Reparations for African-Americans as a Transfer Problem: A Cautionary Tale(William Darity, Dania V. Francis, and Bidisha Lahiri, Review of Economic Development)
A long time ago Black Americans were promised 40 acres and a mule, as a part of a potential “reparations” plan. Today most all reparations plans consider reparations through a direct income transfer from one group to another. William Darity et al explores various “transfer” style reparations plans, in their article Reparations for African Americans as a Transfer Problem: A Cautionary Tale. Under this style, could reparation plans positively affect the “receiving” group? We know through theories of international trade that an issue known as the “transfer problem” arises with direct income transfers. This is when one country's income rises through an income transfer and their marginal propensities to import externally produced goods also rises. This problem is acute when the goods in which said country’s marginal propensities to import, are produced by the “sending” country, and this becomes a “secondary-effect” for that country. Darity et al explores reparation plans that propose large income transfers directly from whites in the U.S. to Blacks. They compared what the likely outcomes of different styles of transfer would be, to see if there are any desirable ones. In each of the four plans discussed, white people in the end would still wind up with the greatest increase in income, producing an even more inequitable scenario. Darity proposes that we need to redirect our focus and resources into a more effective avenue, that is the endowment of skilled labor. Currently there are uneven levels of endowment of skilled labor among the different racial groups in the U.S., which means unequal and propensities for growth and uneven growth in productive capacity. The less production and consumption of black owned goods and services in the U.S., further restricts long-term and sustainable income generating opportunities and revenue potential.