Black American Culture and the Racial Wealth Gap
In the public debate on racial inequality, the wealth gap is among the sharpest arrows in the progressive quiver.
There is arguably no racial disparity more striking than the wealth gap. While the median white household earns just 65 percent more income than its black counterpart, its net worth is fully ten times as high. And, unlike income, which individuals earn in their own lifetimes, wealth accrues over generations, and whites are more than three times as likely as blacks to inherit money from their families. In the public debate on racial inequality, the wealth gap is among the sharpest arrows in the progressive quiver. When conservative commentators argue that America is a meritocracy, or that blacks lag due to cultural factors, progressives can retaliate with a single statistic that seems to prove the reality of white privilege beyond the possibility of doubt.
But statistics don’t interpret themselves, and the wealth gap is no exception. A recent wave of scholarship—including Mehrsa Baradaran’s The Color of Money, Richard Rothstein’s The Color of Law, and Ta-Nehisi Coates’s “The Case for Reparations”—has converged on the interpretation that the wealth gap is caused by two factors: slavery and racist New Deal policies.
In his Atlantic essay, Coates argues that slavery is central to explaining American affluence. “Nearly one-fourth of all white Southerners owned slaves,” he writes, “and upon their backs the economic basis of America—and much of the Atlantic world—was erected.” The wealth gap, therefore, “puts a number on something we feel but cannot say—that American prosperity was ill-gotten.”
But slavery is hardly the root cause of America’s prosperity. If it were, then we would expect American states that practiced slavery to be richer than those that did not. Yet we see precisely the opposite. The South, where slavery thrived, was “the poorest and most backward region of the country,” according to the economist Thomas Sowell.1 This remains true today. A recent analysis of census data found that Northeastern states, which forbade slavery, “are among the wealthiest,” whereas “states in the Southeast are among the poorest.” Nor is the disconnect between slavery and wealth unique to America. Similar disparities have emerged in Brazil, where the formerly abolitionist southern region has been, and continues to be, wealthier than the formerly slave-owning northern region.2
Coates’s mistaken view about the origin of American prosperity is part of a larger fallacy about national wealth in general: the assumption that if a nation is wealthy, it must have stolen that wealth from somebody else. To the contrary, a nation’s wealth has more to do with the economic system it adopts and the set of skills its citizens possess. The example of Singapore is instructive: although it was raided by Portugal in the seventeenth century and colonized by Britain in the nineteenth, today Singapore is wealthier than both Portugal and Britain, in terms of median wealth per adult. By the same measure, not a single one of the nations that made Atlanta Black Star’s list of “Top 6 Countries That Grew Filthy Rich From Enslaving Black People” would make the list of top six wealthiest countries today. Indeed, they would rank 9th, 11th, 12th, 21st, 24th, and 30th. The wealth of modern nations was not plundered; it was, and continues to be, created.3
The second factor offered as an explanation for the wealth gap is the exclusion of blacks from a set of New Deal policies designed to promote homeownership, income growth, and wealth accrual. After World War II, whites received the vast majority of government-backed mortgage loans.4 By the time the civil rights gains of the 1960s made these loans available to blacks, it was too late—the crucial economic boom of the previous two decades, during which housing values rapidly appreciated, had already passed, and blacks, reeling from the effects of redlining and income suppression, couldn’t enter the housing market at its new prices.5 Wealth—in the form of property and inheritances transferred from parent to child—became a birthright for whites. Meanwhile, deprived of such wealth transfers, poverty became a permanent trap for blacks.6
But this story, though based in truth, has been massaged to give the false impression that benevolence from the state is a prerequisite for wealth accrual. The account even contains some factual errors. Rothstein, for instance, falsely claims that “African American incomes didn’t take off until the 1960s,”7 and that “black workers did not share in the income gains that [white] blue collar workers realized” in the mid-twentieth century.8 Although it is true that the median income of white men more than tripled between 1939 and 1960 (rising from 1,112 dollars to 5,137 dollars), the median income of black men more than quintupled (rising from 460 dollars to 3,075 dollars).9 Black women, too, saw their incomes grow at a faster rate than white women over the same timespan.10 Baradaran makes the same mistake in her description of life for blacks in the 1940s and 50s: “poverty led to institutional breakdown, which led to more poverty.”11 But between 1940 and 1960 the black poverty rate fell from 87 percent to 47 percent, before any significant civil rights gains were made.12
The prevailing progressive narrative also gives short shrift to the history of immigrant groups succeeding in the face of racist hostility and without help from the government. Baradaran, for instance, criticizes the “pervasive myth that immigrant success was based purely on individual work ethic.” To the contrary, she claims, “most immigrants’ bootstraps had been provided to them by the government.”13
But history tells a different story. Starting with the California Alien Land Law of 1913, fourteen states passed laws preventing Japanese-American peasant farmers from owning land and property. These laws existed until 1952, when the Supreme Court ruled them unconstitutional. Add to this the internment of 120,000 Japanese-Americans during World War II, and it’s fair to say that the Japanese were given no bootstraps in America. Nevertheless, by 1970 census data showed Japanese-Americans out-earning Anglo-Americans, Irish-Americans, German-Americans, Italian-Americans, and Polish-Americans.14 For Asian-Americans on the whole, an analysis of wealth data from 1989 to 2013 predicted that their “median wealth soon will surpass the white median level.” If wealth differences were largely explained by America’s history of favoring certain groups over others, then it would be hard to explain why Asian-Americans, who were never favored, are on track to become wealthier than whites.
