Mind the Gap
An analysis of the origin and perpetuation of the widening racial wealth gap between Black and White Americans that without reparations could take 10 generations of Black dentists to close.
The racial wealth gap between Black and White Americans is not only massive but also relentless. According to the Federal Reserve, White Americans hold 8 times the wealth of Black Americans, as the median household wealth for White families is $188,200 compared to only $24,100 for the typical Black household and it continues to widen as racial inequities prevail.
This data is overwhelming at face value and devastating for those suffering from the hardships created by wealth and income inequality including concentrated poverty coupled with inadequate housing, limited access to healthcare, and inequitable educational opportunities. However, given the segregated culture of the United States where people commonly live amongst those of the same income bracket, many Americans are not only unaware of the size of the racial wealth gap but also how it came to be and why it persists. Understanding the origin of the wealth gap is necessary to acknowledge the systems that not only keep it in place but also allow it to exacerbate. At the same time, it also requires one to challenge the idea of “The American Dream” that success, particularly, financial success and wealth accumulation, is simply a result of sustained hard work, grit, and good saving practices.
What is wealth exactly and is it just a function of meritocray?
Before drilling deeper into America’s history of wealth inequality, it is important to define wealth as the sum of your assets minus liabilities and distinguish it from merely income. While income and wages are important to maintain the properties of our daily lifestyles such as food and shelter, wealth is a much more significant piece of the economic pie, most importantly in that its accumulation can be transferred to future generations. Furthermore, because inheritances are so lightly taxed compared to income and wages, inequalities in inheritances play a significant role in perpetuating a Black-white wealth gap that spans generations.
This discussion begs to ponder why wealth is so important to livelihood if you can manage to achieve a good salary. Well, in the increasingly expensive capitalist American society where basic necessities must be purchased, wealth is a necessary tool for access to healthcare, home ownership, educational opportunities, and professional achievement. Thus, even in the case of first or second generation high income earners, without established wealth, many families continue to struggle financially.
Also raised into the question is the measure of meritocracy when it comes to financial success. We are strongly influenced by the popular narrative of meritocracy or the self-soothing idea that everyone can be successful if they just work hard. But what if not everyone was given the same opportunity to establish capital in order to build wealth? In the case of Black Americans, 250 years or about 5 generations of their enslaved labor as human capital built the wealth of the most powerful nation in the world but that labor was unpaid. Also, alongside the brutalities of chattel slavery, this long standing absence of income or capital translated to zero means for wealth accumulation from the purchase of land and other assets, and eliminated the subsequent opportunity for generational wealth transfer. Moreover, since formerly enslaved Black Americans and their descendents have never been paid reparations for slavery and also suffered not only the violent attacks but also the many acts of destruction of their wealth during the Jim Crow era, like the Tulsa Race Massacre of 1921, the wealth gap continues to grow while all of its devastating side effects simultaneously continue to fester.
40 Acres and a Mule
After the emancipation of slavery, beginning with President Andrew Johnson rescinding Union General William T. Sherman’s short-lived 40 Acres and a Mule policy to provide land ownership to formerly enslaved Black Americans, the United States failed almost deliberately at enabling Black Americans to create wealth. And even after President Johnson was impeached, the US Congress failed to vote for reparations for Black Americans. In the century that followed slavery, loose government policies and intentional discrimination towards Black Americans restricted them from educational opportunities and home ownership by minimizing their access to the very government sanctioned programs that graciously established White wealth and accelerated its growth.
The Homestead Act
The greatest transfer of land in United States history was under the 1862 Homestead Act. In fact, according to the archives, 46 million people, about a quarter of the US adult population can link their wealth back to the Homestead Act. This federal program for land settlement essentially offered freed Blacks and loyal White Southerners the opportunity to become homesteaders on unoccupied Southern land for a minimal filing fee close to nothing. However, most Black participants were encumbered by the year-long sharecropping labor contracts they had been cajoled or forced into signing shortly after slavery was outlawed. Leaving a job before the end date of a contract frequently resulted in virtual re-enslavement on a chain gang and thus these contracts restricted Blacks from receiving the special homesteading benefits. Further, although the process was rife with fraud, as many White homesteaders sold their plots to corporations, the original claimants pocketed the income from land sales, establishing a basis of wealth and capital. By the end of the Act, more than 270 million acres of western land had been transferred to individuals, almost all of whom were White. 1.6 million White families, both native-born and immigrant, succeeded in becoming landowners during the next several decades. Conversely, only 4,000 to 5,500 African-American claimants ever received final land patents from the Homestead Act.
Social Security Act
Black Americans were also excluded more overtly in their eligibility to receive relief from the Great Depression. Signed into law by President Roosevelt, the Social Security Act of 1935 created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement. It included unemployment insurance, old-age assistance and benefits, aid to dependent children and grants to the states to provide various forms of medical care. However, the 1935 act limited its provisions to workers in commerce and industry and while the new social insurance program applied to about half the jobs in the economy, among those left out were farm and domestic workers, a large percentage of whom were African-Americans. Scholars have concluded that policymakers in 1935 deliberately excluded African Americans from the Social Security system because of prevailing racial biases during that period.
Federal Housing Authority and Mortgages
Around the same time, the Federal Housing Administration (FHA), which was established by the National Housing Act of 1934 to regulate interest rates and mortgage terms after the banking crisis of the 1930s practiced racially discriminatory lending patterns and limited Black Americans access to home ownership and subsequent wealth building. The FHA insured mortgages provided stability to the housing market and increased the availability of funding for home building and purchasing. However, the government body favored loans for new suburban construction over older urban properties, simultaneously contributing to urban decay and the growth of White suburban neighborhoods, while discriminating against Black and other non-White communities. It also endorsed the practice of redlining, which marked African-American neighborhoods as ineligible for FHA mortgages.
The G.I. Bill
Low interest home loans promised by the 1947 G.I. Bill as well as its educational benefits including tuition payments and a stipend for up to four years of college or other training were also denied to Black Americans. For those Black veterans more likely to be limited to the South in their collegiate choices, the G.I. Bill exacerbated rather than narrowed the economic and educational differences between Blacks and Whites among men in the South because of segregation where Blacks were limited to the schools they could attend.
The Black-White wealth gap is not an accident but rather the result of centuries of federal and state policies that have systematically facilitated the deprivation of Black Americans. From the brutal exploitation of Africans during slavery, to systematic oppression in the Jim Crow South, to today’s institutionalized racism, which is apparent in disparate access to and outcomes in education, health care, jobs, housing, and criminal justice, government policy has created or maintained hurdles for African Americans who attempt to build, maintain, and pass on wealth.
Eliminating the racial wealth gap in the United States is a generational challenge as wealth inheritance is a huge contributor to this disparity. White households inherit over 5.3 times as much as Black households. Economists point to professions like dentistry as a career model for not only Black economic mobility but opportunity for generational transfer of profession, business, and wealth. However, without earnest policies that redistribute large stocks of wealth, like reparations to immediately reduce racial wealth inequality, it could take hundreds of years to play out and have any dramatic effect to close the racial wealth gap.
Dr. Brigitte White is a cosmetic dentist in the Washington, DC metro area and adjunct faculty at University of Pennsylvania School of Dental Medicine. Follow her on Instagram, Spotify, and Youtube.
