To Be Defined by History No Longer…
Imagine this… (for the purposes of anonymity, let’s assume two fictitious names to satisfy our scenario) Arthur and Zachery both live in the Woodlands, Texas: a quaint suburb of Houston, well-known by the Houston populous for its tantalizing selection of shopping outlets, its pain-stakingly maintained golf courses, and its majestic residences. Unfortunately, reputation isn’t everything. Arthur and Zachary are both high school baseball players living with their respective parents, and after a competitive, yet relaxing, practice scrimmage, Zachary rides home in Arthur’s BMW 4 series coupe (Zachary’s parents can’t afford another car for him). On Monday, Arthur will attend class at one of the highly selective private schools in the area, while Zachary continues studying at the local public school: his parents simply can’t afford the $30,000 annual enrollment fee for him to attend private school. Saturdays are the relaxing pinnacle of the week: baseball practice followed by scrumptious burritos at the local Chipotle, and yet Zachary finds himself subconsciously worrying about the bill, rather than decompressing with his friend. Although some may attribute any number of circumstantial evidence to justify Arthur’s and Zachary’s current situations, I argue that the mere existence of this inequality deserves an intensive analysis.
In addition, the existence of this wealth disparity localized to one town in the middle of southeastern Texas virtually confirms the presence of this issue in other regions of the globe. Upon inspection, there unequivocally exists income inequality in San Juan, Puerto Rico and Atlanta, Georgia; education inequality in Burkina Faso; and racial wealth inequalities in Washington D.C. and Wisconsin, USA. Though each location may battle a unique flavor of wealth disparity, the overarching issue remains so prevalent in today’s society it brings to light two key questions: firstly, what can be done to prevent the furthering of these unequal gaps? And, are our societies doomed to maintain some trace of economic inequalities despite our best efforts to ameliorate them? I argue that there is hope, both for those who are negatively affected by the crushing weight of wealth inequality and for the innumerable societies who have continued to fail in helping these victims over the last century.
As we approach the ever-daunting idea of reducing global wealth disparities, we must begin by first understanding one of the root causes of the crises: generational wealth. Even though the primary cause of wealth disparities in this paper will be generational wealth in regards to all persons, the analysis inherently shifts to a discussion on the inequalities between white and black populations as generational wealth and racial inequalities are vastly interconnected. The notion of generational wealth describes the passing down of family-owned wealth to subsequent generations. Furthermore, generational wealth can have enormous impacts on the success of the following generation, as an individual who receives a family inheritance has an undeniable advantage as compared to someone who receives nothing.
In some instances, poor public policy has led to a perpetual generational inequality stemming from historic racism. The Homestead Act, originally signed by Ambraham Lincoln in 1868, provided an easy method for Americans to obtain nearly free land during and after the Civil War. Even though the Act concluded in 1934, Thomas Shapiro illustrates the lasting effects of the Act by stating, “25 % of homeowners today…can trace their ownership to the Homestead Act.” While Shapiro focuses on the lasting effects of the Act, its important to note who benefited from this policy in the first place. Historian Keri Leigh Merritt emphasizes that “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.” Thus, this legislation from the 19th century has a disproportionate effect on one race of Americans over another. Not only should we understand that this historic national policy still impacts Americans today, but the Act has succeeded in furthering a generational wealth gap between black and white Americans.
However, the Homestead Act is not the only source of generational wealth. In the book, The Color of Wealth: The Story Behind the U.S. Racial Wealth Divide, the authors emphasize, “an estimated 80 percent of assets come from transfers from prior generations” (Lui, M. et al. 2006). The authors then describe how “white people are much more likely to inherit money from deceased relatives than people of color” (Lui, M. et al. 2006). These statistics provide fundamental evidence for the existence of a racial wealth gap within the United States, as well as, more local regions such as The Woodlands. More than 22.5% of Houstonian residents identify as African American compared to the mere 4.31% of the population of The Woodlands. (World Population Review). Combining Lui’s assertions and the census data from The Woodlands, it can be inferred that a significantly larger percentage of The Woodlands’ population would be expected to have previously inherited wealth from deceased ancestors. While generational wealth is certainly not the sole cause of wealth inequality within the Houston area, it’s important to note that focusing on one root cause of this inequality will allow for a deeper analysis and a more specific solution.
Alexandra Killewald further reviews the impact race has on one’s combined wealth; for instance, Killewald determines a “variety of factors including, income, savings, return on investments, blacks’ limited entrepreneurial activity, and intergenerational transfers, all have a partial effect on the evident wealth gap between whites and blacks.” Killewald explains how intergenerational transfers lead to a “sedimentation of inequality.” This is quite a disheartening concept as Killewald is implying that the uneven distribution of intergenerational transfers between blacks and whites will only succeed in increasing the wealth divide between the two races as time continues. Although I agree with Killewald that intergenerational transfers have a compounding effect on the future of the race, I believe that the solution to mitigating the wealth gap between black and white individuals must come from a collaborative effort between society and the individuals themselves.
In the context of the surrounding Houston area, much of the unaffordability of The Woodlands can be attributed to high-end businesses entering the area because they know the population of The Woodlands has the money to buy their product. Thus, these businesses in The Woodlands area appeal largely to higher income individuals, thereby discouraging lower income residents from shopping and living within the city. Meanwhile, the Houston area suffers much more drastically at the hands of unequal generational wealth, as a significant portion of Houstonians identify as black. However, these two sources of regional inequality are not mutually exclusive as higher end businesses often result in higher barriers to entry for start-up companies. Thus, the entrepreneurial sphere within The Woodlands is limited to start-up companies that already have sufficient capital to compete with the existing businesses. This often excludes black-owned startups from reaching The Woodlands area as these companies often do not have the necessary initial funding to be competitive in an already affluent market.
The solution: encourage and facilitate the creation of non-wealth-inheriting individuals’ businesses. Perhaps one of the most necessary tasks to ensure these businesses have a fighting chance is to reduce the barriers to entry within more affluent areas, like The Woodlands. Municipal powers and policy makers would need to help provide start-up funds for these primarily black-owned businesses in order to boost these companies to the level of their well-established competitors. Furthermore, these new companies would need assistance resisting the predatory effects of large, monopolistic corporations in the area that would threaten to push them out of business. This potential solution requires the collaboration of both parties: the policy-makers of the town and those who are negatively affected by the wealth gaps. However, economic principles can not be discredited and these businesses must be viable in the sense that they provide a product or service that is being demanded by the town. Otherwise, the invisible hand of capitalism will inevitably destroy any hope of these individuals initiating the formation of their own generational wealth.
As seen throughout the last 50 years, the consequence of doing nothing is a sustained division within society, where an entire group of people are forced to live like second-class citizens. No longer are there tangible laws that exhibit discrimination of other races; instead, the discrimination seen today exists in a much more subtle form: economic suppression. Without sufficient financial freedom, any individual’s life becomes a battle for survival. Thus, handicapping an entire race of people forces them to constantly fight for opportunities that are simply handed to others. Reid Cramer states, “this misalignment between public policy and lived experience threatens to undermine the potential of an entire generation, and handicap the next.” While Cramer emphasizes the importance of the millennial generation as a whole, I find significant value in his discussion of the future generation. Suppressing the current generation of people effectively sets back their children. This is precisely what has been occurring over the last century with black Americans and the generational wealth disparity. However, this implies that it only takes one generation to begin a recovery process; implementing empowering techniques in the communities and businesses of non-generational inheritors is the first step to begin decreasing the gap between white and black Americans’ generational wealth.
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