Black Wealth / White Wealth

A New Perspective on Racial Inequality

Melvin Oliver, Thomas Shapiro

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781135024772
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

The award-winning Black Wealth / White Wealth offers a powerful portrait of racial inequality based on an analysis of private wealth. Melvin Oliver and Thomas Shapiro's groundbreaking research analyzes wealth - total assets and debts rather than income alone - to uncover deep and persistent racial inequality in America, and they show how public policies have failed to redress the problem.

First published in 1995, Black Wealth / White Wealth is considered a classic exploration of race and inequality. It provided, for the first time, systematic empirical evidence that explained the racial inequality gap between blacks and whites. The Tenth Anniversary edition contains two entirely new and substantive chapters. These chapters look at the continuing issues of wealth and inequality in America and the new policies that have been launched in the past ten years. Some have been progressive while others only recreate inequality - for example the proposal to eliminate the estate tax.

Compelling and also informative, Black Wealth / White Wealth is not just pioneering research. It is also a powerful counterpoint to arguments against affirmative action and a direct challenge to current social welfare policies that are tilted towards the wealthy.

Race, Wealth, and Equality

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Introduction

Over a hundred years after the end of slavery, more than thirty years after the passage of major civil rights legislation, and following a concerted but prematurely curtailed War on Poverty, we harvest today a mixed legacy of racial progress. We celebrate the advancement of many blacks to middle-class status. In sharp contrast to previous history, school desegregation has enhanced educational access for blacks since the late fifties. Educational attainment, particularly the earning of the baccalaureate, has enabled substantial numbers of people in the black community to take advantage of white-collar occupations in the private sector and government employment. An official end to “de jure” housing segregation has even opened the door to neighborhoods and suburban residences previously off-limits to black residents. Nonetheless, many blacks have fallen by the wayside in their march toward economic equality. A growing number have not been able to take advantage of the opportunities now open to some. They suffer from educational deficiencies that make finding a foothold in an emerging technological economy near to impossible. Unable to move from deteriorated inner-city and older suburban communities, they entrust their children to school systems that are rarely able to provide them with the educational foundation they need to take the first steps up a racially skewed economic ladder. Trapped in communities of despair, they face increasing economic and social isolation from both their middle-class counterparts and white Americans.

The stratified nature of racial inequality highlights the importance of social class background as a factor in the continuing divergence in the economic fortunes of blacks and whites. The argument for class, most eloquently and influentially stated by William Julius Wilson in his 1978 book The Declining Significance of Race, suggests that the racial barriers of the past are less important than present- day social class attributes in determining the economic life chances of black Americans. Education, in particular, is the key attribute in whether blacks will achieve economic success relative to white Americans. Discrimination and racism, while still actively practiced in many spheres, have marginally less effect on black Americans' economic attainment than whether or not blacks have the skills and education necessary to fit in a changing economy.¹ In this view, race assumes importance only as the lingering product of an oppressive past. As Wilson observes, this time in his Truly Disadvantaged, racism and its most harmful injuries occurred in the past, and they are today experienced mainly by those on the bottom of the economic ladder, as “the accumulation of disadvantages … passed from generation to generation.”²

We believe that a focus on wealth reveals a crucial dimension of the seeming paradox of continued racial inequality in American society. Looking at wealth helps solve the riddle of seeming black progress alongside economic deterioration. Black wealth has grown, for example, at the same time that it has fallen further behind that of whites. Wealth reveals an array of insights into black and white inequality that challenge our conception of racial and social justice in America. The continuation of persistent and vast wealth discrepancies among blacks and whites with similar achievements and credentials presents another daunting social policy dilemma. At stake here is a disturbing break in the link between achievement and rewards. If educational attainment is the panacea for racial inequality, then this break carries distressing implications for the future of democracy and social equality in America.

Disparities in wealth between blacks and whites are not the product of haphazard events, inborn traits, isolated incidents, or solely contemporary individual accomplishments. Rather, wealth inequality has been structured over many generations through the same systemic barriers that have hampered blacks throughout their history in American society: slavery, Jim Crow, so-called de jure discrimination, and institutionalized racism. How these factors have affected the ability of blacks to accumulate wealth, however, has often been ignored or incompletely sketched. By briefly recalling three scenarios in American history that produced structured inequalities, we illustrate the significance of these barriers and their role in creating the wealth gap between blacks and whites.

Reconstruction

From Slavery to Freedom without a Material Base

Reconstruction was a bargain between the North and South to this effect: “We've liberated them from the land—and delivered them to the bosses.”

—James Baldwin, “A Talk to Teachers”

“De slaves spected a heap from freedom dey didn't get…. Dey promised us a mule an' forty acres o' lan'.”

