Carl P. Parrini and
James I. Matray
If popular wisdom holds that prostitution is the oldest profession, and spying only a slightly younger occupation, then surely reparations—a country demanding payment or indemnity from another in land, goods, or money for damage inflicted as a result of war—also dates from a very early point in human history. Modern practice on indemnities or reparations has its origins in the late nineteenth century, when statesmen at Hague conferences in the Netherlands began to rewrite the rules for warfare, to limit armaments, to encourage peaceful settlement of international disputes, and, by such indirect means, to fashion a definition of what constituted "a just cause" for war. Indemnities or reparations as a concept developed from the idea that there were clear "laws of war" arising from treaties, conventions, and other international agreements. When in the course of warfare a nation, including all institutions legally subordinate to it, violated these legal norms and brought about "wrongful injury to life, body, health, liberty, property, and rights," that nation must make pecuniary indemnification to the injured persons. It is important to emphasize that in its origins, reparations was conceived of as indemnification for violations of existing international law, rather than for actions contrary to the current "moral" precepts of society.
Germany's Second Reich under Otto von Bismarck established a modern benchmark for indemnities when it collected nearly $1 billion from France in 1871, at the conclusion of the Franco-Prussian War. That same year, the Treaty of Washington provided for arbitration to settle U.S. claims against Britain for the destruction that Confederate privateers built in British shipyards had inflicted on Union merchant ships during the American Civil War. The United States at first requested not only indemnification for direct damages but also $8 million in "war prolongation claims" for all Union costs after the Battle of Gettysburg in 1863. The settlement provided for British payment of $15.5 million in Alabama claims, while the United States would pay $1.9 million for illegal wartime acts against Britain, such as property seizures and imprisonments. In 1885, France wanted an indemnity from the Qing dynasty to end its war against China, but later dropped the demand. Japan was not so lenient after its victory in the Sino-Japanese War of 1894–1895, extracting 200 million taels of silver from China in the peace treaty.
During 1900, the Boxer Uprising resulted in Chinese rebels killing the German minister and trapping the diplomatic legations of Japan and other Western nations, including the United States; foreign business people; and thousands of their Chinese servants and Christian converts in prolonged sieges at Tianjin and Beijing. After a multinational military force liberated the captives, China signed the Boxer Protocol, which required payment of an indemnity of $333 million to eleven nations. The American share was $25 million, but in 1908 Washington remitted all but $7 million to cover private damages. The U.S. government used the remainder to fund a program that sent Chinese students to schools in the United States. Meanwhile, Japan had won the Russo-Japanese War of 1904–1905 and wanted Russia to pay an indemnity. However, bowing to pressure from President Theodore Roosevelt, Japan dropped its monetary demand and accepted the southern half of Sakhalin Island. In 1907, when another conference convened at The Hague, the statesmen had not contemplated a long war that would result in the partial crippling of the economic life of nations. They had envisaged wars of short duration, in which the civilian economies of the belligerents would hardly be touched. But World War I would cause enormous destruction, shaking the foundations on which the "legal" conception of reparations was based.
THE VERSAILLES SETTLEMENT
The Great War was a total conflict of nation against nation, resulting in differential destruction of national social systems. It therefore changed the reparations question into an issue of apportioning the relative gains or losses from participation in the war. Because of the unexpectedly long duration of World War I, none of the belligerents could impose sufficiently large taxes to pay for their economic needs. Internal tax income proved too small to pay for necessary imports. Consequently, the Allies largely had financed the war in the United States through selling international investments and through first-year borrowing. Until April 1917, the British, and to a lesser extent the French, Russian, Italian, and Belgian governments, had borrowed by floating their bond issues through American bankers. The British loans were secured by the international investments of its citizens that the government had sequestered. As the war dragged on, it became clear to British leaders that the longer the conflict continued, the greater the probability that Britain would emerge from the war minus its international investment empire, the protection of which was one of the reasons it was fighting the war. In the view of Prime Minister David Lloyd George, the burden of war costs had somehow to be shifted to the Central Powers, so that Britain would be able to keep its international investments.
U.S. entry into the war in April 1917 presented the possibility to Allied leaders that the United States somehow could be made to bear some of the burden of the war costs. They accordingly began to shape reparations plans that would redistribute Allied war costs not only to Germany but also to American taxpayers and investors. With this ultimate intention in mind, the Allied efforts to impose war costs on Germany began on 5 April 1919, when Lloyd George asserted that Germany should stipulate in the peace treaty "her obligation for all the costs of the war." The United States opposed, on legal grounds, the inclusion of war costs in the reparations total, although, paradoxically and illogically, President Woodrow Wilson did agree that pensions for Allied soldiers, despite not being part of existing international legal definitions of reparations, and thus in no way "civilian damages," ought to be part of the total. In order to limit the amount that Germany would be required to pay, the United States made two broad proposals concerning the parameters within which reparations totals ought to be determined. First, no matter what the amount, Germany would be required to make payments for no more than thirty-five years. Second, a reparations commission would be set up to fix the amount that Germany would be able to pay.
American leaders assumed that these parameters would limit reparations demands to the surplus the German economy could produce, over and above what was necessary for a restoration of a level approximating the nation's living standards in 1914. On the other hand, the provision that thirty-five years be the longest period of payment allowable would roughly fix the total of reparations to be paid. These limits were intended to encourage Allied interest in restoring German economic life. At the Paris Peace Conference early in 1919, the chief American experts, Norman H. Davis and Thomas W. Lamont, suggested a maximum figure of roughly $28.5 billion, half in gold and the remainder in German marks. But Lloyd George and French Premier Georges Clemenceau pressed for a much higher amount. To prevent this disagreement from dividing the Allies, negotiators agreed to a compromise providing for creation of a reparations commission with responsibility to determine Germany's exact liability by May 1921. Veterans' pensions would be included, as Wilson had agreed, but in fact this would have an impact only on distribution, not on the final reparations amount. This decision to postpone determination of an exact amount and the terms of repayment resulted in the United States failing to gain either of its main objectives.
Superficially, the establishment of a reparations commission would seem to have been a victory for the American position. However, France insisted that the commission have no independent power to modify the length and amount of payment in accord with ability to pay. The French position, which prevailed, allowed the postwar commission simply to total up the claims and required at least fifty years of payment from Germany. Meeting its deadline, the commission in 1921 fixed Germany's total liability at about $33 billion. Of this total, approximately $11 billion was assessed to pay for all damaged Allied property. The rest represented war costs imposed by the victors as punishment for Germany's "war guilt" under article 231 of the Versailles Treaty. Under this provision, Germany accepted responsibility for "all the loss and damage to which the Allied and Associated governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of Germany and her allies." By then, the U.S. Senate had rejected the League of Nations Covenant and the Treaty of Versailles to which it was attached. The United States therefore had withdrawn from the reparations commission and only had "observers" at its deliberations.
