The History of the Racial Wealth Gap in America
Pandemics and times of economic upheaval, (like we’re experiencing today), exacerbate inequities that were already there.
Data shows that the Black community, specifically Black women, are bearing the brunt of this current recession.
Black women already face one of the largest gender pay gaps (only Native American women and Latina pay are lower), are more likely to be overlooked for raises and promotions, and have a much harder time getting a job in the first place. They are now experiencing the highest increase in unemployment numbers.
These figures are staggering, but looking at employment and income stats don’t paint a complete picture. Wealth is the true measure of financial stability. Why? Wealth (or our assets) gives us the opportunity to weather times of uncertainty and changes in income.
It would take 228 years for Black families to amass as much wealth as white families if our current policies stay in place.
The racial wealth gap in our country dates back to slavery, when white America built its economy (and wealth) with the free labor of kidnapped enslaved people. In 1865 when slavery was abolished, most Black families began with zero assets, while many white families were already building and passing on intergenerational wealth and financial knowledge.
Throughout history - over and over again - the Black community has been stripped of wealth through policies, massacres, and illegal scandals.
Many of our history classes skipped over these important pieces of our country’s past. I know mine did. It’s time we learn the history behind the racial wealth gap in America.
Here are a few examples:
Freedman’s Savings Bank.
After the Civil War, Freedman’s Savings Bank was created by the U.S. government as a place for freed enslaved people to deposit money and receive financial education. Many had fought in the war and received a small amount of compensation for their service. This was the first bank that allowed Black Americans to deposit money. The bank served individuals as well as Black organizations like churches, charities, and businesses. The bank mismanaged its money by making fraudulent investments and eventually went under.
61k+ Black Americans lost $3 million, which would be worth over $67 million today with inflation. Congress issued a plan to pay back some of the money but it never happened. Get the full story from Miss Be Helpful’s Mind Your Money podcast episode.
The Tulsa Massacre of 1921.
In 1921, a very segregated Tulsa had a thriving business district often called Black Wall Street. Kevin Matthews of Building Bread tells the story: “A white mob burned and bombed the nation’s wealthiest Black neighborhood, killing an estimated 300 Black people, leaving 9k people homeless, destroying 1.2k businesses and causing between $50-$100 million in property damage all in 24 hours. The city then passed laws preventing people from building on land that was burned as a result of the massacre. Insurance companies labeled it a “riot” to deny payments to Black people despite the fact that there were at least 6 airplanes used to drop explosives in the attack.”
For decades there was a public effort to cover up the massacre and as a result, the event didn’t make it into history books and was rarely talked about.
FHA and redlining.
Homeownership is one of the most powerful ways to build intergenerational wealth. This article from Ta-Nehisi Coates shows how this opportunity was far from available for the Black community. “From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market.” This was exacerbated by redlining. “The FHA (Federal Housing Agency) had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.”” Neighborhoods with African Americans were automatically rated “D” and were ineligible for mortgages.
Black people could only attempt to purchase a home “on contract” which was a predatory agreement with speculators who required down payments, monthly payments, and often added random inflated expenses. As soon as a payment was missed, the home was lost along with any previous investment. Redlining was just one of the many Jim Crow laws.
I have a lot of work to do, and I’m ashamed that it has taken me this long to dive into resources like these to educate myself. There is so much more to this story of the racial wealth gap in America. Here are some books from true experts and historians that delve much deeper into the subject.
What needs to be done?
Dedrick Assante-Muhammad, director of the Racial Wealth Divide Initiative at the Corporation for Enterprise Development, says we need to start with tax policy. Specifically in the areas of retirement, child savings accounts, and homeownership.
Darrick Hamilton, the executive director of the Kirwan Institute for the Study of Race and Ethnicity, The Ohio State University, recommends a “comprehensive reparation program that acknowledges these grievances and offers compensatory restitution, including ownership of land and other means of production.”