Economic growth theory supplies a useful tool for thinking about how actions in the past affect the future
Some of today’s wealthy countries extracted resources from their colonies in the past. But how much of their wealth and income today is a result of such unjust transactions? And if those transactions were unjust at the time, does that injustice fade or persist?
These questions are usually the preserve of philosophy and ethics, but economic growth theory is a useful tool for thinking about how actions in the past affect the future and are influenced by technological progress.
To answer the question of whether economic injustice fades or persists, we need a theory of justice to work out who has a right to those assets in the first place. And then a framework to estimate how much wealth and income is unjust at any point in time. Most economists will base their arguments only on the distribution of income and wealth to decide whether it is fair. But the American philosopher Robert Nozick takes a different view and argues that how the distribution of resources, income and wealth came about historically is central to any judgement we make about it.
Nozick’s theory is that, if assets have been acquired fairly in the past and they are willingly passed on by the people who acquired them to their offspring or gifted to other people, then there is no injustice, and the chain of fairness continues. But if an asset is acquired unjustly – for example, it is stolen and then willingly passed on – that initial injustice has not been rectified. Therefore, the ownership of the stolen goods by the person who later receives them is itself unjust.
The economic impact of one country having stolen assets over 100 years ago is relatively small
Working out the extent to which the unjust acquisition of assets in the past might influence incomes and wealth of people today depends on how those assets were used in the past. If people used income generated from the assets and saved it to accumulate more wealth, which could then be passed onto future generations, then the impact of those unjustly owned assets is still with us. Alternatively, the assets could have been consumed by the people that stole them, and therefore depreciated so their impact on income and wealth today is negligible.
The saving rate out of the income generated by unjustly owned assets is crucial to thinking about whether there is a long-lasting impact on the economy today. Using the Solow growth model, we can work out what the level of income and wages in a country that stole some capital from another country would be both with and without assets that were stolen at some point in the past. Using standard assumptions about depreciation of physical assets, saving rates and the growth of productivity and labour force, the economic impact of one country having stolen assets over 100 years ago is relatively small.
We can also look at how long it takes for the impact on income and wealth of stolen assets to fall to half its initial value, which we call the half-life. In the standard Solow model, the half-life of assets stolen from overseas is rarely more than 20 or 30 years. This means that, after 90 years or so, the impact of what may initially have been a very large proportion of assets stolen has shrunk to very small levels.
The ownership of the stolen goods by the person who later receives them is itself unjust
This model only looks at injustice from the point of view of the country that committed the theft, but the view from the other side could be quite different. Belgium under the rule of King Leopold II looted assets on a massive scale from what was then known as the Congo in the late 19th century. If we ask how much wealthier a typical Belgian is today because of King Leopold’s actions, the answer is probably not a great deal, largely because most of those assets went to King Leopold personally. But if we ask why the Democratic Republic of Congo is as poor as it is today, we can conceive that it is significantly due to King Leopold’s actions, which affected its whole political and institutional structure and held the country back.
It is different if assets have been stolen from one group by another group within the same economy. In that case, the labour income – which reflects the stock of national capital – does not necessarily change and does not, by Nozick’s principle, reflect injustice. If one landowner steals the land of another, the wages of the people working the land are likely to stay the same; there is no sense in which their labour income becomes unjust. So, the wage income earned from the part of capital that has been unjustly stolen by one group from another is not itself unjust. This makes a significant difference to the question of how long injustice lasts.
This model only looks at injustice from the point of view of the country that committed the theft, but the view from the other side could be quite different
That said, you might think that, as we own our labour power, any income we earn from it must be justly owned by us. But much of the income people earn is a result of their acquired skills from training and education. Historically, the children of the rich enjoyed a better, more expensive education than the rest of the population, perhaps funded using income that may have been acquired unjustly. This would then be a mechanism for injustice to last significantly longer, even through to today.
Although the longer-term economic impacts of injustice in the acquisition of assets might become relatively low after some years, that does not mean the initial act itself is any less unjust. But it does affect the case for reparations from the descendants of those who committed past injustices because the extent of their responsibility depends on whether they have benefited from those past injustices. This is why the persistence or otherwise of the economic effects of past injustices is so relevant to contemporary issues such as the legacy of slavery and other atrocities from the past.
A detailed account of the analysis summarised here can be found in the article “The Half Life of Economic Injustice” by David Miles, published in Economics and Philosophy