Close examination of the $33 billion in reparations reveals, however, that the amount was less than it appeared to be. The commission specified that about $11 billion of A and B bonds would be payable at 5 percent interest over thirty-seven years. The remainder, in C bonds, would bear no interest and would come due only when the commission determined that Germany's new Weimar Republic was able to pay. The Allies in fact planned not to collect on these C bonds if Washington canceled the war debts to the United States. The U.S. government resented this attempted coercion and refused to cancel all Allied war debts. Administration officials under Wilson and his successor, Warren G. Harding, also were appalled by both the totals fixed and the procedures designed to collect them. Starting with President Wilson, American leaders tried to use the war debts owed to the United States to coerce the European leaders into easing the German reparations burden, not least because the Allies presumably now would collect on the C bonds. Washington's scheme was essentially the same as the one Wilson proposed at Versailles. German reparations had to be based upon Germany's capacity to pay and the period of payment had to be shortened, so that eventually German economic health could be restored.
During negotiations at Versailles, Wilson, as an inducement to the Allies to change their position, offered to cancel that part of the war debts to the United States that the Allies actually had incurred in fighting the war, in exchange for a reduction in the amount of German payments and in the length of time Germany was expected to pay. From 1921 to 1924, Presidents Warren G. Harding and Calvin Coolidge honored Wilson's offer. But the Allies refused. Instead, they demanded that Washington cancel all the war debts, including that portion of what they had borrowed from the United States after the fighting ceased ($3.3 billion of the total of $10.3 billion) that had been used for reconstruction and for civilian commercial trading. Wilson's Treasury secretaries, Carter Glass and David Houston, refused general cancellation on the ground that the Allies already had distributed among themselves spoils of war, including special concession trading advantages, greater than the postwar commercial debts they had contracted with the United States. At first, their successor, Republican secretary of the Treasury Andrew W. Mellon, followed the same policy.
With hindsight, it became fashionable among west European and U.S. intellectuals to accuse American leaders of ignorance and even selfishness in connection with their stubborn refusal to acknowledge any link between the reparations and the war debts. The majority seemed to accept the French argument that the war against Germany was a common effort, in which the United States had belatedly done its small part by contributing its money. "Some gave their ships, some munitions, some the lives of their sons, some money," a member of the French Chamber of Deputies told his colleagues, "and today those who gave money come saying to us: 'Give back what we loaned.'" If the United States indeed had been in "alliance" by treaty or moral commitment with the west European allies, this would have been a telling argument. But Wilson genuinely had tried to stay out of World War I—as long as he could do so—without facing some sort of settlement changing the balance of power against the Allies. To avoid a German military victory of this sort, he had joined the war, but he did not do so on behalf of Allied war aims. He opposed the division of spoils outlined in the "secret treaties" and rejected every Allied effort to induce the United States to share in the booty of war. Wilson in this specific sense sought a "peace without victory," which would allow the vanquished to reenter the community of industrial-capitalist states without disabling prohibitions.
From Wilson's standpoint, World War I was a civil war within the social system of industrial capitalism. Its basic causes were political and economic rivalries over issues such as access to raw materials, foreign markets, and investment outlets, with the allies attempting to defend the existing apportionment of world market opportunities and the Central Powers challenging it. But in Wilson's view neither side had gained as much as it had lost, because the war aroused forces that challenged the very legitimacy of industrial capitalism as a system. In general terms, the Arabian, Chinese, and Bolshevik revolutions were outgrowths of the war; specifically, they reflected the fact that the people in the Third World were dissatisfied with the pace at which they were achieving self-determination and industrial development under the management of the advanced industrial nations. To Wilson, the political destabilization inherent in national revolution appeared to exacerbate the original problem of economic rivalries among industrial states by effectively withdrawing more resources and people from the world market. He believed that to protect, stabilize, and allow for the expansion of industrial capitalism as a social system in the future, leaders formulating the peace after World War I had to establish a peace that would avoid another world war and possible future national revolutions.
FROM DAWES TO DEFAULT
After World War I, the United States struggled to persuade European leaders to accept its definition of just amounts and terms for reparations payments. Presidents Harding and Coolidge, like their predecessor Wilson, applied a criterion in evaluating the different reparations payment proposals that reflected their view of its potential impact against war among industrial states and revolution in the Third World. They were certain that the high reparations required of Germany would militate against the rapid recovery of its economic and political life. Because they knew Germany was the industrial "power plant" of Europe, its slow recovery would retard that of eastern Europe. Narrowed world markets would reignite the kind of trade wars that had in great part caused World War I. At the same time, a failure to return Germany to equality among nations rather quickly would tend to inflame nationalist tendencies in that country. Far more frightening was the prospect of Bolshevik ideology gaining popularity among the German people, especially after the Soviet Union had established the Comintern in 1919 to promote a global communist revolution.
From the standpoint of the United States, the closed trade doors and special privileges arranged among the Allies would set in motion trends toward stagnation, if not contraction, of world markets. While it was true that closed doors and special-concession organization of world markets would tend to diminish both the share and the volume of world trade enjoyed by the United States, and so were against the immediate as well as the long-run interests of the United States, such policies were also against the long-run interests of industrial capitalism as a social system. It was true that Britain, France, Italy, and Belgium would achieve a larger share of world trade in a slowly growing global market under a regime of closed doors and special concessions, but the total volume of growth would be much smaller than under an open door regime—where each nation had equal opportunities to use its capital, technicians, and technology. However, it was also true that the total volume of goods and services available to satisfy the demands of competing domestic interests in the industrial states and of economic developers in the Third World would be greater in an open door world.
American leaders refused to cancel the war debts entirely in order to try to obtain an "expansionist" direction for the postwar world economy. This meant that the United States rejected a program for priority reconstruction of the victors, and instead pushed for priorities that would give the most economic growth for the whole system. It utilized war debts to press the victors to accept a "business-based" set of criteria providing for maximum efficiency of resource utilization. At any time that Britain and France were willing to accept such a businesslike "composition," the United States was willing to negotiate and make concessions in which it would give equivalent for equivalent. This was shown in 1922, when the U.S. Congress created the World War Foreign Debt Commission to set terms for the Allies to fund their borrowing, requiring an interest rate of at least 4.25 percent and repayment over twenty-five years with no reduction in principal. Britain, in the Balfour Note, stated that it would collect from its debtors only what was necessary to pay Washington. After prolonged haggling, the United States was forced to moderate its stand; the Coolidge administration canceled up to 80 percent of some nations' war debts. Thirteen countries agreed in 1926 to repay the lower amounts over sixty-two years at an average of 3.3 percent interest.
After 1926, U.S. and European leaders continued to disagree about the justice of these payments and the propriety of linking reparations to war debts. Meanwhile, the Allies expected the Weimar Republic to comply with the terms for payment of reparations, thereby financing reconstruction of their economies. But Germany refused to raise the taxes necessary to pay, allowing spiraling inflation to destroy the value of the mark. After a series of partial postponements, the Germans defaulted in January 1923. France and Belgium responded with joint occupation of the Ruhr Valley in an attempt to force Germany to devote its total surplus to reparations payments. German workers organized passive resistance, and the Weimar Republic suspended all payments. These events provided an early indication of how in Germany political problems surrounding payment of reparations dominated economic ones. German refusal to comply with Allied demands, combined with the U.S. government's veto of projected reconstruction loans by the House of Morgan to France, on the ground that the French government had not yet settled its war debts to the United States, forced France and the other European powers to agree to convene a conference of business experts, with the Chicago banker Charles G. Dawes serving as chairman and with the task of settling the reparations according to U.S. standards.
