The Cost of Slavery
Marching across the South in 1865, Union soldiers seized up to 900,000 acres of "abandoned property." Some radical Northerners hoped to use this land to provide freed slaves with the now-legendary "40 acres and a mule" as restitution for slavery. Their hopes were obviously dashed. But the argument for reparations lives on nearly 140 years later.

While few doubt that slavery was a great wrong, the challenge before us is how to make things right through financial restitution. But just how would we devise a practical formula to determine who gets what?

Most assessments start with the notion of payment for lost wages. One researcher took 1860's prices for slaves as an estimate of their labor value and applied compound interest. The result: $2 trillion to $4 trillion. Six generations after slavery's demise, such approaches present serious difficulties. There are issues of what to do with whites (and blacks) who immigrated here after slavery ended. What about descendants of blacks who lived freely during the antebellum period? Does someone who is born to a white parent and a black parent cancel out? It would take Solomon to solve this.

Perhaps the issue needs to be looked at differently. One way is to recognize slavery as an institution upon which America's wealth was built. If we take this view, it is not important whether a white family arrived in 1700 or in 1965. If you wear cotton blue jeans, if you take out an insurance policy, if you buy from anyone who has a connection to the industries that were built on chattel labor, then you have benefited from slavery. Likewise, if you are black — regardless of when your ancestors arrived — you live with slavery's stigma.

Extending the reparations argument this broadly frees one to move beyond the issue of lost wages and seek out other factors on which to base a formula. If there were one statistic that captured the persistence of racial inequality, it would be net worth.

The typical white family enjoys a net worth that is more than eight times that of its black counterpart, according to the economist Edward Wolff. Even at equivalent income levels, gaps remain large. Among families earning less than $15,000 a year, the median African-American family has a net worth of zero, while the corresponding white family has $10,000 in equity. The typical white family earning $40,000 annually has a nest egg of around $80,000. Its black counterpart has about half that amount.

This equity inequity is partly the result of the head start whites enjoy in accumulating and passing on assets. Some economists estimate that up to 80 percent of lifetime wealth accumulation results from gifts from earlier generations, ranging from the down payment on a home to a bequest by a parent. If the government used such net-worth inequality as a basis, and then factored in measures like population size, it could address reparations by transferring about 13 percent of white household wealth to blacks. A two-adult black family would receive an average reparation of about $35,000.

What would be the effect of wealth redistribution on such a vast scale? My own research — using national data to follow black and white adolescents into adulthood — shows that when we compare families with the same net worth, blacks are more likely to finish high school than whites and are equally likely to complete a bachelor's degree. Racial differences in welfare rates disappear. Thus, one generation after reparations were paid, racial gaps in education should close — eliminating the need for affirmative action.
http://www.nytimes.com/2003/02/15/opinion/15CONL.html