How much have white Americans benefited from slavery and its legacy?

Many people are talking about the Ta-Nehisi Coates essay on reparations.  Ezra Klein has a summary of the argument, which runs as follows:

What Coates shows is that white America has, for hundreds of years, used deadly force, racist laws, biased courts and housing segregation to wrest the power of compound interest for itself. The word he keeps coming back to is “plunder.” White America built its wealth by stealing the work of African-Americans and then, when that became illegal, it added to its wealth by plundering from the work and young assets of African-Americans. And then, crucially, it let compound interest work its magic.

I would suggest that most living white Americans would be wealthier had this nation not enslaved African-Americans and thus most whites have lost from slavery too, albeit much much less than blacks have lost.  For instance it is generally recognized that freer and fairer polities tend to be wealthier for most of their citizens.  (We may disagree about what “fair” means for many issues, but slavery and its legacy are obviously unfair.)

More specifically, many American whites benefited from hiring African-American labor at discrimination-laden discounted market prices, but many others lost out because it was more costly to trade with African-Americans.  That meant fewer good customers, fewer eligible employees, fewer possible business partners, fewer innovators, and so on, all because of slavery and subsequent discrimination.  The wealth-destroying effects are surely much larger here, even counting whites alone.  And the longer the time horizon, the more likely the dynamic benefits from trade will outweigh the short-run benefits from discriminating against some class of others.

Empirically, I do not think whites in slavery-heavy regions have had especially impressive per capita incomes.  And a lot of the economic catch-up of the American South came only when the region abandoned Jim Crow.

We also can look at how many white Americans have had ancestors who, at least for a while, had zero or near-zero net wealth.  The returns from slavery may have been compounding for some heirs of Mississippi plantation owners, but not for most of us.  My father, when he was thirty, had just gone bankrupt from an unsuccessful attempt to manage a New Jersey pet store.  In what sense was he, or later I, reaping compound returns from a legacy of slavery?  We go back to the point that overall he probably would have had a better chance in the wealthier and fairer non-discriminating society, even if you can pinpoint some mechanisms through which he might have benefited, such as facing less competition from potential African-American pet store entrepreneurs.

The economic incidence of slavery is a tricky matter (most of what Squarely Rooted argues here is wrong).  A lot of whites in the slave trade bought slaves at the going market price and earned the going market rate of return.  Of course these same whites were reluctant to free the slaves they had bought and that meant terrible lives for the victims.  But the gains of those whites are not mirror images of the losses of the slaves.  Thus in some regards slavery was a massive collective action problem with a relatively small number of beneficiaries.  Those benefiting would include individuals who first saw the gains from seizing slaves from Africa, and individuals who were good at spotting undervalued slaves and buying them up and exploiting them.  That’s a fair number of people but it is far from comprising the overwhelming majority of society in 1840, much less 1940 or 2014, once we consider possible wealth transmission to their heirs.

There is still a moral case for reparations even if most American whites have lost from slavery rather than benefited.  (Although I doubt if the America public would see the matter that way, which is one reason why the reparations movement probably isn’t going anywhere.)  Nonetheless on the economics of the issue I would suggest a very different analysis than what I am seeing from many of the commentators.  And this analysis makes slavery out to be all the more destructive, and reparations to be all the more unlikely.

Addendum: It is amazing how many of you cannot read and digest a simple sentence such as “There is still a moral case for reparations even if most American whites have lost from slavery rather than benefited.”  Which by the way is far to the “left” of where the current debate stands in American politics and indeed in most other parts of the world.


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