Nor can historical racism explain wealth disparities between groups of the same race. A 2015 survey of wealth in Boston found that the median black household had only 8 dollars of wealth. Newsweek reported this fact under the heading “Racism in Boston.” But the 8 dollar figure only pertained to black Bostonians of American ancestry; black Bostonians of Caribbean ancestry had 12,000 dollars of wealth, despite having identical rates of college graduation, only slightly higher incomes, and being equally black in the same city.
Similar disparities emerge when people are grouped by religion. A 2003 study found that Jewish households had a 7-to-1 wealth advantage over Conservative Protestant households, despite the fact that Protestants have been favored over Jews for most of American history. Because facts like these discredit the assumption that government favoritism drives wealth accrual, they don’t make it into the progressive narrative. When all the facts are included, the story changes: wealth is not handed from the top down. It is produced by a bottom-up process involving millions of individuals bringing their skills, habits, and knowledge—attributes which vary from group to group—to bear on valuable tasks.
It’s not looking good for the progressive narrative about the racial wealth gap. Still, there is a kernel of truth to it. Researchers at Brandeis followed a nationally representative set of 1,700 families from 1984 to 2009 and measured their wealth gains over that period. They concluded that inherited wealth and length of homeownership accounted for 5 percent and 27 percent, respectively, of the racial disparity in wealth gains. But even if that combined 32 percent could be automatically ascribed to historical racism (which it cannot), that would still leave 68 percent of the gap to be explained by other factors. In short, many commentators have zoomed in on the fraction of the story that can be told without discomfort but have ignored the rest.
Conspicuous by its absence in the progressive account of the racial wealth gap is any active role for blacks themselves. Reading Baradaran, Rothstein, and Coates, one gets the impression that there is nothing blacks could do to improve their lot—outside of asking the government for radical policy solutions. But there are things that blacks can do. Indeed, there are certain elements of black American culture that, if changed, would allow blacks to amass wealth to a degree that no government policy would be likely to match.
No element of culture harms black wealth accrual more directly than spending patterns. Nielsen, one of the world’s leading market research firms, keeps extensive data on American consumer behavior, broken down demographically. A 2017 Nielsen report found that, compared to white women, black women were 14 percent more likely to own a luxury vehicle, 16 percent more likely to purchase costume jewelry, and 9 percent more likely to purchase fine jewelry. A similar Nielsen report from 2013 found that, while only 62 percent of all Americans owned a smartphone, 71 percent of blacks owned one. Moreover, all of these spending differences were unconditional on wealth and income.
Glenn C. Loury
To what extent do poor spending habits explain the persistence of the wealth gap? Economists at the University of Chicago and the University of Pennsylvania asked this question after analyzing 16 years of nationally representative data from the Consumer Expenditure Survey. Consistent with the Nielsen data, they found that blacks with comparable incomes to whites spent 17 percent less on education, and 32 percent more (an extra $2300 per year in 2005 dollars) on ‘visible goods’—defined as cars, jewelry, and clothes. What’s more, “after controlling for visible spending,” they concluded that the “wealth gap between Blacks and Whites, conditional on permanent income, declines by 50 percent.” To be clear, that 50 percent figure doesn’t pertain to the total wealth gap, but to the proportion of the gap that remains after income is taken into account—which was 40 percent. The upshot: the fact that blacks spent more on cars, jewelry, and clothes explained fully 20 percent of the total racial wealth gap.
To make matters worse, spending patterns are just one part of a larger set of financial skills on which blacks lag behind. Researchers at the Federal Reserve Bank of St. Louis followed over 40,000 families from 1989 to 2013, tracking their wealth accumulation and financial decisions. They developed a financial health scale, ranging from 0 to 5, that measured the degree to which families made “routine financial health choices that contribute to wealth accumulation”—e.g., saving any amount of money, paying credit card bills on time, having a low debt-to-income ratio, etc. At 3.12, Asian families scored the highest, followed by whites at 3.11, Hispanics at 2.71, and blacks at 2.63.