Beginning in January 1924 and ending in September of that year, the conference worked out a system that U.S. delegates believed was based on Germany's ability to pay. In addition to measures for currency stabilization, the Dawes Plan provided for reductions in payments and, under very special circumstances, actual suspension of payments. Certain German revenues, to include taxes on alcohol and tobacco and railroad and budget revenues, were earmarked specifically for reparations payments. Furthermore, Weimar was not made responsible for obtaining the foreign exchange necessary to make the annual payments. Most significant, American and British bankers made a $200 million loan to enable German production to expand and reparations payments to begin. From 1924 to 1929, additional loans to Germany meant that net capital flow ran toward Germany. Foreign lending was responsible for a major transfer of wealth toward Germany that exceeded the amount of reparations and war debts. The total amount of reparations that the Dawes Plan imposed on Germany was not excessive, consuming between 5 and 6 percent of annual national income. Germany in fact maintained a higher standard of living than its production justified for the rest of the decade.
Subsequent to the Dawes agreements, German reparations payments to the Allies rose gradually. Germany's production also expanded. But what troubled the U.S. agent general for reparations payment, Seymour Parker Gilbert, was that most loans initially went for public works, unemployment relief, and investment in sectors with excess capacity, such as agriculture, textiles, and steel. Thus, the loans made no commensurate increase in Germany's ability to earn foreign exchange. While American officials objected to how Weimar was using the money, U.S. private bankers continued to extend loans to Germany, expecting profitable returns. German politicians hoped that increasing loans would work as a lever on the U.S. government, because, they believed, the more money Germany owed to U.S. banks, the more pressure Washington would place on the Allies to reduce reparations. This system could be sustained until German industry was essentially reconstructed, which came late in 1927. But then Germany's needs changed. Its heavy industry required new markets if it was to continue to expand. Germany's inability to find these markets revealed the major flaw in the Dawes Plan conception, which had envisioned a far more rapid development of world markets than actually occurred. Pointing to the necessity to deal with its inability to continue to balance foreign payments, the Weimar Republic requested a revision of the Dawes Plan. But Germany in fact resented paying even its already reduced reparations levy, viewing this as an act of national humiliation.
In recognition of the fact that the world market had not expanded as rapidly as the "Dawes planners" had expected, a new committee of experts on German reparations was formed to meet in Paris on 11 February 1929 to revise the Dawes Plan. General Electric Company executive Owen D. Young, one of the major architects of the Dawes Plan, was designated chair. Out of this meeting emerged the Young Plan, which scaled down the final amount of German payments again, reducing the amount by roughly 20 percent to $8,032,500,000 and making it payable over 58.5 years at an interest rate of 5.5 percent. An additional agreement placed limits on the length of German payments at 36.5 years, but this was dependent upon the organization of the Bank for International Settlements. In addition to functioning as a "trustee" for reparations payments, the new bank was supposed to provide financial facilities for making development loans, which planners thought would contribute to world market expansion. For the last twenty-two years of reparations payments, the profits of the new bank were used to make reparations payments. No nation was fully satisfied with the Young Plan. Reflecting the unhappiness in the United States, Secretary of the Treasury Ogden Mills complained that it "tied debts and reparations together," and thus ratified "the principles of the Balfour Note."
For various reasons, the Bank for International Settlements never functioned as a worldwide development bank. The new investment markets it was to create did not appear. Markets for capital goods and the growing capital surpluses they represented never came into existence. The amount of capital investments going into default became too great for the system to sustain. As world trade contracted, the means of settling payments globally disintegrated. On 16 June 1931, President Herbert Hoover proposed a one-year moratorium on payment of both reparations and war debts. He was still hopeful that some way could be found to reexpand the world economy in order to prevent the development of nationalist autarky. But after 1931, each industrial nation began to erect trade barriers to its domestic markets by means of tariffs and discriminatory administrative procedures, and combined these with export offensives based on government subsidies and currency depreciation. As a result, reparations payments never resumed after Hoover's moratorium ended. At Lausanne, Switzerland, in 1932, the Allies canceled them altogether, subject to a final token payment that the Germans never made. Except for Finland, European nations also defaulted on their war debts to the United States.
Franklin D. Roosevelt, who became president after defeating Hoover's bid for reelection, rejected an international solution to world economic problems then being considered at the London Economic Conference of June–July 1933. The movement toward nationalist autarky that he thereby accelerated prevented any reconsideration of a settlement on war debts or reparations. It later became fashionable to lay responsibility for the world depression, economic nationalism, the rise of Adolf Hitler, and World War II not only on high tariff rates in the United States, but also on the American refusal to equate war debts with reparations, and hence agree to the cancellation of war debts in exchange for a reduction of German reparations payments. These criticisms are without much merit. The key point that such critics make is that the burden of war debts caused the world economic crisis and the rise of "Hitlerism." Their argument ignores the reality that German financial policies and eventual defaults were mainly the product not of U.S. actions but of the political weakness that was a structural component of the political economy of the time. Weimar's fragmented polity, combined with the emotionally charged symbolic issues of war guilt, reparations, and nationalism, meant that following significantly different policies to prevent insolvency would have been highly unlikely, if not impossible.
Nor were Germany's reparations and loans solely responsible for creating the economic crisis that led to the international instability of the 1930s and the eventual outbreak of World War II. There were deeper causes. From 1924 to 1927, when the underlying condition for the economic crisis took shape, Germany had three possible avenues for stabilizing its foreign trade and payments. First, it could export directly to reparations receivers such as France and Belgium. Second, it could export its capital goods to the Third World for development purposes. And third, it could export to the Soviet Union. As a practical matter, all three of these alternatives were not open by 1927. Direct exports to reparations receivers would tend to interfere with employment in those countries, and so were not welcome. Export of capital goods to the Third World was not really possible—except for Latin America, where German industry could not compete very successfully with the United States, and China, where prolonged civil war by and large blocked economic development—because most of the Third World was under the control of the Allied victors, who discouraged the export of German capital goods to their colonies and semicolonies to preserve them as monopoly markets for their home industries. Extensive exports of German heavy industrial goods to the Soviet Union were blocked by the unofficial but effective U.S. government embargo on long-term American financing for developing Soviet socialized industry.
Since new outlets for German heavy industry did not appear in the world market, Germany began to invest American banking loans in an economically wasteful fashion. Bankers lent to German states and municipalities, which used these funds for projects designed to bring about more social consumption, such as municipal beautification, parks, sports stadia, hotels, public bathhouses, and roads of little or no productive utility. Investments of this sort did not provide goods or marketable services that could be used to defray the costs of the borrowed foreign capital. But the irony was that the United States, with the Dawes loans, spent an amount in excess of what the Germans paid in reparations. Germany transferred a total of 16.8 billion marks to the Allies while receiving 44.7 billion in speculative mark purchases and loans that it never repaid after the Great Depression brought down the international monetary system in 1931. President Hoover was not entirely wrong when he claimed that economic forces originating in Europe had shattered the U.S. economy, although his critics at that time ridiculed him for attempting to avoid blame for the economic collapse. While Hoover shares responsibility for the Great Depression, President Roosevelt failed to make any effort to protect the equity of American bondholders. His embrace of the anticreditor mood of the era meant that Germany was able to default on its war debts, resulting in U.S. investors paying "reverse reparations."
