Posted on April 18, 2020

Why We Need Reparations for Black Americans

Rashawn Ray and Andre M. Perry, Brookings, April 15, 2020

Executive Summary

Central to the idea of the American Dream lies an assumption that we all have an equal opportunity to generate the kind of wealth that brings meaning to the words “life, liberty and the pursuit of happiness,” boldly penned in the Declaration of Independence. The American Dream portends that with hard work, a person can own a home, start a business, and grow a nest egg for generations to draw upon. This belief, however, has been defied repeatedly by the United States government’s own decrees that denied wealth-building opportunities to Black Americans.

Today, the average white family has roughly 10 times the amount of wealth as the average Black family. White college graduates have over seven times more wealth than Black college graduates. Making the American Dream an equitable reality demands the same U.S. government that denied wealth to Blacks restore that deferred wealth through reparations to their descendants in the form of individual cash payments in the amount that will close the Black-white racial wealth divide. Additionally, reparations should come in the form of wealth-building opportunities that address racial disparities in education, housing, and business ownership.

In 1860, over $3 billion was the value assigned to the physical bodies of enslaved Black Americans to be used as free labor and production. This was more money than was invested in factories and railroads combined. In 1861, the value placed on cotton produced by enslaved Blacks was $250 million. Slavery enriched white slave owners and their descendants, and it fueled the country’s economy while suppressing wealth building for the enslaved. The United States has yet to compensate descendants of enslaved Black Americans for their labor. Nor has the federal government atoned for the lost equity from anti-Black housing, transportation, and business policy. Slavery, Jim Crow segregation, anti-Black practices like redlining, and other discriminatory public policies in criminal justice and education have robbed Black Americans of the opportunities to build wealth (defined as assets minus debt) afforded to their white peers.

Bootstrapping isn’t going to erase racial wealth divides. As economists William “Sandy” Darity and Darrick Hamilton point out in their 2018 reportWhat We Get Wrong About Closing the Wealth Gap, “Blacks cannot close the racial wealth gap by changing their individual behavior –i.e. by assuming more ‘personal responsibility’ or acquiring the portfolio management insights associated with ‘[financial] literacy.’” In fact, white high school dropouts have more wealth than Black college graduates. Moreover, the racial wealth gap did not result from a lack of labor. Rather, it came from a lack of financial capital.

Not only do racial wealth disparities reveal fallacies in the American Dream, the financial and social consequences are significant and wide-ranging. Wealth is positively correlated with better health, educational, and economic outcomes. Furthermore, assets from homes, stocks, bonds, and retirement savings provide a financial safety net for the inevitable shocks to the economy and personal finances that happen throughout a person’s lifespan.

Recessions impact everyone, but wealth is distributed quite unevenly in the U.S. The woeful inadequacy of a government-sponsored safety net was made apparent in the wake of economic disasters like the 2008 housing crisis and natural ones like Hurricane Katrina in 2005. Those who can draw upon the equity in a home, savings, and securities are able to recover faster after economic downturns than those without wealth. The lack of a social safety net and the racial wealth divide are currently on display amid the COVID-19 crisis. Disparities in access to health care along with inequities in economic policies combine to make Black people more vulnerable to negative consequences than white individuals.

Below, we provide a history of reparations in the United States, missed opportunities to redress the racial wealth gap, and specific details of a viable reparations package for Black Americans.