—Eric Foner, Reconstruction

The tragedy of Reconstruction is the failure of the black masses to acquire land, since without the economic security provided by land ownership the freedmen were soon deprived of the political and civil rights which they had won.

—Claude Oubre, Forty Acres and a Mule

The close of the Civil War transformed four million former slaves from chattel to freedmen. Emerging from a legacy of two and a half centuries of legalized oppression, the new freedmen entered Southern society with little or no material assets. With the North's military victory over the South freshly on the minds of Republican legislators and white abolitionists, there were rumblings in the air of how the former plantations and the property of Confederate soldiers and sympathizers would be confiscated and divided among the new freedmen to form the basis of their new status in society. The slave's often-cited demand of “forty acres and a mule” fueled great anticipation of a new beginning based on land ownership and a transfer of skills developed under slavery into the new economy of the South. Whereas slave muscle and skills had cleared the wilderness and made the land productive and profitable for plantation owners, the new vision saw the freedmen's hard work and skill generating income and resources for the former slaves themselves. W. E. B. Du Bois, in his Black Reconstruction in America, called this prospect America's chance to be a modern democracy.

Initially it appeared that massive land redistribution from the Confederates to the freedmen would indeed become a reality. Optimism greeted Sherman's March through the South, and especially his Order 15, which confiscated plantations and redistributed them to black soldiers. Such wartime actions were eventually rescinded and some soldiers who had already started to cultivate the land and build new lives were forced to give up their claims. Real access to land for the freedman had to await the passage of the Southern Homestead Act in 1866, which provided a legal basis and mechanism to promote black landownership. In this legislation public land already designated in the 1862 Homestead Act, which applied only to non-Confederate whites but not blacks, was now opened up to settlement by former slaves in the tradition of homesteading that had helped settle the West. The amount of land involved was substantial, a total of forty-six million acres. Applicants in the first two years of the Homestead Act were limited to only 80 acres, but subsequently this amount increased to 160 acres. The Freedmen's Bureau administered the program, and there was every reason to believe that in reasonable time slaves would be transformed from farm laborers to yeomanry farmers.

This social and economic transformation never occurred. The Southern Homestead Act failed to make newly freed blacks into a landowning class or to provide what Gunnar Myrdal in An American Dilemma called “a basis of real democracy in the United States.”³ Indeed, features of the legislation worked against its use as a tool to empower blacks in their quest for land. First, instead of disqualifying former Confederate supporters as the previous act had done, the 1866 legislation allowed all persons who applied for land to swear that they had not taken up arms against the Union or given aid and comfort to the enemies. This opened the door to massive white applications for land. One estimate suggests that over three-quarters (77.1 percent) of the land applicants under the act were white.⁴ In addition, much of the land was poor swampland and it was difficult for black or white applicants to meet the necessary homesteading requirements because they could not make a decent living off the land. What is more important, blacks had to face the extra burden of racial prejudice and discrimination along with the charging of illegal fees, expressly discriminatory court challenges and court decisions, and land speculators. While these barriers faced all poor and illiterate applicants, Michael Lanza has stated in his Agrarianism and Reconstruction Politics that “The freedmen's badge of color and previous servitude complicated matters to almost incomprehensible proportions.”⁵

Gunnar Myrdal's An American Dilemma provides the most cogent explanation of the unfulfilled promise of land to the freedman in an anecdotal passage from a white Southerner. Asked, “Wouldn't it have been better for the white man and the Negro” if the land had been provided? The old man remarked emphatically:

“No, for it would have made the Negro ‘uppity,’ … and “the real reason … why it wouldn't do, is that we are having a hard time now keeping the nigger in his place, and if he were a landowner, he'd think he was a bigger man than old Grant, and there would be no living with him in the Black District. … Who'd work the land if the niggers had farms of their own?”⁶

Nevertheless, the extent of black landowning was remarkable given the economically deprived backgrounds from which the slaves emerged. Blacks had significant landholdings in the 1870s in South Carolina, Virginia, and Arkansas according to Du Bois's Black Reconstruction in America. Michael Lanza has suggested that while the 1866 act did not benefit as many blacks as it should have, it did provide part of the basis for the fact that by 1900 one-quarter of Southern black farmers owned their own farms. One could add that if the Freedmen's Bureau had succeeded, black landowners would have been much more prevalent in the South by 1900, and their wealth much more substantial.

John Rock, abolitionist, pre-Civil War orator, successful Boston dentist and lawyer, and the first African American attorney to plead before the U.S. Supreme Court, expressed great hope in 1858 that property and wealth could be the basis of racial justice:

When the avenues of wealth are opened to us we will become educated and wealthy, and then the roughest-looking colored man that you ever saw … will be pleasanter than the harmonies of Orpheus, and black will be a very pretty color. It will make our jargon, wit—our words, oracles; flattery will then take the place of slander, and you will find no prejudice in the Yankee whatsoever.⁷

The Suburbanization of America

The Making of the Ghetto

Because of racial discrimination, blacks were unable to enter the housing market on the same terms as other groups before them. Thus, the most striking feature of black life was not slum conditions, but the barriers that middle- class blacks encountered trying to escape the ghetto.