COMPLICATIONS OF COLD WAR COMPENSATION
When American, British, and Soviet leaders began to grapple with the problem of war debts and reparations resulting from World War II, they had the benefit of the World War I experience. Instead of granting simple war loans, the U.S. Congress authorized the president in March 1941 to enable any country whose defense he defined as vital to the United States to receive arms, other equipment, and matériel "by sale, transfer, exchange or lease." Lend-lease aid to Britain, China, and the Soviet Union made possible a clear separation of wartime economic aid, reparations, and reconstruction credits. The Allies created a reparations commission at the Yalta Conference of 4–11 February 1945. Under Soviet pressure, the United States and Britain agreed that a figure of $20 billion would be the starting point for discussions about Germany's new reparations obligation. The Soviet Union would receive half of that amount. But at the Potsdam Conference in July 1945, President Harry S. Truman opposed Soviet efforts to collect reparations from current output until Germany exported enough to pay for imports to feed its labor force and fuel its industry. He was following the advice of Secretary of State James F. Byrnes, who was acting in accordance with his understanding of the negative impact of the reparations dispute on European reconstruction and world economic and social stabilization in the 1920s, but was unaware that only U.S. loans had made possible German reparations payments.
By the time of the Potsdam Conference, Germany's unconditional surrender in May 1945 had left the United States, Britain, France, and the Soviet Union with separate zones of occupation in the defeated nation. Even before Potsdam, Soviet occupation forces had begun to dismantle and transport whole German industrial plants to Soviet territory. The Soviets also designated special factories to produce exclusively for them. Moreover, Moscow kept the services of four million German prisoners of war and demanded forced labor from those living in its occupation zone. In general terms, the Soviet Union acted after World War II much as France had after World War I. It wished to reconstruct its own economy and to retard the reconstruction of Germany, both to stabilize itself and to prevent the stabilization of Germany. A destabilized Germany would remain militarily weak and the Soviet Union would become militarily strong. Moscow saw that large reparations taken quickly would facilitate both these objectives. U.S. leaders already had decided that imposition of large-scale reparations on Germany would retard postwar European economic recovery. During 1946, they concluded that without surplus production, the western zones of Germany would become a vast relief camp dependent on U.S. aid.
Concerns about German postwar economic recovery had not stopped the United States from developing plans and organizations late in World War II for conducting industrial espionage and seizing useful patents in chemicals, machine tools, and other technologically advanced industries in Germany. Operation Petticoat and Operation Paperclip sought to acquire German equipment, scientific research, and technical information of both military and industrial value, not only in hopes of shortening the war against Japan, but also for postwar economic advantage. Britain and France conducted similar operations, no doubt justifying exploitation of German industry, science, and technology as legitimate reparations. Subsequently, in the Harmssen Report of 1947–1951, the city of Bremen's economic minister calculated the total value of the information that the Western Allies secured at $5 billion. Citing this report, Soviet Foreign Minister Vyacheslav Molotov set the final amount of German intellectual reparations, including the Soviet portion, at $10 billion. British, French, and U.S. officials disputed these numbers then and thereafter. Also, defenders of the seizures later would point out that Germany looted French companies, practiced slave labor, expropriated possessions of concentration camp victims, and extracted tribute from the countries it occupied.
Discord between the Allies over reparations contributed to starting the postwar Soviet-American Cold War. Devastated by World War II, the Soviet Union insisted upon major reparations payments from Germany to hasten economic recovery. Consequently, Soviet Premier Joseph Stalin proposed that the Ruhr Valley industries be administered jointly by the Soviet Union and the three Western powers to secure reparations from the Western-controlled portions of Germany. The United States and Britain rejected this proposal, revealing the growing differences on matters of priorities to be observed in European reconstruction. Washington increasingly suspected that the Soviet Union's wish to strip Germany, and to slow European reconstruction, meant it wanted to dominate the balance of power in Europe. This negative view of Soviet intentions seemed to be confirmed by Moscow's refusal to accept the U.S. invitation to participate in the Marshall Plan, which was designed to solve the problem of European reconstruction on a joint Europe-wide basis. After considering the matter, Stalin decided to reject the offer, largely because this would have required the Soviet Union to reveal the secrets of its economic capacity. Furthermore, the Marshall Plan would have meant priority for west European reconstruction over that of the Soviet Union, as well as that the east European countries would be linked economically to western Europe, functioning largely as raw material suppliers.
Once the Soviet Union rejected participation in the Marshall Plan, the logic of its situation was to organize East Germany and other areas of Eastern Europe along lines allowing it to seize resources for its own reconstruction. Between 1947 and 1956, Moscow took large reparations from East Germany and much of Eastern Europe, probably far more than the $10 billion it had demanded at Yalta. Based on its experience with France in the controversy over German reparations following World War I, the United States must have expected that the Soviet Union would fail in its effort to achieve unilateral reconstruction based on reparations forcibly taken. Since France had no choice but to withdraw from the Ruhr in 1923 and accept U.S. conditions for European reconstruction, American leaders believed the Soviet Union would ultimately have to give up its domination of Eastern Europe. But what had worked against France in 1922–1923 did not work against the Soviet Union in the Cold War period. The Soviet Union and France were two dissimilar political economies. Because it engaged in state trading and had long been denied supplies for its industry by the Western industrial states, the Soviet Union was in effect isolated from the major impact of the world market. Unlike France after World War I, it had made its unilateral system of reparations collection in East Germany and much of Eastern Europe a sufficient base for its own reconstruction and for its strategic, political, and economic control of Eastern Europe to the Elbe River.
Acting on the same assumptions that guided its policy toward Germany, the United States did not collect reparations from Japan. But the nations victimized by Japanese aggression in World War II demanded compensation immediately after the conflict ended. In Tokyo, the Far Eastern Commission began discussions on how to meet these demands in the fall of 1945. Early in 1946, President Truman named Edwin W. Pauley as special ambassador, with instructions to conduct a fact-finding mission for recommendations on Japanese payment of reparations. Made public in April 1946, Pauley's plan provided for transferring to the devastated nations of Asia all Japanese industrial equipment beyond that needed to maintain Japan's prewar living standard. Japanese leaders criticized the plan as both unduly harsh and impractical. General Douglas MacArthur, the supreme commander of Allied powers and head of the U.S. occupation, agreed that the imposition of reparations would delay, if not prevent, Japan's economic recovery. Many American officials in Tokyo and Washington shared his concern. By the fall of 1946, as Soviet-American relations deteriorated in Europe, serious doubts about Pauley's plan arose in the War and State departments.
Early in 1947, the United States adopted the containment policy. This would lead to implementation of the "reverse course" in U.S. occupation policy toward Japan. Its objective was to create an economically powerful and friendly Japan that would be the cornerstone of a postwar U.S. policy in Asia to block Soviet-inspired communist expansion. While the United States abandoned Pauley's plan, the nations serving on the Far Eastern Commission were deadlocked over the complex question of how best to distribute the required reparations equipment. The War Department first commissioned several reevaluations of the reparations and economic policy that resulted in a two-thirds reduction of the demands. During May 1949, the United States broke the stalemate by unilaterally terminating all demands for reparations payments. The Philippines strenuously objected, compelling Washington to include in the 1951 Japanese Peace Treaty an article providing that Japan negotiate and pay reparations in goods and services to any former victim of its aggression that demanded compensation. Japan's government and its business community would make a virtue of necessity after U.S. occupation ended in May 1952. They pursued a successful strategy for establishing friendly and productive relations with its former imperial conquests that utilized reparations payments to help reopen East Asian markets and regain access to raw material sources in Southeast Asia.
