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Reparations and Distributism

One aspect of Ta-Nehisi Coates’s big article that I feel I gave short-shrift to was his argument about how white supremacy made capital accumulation difficult for African- Americans, and the consequences of this fact for the present-day distribution of capital. I want to come back to this point, prompted as well by a piece by David Frum […]

One aspect of Ta-Nehisi Coates’s big article that I feel I gave short-shrift to was his argument about how white supremacy made capital accumulation difficult for African- Americans, and the consequences of this fact for the present-day distribution of capital. I want to come back to this point, prompted as well by a piece by David Frum that also was responding to Coates’s article.

Frum’s piece has a kitchen-sink quality to it – I get the sense that he had a strong negative reaction to the idea of reparations for slavery, and proceeded to marshall all the arguments he could think of against it. Inevitably, some arguments are better than others.

In the course of that stream of arguments, he makes a couple of claims that I think are important to push back on. To whit:

A reparations plan is likely to prove even more distorting [than affirmative action in the public sector].

If paid to individuals as an income stream, reparations would dis-incentivize work.

If paid to individuals as a lump sum, reparations would expose one of America’s least financially sophisticated populations to predatory practices that would make subprime lending seem socially responsible by contrast.

These statements make much stronger claims than I suspect Frum really wants to make.

Let’s take a look at the first statement: unearned income disincentivizes work. Why would that be the case? The usual argument against traditional welfare is that, because payments were predicated on not having an earned income, it effectively created a very high marginal tax rate on wages. That would indeed be expected to disincentivize work – profoundly. But an annuity income without strings attached would have no effect on the return to work. So why would it create a disincentive? It’s worth pointing out that Daniel Patrick Moynihan, Milton Friedman and Friedrich Hayek all advocated one version or another of a guaranteed minimum income. These are not individuals usually associated with blithe disregard for disincentives to work.

You would see a disincentive if the population in question has a target income, and, once that target income is achieved, prefers leisure to work. There’s a variety of evidence for this effect. For example, retired people who receive income from pensions and/or Social Security often do work, both for the additional income and because of the inherent satisfactions of labor, but they often prefer to work shorter hours, and more irregularly, than people of prime working age. Wealthy people of any age capable of maintaining a desired lifestyle without work may choose not to, or to work more irregularly, or in an occupation that is less-reliably remunerative. A high enough income from capital may make “mere” wage work look unappealing relative to either leisure or speculative ventures, because of the sheer number of hours of work it would take to have a meaningful lifestyle impact.

This line of argument leads logically to high taxes on unearned income – so that our most “productive” citizens don’t drop out of the labor force to live off interest and dividends. But for this disincentive to operate at the bottom of the income scale, the individuals in question would have to have very low target incomes, and limited interest in capital accumulation. Is that Frum’s contention?

Frum’s objection to a lump-sum distribution is also problematic. As Fredrik deBoer points out, a major obstacle to entrepreneurship is lack of startup capital. If one problem Frum identifies with affirmative action in the public sector is that it drew African Americans away from entrepreneurship, then it makes no sense to also criticize reparations for putting recipients in a position to take much more market risk than they would otherwise be able to do. On the contrary, you’d expect the argument that reparations would be preferable to affirmative action precisely because it makes true financial independence more possible.

Unless, of course, you believe that African Americans are much more likely to fail at entrepreneurship than Americans in general, whether because of an information disadvantage or a poor skills match or what-have-you.

I don’t intend to minimize Frum’s concerns. In certain ways, I share them – as I alluded to in my own response to Coates about not expecting reparations to close the socioeconomic gap between black and white in America. It may be that multi-generational poverty does lower your horizons in ways that make it difficult to plan to accumulating capital. It may be that there are distinct barriers to successful entrepreneurship in the African American community other than a relative lack of startup capital. There is certainly plenty of evidence that large windfalls are frequently squandered – the long list of athletes, actors, musicians and other highly gifted individuals who were successfully exploited to the point of being left bankrupt attests to the risks. But these concerns should be part of the discussion – not reasons to end it.

Coates’s argument for reparations can be read primarily from a moral perspective, as a backward-looking effort to achieve justice, which is how I read it initially. But it can also be read from a consequentialist perspective, as an argument for a variety of distributism. Read in that frame, the lengthy case that white supremacy has profoundly obstructed capital accumulation among African Americans is there largely to provide a moral justification for something one might want to do anyway because it would make for a more just and harmonious society: legislate a broader distribution of capital.

I wouldn’t want that argument held hostage to the other questions that bedevil reparations. Inasmuch as the reparations debate punctures some of the sanctimony around the existing distribution of property, well and good – but the question of the practicality of distributism is one that I think deserves its own attention. There are important arguments against distributism that have nothing to do with the sanctity of property rights – paternalistic arguments for providing economic assistance in a more structured and supervised fashion, economic arguments about the efficiency of concentrating capital, Harry Lime’s argument about cuckoo clocks – but these arguments already form part of the conventional wisdom of our time. Distributism runs counter to that wisdom, and has rarely received a full airing. It deserves one.



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