[The following is an excerpt from the Roosevelt Institute | Don’t Fixate on the Racial Wealth Gap: Focus on Undoing Its Root Causes]
If we are committed to tackling racial wealth inequities, we must focus squarely and unapologetically on their root causes. Whether you call it the racial wealth gap or the racial wealth divide, it’s time to go beyond the supreme goal of closing it altogether if we want to actually start making progress toward a more economically equitable society. It may seem counterintuitive, but we can’t tackle racial wealth inequality by predominantly focusing on closing the gap.
There are several key reasons this framework is not useful today.
First, describing the problem as a racial wealth gap doesn’t help us clearly articulate a vision that is based on the values we hold most dear. We could simply narrow the Black-white racial wealth gap if white families lost their wealth and became poorer without providing any gains to Black families. This is not what we want for either community or our society more broadly. What we really want is liberation and dignity for all people; however, fixating on closing racial wealth gaps does not guarantee that we can deliver that.
Second, focusing on closing the racial wealth gap keeps us locked into the status quo—and often reflects a neoliberal discourse—by upholding personal responsibility narratives and strategies of entrepreneurial liberation and other fallacies. Solutions born from the racial wealth gap framework have traditionally included individual-based approaches.
Utilizing these approaches—such as helping families open a bank account, encouraging savings, seeding young children with $50, or opening businesses with little capital—without changing structural barriers gives us a false notion that class-based solutions will solve racial inequities and deep-seated racism. In other words, while there is a growing recognition that slavery, Jim Crow, redlining, segregation, and discrimination have deeply impacted Black families, solutions written to close the racial wealth gap are still very much predicated by communities of color and specifically Black Americans making better financial decisions and taking personal responsibility. If we think that well-off white individuals and households acquired their wealth only through individual ability and effort—ignoring the role of social and economic policies in driving wealth accumulation for white families—then we will continue to urge Black people to work harder and “play by the rules.” This neoliberal language of individualism and personal responsibility operates to intentionally ignore structural factors and hold everyone accountable to the rules of a colorblind, seemingly fair playing field.
Research from the Groundwork Collaborative shows just how pervasive these narratives are: When asked to identify a single factor that has most contributed to their economic situation, Black people most commonly pointed to “personal drive and persistence” (27 percent) and the way that they were raised by their family (26 percent).
The dominant gap-focused framework distracts us from reckoning with the systemic economic decisions that are actually driving racial wealth inequality and addressing their root causes. Far too often, we promote policies that address the symptoms of racial wealth inequality and not its root causes. Mehrsa Baradaran, a law professor specializing in banking law at the University of Georgia, notes that Black people have often been urged to engage in capitalism with no capital and suggests that over the last 50 years, nearly every legislative response to separate and unequal credit markets has been centered on symptoms and not the root cause of racial credit inequality. She asserts that by focusing on small community banking, minority-owned banks, and mission-oriented institutions, which are viewed as “community-empowerment” approaches, we looked past the larger structural forces and shifted the responsibility of a solution to marginalized communities themselves. The sheer magnitude and enduring legacy of discrimination, segregation, and intentional theft require a suite of policies and strategies that are far-reaching and structural. Anything less will prevent us from enacting meaningful change to the rules and structures that uphold wealth inequality and cement Black Americans in a disadvantaged place.
Getting to the Root of the Racial Wealth Gap and Why Power Matters: Housing
The 2008 foreclosure crisis provides a chilling illustration of how outsized corporate power and distorted public power created the greatest confiscation of economic assets from Black people in modern American history. The deregulation of the financial sector allowed politicians to dismantle the protections created after the stock market crash of 1929 that launched the Great Depression, encouraging financial institutions to take unproven risks. Housing brokers invented and reinvented loan terms at their whim while politicians looked on from the sidelines. Bankers deliberately issued mortgages to families who could not afford them with the intention of taking their homes, so they could turn a handsome additional profit from reselling them. The toxic mix of irresponsible financial deregulation, bankers’ exploitative practices and reckless gambling and borrowing, and too little transparency resulted in an estimated $7 trillion in home equity stripped from American families; Black people had nearly half (47.6 percent) of their wealth removed from their grasp. This was a white-collar heist of epic proportions.
And the same corporations that were responsible for the foreclosure crisis in 2008 continue to profit off of and extract wealth from Black Americans today. Investors have erected a shadow housing market in which traditional mortgage foreclosure protections don’t apply through new predatory arrangements like land installment contract sales. This built-to-fail arrangement largely targets Black people and other communities of color who do not qualify for conventional loans, and it uses methods to find ways to cancel the contract so as to churn over as many would-be homeowners as possible. This type of contract was historically used to sell homes to friends and family, but the use of land installment contracts attracted predatory investors because they can reap massive profits by quickly evicting defaulting borrowers.
There is little wonder as to why homeownership rates among Black Americans have declined to levels not experienced since racial discrimination was legal in the 1960s. The Great Recession, for instance, slowed early Black Gen Xers’ ability to purchase homes from 2000 to 2010 (when they were in their 30s and early 40s) and resulted in more of this generation having their homes taken than becoming homeowners after 2010. Homeownership is often mischaracterized as a prime driver of racial wealth inequality and has been an ongoing focus of efforts to close the racial wealth gap. Although most Black people with some wealth are more likely than white people to hold a greater share of wealth in their homes, the evidence simply does not support the claim that racial homeownership differences explain racial wealth inequality.
Moreover, an emphasis on increasing Black homeownership as a means to close a racial wealth gap derails us from addressing the root causes of discrimination, exploitation, and predation in our nation’s housing markets. It also obscures who has the power in our economy by promoting a neoliberal frame of inclusion and colorblindness. Historically, homeownership programs allowed the real estate industry outsized influence and control over residences that intended to serve a high share of Black people. In turn, Black Americans are at the whims of an industry whose wealth has been largely generated through racial discrimination and segregation as a business model. Moving beyond the goal of closing a racial wealth gap means addressing the compounding effects of structural racism, residential segregation, and extractive corporate practices that ensure that the gains of the economy flow to powerful corporations and white elites. Residential segregation is a mechanism that maintains white supremacy and has been upheld by private interests through the public sector. Although governments at all levels have been complicit in practices that promote segregation and discrimination, they must lead the way in dismantling racial oppression.
To improve the lives of Black people and all Americans, a greater public provision that attends to both market dynamics and structural racism is critical. We must use the power of government to weaken the stronghold that private equity firms and the real estate industry have over Black people. A proposal from Mehrsa Baradaran, for example, would create a federally funded program that places investment dollars and equity directly in the hands of community members. It calls for purchasing abandoned properties and granting them to families who are struggling to get by or to those who experienced direct harm from redlining and disinvestment.