Paying Reparations for Ancient Wrongs Is Not Right

When we seek to punish corporations, we actually punish ourselves, because we're the ones who end up paying

Most Americans have an instinctive (if self-serving) feel for why it would not be a good idea to pay reparations to the descendants of slaves. As victims of one of history's great crimes, the slaves themselves surely deserved reparations. So, in principle, do the many living victims of the century of legal apartheid that followed slavery. But while the legacy of slavery still plagues us, the passage of 138 years since the Emancipation Proclamation and 37 years since the 1964 Civil Rights Act has changed the landscape utterly, making it impossible to decide with any pretense of fairness which of today's African-Americans should receive compensation and who should pay.

Try explaining to a struggling taxi driver whose parents were refugees from communist Poland why he or she or the government should pay reparations to the black grandmother he just picked up, or to the young black men he sees on the street. Try telling him why the millions of more-fortunate African-Americans—the most-accomplished and -affluent collection of black people anywhere, in the history of the world—should be classified as "victims" of anything.

Put that same taxi driver on a jury, however, and you might well be able to persuade him to take a few million dollars from the likes of W.R. Grace and Co. to "compensate" thousands of plaintiffs who say they were (but in most cases were not) injured by the company's asbestos products 30 years ago. Or from the likes of Sherwin-Williams, for selling paint that contained lead pigment 50 years ago. These are not entirely hypothetical examples. On April 2—27 years after it had stopped using asbestos in its products—W.R. Grace became the 26th major company driven into bankruptcy by asbestos lawsuits. The same day, a Rhode Island judge kept alive (barely) one of the lawsuits brought by state and local governments around the country demanding that Sherwin-Williams and seven other paint and chemical companies pay to strip public and private homes of lead paint—virtually all of which was sold more than 40 years ago.

The proliferation of lawsuits against corporations for such ancient wrongs has more in common with the slavery reparations movement than might be apparent to my taxi-driving juror. Both are emblems of a litigation-happy culture so obsessed with a costly and often wasteful hunt for real or imaginary victims and villains (transactional justice, in scholarspeak) as to lose sight of the need to pursue justice for all (distributive justice). And both flout a principle that should be self-evident but is sadly neglected by our legal and popular cultures alike: As the passage of time removes from the scene more and more of the accused wrongdoers, and more and more of their possible victims, it makes less and less moral or economic sense—and ultimately no sense at all—for the law to exact monetary redress from incorporeal institutions such as corporations or governments.

This is not to deny that imposing liability upon institutions in conventional lawsuits serves two vital social purposes: 1) Deterring executive and employee misconduct by providing healthy economic incentives for the people who run the institutions to avert similar liabilities in the future. (Executives, after all, are held accountable by stockholders or voters for costly liabilities caused by misconduct on their watch.) 2) Compensating real victims of real injuries that impose real monetary costs, such as medical expenses and lost wages.

But when the lawsuits come (say) 30 years after the supposed wrongs, they serve neither of these purposes very well, if at all. First, the economic deterrent to harmful conduct recedes as the interval between wrong and lawsuit increases. The reason is that corporate executives will rarely be in a position to see decades into the future, and in any event will have virtually no economic incentive to cut into this year's profits to minimize some faraway, speculative risk of liability years after they will have died or retired.

Second, hitting corporations for ancient wrongs often provides little compensation to real victims. Some will have died and others will not be identifiable. The evidence will have become so stale, meanwhile, that it will be very difficult to deduce who did what to whom and who (if anyone) was at fault. Most asbestos plaintiffs these days, for example, do not and never will have asbestos-related diseases; rather, they say they were exposed to the mineral and seek money because someday they might become sick. And most of the lead paint lawsuits seek nary a dime in compensation for children injured by the stuff, most of whom could not possibly be identified; they seek instead to finance state and local government cleanup programs.

To the extent that such lawsuits finance real compensation or other worthy public purposes, they amount to enormously wasteful covert taxes that could be raised far more efficiently by taxing the public the old-fashioned way. Studies of asbestos and other mass tort litigation have shown that as much as 60 cents to 70 cents of every dollar paid out by defendants and insurers will go not to compensate injured people, and not to strip lead paint, but to pay for legal costs—and in turn to finance the mansions, yachts, and Learjets of the plaintiffs' attorneys who alone typically take 33 percent to 50 percent of any award.

Contrary to boatloads of misleading rhetoric by lawyers, politicians, and others, a corporation is not a moral actor that can be punished, any more than a car, a house, a banana, or the Girl Scouts can be punished. Sure, the bonus-seeking, corner-cutting, profit-mad executives who are so familiar in popular culture have some real-world equivalents who have done very bad things for which they deserve to be punished (but almost never are). But clobbering their companies after they are gone is no skin off their backs. And given the constant buying and selling of shares in most big companies, the fiction that liability makes shareholders responsible for the companies' misconduct becomes especially fanciful when the imposition of liability comes long after the misconduct.

When we seek to punish corporations, we actually punish ourselves, because the bill eventually comes back to us in the form of higher prices to cover the costs of liability. And we—or the majority of us—own these same corporations, whether as individual stockholders or as beneficiaries of huge pension funds. With all due respect to Julia Roberts, Erin Brockovich, Ralph Nader, Al Gore (when in populist mode), trial lawyers, television correspondents, exposé-writers, and all the others whose morality plays have made "corporation" almost a dirty word, the reality is that Corps 'R' Us.

The targets of the reparations movement are us too—all of us. Nobody alive today had anything to do with slavery, of course. The vast majority of white Americans had nothing to do with segregation, either. Even if it were possible to track down the descendants of slaveowners, whatever wealth they possess could rarely be traced to such distant ancestors. And the notions of ancestral guilt and ancestral entitlement—for slavery or anything else—are alien to American ideals.

These realities force reparations advocates back on the claim that American institutions—mainly the federal government—have a multitrillion-dollar debt to the descendants of slaves. But the government, like a corporation, is nothing but a collection of individuals, most of whom reject the notion that they should pay a lot of money for something that someone else did generations ago. Unlike the $20,0000 in reparations awarded by Congress in 1988 to each of the 60,000 Japanese-American survivors of the federal government's World War II internment camps, slavery reparations would bankrupt the government for wrongs done by others to long-dead victims under two evil institutions—slavery and segregation—that it abolished.

Beyond that, compensating older African-Americans who have the most plausible legal claims—because they lived under the yoke of American apartheid—would do very little to help the inner-city children who have the most-crying needs, or to end the culture of poverty that afflicts them. Tacitly recognizing this, some suggest putting the money in trust to pay for better schools and economic development in impoverished black areas.

Now, that has some appeal. If the idea is to raise taxes to provide poor kids with better educations and job opportunities, I'm for it. But don't call it "reparations." Not if you want to sell those of us who believe in justice and opportunity for all, but who reject the notion of inherited guilt. And not unless you can explain why we should leave out the needy children of Mexican-American field-workers, Polish-American cab drivers, Appalachian coal miners, and others just because their ancestors were not slaves. We will not build a better future by wallowing in grievances from generations past.