Friday, May 30, 2014

Hey Buddy, Can You Spare A Trillion?

This article is about Ta-Nehisi Coates' now infamous article in the Atlantic Monthly entitled The Case For Reparations.

Mr. Coates' article is better written and more thoroughly researched than a handwritten, beggar's plea, but the message is pretty much the same.
Homeless, tired and hungry. No family. Anything helps. God Bless you.
Like the sidewalk bum, Mr. Coates is coy about the amount he wants us to put in his tin cup. Estimates I've read range from $1 trillion to $1.5 trillion. He purports instead to be more interested in the come to Jesus moment when the scales finally fall from us white folks' eyes. We're supposed to have a conversation, a heart-to-heart where we finally recognize that we're all brothers under the skin. So here's my two-cents to the conversation, not that Mr. Coates will be listening.

Like the homeless beggar, no doubt Black people are poor, and no doubt they're an underclass, and no doubt they've been horribly mistreated. They've been an underclass ever since they arrived on these shores. Indeed (if you take Gregory Clark's thesis seriously) they were probably an underclass even before they left Africa. After all, the African slavers didn't pursue the social elite or the militarily capable. No--they targeted the poor and defenseless for sale to the Europeans. It's odd that Mr. Coates doesn't insist that some share of reparations come from today's West African elite--descendants of the slavers.

Mr. Coates wants us to take Congressman John Conyer's HR 40 bill seriously. From Mr. Conyers' website, the bill is supposed to accomplish four things:
  1. It acknowledges the fundamental injustice and inhumanity of slavery;
  2. It establishes a commission to study slavery, its subsequent racial and economic discrimination against freed slaves;
  3. It studies the impact of those forces on today's living African Americans; and
  4. The commission would then make recommendations to Congress on appropriate remedies to redress the harm inflicted on living African Americans.
Point 1 is stipulated. Slavery is fundamentally unjust and inhuman. If Mr. Conyers wants to pass a resolution in Congress saying that, it's fine by me.

Point 2 is silly. Why do we need a commission? Isn't the history of slavery being widely studied by academics and many others? What is a government commission supposed to accomplish that isn't already being done?

Point 3 is way too complicated. Shouldn't we also study the impact of history on white Americans? And what about Native Americans? Or Chinese Americans. Tyler Cowen argues (cogently in my opinion) that the large majority of white Americans were (slightly) harmed by the institution of slavery. And aren't today's African-Americans, dispossessed though they may be, better off than they would have been if their ancestors had been left in Africa? Compare North Lawndale with, e.g., Sierra Leone. How is some commission going to reconcile all of this?

Point 4 is impossible. History is history. You can't change it or undo it.

But OK--let's give Misters Coates and Conyers their way. And suppose that African-Americans are awarded some trillion dollars for successful beggary. The immediate beneficiaries will be Black folks, each of which will get some $30,000. Here is my prediction for the secondary beneficiaries.

State Lotteries--Poor people are almost by definition financially unsophisticated. They play the lottery as an investment--it's a get rich quick scheme. Accordingly, I predict that the teachers' unions will be avid supporters of this reparations scheme, given that most of the proceeds goes to education.

Drugs, Liquor and Tobacco--What better way to spend a windfall? Drugs, of course, represent another get rich scheme that young, poor males are likely to fall for. Besides, they get you laid. Accordingly, expect the Mexican cartels to support and lobby for reparations--a lot of the money is going to them.

Prisons--An enhanced drugs trade will lead to more crime and more arrests. The prison guards' union will be very happy with this. What a great deal!

Real Estate Scammers--Mr. Coates spends much of his essay describing how Blacks were ripped off by real estate salesmen in North Lawndale. Crooks prey on gullible people, and if you believe Mr. Coates then poor Blacks are among the most gullible around. Expect lots of the reparations money to be spent on fancy McMansions, sold for far more than they're worth. And in ten years, when the financial and social capital has expired, it will all degenerate into a new slum. Why does Mr. Coates think this will be any different than North Lawndale?

Colleges & Universities--Well meaning commentators are hoping that our gullible friends will spend their new found wealth on education instead of fake luxury. Nevermind that our nation is already over-invested in education, and for a lot of people more schooling makes little sense. And then colleges are often just as corrupt as real estate agents. Mr. Coates will probably finger places like the University of Phoenix, but ripoff joints like Chicago State University or the City College of San Francisco probably deserve more blame. Either way, the academics are going to make out like bandits, which is what they are.

Mr. Coates and Mr. Conyers miss a very important fact. Money is not the same thing as wealth. Especially in this case, many are suggesting that the Fed should just print up a trillion dollars and give it to Black people. But little bits of green paper are not going to substantially improve people's lives.

Money becomes wealth only when it is invested in capital that returns a revenue stream. That can be physical capital (e.g., rental property, or a restaurant) or human capital (e.g., education in something useful). Actually, it has to be both because there's no point in buying a restaurant if you don't know how to run it. But it can't be spent on fake luxury or phony degrees, much less on lottery tickets. Those aren't wealth.

Black people, like underclasses around the world, have not been able to accumulate wealth. In this they differ from the Jews, the Chinese, the Amish, the Mormons, and that fraction of white people we call the middle class. These are all people with bourgeois, or at least petty-bourgeois attitudes. These are people who hoard capital and pass it on to their children and grandchildren. That's why, unlike most Black people, they have a net worth greater than zero.

Until Black people can do that, not even $1,000,000,000,000 in reparations will make a dime's worth of difference.

Further Reading:


  1. This comment has been removed by the author.


      Spot on.

      Money is not the same thing as wealth.

      Why these people can't (or refuse to) understand that, mystifies me.