Individual effort and hard work determines who becomes prosperous and wealthy in the United States. Thus, government should stay out of the business of trying to diminish these disparities through the creation of programs such as affirmative action

Today’s Guests Are:

Betsy Leondar-Wright: author, “Class Matters: Cross-Class Alliance Building for Middle-Class Activists ” and co-author, “ The Color of Wealth: The Story

Behind the US Racial Wealth Divide.” Betsy is a long-time economic justice activist who was the Communications Director of United for a Fair Economy for 9 years. Currently she is publicizing the national campaign to raise the minimum wage called “Let Justice Roll.”

Thomas Shapiro : Pokross Professor of Law and Social Policy, focuses on inequality and race in the United States. “Black Wealth/White Wealth,” co-authored with Melvin Oliver won the American Sociological Association’s Distinguished Scholarly Award and the C. Wright Mills Award from the Society for the Study of Social Problems. He has been active in the emerging area of asset policy. His work on assets and the transmission of racial inequality, “The Hidden Costs of Being African American: How Wealth Perpetuates Inequality,” was published in 2004.

Listen to the show accompanying this myth:

Part 1

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Part 2

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Myth: Individual effort and hard work determines who becomes prosperous and wealthy in the United States. Thus, government should stay out of the business of trying to diminish these disparities through the creation of programs such as affirmative action.

FACT: Common sense and our lived experiences teach us that hard work and wealth do not necessarily go hand in hand. Moreover, government policies have enriched some Americans at the expense of others, enabling them to accrue far more capital assets than their minority counterparts. These assets are then passed on to their children. This intergenerational transfer of wealth offers the key to understanding racial stratification in the United States.

Critics of affirmative action lean heavily on the myth that people make it on their own in the United States based on hard work and individual effort. They also maintain that government intervention in the wealth creation process is not just unprecedented, but un-American.  They ask: Why should the beneficiaries of affirmative action be the recipients of preferential governmental policies when whites acquired their wealth through hard work? The answer is simple: in reality governmental policy has played an absolutely crucial role in determining the racial character of the haves and the have nots in America.

Believe it or not!

There is a cost to being Black in America:

Prof. Thomas Shapiro, calculated the lower return on Black investment in housing, education and jobs. In net financial assets, the cost of being African American amounts to $94,426. Or to state in in the reverse, the advantage of being white is $94,426!

“These numbers represent our best attempt to put a dollar figure on penalties African Americans pay.”

(Thomas Shapiro, “The Hidden Cost of Being African American: How Wealth Perpetuates Inequality” p. 55)

As many advocates have noted, there is a sizable race/gender income gap in America.  ln fact, in the United States your gender and race have an enormous impact on how much money you will earn. On average, white women earn 76.7 cents for every dollar that white men earn, while Black and Hispanic men earn only 74.5 cents and 63.2 cents respectively. Black and Hispanic women earn even less, receiving just 68.4 and 56.9 cents for every dollar that white men earn. It is important to note that all the workers whose earnings are compared in this category are full-time workers. These figures don’t even address the reality that many people are unemployed or underemployed because racial stereotypes prevented them from finding full-time work.

Even larger than the income gap is the racial asset gap. Recent studies have demonstrated that white households possess between five and ten times the net worth of Black households. The gap between Black and white wealth exists even when the income of Black and white households is the same. Not surprisingly, the wealth gap makes it much more difficult for Black families to own homes, to send their children to expensive, well-funded schools, and to recover from economic downturns caused by unemployment or illness.

Why is wealth important in the affirmative action debate?

How we try to close the racial wealth gap depends on how we understand where assets come from. If we think well-off  white people got their wealth only through individual ability and hard work, then the solution will be to urge low-income people of color to try harder. But if we also see how heavily white people have historically relied on government help to build assets, then we will support expanding assistance to all assetless Americans, and we will work for racial justice for those historically barred from wealth because of their race. (The Color of Wealth.)

So then, what is the origin of the racial wealth gap?

WEALTH DISPARITIES

To begin with, wealth CANNOT be viewed as simply a measure of hard work. In fact, many of the hardest workers in America are the least prosperous. Are our friends and family members who earn small salaries as laborers and service workers to be condemned as slackers because the wealth they have accumulated fails to reflect the long hours they have worked? Single mothers, for example, struggling to hold down two minimum-wage jobs work harder, for less, than most folks. Throughout our history, non-whites have been shut out of the most asset-building activities including home ownership, business, and prestigious occupations and jobs with the highest paying salaries. Asian Americans, Blacks, Latinos and Native Americans were all formally barred from many basic opportunities in the first half of the Twentieth Century, a period when the U.S. government assisted large numbers of white families as they moved up the social ladder and became middle-class members of society. Wealth, therefore, must be viewed as “a measure of cumulative advantage or disadvantage.”Click HERE for USA Today article on wealth disparities.

