A great post by Ish Gabor on ES, on the topic...
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White Americans’ Hold on Wealth Is Old, Deep, and Nearly UnshakeableWhite families quickly recuperated financial losses after the Civil War, and
then created a Jim Crow credit system to bring more white families into
money.It will end up costing the U.S. economy as much as $1 trillion between now
and 2028 for the nation to maintain its longstanding black-white racial wealth
gap, according to a report released this month from the global consultancy firm
McKinsey & Company. That will be roughly 4 percent of the United States
GDP in 2028—just the conservative view, assuming that the wealth growth
rates of African Americans will outpace white wealth growth at its current clip
of 3 percent to .8 percent annually, said McKinsey. If the gap widens,
however, with white wealth growing at a faster rate than black wealth instead,
it could end up costing the U.S. $1.5 trillion or 6 percent of GDP according to
the firm.
“Despite the progress black families have made in civic and economic life since
the passage of the Civil Rights Act of 1964, they face systemic and cumulative
barriers on the road to wealth building due to discrimination, poverty, and a
shortage of social connections,” reads the report, “as both mechanisms and
results of racial economic inequity.”
Crucial to understanding how to close that gap—such that it can actually be
closed—is grappling with how it was created in the first place. The McKinsey
report identifies four components that perpetuate this gap—family wealth,
family income, family savings, and community context (a community’s
collective public and private assets). Black families have not been able to build
wealth due to “unmet needs and obstacles” across these four dimensions.
That’s the deficit-lens on the problem as it pertains to black families. But it’s
worth looking at how each of those components also played a huge role in
boosting white families’ financial standing to begin with. The wealth, income,
and savings that white families accumulated during slavery supplied the
economic thew that catapulted them into elite affluent status during the
country’s first two centuries of existence. But it was community context and
creative credit machinations that helped white families maintain that status over
the ensuing two centuries, putting into doubt whether a closure of the
black-white racial wealth gap is even possible given these deeply entrenched
advantages.
Community context and connections
A study on the transfer of wealth from Southern slaveholding families to their
children helps explain how these advantages came about. Strikingly, the
inheritance of actual material profits from the slavery-based economy isn’t the
culprit some suppose. The economists Leah Platt Boustan of Princeton
University; Katherine Eriksson of the University of California, Davis; and
Philipp Ager of the University of Southern Denmark found in their study, “The
Intergenerational Effects of a Large Wealth Shock: White Southerners After
the Civil War,” that white resilience to economic catastrophe has been almost
impenetrable.
According to the study, the largest slaveholding families in the South took a
huge hit after the Civil War—a 38 percent drop at the median and a 75 percent
loss among the top wealthiest families between 1860, a peak year for slavery
profits, and 1870. But by 1880, many of the sons of those families had already
recovered that wealth. By 1900, the sons of the richest slaveholders had not
only financially recovered but were wealthier than the sons of families who
were just as wealthy before the Civil War, but from mostly non-slaveholding
assets and activities.
It took just one generation for white slaveholding families to regain their
riches, and this rebound was not due to an inheritance of slavery profits. Much
of that was devoured by the war, emancipation, and regressive crop
productivity in the South after the war. Nor was the recovery owed to an
inheritance of entrepreneurial skills, which the study ruled out because of the
drastic transition of the economy from agricultural-based to industrial-based.
“Even destroying the capital stock or temporarily expropriating the land of
wealthy households would not have been enough to prevent their sons from
experiencing full recovery.”The Southern dollar rally might have had something to do with those
slaveholders’ sons marrying into wealthier families. But most of the wealth
recovered by slaveholders’ children came from occupation-based earnings. The
most likely explanation for the restoration of their wealth, according to the
study, is the “role of social networks in facilitating employment opportunities
and access to credit”—or, in other words, community context. The wealthy
slaveholding families were cozy enough with the wealthy families who weren’t
totally in the slavery business to leverage their relationships into preservation
of their elite status.