After regaining its sovereignty, Japan negotiated a series of agreements providing consumer goods and industrial equipment, often tied to economic assistance and loan programs, with the Philippines, Burma, Indonesia, and South Vietnam (after the division of Vietnam in 1954). Controversy in Japan surrounding alleged government-business collusion in awarding reparations contracts prolonged the talks, but separate agreements finally were reached with all four countries. In November 1954, Burma gained $200 million over a term of ten years, and in March 1963 supplementary payment of $140 million paid over twelve years. In May 1956, the Philippines accepted $550 million in reparations over a term of twenty years, and the agreement with Indonesia in January 1958 provided for payment of reparations of $223 million over twelve years. South Vietnam in May 1959 accepted $39 million over a term of five years. These four nations received an additional $707.5 million in the form of loans. Cambodia and Laos accepted "free technical aid" rather than formal reparations. Under these agreements, recipient nations agreed to provide Japan with necessary raw materials. In addition, receipt of economic aid often required purchase of Japanese manufactured goods, contributing significantly to Japan's economic recovery and later expansion, especially in its steel, shipbuilding, and electronics industries.
Japan did not pay reparations to China after World War II because of the outcome of the civil war in that country. Under pressure from the United States, the Japanese did not recognize the People's Republic of China. This precluded negotiations regarding reparations with the Chinese communist government, and the Republic of China, in exile on Taiwan, could not make claims because that island had been part of the Japanese empire. South Korea demanded that Japan pay $8 billion in reparations for gold and art objects taken from Korea, forced labor, and lost Korean investments during forty years of Japanese imperial rule and brutal colonial exploitation of the Korean peninsula after 1905. After protracted negotiations beginning in 1952, Tokyo and Seoul finally signed in June 1965 the Treaty of Basic Relations Between Japan and the Republic of Korea, which provided for Japan's commitment to extend to South Korea's government $200 million in long-term, low interest loans, $300 million in goods and services over ten years, and $300 million in commercial loans to promote the development of South Korea's economy. Meanwhile, Japan had established and developed quasi-official contacts with North Korea, resulting in expanded trade that in 1964 reached $30 million. By that year, Japan had paid over $1 billion in reparations and $490 million in economic assistance to Burma, Indonesia, South Korea, Malaysia, Laos, Cambodia, and South Vietnam.
In August 1990, Saddam Hussein launched an invasion of Kuwait. The United Nations then authorized the United States to organize military action to liberate Kuwait if Iraqi forces refused to withdraw. The Gulf War during January and February 1991 resulted in Iraq inflicting tremendous destruction on Kuwait, including its oil wells. After Saddam's surrender, the UN Security Council in April passed Resolution 687 to impose punishment on Iraq. One of its provisions stated that Iraq was liable under international law for all direct loss, damage (including environmental damage), and the depletion of natural resources, or injury to foreign governments, nationals, and corporations, as a result of Iraq's unlawful invasion and occupation of Kuwait. No concrete plan for collection emerged, because the resolution also called for measures to restrict Saddam's ability to produce weapons of mass destruction. Accordingly, Iraq was prohibited from selling oil until it met the cease-fire conditions. But Saddam increasingly engaged in defiance and deceit to avoid full compliance with the resolution. The UN inspectors ultimately left Iraq in protest and new U.S. air strikes failed to alter Iraq's behavior, let alone revive any expectation of reparations payments. The Gulf War showed the supremacy of international power over international law.
REPARATIONS AND GROUP REMEDIATION
There were occasions in the twentieth century when the United States paid reparations or considered doing so. In 1903, President Theodore Roosevelt provided indirect assistance to a group of conspirators who staged a rebellion in Panama that resulted in the secession of this province from Colombia. His motivation was to help create an independent nation in Panama that would then sign a treaty authorizing the United States to build a canal across the Isthmus of Panama. Roosevelt succeeded, but embarrassment over the incident and hopes for oil concessions caused Congress in 1921 to approve payment of a $25 million indemnity to Colombia, satisfying a demand it first had made in 1914. A similar situation existed in Hawaii, where many natives believed that the United States played an unethical role in conspiring with white American businessmen to stage a rebellion during 1893. Although the United States did not annex Hawaii at that time, its actions eventually led to the overthrow of Hawaii's last monarchy. In August 1988, the U.S. House of Representatives held hearings on a proposal for payment of reparations to native Hawaiians. But in the end, native Hawaiians had to be satisfied with only an official apology that Congress extended in November 1993 for U.S. actions in helping end Hawaiian home rule.
Much more controversial was the issue of whether the United States should pay reparations for the destruction that military operations inflicted on Vietnam during the Second Indochina War. In January 1973, as part of the Paris Peace Agreement, the Nixon administration agreed to provide North Vietnam with $4.75 billion in aid for economic reconstruction. This was intended as an inducement to respect the terms of the accord, but Hanoi was determined to reunite the country and achieved success in April 1975. Two years later, when President Jimmy Carter sought the establishment of diplomatic relations, the Socialist Republic of Vietnam made the payment of reparations at least equivalent to the amount of the promised reconstruction aid a condition for normalization. The House of Representatives, in a quick and angry response to perceived blackmail, voted to forbid aid, reparations, or payments of any kind to Vietnam. By contrast, a decade later, the United States paid compensation when it accidentally shot down an Iranian civilian airliner over the Persian Gulf. These differing outcomes revealed how the principle of reparation for damages had not been firmly set in international law. In 2000, the United States chose not to pay reparations to the families of South Korean civilians that U.S. soldiers had killed at No Gun Ri during the first weeks of the Korean War.
During the years after World War II, specific groups of people have made claims to reparations for a variety of transgressions. The Federal Republic of Germany, for example, voluntarily paid reparations to Israel for the policies and actions of the Nazi government that inflicted unspeakable suffering upon individual Jews. During the 1990s, U.S. World War II veterans who had been prisoners of war in Germany filed suit against Daimler-Benz and other firms to gain damages for German industry's ruthless exploitation of them as slave laborers. These demands gained legitimacy from a definition of reparations as an "act or process of making amends," usually by "giving compensation to satisfy one who has suffered injury, loss, or wrong at the hands of another." Consistent with this broader definition, in 1983 the U.S. Congress passed a remediation (remedy) law for Japanese Americans whom the U.S. government had put into internment camps during World War II. It provided for Congress first to pass a joint resolution, signed by the president, "which recognizes that a grave injustice was done and offers the apologies of the nation for the acts of exclusion, removal, and detention." Second, it granted official pardons to Japanese Americans convicted for violating orders to evacuate. Third, it created a foundation for educational and humanitarian purposes. Last, and most important, Congress established a $1.5 billion fund for the payment of reparations to survivors of the internment camps.