Believe it or not!

Some critics of affirmative action argue that the Black/white wealth gap can be attributed to conspicuous consumption and the failure to save money in a responsible fashion. But Blacks do save as much as their white counterparts. Dr. William Darity, Professor of Public Policy, African American Studies and Economics at Duke University, reports that, “if you control for income, the Black savings rate is at least as high as the white savings rate. There is some evidence to suggest that it might be higher. In any event, closing the Black/White wealth gap through a process of efficient and responsible savings is impossible. According to Dr. William Darity, “there is no way that Blacks can catch up [to whites through] systemic and careful savings. If Blacks saved all of their income – that is, if we didn’t eat, pay any bills, but saved every cent of income – we could not close the wealth gap.” Click HERE to read more.

* “Middle-income black families worked the equivalent of 12 more weeks than white families to earn the same money in 2000.”

* “The most dramatic difference is the wealth effect of homeownership, which is worth about $60,000 more for whites than blacks.”

* “Over half of black American families lived below the Asset Poverty Line in 1999, more than twice the rate of white families.”

Most Americans would be surprised to learn that the distribution of benefits that has led to so much white wealth and so little Black wealth has come out of specific government policies rather than simply the hard work and personal initiative of whites. From America’s founding moments, government has been in the business of providing wealth to whites, while simultaneously excluding, when not outright stealing that wealth from other groups. The consequences of these government policies — some of which remain in place — continue to be felt today.

Did you know?

Facts and Figures: Adding up Black Losses or The Cost of Discrimination

$1.6 trillion: The estimated economic loss for African Americans as a result of legal segregation for 1929-1969 (in 1983 dollars).

+ Several trillion dollars: The cost of discrimination from the end of slavery in 1865 to the year 1969, the end of American style apartheid, based on year-2000 dollars.

+ $94-123 billion: The estimate of how much Black workers lose annually from continuing discrimination and informal segregation in employment.

+ 100 billion: The estimated amount that Blacks in this generation have lost in home equity as a result of the racial discrimination they confront when they attempt to secure mortgages for homes and businesses.


= $5 to $24 trillion: The sum total of the worth of all the Black labor stolen through the means of slavery, segregation, and contemporary discrimination in today’s dollars.

Source: Joe R. Feagin, Documenting the Costs Of Slavery, Segregation, and Contemporary Discrimination: Are Reparations in Order for African Americans? 20 HARV. BLACKLETTER L.J. 49 (2004)

Today, as Tim Wise writes in “The Mother of All Racial Preferences“, white baby boomers are benefiting from the largest transfer of wealth in American history as they inherit their parents’ estates. Some of that wealth dates back to the years of slavery, when Blacks were forced to work for free while their white owners and the American economy accumulated the benefits of their toil. Another large category of the transferred wealth is land, much of it stolen by the American government from Native Americans and Mexicans and sold for a pittance to white settlers. For the average white family, however, some of the largest sources of wealth are the result of racial preferences in government policies that were started in the 20th century.

What government policies have so advantaged whites while leaving other groups behind? The same policies that created the American middle class:

The Federal Housing Authority (FHA).

After World War II, the government created the FHA (which brought us today’s mortgage system). The FHA encouraged home ownership by providing extremely generous loans for first-time home buyers. The rise in value of these homes has provided many Americans with the wealth they need to live comfortably and to prosper. African Americans and other members of racial minority groups, however, were, more often than not, systematically excluded from access to these loans. In virtually every city in America, Black neighborhoods were “redlined”, or marked ineligible for FHA loans. Even for those that could afford it, buying a home in a non-redlined market was also barred by government policy. The FHA, fearing that integration would be detrimental to property values, urged lenders to keep white neighborhoods white. The FHA Underwriting Manual stated that “[i]f a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes.” It recommended the use of racially restrictive covenants (agreements not to sell, transfer, or rent to, or even allow occupancy by someone from another race) from its inception in 1934 until 1950.

As a result, while white wealth skyrocketed as government funds helped millions of families to achieve the American Dream of home ownership, Black families and other communities of color were left behind. Redlining policies were in place until 1977, when they were finally made illegal. However, there is some evidence that redlining restrictions are now being relaxed, which will only solidify the already stark divide in Black and white home ownership rates. Moreover, even when one accounts for factors such as employment and financial status Blacks and Latinos are still 60% more likely than whites to be denied a mortgage.

In the next generation, while white families stand to inherit homes (or the profits from sold homes) that have greatly increased in value, Black families, more often than not, will inherit only debt – debt that is a direct legacy of racial preferences for whites.