—Kenneth T. Jackson, Crabgrass Frontier

A government offering such bounty to builders and lenders could have required compliance with nondiscriminatory policy. … Instead, FHA adopted a racial policy that could well have been culled from the Nuremberg laws. From its inception FHA set itself up as the protector of the all-white neighborhood. It sent its agents into the field to keep Negroes and other minorities from buying houses in white neighborhoods.

—Charles Abrams, Forbidden Neighbors

The suburbanization of America was principally financed and encouraged by actions of the federal government, which supported suburban growth from the 1930s through the 1960s by way of taxation, transportation, and housing policy.⁸ Taxation policy, for example, provided greater tax savings for businesses relocating to the suburbs than to those who stayed and made capital improvements to plants in central city locations. As a consequence, employment opportunities steadily rose in the suburban rings of the nation's major metropolitan areas. In addition, transportation policy encouraged freeway construction and subsidized cheap fuel and mass-produced automobiles. These factors made living on the outer edges of cities both affordable and relatively convenient. However, the most important government policies encouraging and subsidizing suburbanization focused on housing. In particular, the incentives that government programs gave for the acquisition of single-family detached housing spurred both the development and financing of the tract home, which became the hallmark of suburban living. While these governmental policies collectively enabled over thirty-five million families between 1933 and 1978 to participate in homeowner equity accumulation, they also had the adverse effect of constraining black Americans' residential opportunities to central-city ghettos of major U.S. metropolitan communities and denying them access to one of the most successful generators of wealth in American history—the suburban tract home.⁹

This story begins with the government's initial entry into home financing. Faced with mounting foreclosures, President Roosevelt urged passage of a bill that authorized the Home Owners Loan Corporation (HOLC). According to Kenneth Jackson's Crabgrass Frontier, the HOLC “refinanced tens of thousands of mortgages in danger of default or foreclosure.”¹⁰ Of more importance to this story, however, it also introduced standardized appraisals of the fitness of particular properties and communities for both individual and group loans. In creating “a formal and uniform system of appraisal, reduced to writing, structured in defined procedures, and implemented by individuals only after intensive training, government appraisals institutionalized in a rational and bureaucratic framework a racially discriminatory practice that all but eliminated black access to the suburbs and to government mortgage money.” Charged with the task of determining the “useful or productive life of housing” they considered to finance, government agents methodically included in their procedures the evaluation of the racial composition or potential racial composition of the community. Communities that were changing racially or were already black were deemed undesirable and placed in the lowest category. The categories, assigned various colors on a map ranging from green for the most desirable, which included new, all-white housing that was always in demand, to red, which included already racially mixed or all-black, old, and undesirable areas, subsequently were used by Federal Housing Authority (FHA) loan officers who made loans on the basis of these designations.

Established in 1934, the FHA aimed to bolster the economy and increase employment by aiding the ailing construction industry. The FHA ushered in the modern mortgage system that enabled people to buy homes on small down payments and at reasonable interest rates, with lengthy repayment periods and full loan amortization. The FHA's success was remarkable: housing starts jumped from 332,000 in 1936 to 619,000 in 1941. The incentive for home ownership increased to the point where it became, in some cases, cheaper to buy a home than to rent one. As one former resident of New York City who moved to suburban New Jersey pointed out, “We had been paying $50 per month rent, and here we come up and live for $29.00 a month.”¹¹ This included taxes, principal, insurance, and interest.

This growth in access to housing was confined, however, for the most part to suburban areas. The administrative dictates outlined in the original act, while containing no antiurban bias...

Table of contents

• Cover
• Half Title
• Full Title
• Copyright
• Contents
• Preface to the Tenth-Anniversary Edition
• Preface
• Introduction
• 1 Race, Wealth, and Equality
• 2 A Sociology of Wealth and Racial Inequality
• 3 Studying Wealth
• 4 Wealth and Inequality in America
• 5 A Story of Two Nations: Race and Wealth
• 6 The Structuring of Racial Inequality in American Life
• 7 Getting Along: Renewing America's Commitment to Racial Justice
• Eplilogue Changing Context of Black Wealth/White Wealth: 1995 to 2005
• 8 Wealth Inequality Trends
• 9 The Emergence of Asset-Based Policy
• Appendix A
• Appendix B
• Notes
• References
• References to Epilogue, Chapter 8, and Chapter 9
• Index