Homestead grants, to the exclusion of Black people from the New Deal and GI bill, Darity explained that “it’s federal policy that has created the racial wealth difference that we observe in the US, and so we argue that it’s the federal government that has to close the gap.”

On what scale should reparations be paid, and how much would they cost?

Darity and Mullen consider the racial wealth gap to be the “most robust indicator of the cumulative economic effects of white supremacy in the US.” As a result, they say that reparations should aim to eliminate the racial wealth gap between Black and white families in the US.

According to the Survey of Consumer Finances, the average household wealth gap is around $840,000. Eliminating this gap, and bringing the Black share of wealth into conformity with the Black descendants of US slavery share of the population (13%) would cost around $11 trillion.

What forms should reparations take? For Darity and Mullen, reparations can take several forms including: direct payouts allocated over 10 years, public trust funds that give out grants for asset building projects (such as homeownership, education, self employment, purchase of financial assets), or funds to assist in developing endowments of historically Black colleges and universities.

Direct payments are a critical part of the proposal. As Mullen put it, “we absolutely think that it’s important for both symbolic and substantive reasons for a significant amount of funds to be distributed to Black American descendants of slaves as direct payments or cash payments.”

Mullen emphasized that these payments can be made in less liquid forms, to avoid runaway inflation, and can stretch out over a decade. “For individuals who have not yet reached the age of maturity, those funds could be put into savings accounts, which would slow down these expenditures to some extent”, she said.

Who should be eligible for reparations? For Darity and Mullen, there are two main criteria. The first is that recipients must have at least one ancestor who was enslaved in the US. The second is that recipients must be able to prove that they self identified as 'Black,’ ‘negro’, ‘Afro-American,’ or ‘African-American’ at least twelve years before the enactment of the reparations program.

For many, an obvious question is: ‘can we really afford this?’ As proponents of Modern Monetary Theory, Darity and Mullen believe that the Federal Reserve can easily manage an annual outlay of $1 to $1.5 trillion if directed by Congress without raising taxes.

I asked Darity whether a reparations agenda should be financed not only by public deficit spending, but also through higher taxation rates on the wealthy. He sharply disagreed.

“The question of financing the project is not one that has to be constrained by tax revenue of any type. The combination of the funding for the CARES Acts, for the American Rescue Plan, the response to the Great Recession: all were instances in which the federal government generated very large sums of money overnight, without relying upon additional taxation,” he said.

The only constraint, according to Darity, is inflation. He emphasizes that the inflation risk will be dependent on the extent to which the new resources will stimulate more employment and production within the economy.

“We’re talking about a substantial change in Black American descendants of US slavery’s economic well-being and opportunity,” Mullen said. “An opportunity to purchase a higher amenity home, to send your children to higher quality schools, an opportunity to invest in a business. When they receive something on the order of $840,000 per household, that’s not trivial.”

Breaking American capitalism

Many prominent commentators and economists have endorsed the idea of reparations, but have held back from embracing practical proposals.

Paul Krugman has stated that the policy is “certainly just, but I find it hard to believe it’s going to happen.” David Brooks, a columnist for the New York Times, has written that “reparations are a drastic policy and hard to execute, but the very act of talking about and designing them heals a wound and opens a new story.”

Ethically it’s the right thing to do, but reparations are not necessarily good economic policy or even practically possible, the argument goes. It would be better to institute universal social welfare programs that disproportionately benefit the descendants of slaves, without the difficult national conversations and impossible targeted bureaucratic procedures.

However as historical precedents have demonstrated, it’s by no means impossible. If reparations are ethically right and economically feasible, then what’s the justification for not implementing them?

A comprehensive reparations agenda would entail a massive transfer of wealth at an unprecedented scale, eliminate vast inequalities, rectify hundreds of years of racialization and exploitation, and perhaps most significantly, shatter the meritocratic mythology of American capitalism: that anyone can make it with enough ambition and hard work.

As Ta-Nehisi Coates explains in ‘The Case for Reparations’, “the idea of reparations is frightening not simply because we might lack the ability to pay. The idea of reparations threatens something much deeper – America’s heritage, history and standing the world.”

Slaves built the White House and the Capitol. And as Darity and Mullen told me, many of the US’s largest financial institutions from Lehman Brothers, to New York Life amassed phenomenal profits lending money to and insuring the slave trade and cotton empire.

The monthly reparations checks that my grandmother received helped her financially, but most importantly they represented Germany’s acknowledgment of the atrocities that occurred under the Nazi regime.

Slavery in the US ended in 1865. But still the US government refuses to acknowledge their culpability by paying reparations to descendants of slaves.

Reparations may well break the foundations of American capitalism. And that’s not a bad thing.

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