As the PBS Series “Race: The Power of an Illusion” demonstrates:

Residential segregation didn’t happen by accident. The U.S. federal government took many steps to channel resources     and opportunities to whites and away from nonwhites, resulting in an enormous wealth gap that persists today. In 1993, 86% of suburban whites still lived in places with a Black population of less than 1%. The 2000 Census showed
that whites are still more likely to be segregated than any other group. Today, 71% of whites own their own home, compared to 44% of African Americans. Black and Latino mortgage applicants are 60% more likely than whites to be turned down for loans.  As housing gets more expensive and wealth gets passed down from generation to generation,  the legacy of past discrimination persists, giving whites and nonwhites vastly different life chances.

(Read a timeline of  government action to promote housing discrimination HERE)

Did You know?

While white home ownership has jumped from 65% to 75% of their families since 1970, Black home ownership has only risen from 42% to 48%. At this rate, it would take 1,664 years to close the home ownership gap – about 55 generations.

Source: United for a Fair Economy, State of the Economy: Enduring Disparities in Black and White.

Social Security:

Social Security has allowed millions of Americans to support themselves after retirement. As a result, its beneficiaries have not had to rely on family members to sustain themselves as much as those who do not greatly benefit from these policies. Many of its beneficiaries have been able to keep their homes and other assets to pass on to the next generation.

Today we think of Social Security as quintessentially American – we even rely on Social Security numbers for identification purposes. But, when it was created, it was envisioned as a white program, designed to exclusively benefit white workers. How was this accomplished? In so far as Blacks are concerned, agricultural and service workers were made ineligible for social security benefits. At the time, non-whites worked almost exclusively in the agricultural and service industries. In fact, they were barred from working almost anywhere else. Not surprisingly then, Black families were often forced to spend their family incomes to support their elderly relatives, even as white families were reaping the benefits of growing inheritances.

Today, Blacks, though eligible for social security are less likely to benefit from it because they don’t live as long as their white counterparts. According to the National Center for Health Statistics, Black males born in 1992 can expect to live to age 65, whereas white males on average live 73.9 years. Black females born in 1992 can expect 73.9 years of life, white females, 79.8 years.

Black men are clearly being short changed by the state policy that sets social security eligibility at the age of 65. Not only are they less likely to benefit from it, they are much more likely to spend their working lives paying into a program that they wont greatly benefit from, if they benefit from it all.

RACIAL PREFERENCES?

Contemporary advocates of colorblindness seek to insulate the unfair advantages whites have received by severely limiting policy makers from even noticing these disparities, much less attempting to equalize the playing field. Courts regard phenomena such as housing segregation as “societal discrimination,” as though its causes are not known and the solutions are beyond our reach. Neither assertion is true. Its causes are known and a range of policies, including affirmative action, can be deployed to diminish these disparities.

As a result of slavery, the theft of land, and discriminatory programs such as the FHA and Social Security, we can safely say that there has only been one group in American history that has ever benefited from genuine “racial preferences”: white Americans. Affirmative action programs work to offset these preferences. Thus, they reflect nothing more than an incremental step in the direction of a more egalitarian America.

Did you know?

* ” In 1865, just after Emancipation, it is not surprising that African Americans owned only 0.5 percent of the total worth of the United States. But by 1990, a full 135 years after the abolition of slavery, Black Americans still possessed only a meager 1 percent of national wealth.”

* “Between 1934 and 1962, the federal government backed $120 billion of home loans. More than 98% went to whites. Of the 350,000 new homes built with federal support in northern California between 1946 and 1960, fewer than 100 went to African Americans.”

Read more of Larry Adelman’s essay, “A Long History of Racial Preference – for Whites”, HERE

BOTTOM LINE

Governmental intervention served to create the wealth gap between whites and non-whites, and affirmative action is necessary to assist in closing this gap.

The intergenerational wealth accumulated by whites continues to lead to greater fiscal stability, and a broader set of economic and other social opportunities than those experienced by minority Americans. It represents a marked advantage. Black families with high incomes have accumulated only about 10 percent of the wealth accrued by their white counterparts. The state has played a major role in creating such disparities. It should now work to level the playing fie

Mythbusting Homework:

1. Try United for a Fair Economy’s “Starting Line” exercise with as many friends and co-workers as you can. In the course of the exercise, you will see before your eyes just how great an impact race and ancestry have on wealth accumulation. The exercise is located HERE.

2. Try to think of the ways in which you and your family have benefited from — or been shut out of — government programs that act as wealth creation measures. How do you think your current life would be different if your parents and grandparents had been of a different race? Perhaps the following narrative will help you to place your experiences in perspective:

Racial Preferences for Whites: The Houses that Racism Built




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