Wealth and African Americans

Mike Konczal and Bryce Covert have a monthly page in The Nation magazine, in which they generally focus on a topic that has economic implications. In the February 2, 2015 issue of the magazine they draw  on the Black Lives Matter movement and entitle their article "Black Wealth Matters."

The thesis of the article by Konczal and Covert is that the major force  that sustains the racial wealth disparity in America is housing segregation. The New Deal's mortgage program, the Home Owners' Loan Corporation and the Federal Housing Administration, used racial makeup to rate neighborhood property values across the country, giving areas where black people lived few 'A' ratings and coloring them in red. This practice led to rising property values in white neighborhoods, with the opposite impact on black ones. Black people were thus shut out of the legitimate market --"

"Racial segregation peaked around 1970, but even today the average white city resident lives in a 75 percent white neighborhood, while the average black person lives in one that is 35 percent white."

"Housing segregation deprives black families of the opportunity to build wealth through their homes. African Americans were twice as likely to be affected by the foreclosure crisis as white borrowers." Since black families didn't have access to traditional low-cost mortgages, they became easy prey to lenders pushing high-cost subprime mortgages.

In 2007, whites had four times the wealth of blacks; however, with the housing market's recovery, "the median net worth of white households today is thirteen times than that of black ones. Median wealth for black families fell 33.7 percent between 2010 and 2013, while white households saw theirs rise." "Among middle- and upper-class black people, half of all children are raised in impoverished neighborhoods, compared with just 1 percent of their white peers."

"Housing segregation also means the black students are often crowded into troubled public schools. The education system is segregated along racial lines and funded by property taxes, with white students attending schools that are about 73 percent white and black students attending schools that are nearly 50 percent black."

Even when it comes to punishment in school, black students are "three times as likely to get suspended or expelled and become fodder for the school-to-prison pipeline, all but negating any future economic opportunity."

Tiny Capitalists
Republicans have long castigated Democrats for offering African Americans free goodies to secure their support in elections. Republicans have been saying that they have a better approach to lift up those African Americans mired in poverty: they will make entrepreneurs out of them. This is a cynical hope to raise, as most Americans will have to work for someone else. Many start-up small businesses fail; and even the ones that succeed don't often  make a profit in the first one or two years of operation, meaning that the business owner(s) must have sufficient savings or loans to tide them over.

In the August 18/25, 2015 issue of The Nation magazine Mike Konczal and Bryce Covert use a graph designed by the economists Seiz and Zucman to illustrate that the wealth controlled by the top tenth of the 1 percent has more than doubled over the past thirty years in the United States. Konczal and Covert blame both Democrats and Republicans for shifting financial risk from the state to the individual. The Republicans do it by promoting the "ownership society." in which social insurance is privatized and investor protections are removed. Democrats focus on education and on helping the poor build wealth through savings programs. Konczal and Covert say that: "Instead of just giving people more purchasing power, we should be taking basic needs off the market altogether." The two contend that "social wealth programs like Social Security combat inequality more powerfully than any privatized, individualized wealth building 'solution.' "

"Public programs like universal health-care and free education function the same way, providing social wealth directly instead of hoping to boost people's savings enough to allow them to afford either."

"Bringing wealth under democratic accountability -- rather than making everyone a tiny capitalist -- has to be an essential part of any equality agenda. America's biggest declines in  poverty often follow from this approach (expanding Social Security and Medicare, for example)."

ADDENDUMS: (From Konczal and Covert in the August 18/25, 2015 The Nation)
* THE GLASS IS... HALF-FULL" - "Employment growth has picked up in 2014. The average number of jobs created per month has been 231,000, compared with 194,000 last year. Also, broader surveys of consumer confidence are approaching pre-crisis levels."

HALF-EMPTY - "This hasn't translated into real wage gains, with median incomes still 4 percent below pre-crisis levels and showing no signs of catching up. Ironically, the good employment numbers could also hurt working people by prompting the Federal Reserve to step on the brakes sooner and raise interest rates."

*Forty-six companies have court cases pending that challenge the Affordable Care Act's requirement that their health insurance policies cover contraception."

*The hourly rate that homecare workers in Illinois will make by the end of the year would have increased to $13 thanks to a union-brokered agreement. The Supreme Court ruling in Harris v. Quinn holds that such workers are no longer required to pay union dues, a decision likely to bankrupt their unions."