Some reparations advocates have produced calculations purporting to show the present-day value of unpaid enslaved labour, with compound interest applied from the time of enslavement to the present day. The figures produced are enormous, typically running into the tens or hundreds of trillions of pounds. The sheer scale of these numbers is used to make the case that reparations represent a genuine debt of staggering magnitude.
It sounds plausible because compound interest is a real mathematical phenomenon. Money invested 200 years ago would indeed be worth an enormous amount today if it had grown at a reasonable rate of return.
The problem is that this calculation is not economics. It is an arithmetical trick applied to a figure that does not exist.
For compound interest to apply, there needs to be a principal sum, a defined interest rate, and an agreement that the debt is accumulating interest. None of these things exist in this case. The enslaved people who performed unpaid labour were not creditors who lent money at an agreed rate of return. They were victims of theft. Theft does not generate compound interest. The value stolen was value stolen at the time. Applying compound interest to it is a rhetorical device, not a financial calculation.
The methodology also requires you to assume that the stolen labour, if paid, would have been invested and grown at a particular rate. But enslaved people in the conditions they faced would not have been in a position to invest their wages. The compound interest model assumes a counterfactual world so different from the actual one that the resulting figure is meaningless.
The variation between different advocates’ figures exposes this. Estimates range from a few hundred billion to many hundreds of trillions, depending on the assumptions used. When the same underlying historical facts produce estimates that differ by factors of hundreds or thousands, the calculation is not measuring a real quantity. It is producing whatever number the methodological choices are designed to produce.
No court, no economist, and no serious legal scholar has endorsed any specific compound interest calculation as a valid basis for a reparations claim. The figures are produced for political effect, not legal or economic analysis.
The one-line rebuttal: compound interest requires a lending agreement and an agreed rate of return, neither of which existed, making these calculations arithmetically creative but economically meaningless.
