Why a Social Wealth Fund Must Account for Racial Inequity
By Anne Price and Jhumpa Bhattacharya
There has never been a more critical, more insistent time to reimagine and implement economic policies to address the rise of extreme racial and economic inequality, and change the rules that govern power and the concentration of wealth.
Wealth — what you own minus what you owe — acts as the buffer between temporary setback and economic catastrophe; it allows us to live and retire with dignity and security. Without savings or wealth of some form, economic stability is built on a house of cards that quickly crumbles when income is cut or disrupted through job loss, reduced work hours or wages, or if families suffer from an unexpected health emergency.
The difference in wealth holdings between the ultra-wealthy and everybody else continues to widen. Today, about 160,000 U.S. households own more wealth than the poorest 90 percent combined. And the differences in wealth between whites and people of color is at its highest level in 25 years. In 2016, the typical white household held $171,000 in wealth — 10 times that of the typical Black household, and about 8 times that of Latinx households.
We can and must steer our economy to create a just and fair society that tackles inequality and climate change, and empowers each American to share in the investments that are now hoarded by a select few. The public wealth fund is one key model that has drawn increased study as a way to address these issues.
Often referred to as a Social Wealth Fund, Citizens Wealth Fund or Sovereign Wealth Fund, this concept rests on the principle of shared ownership, and builds from the foundational vision that all Americans have a right to reap benefits from wealth that we all created together.
Recently, there have been a number of leading thinkers in the United States who have proposed a version of a national public wealth fund. American entrepreneur and environmentalist Peter Barnes calls for a focus of co-owned assets on areas that address industrial waste, especially the atmosphere, and the financial infrastructure that has been used for speculative betting. Matt Bruenig’s Social Wealth Fund proposal includes a government-owned portfolio of stocks, bonds, and real estate to be used to distribute funds to every American.
Public wealth funds could possibly address abject poverty among some groups in America by increasing income. But we can and should be striving for more. Any economic policy put forth in this moment must take a racial equity approach by accounting for, examining, and answering key questions around racial wealth exclusion to economic prosperity. Without that, we will fall short in realizing the full potential of any economic policy and may inadvertently contribute to greater inequity.
The interest and discourse around public wealth funds lends us an opportunity to create a policy that helps make up for the sins of our past and create a better, equitable future for all Americans.
What is a Public Wealth Fund?
The concept of a public wealth fund is fairly simple. Currently, assets from oil companies, banks, telecom, and other industries are privatized, robbing ordinary people of income to which they are entitled as common property holders. To ensure a more equitable balance between public and private ownership, the federal government would create a large pool of income-generating assets managed by a public entity that would then use the returns to regularly generate dividends for all Americans, giving every adult in the country one share of ownership.
The idea of a government-owned portfolio of resources whose dividends are paid out to its citizens is not new. Over 70 governments around the world have public wealth funds, including nine states in the U.S, most notably the Alaska Permanent Fund. This state-owned investment fund pays Alaska residents an annual dividend out of investments from taxes on oil companies that operate in the state. Since 1982, the fund has sent a dividend check to every Alaskan resident. In recent years, the dividend has reached $2,072 per person, or $8,288 for a family of four, and has proven to make a marked, positive difference in the lives of Alaskans.
Addressing Racial Wealth Exclusion
Wealth is tied to the well-being of the next generation, as it provides parents with the ability to help pay for their children’s college education or purchase a home, and can also be passed down from generation to generation. In fact, intergenerational transfers of wealth are one of the key reasons why racial wealth inequities have become entrenched.
A public wealth fund is a universal, race-neutral policy that provides all people with extra income that can help them get ahead. In Alaska, for example, the dividend is a critical source of income in rural areas where paying jobs are scarce.
A critical question we must ask ourselves is, as a race-neutral policy, will public wealth funds address racial wealth exclusion, or exacerbate it?
Mike Konczal, a senior fellow at the Roosevelt Institute reminds us that “everyone who is interested in racial inclusion and inclusion of all in the economy should also be interested in tackling the issues of corporate power and financial power, and vice versa.”