Remediation for Japanese Americans revived African-American demands to receive reparations for enslavement. Despite various legislative and legal attempts to redress the legacy of American slavery after 1865, large-scale payment of reparations never had gained widespread support in the United States as a viable option for indemnification. In 1989, Representative John Conyers, an African-American Democrat from Michigan, introduced in the House of Representatives legislation to allow African Americans to achieve remediation. It failed to pass then and again in 1991. But in February 1993, the first National Reparations Awareness Day program in Detroit presented strategies for accomplishing indemnification. Legal action, while not expected to succeed, was endorsed as a powerful symbol of white group responsibility for slavery that would set the stage for passage of remediation legislation once a favorable political context emerged. In 2001, at the National Reparations Conference in Chicago, activists argued that an honest reckoning of American history showed "the difficulty of transcending race without some attempt to repair the damage done by racial slavery and the structures of racism erected to justify it." That demands to indemnify the descendants of American slaves extended into the twenty-first century demonstrated that the principle of reparations for damages had not been firmly established either in U.S. domestic or international law.
Bower, Tom. The Paperclip Conspiracy: The Hunt for the Nazi Scientists. Boston, 1987. Discusses Operation Paperclip, which brought German scientists to the United States, despite the involvement of many in Nazi war crimes.
DeConde, Alexander. A History of American Foreign Policy. 3d ed. New York, 1978. Provides succinct summaries of the terms of U.S. agreements that involve reparations prior to the Versailles Peace Treaty.
Falkus, M. E. "The German Business Cycle in the 1920's." Economic History Review 27 (1975). Argues that net declines in foreign investment in Germany in 1928 and 1929 contributed to the onset of the Great Depression.
Finn, Richard B. Winners in Peace: MacArthur, Yoshida, and Postwar Japan. Berkeley, Calif., 1992. Provides a well-researched and reflective study of the occupation that covers the deliberations of the Far Eastern Commission and reparations.
Gimbel, John. Science, Technology, and Reparations: Exploitation and Plunder in Postwar Germany. Stanford, Calif., 1990. Documents how after World War II the United States supervised a comprehensive and systematic intellectual reparations program to exploit German scientific and technical know-how.
Kent, Bruce. The Spoils of War: The Politics, Economics, and Diplomacy of Reparations, 1918–1932. Oxford and New York, 1989. Contends that the Allies were fully aware from the start that Germany could not pay the large reparations they demanded, but followed this policy as a way to silence calls for increased taxes to reduce government debt or finance expanded social programs.
Keynes, John Maynard. The Economic Consequences of the Peace. New York and London, 1919. Contains an excellent analysis of why the reparations settlement worked out at Versailles was bound to fail.
Leffler, Melvin C. "The Origins of Republican War Debt Policy, 1921–1923: A Case Study in the Applicability of the Open Door Interpretation." Journal of American History 59 (1972). Explains how domestic public opinion and administration, as well as congressional, views of American fiscal problems, complemented efforts of U.S. leaders to manipulate reparations to create an expansionist world market structure.
Link, Werner. Die Amerikanische Stabilisierungspolitik in Deutschland, 1921–1932. Düsseldorf, 1970. Demonstrates that American, and to a lesser extent British, bankers insisted on reversal of French reparations policy as the major key to U.S. investment in Germany.
Magee, Rhonda V. "The Master's Tools, from the Bottom Up: Responses to African-American Reparations Theory in Mainstream and Outsider Remedies Discourse." Virginia Law Review 79 (1993). Traces failed efforts after 1865 to gain compensation for African Americans, in land or money, for damages resulting from American slavery.
McNeil, William C. American Money and the Weimar Republic: Economics and Politics on the Eve of the Great Depression. New York, 1986. Explains how attracting and allocating foreign loans following the approval of the Dawes Plan became the center of conflict between German political factions and between the Allies and Germany.
Moulton, Harold G., and Leo Pasvolsky. War Debts and World Prosperity. New York, 1932. Although covering events only up to 1932, this is still the most useful account of the complex interrelationships among reparations, war debts, tariff structures, and the requisites of an expanding world economy.
Parrini, Carl P. Heir to Empire: United States Economic Diplomacy, 1916–1923. Pittsburgh, 1969. Shows that reparations were linked to war debts, and that the United States used war debts to force the European powers to modify the reparations settlement, and tried to find a place for Germany in an expanding world market without displacing other industrial states.
Rhodes, B. D. "Reassessing Uncle Shylock: The United States and the French War Debt, 1917–1929." Journal of American History 55 (1969). Asserts that the U.S. government maintained a moderate approach to war debts.
Rix, Alan. Japan's Economic Aid: Policy-Making and Politics. New York, 1980. Examines Japan's postwar foreign aid decision-making process.
Schaller, Michael. The American Occupation of Japan: The Origins of the Cold War in Asia. New York, 1985. Places the occupation within the context of overall postwar U.S. security strategy in East Asia from 1945 to 1950.
Schuker, Stephen A. American "Reparations" to Germany, 1919–33: Implications for the Third-World Debt Crisis. Princeton, N.J., 1988. Asserts, in a revisionist argument reflecting the new international history of the 1920s, that, contrary to the view of John Maynard Keynes, the reparations bill assigned Germany in 1921 was not unreasonable, but in fact reflected a measure of rough political justice.
Temin, Peter. "The Beginning of the Depression in Germany." Economic History Review 24 (1971). Contends that the impact of the reparation payments on investment in Germany had no relationship to the onset of the Great Depression there.
Trachtenberg, Marc. Reparation in World Politics: France and European Economic Diplomacy, 1916-1923. New York, 1980. Examines the reparations dispute after World War I from the French perspective.
U.S. Senate Committee on the Judiciary. Loans to Foreign Governments. Senate Document no. 86. Washington, D.C., 1921. A collection of correspondence on war loans, war debts, and reparations.
U.S. World War Foreign Debts Commission. Combined Annual Reports of the World War Foreign Debt Commission with Additional Information Regarding Foreign Debts Due the United States. Washington, D.C., 1927. Contains much of the correspondence between the U.S. Treasury Department and the British and French governments.
See also Alliances, Coalitions, and Ententes; Cold War Origins; Foreign Aid; International Law; Loans and Debt Resolution; Summit Conferences.
THE TREATY OF VERSAILLES, 28 JUNE 1919
Article 231 of the 400-article Treaty of Versailles placed responsibility for World War I on Germany. Articles 232 and 235 addressed the issue of German reparations.
Article 231 The Allied and Associated Governments affirm and Germany accepts the responsibility of Germany and her Allies for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of Germany and her allies.
Article 232 The Allied and Associated Governments recognize that the resources of Germany are not adequate, after taking into account … other provisions of the present Treaty, to make complete reparation for all such loss and damage.
The Allied and Associated Governments, however, require, and Germany undertakes, that she will make compensation for all damage done to the civilian population of the Allied and Associated Powers and to their property during the period of the belligerency of each….
Germany undertakes … as a consequence of the violation of Treaty of 1839, to make reimbursement of all sums which Belgium has borrowed from the Allied and Associated Governments up to November 11, 1918, together with interest at a rate of five percent…. This amount shall be determined by the Repa ration Commission….
Article 233 The amount of the above damage for which compensations to be made by Germany shall be determined by an Inter-Allied Commission, to be called the Reparation Commission. …
This Commission shall consider the claims and give to the Germany Government a just opportunity to be heard.
The findings of the Commission as to the amount of damage defined as above shall be concluded and notified to the German Government on or before May 1, 1921, as representing the extent of that Government's obligations.
The Commission shall concurrently draw up a schedule of payments prescribing the time and manner for securing and discharging the entire obligations within a period of thirty years from May 1, 1921. If, however, within the period mentioned Germany fails to discharge her obligations, any balance remaining unpaid may, within the discretion of the Commission, be postponed for settlement in subsequent years, or may be handled otherwise in such manner as the Allied and Associated Governments … shall determine.
