Life, liberty and the pursuit of happiness were declared inalienable rights centuries ago. But these rights are as deeply tied to the ability to achieve wealth as they are rooted in the words of the Declaration of Independence. And America’s stubbornly persistent racial wealth gap is proof that, for some, the American Dream has remained out of reach.
I was inspired to write the “We Can Solve the Racial Wealth Gap” series – in honor of Stewart’s lyrics, “Where’s the Money” – based on my experience coming out of graduate school with debt of six-figure student loan. I remember talking to some of my classmates around graduation about what seemed like an insurmountable financial hurdle, hoping to participate in a small group venting session.
But I couldn’t. None of my white friends in this conversation had student loans. Their parents paid their school fees.
It was the first time I really understood what the racial wealth gap was. I have felt it. I worked hard, I stayed in school, I did what I was told to do to succeed. Yet my professional adult life started out about $200,000 behind the starting line compared to my peers.
Over the years, I’ve seen them buy new cars, houses, and vacation homes, and travel to exotic places. During that time, I bought decades-old used cars, rented apartments, and learned to travel on a shoestring. Although holding similar professional titles, my net worth was a drop in the bucket of theirs. My hard work and the hard work of my parents — who sent me to a private high school to boost my chances of a bright future and helped me pay off some of my college debt — didn’t were not sufficient. As I write this, I still have a five-figure student loan balance, although light is beginning to appear at the end of the long tunnel.
I am very lucky now to live well, within my means, and I have never experienced poverty. But I still have a fraction of the accumulated wealth of my white peers.
Origins of the Racial Wealth Gap
There is a lot of data to back up my story. The average black American household has a wealth of 12 cents for every dollar of the average white household, according to the Federal Reserve. In 2019, the median wealth of a white family was $188,200. The median wealth of a black family? Just $24,100, according to an analysis by the Brookings Institution.
And the differences are not just between the haves and the have-nots. Even among the poorest there is a gaping racial divide.
Black Americans are much more likely to have little or no savings or safety net.
According to the Federal Reserve, nearly 1 in 5 black households have zero or negative net worth, compared to less than 1 in 10 white Americans.
We know that land ownership, or the denial of it for black people, was the foundation on which the wealth gap was built over 400 years ago in America. The causes of this financial inequality can be traced back to slavery, but these inequalities are not simply remnants of ancient discrimination that continues to spread into the modern era. They have been reinforced, reintroduced and reaffirmed time and time again throughout history.
“So-called black codes have been put in place,” says Lisa Rice, president and CEO of the National Fair Housing Alliance. Rice is an expert on the historical origins of the racial wealth gap who has repeatedly testified before Congress on the issue. “Settlers denied people of color the ability to access property.”
Post-war land ownership restrictions, Jim Crow laws, redlining, gerrymandering, discriminatory lending practices, and employment discrimination served to create and preserve a racially unequal financial system. Today in Boston, the very city where Stewart spoke, lenders are denying mortgages to black applicants at three times the rate of white applicants, according to a WBUR analysis.
The laws and policies that erected and perpetuated barriers to black homeownership were built on a common theme, Rice explains.
“It’s a system that ties race to risk,” Rise says. “As black people moved through urban areas throughout the Great Migration period, they were racially directed to certain areas perceived as dangerous. Then there were divestments and divestments in those areas. The banks are leaving. Businesses are leaving. Municipalities would not serve these areas and would not invest in infrastructure.
“It was all orchestrated,” Rice says.
From these roots grew a system in which blacks continued to be held back: by student loans that burdened them disproportionately with debt, a credit-reporting system that wrongly treated blacks as inherently risky, and a lack of investment in black businesses that keeps black entrepreneurs from thriving – and driving the economy.
Racism? Oh, we all pay for it
Let’s be clear: racism costs us all. Every American. I don’t just mean that it costs us our pride by casting a shadow over the bright, shiny American story of exceptionalism we’ve grown to tell ourselves.
I say it more clearly: Racial inequality in our financial systems is costing all of us – white Americans too – hard cash.
Racial inequality in the labor market alone has sank $51 trillion from the US economy over the past 30 years, study shows.
So when I say we need to reinvent reparations, I don’t mean the transfer of wealth from one group to another, which critics are quick to decry as fundamentally unfair and backward-looking.
I mean fixing America’s systems to eliminate the built-in racism that perpetuates injustices like the racial wealth gap, and in the process, making those systems work better for all of us.
This series offers a number of solutions that a wide range of stakeholders – legislators, community members, banks, philanthropists, educational institutions, etc. – can start implementing today.
The solutions presented are not exhaustive and there is no single approach. Much like the 19th century abolitionist journals that inspired The Emancipator, this series is meant to be an invitation for all of us to imagine a society where black people can participate fully and equitably, including in its financial systems. It’s a seed from which more innovative, out-of-the-box solutions can grow.
By breaking the cycle of financial discrimination rooted in the enslavement of black people, codified by usurious and restrictive laws and policies, and perpetuated by the misconception that black people are a bad financial investment, Americans can finally begin to realize the promise enshrined in the Declaration of Independence. Only then can life, liberty and the pursuit of happiness become an anti-racist ideal.
Kimberly Atkins Stohr is the senior columnist for The Emancipator, as well as an opinion writer and senior columnist at the Boston Globe. It can be attached to firstname.lastname@example.org. Follow her on Twitter @KimberlyEAtkins.