“We think the most likely explanation for the rapid recovery of slaveholders’
sons is that slaveholding families were embedded in social networks that
facilitated adjustments to wartime losses,” reads the study. One critical
adjustment facilitated in this respect was credit, which was “surprising in light
of the fact that slave collateral formed the basis for nearly all southern credit
relations and was completely wiped out after emancipation.”
Also wiped out were, in some cases, the land and plantations themselves,
which were the final major appreciable assets that some former slaveholding
families possessed after the war. The study examines General William T.
Sherman’s “March to the Sea” and his “Special Field Order No. 15,” which
directed Union troops to destroy and confiscate Confederate family homes,
businesses, and properties along the Carolina and Georgia coasts. The
households targeted and toppled by Sherman’s troops lost considerable wealth,
on top of losing their slaveholding assets. But by 1880, those same ransacked
families had financially recuperated. By that year, their wealth had even
surpassed that of the wealthy families of neighboring counties that Sherman did
not invade.
“Results suggest that even destroying the capital stock or temporarily
expropriating the land of wealthy households would not have been enough to
prevent their sons from experiencing full recovery in a generation,” reads the
study.
Those coastal families achieved recovery through the same means that other
white former-slaveholding families achieved it throughout the South: via their
connections to those commandeering capital and finance in the post-Civil War
milieu. Slaveholding families’ pre-war material resources and wealth did “not
ultimately affect” their children’s future comeuppance, and neither did these
advantages stop with their sons. By 1940, even the grandsons of former
slaveholders were doing better than similarly situated non-slaveholding
families, by graduating from high school and college— fairly uncommon in the
South at the time—and settling securely into white-collar jobs.
“Jim Crow Credit”
The 1940s were also the period when white families were able to further
enhance their wealth prospects through new credit and finance instruments
created as part of the New Deal. At this point, white families and farm owners
were taking advantage of loans created by what was then called the Federal
Housing Administration and the Farm Security Administration to leverage their
way into wealth. Whereas before the Civil War, mortgages and credit were
collateralized on the backs of enslaved Africans as properties, by 1940 white
families could obtain mortgages and credit collateralized by land, houses, and
farms. And they didn’t have to come from wealthy families or be wealthy
themselves to obtain this financing.
African American farmers and families, meanwhile, were unable to establish the
wealth that former slaveholding families were re-establishing, nor were they
able to access the FHA and FSA loans at the same rates as whites. The
Atlantic’s Vann Newkirk describes in his story “The Great Land Robbery” how
black farmers lost their land and farms during this time period:
While most of the black land loss appears on its face to have been through
legal mechanisms—“the tax sale; the partition sale; and the foreclosure”—it
mainly stemmed from illegal pressures, including discrimination in federal and
state programs, swindles by lawyers and speculators, unlawful denials of
private loans, and even outright acts of violence or intimidation. Discriminatory
loan servicing and loan denial by white-controlled [Farmers Home
Administration] and [Agricultural Stabilization and Conservation Service]
committees forced black farmers into foreclosure, after which their property
could be purchased by wealthy landowners, almost all of whom were white.[...]
[/QUOTE]
www.citylab.com/equity/2019/09/racial-wealth-gap-history-slavery-black-white-family-income/597100/ Six facts about wealth in the United States
On Wednesday night, the first of the 2020 Democratic debates will take place
with ten candidates vying for the national spotlight. Senator Elizabeth Warren,
one of the leading contenders for the nomination, will take the stage. She has
proposed a wealth tax on the richest Americans, sparking intense debate about
wealth inequality in the United States. Her proposal would levy a two percent
tax on household net worth above $50 million and a three percent tax on
household net worth above $1 billion.
As the Democratic candidates debate how to best address economic inequality,
here are six things to know about wealth in the United States…. www.brookings.edu/blog/up-front/2019/06/25/six-facts-about-wealth-in-the-united-states/ [/QB][/QUOTE]