Article 234 The Reparation Commission shall after May 1, 1921, from time to time, consider the resources and capacity of Germany, and, after giving her representatives a just opportunity to be heard, shall have discretion to extend the date, and to modify the form of payments … in accordance with Article 233; but not to cancel any part, except with the specific authority of the several Governments represented upon the Commission.
Article 235 In order to enable the Allied and Associated Powers to proceed at once with the restoration of their industrial and economic life, pending the full determination of their claims, Germany shall pay in such instalments … as the Reparation Commission may fix … the equivalent of 20,000,000,000 gold marks. Out of this sum the expenses of the armies of occupation subsequent to the Armistice of November 11, 1918, shall first be met…. The balance shall be reckoned towards liquidation of the amounts due for reparation.
Parrini, Carl P.; Matray, James I.. "Reparations." Encyclopedia of American Foreign Policy. 2002. Encyclopedia.com. (May 27, 2016). http://www.encyclopedia.com/doc/1G2-3402300133.html
Parrini, Carl P.; Matray, James I.. "Reparations." Encyclopedia of American Foreign Policy. 2002. Retrieved May 27, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3402300133.html
The term reparations refers to a concept and tool for providing monetary payments to members of aggrieved groups based on past wrongful actions against them or their ancestors. Reparations are used for addressing injuries and damages in relations among nations, ethnic groups, and other victims of sustained economic and sociopolitical injustice or military or police aggression. Examples include reparations paid to victims of the German Holocaust in Europe from 1930 to 1945 and Japanese Americans who were partially compensated for their internment and loss of property in the United States during World War II (1939-1945). Earlier reparations were paid by Germany to the Allies after World War I (1914-1918), but in a manner and intensity that probably contributed to reopened hostilities later in the century. The reparations concept is being thought of by some as a potentially useful tool for helping to resolve chronic ancestral grievances in many situations worldwide, including in Northern Ireland, the Balkans, the Middle East, South Asia, and elsewhere.
In the United States, the idea of reparations has gained strength as a way to remedy injustices against African Americans as a group, as well as Native American Indians and Native Hispanic American Indians. This latter debate over what many call reparations has often been a catchall for discussion of a wider range of concerns in social policy and the expression of other agendas. In that sense, some reparation advocates seek monetary damages for their ancestors’ pain and suffering, for their loss of language and African identity, and for the slave trade itself. The debate has also been characterized by imprecision, and the parties to the argument often mischaracterize, disregard, or distort opponents’ actual positions and beliefs. This was the case, for example, in the article “Ten Reasons Why Reparations for Slavery Is a Bad Idea for Blacks— and Racist Too” (2001) by the conservative activist and media personality David Horowitz.
After Horowitz’s article was published, a sharp encounter ensued between Horowitz and several others involving the definition of “reparations for slavery” and whether it was justified or fair to white Americans currently living and paying taxes. None of the parties to the discussion, on either side, had carefully reviewed the literature or provided any original opposing or clarifying analysis. Thus, the entire episode primarily illustrated the tendency toward carelessness in thought and discussion on racial redistributive justice, even by most proponents. This encounter also underscored the highly emotional quality of much discussion of the subject of reparations, which brings to the surface fundamental, and long-buried and unarticulated, core racial concerns on all sides. The debate also raises questions about the political feasibility of reparations, whatever the term means. Is there broad support for a practical policy and program of explicitly redistributive and compensatory justice in the United States?
There is a growing scholarly analytical literature on the subject of reparations. Among the earliest articles was one by Robert Browne, published in 1972 in a special issue of the Review of Black Political Economy. This issue featured the first attempts to quantify the present value of the stream of benefits to whites from past wrongful takings under slavery, segregation, and discrimination. Much of that analysis was based on work done by the economist Lester Thurow in his 1969 book Poverty and Discrimination. Thurow developed a model, and using census data he established that white Americans gained approximately $15 billion in one year, 1960, from racial discrimination in the labor market.
From 1985 to 1990, the National Economic Association, an organization of African American economists and policy analysts, conducted sessions on reparations at their annual meetings. The papers presented at these sessions were published in The Wealth of Races: The Present Value of the Benefits of Past Injustices (1990), edited by Richard F. America. This volume included the work of William Darity, Roger Ransom and Richard Sutch, Warren Whatley and Gavin Wright, Larry Neal and Robert Browne, and other established economists, and carried quantitative and historically based analysis several steps forward. In a 1993 monograph Richard America continued to refine and develop the concept of reparations, focusing on unjust enrichment and the income and wealth-transfer effects of slavery and discrimination. In 2003 Darity and Dania Frank published a short but comprehensive summary of research to date. This volume refines the analysis and points to a new framework that can produce an even more robust analytical basis.
A common question raised about reparations is that if they are suitable for African Americans, are they not also appropriate for other aggrieved groups? Reponses vary widely. But the emerging approach with the deepest analytical grounding involves an analysis of wrongful taking and unjust enrichment, and findings of magnitudes of compensation based on historical auditing. This approach can be used for other groups with similar historical backgrounds, wherever appropriate.
What about popular opinion and support for or opposition to reparations for African Americans? Michael Dawson and Rovana Popoff (2004) found that 79 percent of blacks and 30 percent of whites in the United States favored an apology for slavery, but 66 percent of blacks and only 4 percent of whites favored monetary reparations to blacks “for slavery.” This finding may or may not reflect actual views on reparations when defined differently as “recapture of unjust enrichment” rather than reparations “for slavery.” That distinction is crucial. The question of reparations, in various forms, has become a serious public policy issue since it first emerged in the late stages of the civil rights movement of the 1960s. Of course, as early as the American Revolution, some advocates of abolition were framing remedies that included some form of compensatory justice for freedmen and freedwomen.
The concept of reparations varies according to the worldview of those in the debate. There are three broad views. For some, reparations primarily mean compensation for the slave trade. A second view is that reparations are owed to current generations for the pain and suffering of their collective ancestors—for crimes against humanity. A third view of reparations is narrower and seeks to recapture, recover, and reclaim unjust enrichment that resulted from wrongful takings under slavery, segregation, and many forms of discrimination from 1619 through the present. The focus in this entry is on this third definition.
The idea of unjust enrichment is key, and functions as a useful framework for understanding chronic poverty, poor educational performance, substandard housing, high unemployment, and low income and wealth accumulation among African Americans, as well as persistent black-white disparities in health care, business investment, and competitiveness. These conditions all derive, significantly, from the processes of wrongful taking and unjust enrichment. In addition, these conditions can be measured because they all include a measurable, historically based component. The processes of slavery, Jim Crow segregation, and discrimination were all mechanisms that transferred or diverted income and wealth from blacks as a class to whites as a class, producing unjust enrichment. Reparations, in this view, constitute the proper basis for a well-founded program for rational compensatory public policy. Unjust enrichment and reparations are ways to understand chronic social distress in a long-term historical context. Slavery and discrimination operated in many forms, in every aspect of American life, for 350 years, and this explains much of the current dysfunction. Social problems derive largely from the extraction or confiscation of black property and income by white decision-makers, for white benefit, in millions of daily microdecisions.
