An artists collage with a theme of reparations.

Reparations: Why Paying Them in Cash is Throwing Good Money After Bad

Sometime in 1897 or possibly 1898, a dapper young Brit with a handlebar mustache, Edmund Dene Morel, tumbled purposefully from a steamer docked in a Belgian port to inspect cargo that had just arrived from the Congo Free State. His employer, a British shipping line, held the contract for this transcontinental run, and regularly sent the French-speaking, bean-counting Morel to Antwerp to supervise the loading and unloading of its fleet.  On this trip, however, Morel sensed that something didn’t quite add up: his company’s ships arrived at the Antwerp docks chock full of valuable rubber and ivory, but when they cast off their hawsers to circle back to central Africa, the vessels carried only army officers, firearms, and ammunition and nothing of commercial value.

Mortified, Morel suddenly realized what was rotten in Antwerp: the transaction he was managing was not trade, but slavery.

Along with the reportage of a muckraking African American journalist named George Washington Williams, Morel’s discovery sparked an international campaign that exposed Belgian King Leopold II as a terrorist who plundered other people’s resources while painstakingly portraying himself to the world as a humanitarian.  In his searing historical account, King Leopold’s Ghost: A Story of Greed, Terror and Heroism in Colonial Africa, the author Adam Hochschild described a genocide that certainly rivaled –if  not surpassed – Europe’s Holocaust in both its scale and horror. Over a span of 23 years, the king’s men massacred 10 million Africans in what was essentially an extortion racket, coercing free labor from the Congolese by burning their villages, cutting off their hands and genitals, flogging them to death, starving them, ransoming and even cannibalizing the wives and children of enslaved men who failed to meet their quota for rubber harvesting.

Nearly 80 years after Morel’s discovery, in 1975, Detroit’s first African American Mayor, Coleman Young, warned Congress of an impending disaster, triggered by a spike in interest rates on municipal bonds, which city governments typically rely on as bridge loans to pay for salaries, pensions and construction. Wall Street lenders were threatening to shut big cities out of the credit market unless they slashed their payrolls to free up money to service their debts. Had it not been for a bailout in the final months of 1975, New York City would’ve had no other option but to file for bankruptcy. In his testimony, Young said:

“The impact of New York’s crisis obviously spreads far beyond the borders of that city . . . I can cite my own city as an example. . . It does not matter to the bond market whether cities have taken steps in order to  correct their situation or whether they have not. In Detroit for instance, we have within the last 18 months reduced the number of our public employees from 25,000 to 20,000. That’s a 20 percent cut in services to our people. We’ve taken every measure that we can and yet as we have approached the bond market over the last year we’ve found that the eminence of the crisis in New York city has affected our ability to sell our bonds . . never prior to 1974 did Detroit pay in excess of 6 percent on a general obligation bond. . . Again approached the bond market on a 30 million dollar issue where we paid 9.8 . . .which we feel to be extortion.”

That reparations are  owed to 41 million African Americans is incontestable, both to pay a moral debt and help plug a budget deficit in an economy that has been systematically shorn of its buying power. Of all the nations in the U.S., none has done more to modernize the state, democratize our elections and institutions,  organize workers, and cauterize the rawest and deepest wounds inflicted on the American body politic. And yet, for all intents and purposes, we own virtually no more of the commonwealth today than we did when the first African disembarked in this corner of the New World more than 400 years ago.

But the devil, as always, is in the details, and what connects King Leopold’s rape of the Congo to Wall Street’s shakedown of Detroit is the geography of racial capitalism, and its reconfiguration of African communities on either side of the Atlantic into what the sociologist Saskia Sassen describes as extraction zones.

Accordingly, paying reparations in the form of cash remittances would be tantamount to throwing good money after bad, failing to significantly improve living standards for African Americans because such a scheme doesn’t account for a European settler state that is, at base, an extortion racket.

Without concomitant power over the means of production and finance, cash payments would merely pass through the hands of African Americans on its return to white financiers –like water through a leaky boat –similar to the Congolese rubber shipped to Belgian ports or Detroit’s taxpayer revenues siphoned off by Wall Street’s loan sharks.

If history is any guide, we can assume the imminence of a steep economic downturn, followed inexorably by the implementation of low-hanging, universal reforms to again save capitalism from itself –Medicare-4-All, guaranteed minimum income and a write- down of college debt perhaps funded with a 1 percent Robin Hood tax on all speculative transactions –African Americans’ best bet is a race-specific reparations strategy that cordons off the black community, immunizes it from financiers’ predations, prioritizes production rather than consumption, public benefit in lieu of private profits, and the grassroots more than the Vichy Negro leadership that has aided and abetted the  kleptocracy.

