A bill is pending in the US Congress that would establish a commission to study the effects of slavery and subsequent discrimination against black Americans. It would develop proposals for reparations to address historical and current harms, including wealth gaps and mass incarceration.
While allegations of systemic racism in the US inspire diverse reactions, neither such historical nor current inequities justify reparations. Not only is the black population with the highest median income black Americans, but at more than $50,000, black Americans generally outearn Europeans. The fact that America’s median income is almost $80,000 elevates prospects for black Americans. Politicians and pundits portraying this negatively as inequality are, on balance, unhelpful.
For every poor American, nearly four are solidly affluent. In SA, this ratio is inverted. It is not that we have an inequality problem that can be meaningfully mitigated through redistribution. Rather, our ultra-elevated unemployment precludes adequate productivity gains, while SA’s localisation policies, despite meagre domestic discretionary income, entrench rampant poverty.
Enormous reparation payments would undermine the confidence of young black Americans by depicting them as perennial victims. Credible assertions have long been made that women face systemic discrimination, yet young women now routinely outearn their male counterparts in various US and European cities. This was achieved even though women are still underrepresented in important fields.
Pursuing progress is different from politicians exploiting ― and therefore being motivated to worsen ― inequities. Neither reparations nor grants are effective at reducing wealth gaps or incarceration rates.
The history of big winners of lotteries provides a cautionary tale. People with poor financial management skills struggle to save, and when their income spikes, they rarely invest wisely. Nor are incarceration rates likely to decline due to payments that dilute dignity by perpetuating victimhood narratives.
Blacks, like whites, should look to increase their incomes by developing valuable skills and investing prudently. If black Americans shared a country with low-income people lacking investment successes, their local status would be higher, but their economic prospects would plunge.
All Americans, but particularly those who invest well, benefit from the country’s well-funded, highly competitive companies. The so-called “magnificent seven” that have accounted for so much value creation among US stocks don’t oppress others by dominating land ownership, like feudal lords or landlords.
Nor do they seek to control mineral deposits like the “randlords”. Their shareholders don’t get rich by monopolising physical assets. They create tremendous wealth through mixing coding and creativity. White and Asian men dominate such pursuits but they get rich while benefiting others.
As SA’s young adults are mostly poorly educated and unemployed the trajectory of the country’s productivity is frighteningly flat. This pummels prospects for reducing poverty; consequently, the country’s already tentative political calm is particularly vulnerable to food inflation. We rely on highly productive large farms to avoid surging food prices. Redistribution by breaking up such farms would be counterproductive and dangerous.
Most commodity-exporting nations are poor. Advances in farming economics continue to reduce the contributions from low-skilled labour and land. Yet our policies ignore how economic growth has shifted from relying on land and subsurface assets to being driven by disruptive technological advances and much specialisation amid increasingly intense global integration.
Whereas the US’s zest for political theatre promotes reparation proposals at the expense of genuine upliftment, a similar penchant here fixates on racially defined redistribution at growth’s expense, further entrenching stagnation amid dangerously elevated unemployment. Our politics and economics are at war with each other.
Prioritising redistribution has devastated our economy to the point where we can only sustain rapid job creation through integrating far more deeply with the global economy. This requires policy reforms to encourage upliftment basics, particularly merit-based employment.
The high median income of black Americans is not due to the eradication of racial discrimination and its legacies. Rather, it reflects a job market that is opportunity-rich due to its emphasis on rewarding merit.
• Hagedorn (@shawnhagedorn) is an independent strategy adviser.
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