The cumulative effect of those wrongful takings produces current unjust enrichment and a range of conditions referred to as affluence and poverty. This situation helps explain the problems we objectively see on the ground, but this fact has been absent from policy discussions. The reparations concept inserts these ideas into the heart of policy analysis, and changes the way problems are viewed and the way policy and programs are created.
There has been widespread and consistent white discrimination against blacks. This behavior has been outlawed in the United States since 1965, but policy analysts and social scientists have not failed to note the full long-term consequences, especially the unjust enrichment. Explicitly accounting for the ways in which black and white ancestors behaved puts a spotlight on the transferred income and wealth. The concept of reparations, and the associated framework of wrongful taking and unjust enrichment, provides a public policy framework for examining objective reality by quantifying and taking into full account historical context. In this way, it is a new or, at least, improved paradigm—a new or improved way of viewing the world. There has been massive, systematic exploitation and confiscation. And those practices—slavery and discrimination—produced wrongful benefits that have been passed on, transferred intergenerationally, to the present.
This analysis points to redistributive justice—recovering monies wrongfully taken through restitution—as the general remedy. That is what reparations mean in public policy terms. Other analysts emphasize payment for pain and suffering or for crimes against humanity. And still others have focused on a form of reparations as a means of laying the groundwork for atonement and reconciliation; they emphasize healing.
But reparations of the kind described here focus on improved public policy analysis, in which national tax and budget priorities are informed by the concept of unjust enrichment, and, by implication, reparations. Thus, social spending becomes a tool for explicitly making restitution.
The amount of reparations owed would equal the net present value of the sum of the deviations from “fair” standards in prices, wages, rents, employment, interest, and investment in education, plus all other affected transactions between whites and blacks. This is an overly simple but illustrative form of the model that leads to a grasp of the dimensions of the wrongful taking and unjust enrichment that produced the need for reparations. We can audit the actual patterns of labor, trade, and investment relations long after the fact. We can also posit a set of “fair” wages, occupational distributions, employment levels, prices, rents, interest rates, educational expenditures, taxes, profits, and returns on investment. We can then estimate the deviations from those “fair” standards. And we find that those deviations resulted, in part, from force, manipulation, and coercion. Then we aggregate, compound, and adjust for price changes over time. That produces a “bill” that represents the financial basis for redistributive justice. We can then negotiate the bill, and reach rational, feasible, make-whole settlement agreements that will restore African Americans as a class to their rightful place. These actions are reparations. Clarifying that will help clarify policy choices in education, housing, employment, and every other controversial sector. The remedy is income and wealth redistribution in capital injections, or grants, in housing equity, quality education, and business equity, targeted to rectify the injustice.
Reparations are a way of looking at complex policy issues that can be rationally applied to understanding, defining, and solving chronic social problems in housing, health, education, employment, and business and community development. Without this historical framework, public policy cannot effectively address these problems.
America, Richard F., ed. 1990. The Wealth of Races: The Present Value of Benefits from Past Injustices. New York: Greenwood.
America, Richard F. 1993. Paying the Social Debt: What White America Owes Black America. Westport, CT: Praeger.
Browne, Robert, ed. 1972. Review of Black Political Economy. Special Issue on reparations.
Darity, William A., and Dania Frank. 2003. The Political Economy of Ending Racism and the WCAR: The Economics of Reparations. American Economic Review 93 (2): 326-329.
Dawson, Michael, and Rovana Popoff. 2004. Justice and Greed: Black and White Support for Reparations. Du Bois Review 1 (1).
Horowitz, David. 2001. Ten Reasons Why Reparations for Blacks Is a Bad Idea for Blacks—and Racist Too. Front Page Magazine (January 3). http://www.frontpagemag.com/Articles/ReadArticle.asp?ID=1153.
Thurow, Lester. 1969. Poverty and Discrimination. Washington, DC: Brookings Institution.
Richard F. America
"Reparations." International Encyclopedia of the Social Sciences. 2008. Encyclopedia.com. (May 27, 2016). http://www.encyclopedia.com/doc/1G2-3045302236.html
"Reparations." International Encyclopedia of the Social Sciences. 2008. Retrieved May 27, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3045302236.html
reparations, payments or other compensation offered as an indemnity for loss or damage. Although the term is used to cover payments made to Holocaust survivors and to Japanese Americans interned during World War II in so-called relocation camps (and used as well to describe compensation sought by many African Americans for enslavement of blacks prior to the Civil War), in 20th-century world history reparations are the payments sought by the victorious nations of World War I and World War II as compensation for material losses and suffering caused by war.
The Treaty of Versailles (1919) formally asserted Germany's war guilt and ordered it to pay reparations to the Allies. The United States did not ratify the treaty and waived all claims on reparations. A reparations commission fixed sums in money; some payments were to be in kind (i.e., coal, steel, ships). The chaotic German economy and German government resistance made it difficult for the Allies to collect amounts due them, and they in turn declared it impossible to honor their war debts to the United States. In 1923, French and Belgian troops occupied the Ruhr district after Germany was declared in default. The Dawes Plan (1924) and the Young Plan (1929) sought to ease the strain of reparations payments. By 1931 the world economic situation had so deteriorated that a one-year moratorium on all intergovernmental debts was announced. The Lausanne Pact of 1932 substituted a bond issue for the reparation debt, but Adolf Hitler repudiated the debt, and German payments were not resumed until after 1953. Reparations were also demanded in treaties with Germany's allies in the war—Austria, Hungary, Bulgaria, and Turkey—but the amounts were never set and nothing was collected.
In 1945 the Allies assessed Germany for damages suffered in World War II. Payments were to be effected chiefly through removal of assets and industrial equipment. The Western powers and the USSR came into conflict over reparations, and seizures of capital goods and German assets in Allied or neutral countries proceeded unevenly. The Western powers ended reparations collections from West Germany in 1952, and the USSR ceased collection from East Germany a year later, although official renunciation of claims did not occur until 1954 in both cases. In 1953 the West German government agreed to pay reparations to Israel for damages suffered by the Jews under the Hitler regime. Lesser reparations claims were made against Germany's allies in the war—Bulgaria, Finland, Hungary, Italy, and Romania. The Western powers did not support these claims, and payments to the nations that asked compensation were arranged through separate treaties.
Japan also had to pay reparations after World War II. The United States administered removal of capital goods from Japan, and the USSR seized Japanese assets in the former puppet state of Manchukuo. The United States ended collections from Japan in 1949 and renounced further claims in 1951. At that time Japan agreed to settle the reparations claims of Asian nations by individual treaties with those countries. These treaties were subsequently negotiated.
See J. M. Keynes, The Economic Consequences of the Peace (1919); C. G. Dawes, A Journal of Reparations (1939); B. Ratchford, Berlin Reparations Assignment (1947); A. Cairncross, The Price of War (1986); B. Kent, The Spoils of War (1989).
"reparations." The Columbia Encyclopedia, 6th ed.. 2016. Encyclopedia.com. (May 27, 2016). http://www.encyclopedia.com/doc/1E1-reparati.html
"reparations." The Columbia Encyclopedia, 6th ed.. 2016. Retrieved May 27, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1E1-reparati.html
"reparations." World Encyclopedia. 2005. Encyclopedia.com. (May 27, 2016). http://www.encyclopedia.com/doc/1O142-reparations.html
"reparations." World Encyclopedia. 2005. Retrieved May 27, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1O142-reparations.html