The first step is isolating the black empowerment zones or bantustans (if you prefer) that will be the beneficiaries of our reparations plan. This task is made easier by the rigid residential segregation that continues to define the urban landscape in the 21st century. Each community would have to negotiate its own borders (and their fluidity)  but as a starting point we might think in terms of Illinois’ 1st Congressional district on Chicago’s South Side, North Philadelphia, South Dallas, Houston’s 5th Ward, New Orleans’ 9th, Harlem, Southeast D.C., the whole of Detroit, the Maryland suburb of Prince George’s County, Richmond in Northern California’s East Bay, and Liberty City in Miami.

Within those newfangled borders, African Americans would endeavor assiduously to achieve what a young Kwame Ture urged 55 years ago: black power as a means to offset white people’s near-complete authority over our lives. This would be acquired largely through worker-owned cooperatives, housing and land trusts, and community credit unions. Ironically, a viable reparations project for African Americans would partly resemble China’s Great Leap Forward, re-opening shuttered factories, refineries and warehouses to re-industrialize  swaths of the black community, and focusing on environmentally sustainable, value-added industries to accelerate economic development.

Redolent of the import-substitution strategies deployed across the global South in the postwar era, virtually everything that the black working class consumes, the black working class would make: bar soap, bicycles, batteries, broomsticks, backpacks, bathrobes,  sofas, shoes, speedboats, spoons, condoms, chewing gum, comforters, crayons, refrigerators, relish, razorblades, rainbow sherbert and ultimately, even automobiles, airplanes, buses, laptops, and cell phones. We would roast our own coffee, distill our own whiskey, brew our own beer, bottle our own wine and soda.

By raising the black community’s industrial metabolism, we’d begin to repair the leaks that cause an outflow of wealth, and expand the political power that accrues from it. As such, worker-owned enterprises would be the cornerstone of our strategy, largely because cooperatives make the bosses redundant, and lessen whites’ authority over us. When Argentine confectionery workers laid claim to a shuttered factory in 2001 at the height of that country’s economic crisis, they were able to raise workers’ pay, lower prices for their customers, and improve the quality of the sugary goods they produced, all by getting rid of investors’ dead weight. Similarly, when the price of copper plummeted on the world market in the 1990s, Zambia’s privately owned mines reduced output or closed entirely, throwing miners out of work; Chile’s mining sector, publicly owned at the time, doubled production, and added jobs.

Supplementing these cooperative arrangements would be community housing and land trusts in which property is deeded to a nonprofit for use as affordable rentals, urban farming, or recreation and job centers. Limited use of housing and land trusts have shown promise in curbing homelessness and providing a buffer against gentrification by removing parcels from the commercial real estate listings.

Proponents of reparations in the form of cash remittances tend to be vague in describing the funding mechanism although Duke University economics Professor William A. “Sandy” Darity Jr.  makes it clear that the federal government should administer any reparations program. The two most likely funding sources for a direct transfer of cash benefits to African Americans are an income surtax –presumably on whites or all nonblacks –or simply ginning up the presses at the U.S. Treasury Department to print a sum that Darity estimates at $11 trillion, representing roughly one-half of the nation’s annual Gross National Product.

Both options reflect a dangerous political tone deafness and could create far more dire problems than they solve. Printing money out of thin air would almost surely accelerate the onset of hyperinflation, devaluing the dollar and threatening its privileged status as the international reserve currency. That’s because the Federal Reserve has been essentially flooding the market with billions of dollars in newly-printed bank notes each month since the Great Recession began in 2008. Known in financial circles as “quantitative easing” the low-cost loans represent a government handout to the big banks that swindled home buyers – disproportionately black and brown –with predatory, subprime mortgages, the bulk of which were classified as fraudulent by the FBI.

The combination of quantitative easing and pandemic-related programs such as enhanced unemployment benefits and paycheck protection resulted in the printing of more money in a single month in 2020 than in the first 200 years of the Republic. Consumer prices increased 5.4 percent in June representing the largest spike in 30 years by some measures; printing anything in the vicinity of $11 trillion would likely send the U.S. economy into a death spiral reminiscent of the last days of Germany’s Weimar Republic.

A reparations tax, however, might even be worse, likely deepening a backlash among many whites who are already unhinged by what they perceive as challenges to the racial hierarchy. A black police officer testified last month that he was met with a chorus of epithets when he tried to stop white protesters from attacking the U.S. Capitol on January 6th. Similarly, white conservative organizations have filed 13 lawsuits to block a relatively modest plan by the Biden administration to provide $4 billion in debt relief to an estimated 16,000 farmers and ranchers of color who have for decades been systematically excluded from loans and other assistance offered by the U.S. Department of Agriculture. The litigants say the plan discriminates against whites on the basis of race.

