Racial wealth gap quadruples in 20 years

subprime

Capitalism is bad for working-class people. Unregulated capitalism is even worse, particularly for black and brown citizens and immigrants who suffer the additional burden of systemic racial, ethnic and gender discrimination.

So says a new study by Brandeis University's Institute on Assets and Social Policy. The study shows a dramatic quadrupling of the wealth gap between African American and their white counterparts in the two decades since 1984. The study tracked median wealth between whites and blacks."The greatest wealth produced in this period accrues primarily to highest income whites," says the study. This group was the chief beneficiariy of Republican tax cuts.

Several causes are seen as contributing to the unequal outcomes: tax cuts on investment income, tax deductions for home mortgages and patterns of discrimination in housing, credit and labor markets. Growing debt as a result of predatory high cost home loans is also seen as one the chief causes. 

The size of the wealth gap is startling. "Measured in 2007 dollars, the disparity in assets increased $75,000 on average, from $20,000 to $95,000 over the 23-year period. At least one in four black households had no assets," writes the LA Times.

Significantly this economic racism affects African Americans across class lines, which saw almost no wealth increase even among higher income brackets. "The study found that even as white families saw their financial assets grow from a median value of $22,000 in 1984 to $100,000 in 2007, black families experienced only the slightest growth in wealth during this same period," continues the LA Times.

Median wealth does account for class differences among a given population and may overstate wealth accumulation among working-class whites, given the stupendous capital accumulation of wealthy white elites.  The study however does point out that "economic  stagnation  and  decline  was  experienced  by  both  low wealth  whites  and  low wealth  African  Americans." Still, one if four African Americans had no assets at all. 

On the other hand African Americans at the higher end of the income bracket lost ground during this same period leading the study to conclude that "African  Americans  who  have  worked  hard  at  well  paying  jobs  to  achieve  the  American  Dream  are  still  not  able  to  achieve  the  wealth  of  their  peers  in  the  workforce, which translates into very different life chances." 

The new consumer protection agency contained in the recently passed financial reform legislation is seen as an important potential safeguard. It does not however target wealth building measures.

Thomas Shapiro one of the study thinks more is necessary, including special targeting measures, say the Times:

"Shapiro said while he is in favor of the 'general ideas that frame' the provisions for such an agency in the proposed financial reform bill, he hopes the agency would take on more of an advocacy role and have more autonomy than contained in the current proposal. Wealth building policies, he recommends, should carry provisions to 'target...families of color.'"

The Brandeis study only indirectly refers to the double digit unemployment among African Americans that has been a consistent presence throughout the 23 years it tracked economic data. It does not address the racial wage differential.

The Great Recession which has seen severe worsening of unemployment, foreclosure and wealth loss is sure to make these matters worse. The subprime crisis has precipitated the biggest wealth loss in Black and Latino history in the United States.

Photo: CC/http://www.flickr.com/photos/carbonnyc/3355476155/

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  • Here is a reading selection from Robert Nozick regarding patterns of wealth distribution that you should find interesting.

    "Nozick illustrates and defends the entitlement theory in a famous thought-experiment involving the basketball player Wilt Chamberlain. Imagine a society in which the distribution of wealth fits a particular structure or pattern favored by a non-entitlement conception of justice – suppose, to keep things simple, that it is an equal distribution, and call it D1. Nozick’s opponent must of course grant that this distribution is just, since Nozick has allowed the opponent himself to determine it. Now suppose that among the members of this society is Wilt Chamberlain, and that he has as a condition of his contract with his team that he will play only if each person coming to see the game puts twenty-five cents into a special box at the gate of the sports arena, the contents of which will go to him. Suppose further that over the course of the season, one million fans decide to pay the twenty-five cents to watch him play. The result will be a new distribution, D2, in which Chamberlain now has $250,000, much more than anyone else – a distribution which thereby breaks the original pattern established in D1. Now, is D2 just? Is Chamberlain entitled to his money? The answer to these questions, Nozick says, is clearly “Yes.” For everyone in D1 was, by hypothesis, entitled to what he had; there is no injustice in the starting point that led up to D2. Moreover, everyone who gave up twenty-five cents in the transition from D1 to D2 did so voluntarily, and thus has no grounds for complaint; and those who did not want to pay to see Chamberlain play still have their twenty-five cents, so they have no grounds for complaint either. But then no one has any grounds for a complaint of injustice; and thus there is no injustice."

    Posted by Brett Ruiz, 06/01/2010 10:11am (4 years ago)

  • I am appalled by your generalization that "Capitalism is bad for working-class people." Of course most of the people who are now 'upper class' were once 'working class' and saved their money, withheld consumption and learned skills. There is in America no such thing as class as has been shown census data that shows people tend to move up and down in the income quintiles throughout their life as they gain skills, promotions and educations. It is statistically more likely for a person to move from the bottom quintile to the top, than to stay put over a given 10 year period.

    This Institute on Assets and Social Policy study of course, does not show any causality between a market that does not have prices and production set by government fiat (free market) and a gap in wealth between blacks and whites. What difference would it make if the government established prices and production and how people spent their money? We could live a totally authoritarian, centrally planned economy and if I spent all my money on clothing or bicycles while you hoarded it away, your level of 'wealth' would be higher than mine, despite the fact that the government ran the economy.

    As the study notes "Wealth, what you own minus what you owe, allows people to start a business, buy a home, send children to college, and ensure an economically secure retirement." which is precisely the argument that free marketers such as myself make when defending low taxation and regulation as a matter of defense. So the study has in fact, contradicted your claims that capitalism is bad for people, it actually argues that it is good when people have more of their own money.

    If their statistics are accurate then there is certainly something wrong with our economic system. The problem for your hypothesis is that we haven't had anything close to a free market in the period (1984-2007) that the study covers. So, there must be another explanation for the disparity.

    I'd like to see a thoughtful response from the author.

    Posted by Brett Ruiz, 05/26/2010 10:39pm (5 years ago)

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