Both economic and racial justice are core priorities, but too often we talk about them as if they are separate, and not inextricably linked. Those who are advocates for public wealth funds can reach beyond good intentions and a laudable vision by embracing a racial equity framework. While continued racial and economic injustices may not be the intended outcome of public wealth funds, we cannot ignore the consequences of historical policies that were neutral on their face, but had the same effect as nakedly discriminatory ones.
The 1938 Fair Labor Standards Act, which established the 40-hour work week, the minimum wage, and overtime protections, serves as a prime example. Protections were not extended to everyone and the New Deal purposefully excluded domestic and agricultural workers “as a race-neutral proxy” for leaving out Blacks and Latinx people. And, today, there is still an agricultural and domestic worker exclusion in the National Labor Relations Act, disproportionately shutting out people of color from basic labor protections.
These and other policies of exclusion cannot be discounted as relics of our uneasy past. They form the cornerstones of our ongoing economic policies and are at the core of current racial and economic inequities.
A progressive economic policy must include a racial equity approach that accounts for the rules, institutions, and norms that have ensured that certain groups reap a greater share of all America offers while others have been intentionally left out. We cannot view public wealth funds that do not include a racial equity perspective as a tide that will lift all boats policy. Quite the contrary.
Without a strategic, race-equity approach, public wealth funds will not address and undo the underlying structures of racial exclusion and discrimination that cause people of color to be overrepresented among the jobless and low-wage workers in the first place.
Further, while all people would be provided the same dividend, the outcomes would remain deeply inequitable. For financially strapped families, who are disproportionately communities of color, money from the fund would keep the lights on, put food on the table, finally pay for that much-needed car repair, or pay off a debt. These are important stopgaps, but they are not wealth creation.
In contrast, a dividend would allow higher income families to save and invest in asset-building activities, such as buying a house or contributing to a retirement account, since their basic needs are already met.
This dynamic, fueled by a “race-neutral” dividend, would exacerbate economic and racial inequality by boosting wealth building for higher income families while simply filling holes for families barely scraping by. The economic floor would be raised, but the structural inequities would persist.
The Way Forward
If we believe that our wealth is made possible by the “blood, sweat and tears of past generations,” as aptly stated by Rutger Bregman, and that this wealth belongs to all of us, then we must address how wealth is unevenly distributed. But we cannot build power to change the rules that created wealth concentration and inequality without also shining a light on how wealth was and is generated, including how it was extracted from one group to directly benefit another.
Before we can consider how to best convey that different groups hold vastly unequal amounts of wealth and the reasons for this, we must step back and consider how we are communicating about the mechanism that creates and doles out that wealth.
If we think that well-off whites acquired their wealth only through individual ability and effort, then we will continue to urge low-income people, particularly Black and Brown people, to work harder and “play by the rules.” Whites have historically relied on government help to build wealth across generations through a legacy of legal and physical violence on communities of color. Work on public wealth funds should provide space to explore how implementation of the policy can address this legacy.
One key way to embed a racial equity approach into public wealth funds is by drawing on expertise on the ground. We need to create councils made up of community members, activists, scholars, and decision-makers to determine the design and implementation of a public wealth fund.
These councils would be versed in what wealth is, why it is important, and how it has been created in America. They could also follow grassroots public education approaches to accurately understand how and why different groups are situated the way they are today. Using this knowledge, councils would determine how funds should be allocated in order to achieve racial wealth equity.
The councils would answer key questions around how money would be allocated and where the money for a dividend would come from. They would also determine key design questions, like if fund amounts should be based on wealth position at birth rather than equally distributed.
It is time to champion big ideas that are shaped by what we deeply and collectively value in life. We can move toward a vision of the society we want to live in, and public wealth funds are an important step in that process — if implemented with a racial equity lens.
It is within our means to take the next step in the history of progress, to give each American greater economic security. But we must not only look forward, but deep into our history, and into the lived experiences of so many American communities, to forge the path ahead.