If only for tactical reasons, reparations should be funded from multiple revenue streams, all of which draw upon the ample cash reserves of the country’s wealthiest 1 percent. No matter how liberal, few whites would be willing to fork over so much as a sliver of their annual income to address racial inequalities. But neither will many whites, regardless of how conservative, exert much energy to defend Jeff Bezos, Elon Musk, Bill Gates, Warren Buffet, George Soros, JP Morgan, or the Ford Foundation, from a levy of say, 10 percent on every billion in assets they own, particularly if Congress has already passed a single-payer health care bill, and a basic income grant of $1,000 per month to every adult earning less than $30,000 annually.

All money generated by a billionaire’s tax would not fund cash payments to blacks but rather go towards the costs of retrofitting shuttered factories, or buying properties to be included in community housing trusts. In that same vein,  we can reimagine tax increment finance districts as a tool for redevelopment which is how Chicago’s first African American Mayor, Harold Washington, envisioned the scheme in the 1980s. The allocation districts, known as TIFs, are essentially slush funds, which freeze property tax revenues at a certain level. If, for example, revenues collected within a particular TIF were $1 million in 1999, but mushroom to $1.5 million 20 years later, municipal government officials can reinvest $500,000 – the increment – into pet development projects. Washington wanted to use the TIFs to seed economic development projects in poor neighborhoods but died of a heart attack in 1987 before he could get his plan off the ground. Needless to say, his successors, Richard Daley and Rahm Emmanuel, had other ideas for how to use the reallocation.

Chicago TIFs generate substantial sums of money, skimming $3 billion from the property tax rolls over a five-year-period between 2006 and 2011. But rather than investing the money in distressed communities, Emmanuel –known as Mayor 1 percent– showered his donors with cash, building a skyscraper in one of the city’s toniest neighborhoods and a basketball arena for DePaul, a private Jesuit university, in the western suburbs, all while closing 50 public schools, mostly in black and Latino neighborhoods.

There is no reason that reparations activists in Chicago and elsewhere couldn’t demand a redesign of TIFs to comply with Washington’s original intent and redistribute resources from the city’s wealthiest neighborhoods to its poorest, with local governing councils responsible for all decisions on how the reparations monies should be spent in their empowerment zone. In fact, TIFs could be used to provide the startup money for what could be the reparations movement’s piece de resistance: the restoration of the Freedmen’s Bank.

Shuttered in 1874 due to gross mismanagement by corrupt white trustees and executives, the Freedmen’s Bank imbroglio anticipated what Sassen calls the “extractive logic” of 21st century speculative capital. Unlike the robber barons of old, today’s financiers produce almost nothing of value and instead make most of their money simply by lending it out. Young’s 1975 testimony to Congress coincided with the beginning of a post-industrial era in which employers sought to reduce their wage bill by outsourcing their labor to Mexico, China and other countries, yet hollowing out the domestic manufacturing sector has reduced the pool of customers for U.S. businesses.

When Young testified in 1975, workers’ share of the nation’s Gross Domestic Product was slightly more than half; today it is a bit more than 40 cents of every dollar. What’s more, jobs have simply vanished: in 1951, roughly nine in 10 adult men participated in the workforce, according to the Federal Reserve. By 1991, that figure had dropped to about three-in-four and today, only about two in three adult men in the U.S. are attached to the workforce.

Speculators have filled the gap in disposable income with usury, beginning with their extortion of cities in the 1970s and culminating in the proliferation of predatory subprime mortgages, saddling college students with crushing college debts, and even poisoning the drinking water in Flint, Michigan, as part of a cost-cutting measure designed to ensure that the city could repay exorbitant loans to Wall Street.

A new Freedmen’s Bank, managed by the black working class, could be the antidote to the big banks’ financial predations, not just for the African American community but for the country as a whole, by providing borrowers with credit at affordable rates. Or as Fred Hampton once said:

“We say we’re not going to fight capitalism with black capitalism, but we’re going to fight it with socialism.”

If the post civil rights era has proven anything, it is that integration is unworkable; the differences between blacks and whites are simply irreconcilable. But perhaps the U.S. can borrow a page from Vladimir Lenin’s vision for a Soviet Republic that not only acknowledged distinct cultural identities but celebrated them, in an attempt to shake off the ethnic rivalries and tribalism promoted by the tsars to pit workers against each other, and distract from their own failures. A viable reparations plan must acknowledge that America is also a “prison house of nations” as Russia was described before the 1917 revolution, and that the African American community has historically been treated by the ruling class as a beachhead from which to discharge a broader war against the proletariat.

African Americans won’t turn the tide by going on a shopping spree with cash reparations payments, or leaving it to whites to decide what we can and cannot teach our children, where we work, and for how much, whether we are free or imprisoned, or whether we live or die. We need power over our own communities just as the white working class needs it over theirs.