Reparations and the climate change interest rate
Another claim that some vast sum is due in reparations for the slave trade:
Britain stole 25 million years of life and labour through slavery in Barbados, according to research by a team of international experts.
Their report concludes that Barbados’s population of African descent have suffered damages estimated at up to $2tn (£1.5tn) from 200 years of chattel slavery.
We do not believe this for a moment, of course. History is the listing of who was being beastly to whom and there’s an awful lot of it out there. Selecting one or other issue for compensation isn’t going to work. However, this little part did interest:
The team then projected those values into the present day, using economic modelling to account for centuries of unpaid debt – a process Bazelon admitted posed significant challenges.
“There are not financial markets that tell you what an interest rate to use is for a debt that’s going to be paid back hundreds of years in the future,” he said, adding that multiple valuation approaches were used to ensure the estimates were credible and consistent.
We’ve had a large report about long term interest rates. The Stern Review. Yes, discount rates off into the future are the same thing as interest rates off into the past. Much of Stern’s actual argument - rather than the set up - is that we must use very low discount rates when considering more than mere decades otherwise no current action can be justified by future costs. Society as a whole has accepted that argument otherwise we’d not be doing as much as we are - in fact we’d be doing near nothing at all - about climate change so small do those future costs look against current ones at market interest rates.
As we say, interest and discount rates are the same thing. The full report seems not to be available but we’re really very sure those damages haven’t been calculated using that 0.1% interest rate. Yet as society as a whole is currently insisting that 0.1% rate really is what should be used over centuries.
We don’t believe in such calculations even in theory but it’s also true that they’re technically wrong as well.
That Ms. Motley, the Prime Minister of Barbados, is so prominent in both the campaign about climate change and that concerning reparations is just one of those things.
Tim Worstall