Next, they asked if education accounted for the differences in financial habits by limiting the comparison to middle-aged families with advanced degrees. Surprisingly, they found that the racial gap in financial health-scores didn’t shrink; it widened. Highly-educated Asian families scored 3.49, comparable whites scored 3.38, comparable Hispanics scored 2.94, and comparable blacks remained far behind at 2.66. Thus, the study authors concluded, neither “periodic shortages of time or money” nor “lower educational attainment” were the driving forces behind the differences in financial decision-making.
Many find it hard to confront such data. People worry that discussing behaviors that blacks disproportionately engage in represents a backslide into white supremacy and racist stereotyping. Ibram X. Kendi expresses this concern in his New York Times bestseller Stamped from the Beginning: “When you truly believe that racial groups are equal, then you also believe that racial disparities must be the result of racial discrimination.”15
But this makes no sense. Is it racist to observe that whites are more likely to drive drunk than blacks are? Is it racist to assert that black immigrants in the UK outscore comparable white Britons on standardized tests? Is it racist to observe that black American culture has produced a higher number of musical icons than Asian-American culture has? And if it’s not racist to mention these facts, then why is it racist to mention the same kinds of facts when they run in the opposite direction? Moreover, cultural differences can even cause disparities between groups that belong to the same race, as with the aforementioned wealth disparities between black Americans and black Caribbeans living in Boston, or the nearly 4-to-1 income ratio between Taiwanese-Americans and Hmong-Americans. Discussing the different patterns of behavior that underlie such intra-racial disparities cannot be racist, by definition. Race and culture, though often correlated, are entirely different concepts.
Just like no person is born knowing how to brew beer or play basketball, no person is born knowing how to build wealth. These skills must be taught. And just like some cultures teach beer-brewing or basketball-playing better than others, some cultures teach wealth-building better. Children from one culture may routinely hear phrases like “asset diversification,” “mutual fund,” and “inflation rate” on the lips of their parents, whereas children from another culture may not hear such phrases until adulthood, if they ever hear them at all. More importantly, those who believe they are helping black Americans—or any demographic group—succeed by encouraging them to blame society are mistaken. Talking honestly about harmful behavioral patterns is the only way to reliably correct them. This ethical blind-spot is thrown into sharp relief by imagining instead that it was a loved one who was making disastrous financial decisions. Would you withhold criticism from them for fear that you’d be ‘blaming the victim’? Would you feed this person story after story meant to confirm their belief that society had caused all their problems? Or would you view it as your duty—a duty born out of your love for that person—to point out their self-defeating behaviors and encourage them to make wiser decisions? To alter a quote from James Baldwin: I love black American culture, and exactly for this reason I insist on the right to criticize it perpetually.
But let’s assume for a moment that I’m wrong, and that all of the racial wealth gap is directly attributable to slavery and discrimination. What then? If the government made the wealth gap, then shouldn’t the government unmake it? This line of thinking—wherein the entity that created a problem must fix it—dominates scholarship on the wealth gap. “It was our government that segregated American neighborhoods,” writes Rothstein, “…and it is our government that now must craft remedies.”16 Likewise, Coates maintains that, “as surely as the creation of the wealth gap required the cooperation of every aspect of the society, bridging it will require the same.”
But the entity responsible for a harm cannot always redress it. This truth is illustrated by ‘The Parable of the Pedestrian,’ from legal scholar Amy Wax: A reckless driver runs a stop light and hits a pedestrian, injuring her spine. Doctors inform the pedestrian that if she ever wants to walk again she’ll have to spend many painstaking years in physical therapy. Clearly, she bears no responsibility for her injury; she was victimized by the reckless driver. Yet the driver cannot make her whole. He might pay for her medical bills, for instance, but he cannot make her attend her tedious physical therapy sessions; only she can do that. Still, she might resist. She might write historical accounts detailing precisely how and why the driver injured her. When her physical therapists demand more of her, she might accuse them of blaming the victim. She might wallow in the unfairness of it all. But this will change nothing. The nature of her injury precludes the possibility of anyone besides her healing it.17
The dynamic underlying the Parable of the Pedestrian scales up to entire communities. It is no longer primarily racism that holds blacks back, but a set of cultural elements—some acquired from white southerners,18 some a consequence of historical racism,19 others a consequence of the political upheavals of the 1960s,20 and some which are mysterious in origin—that are ill-suited for success in a modern information economy. Thus, unfair as it may seem, blacks can now do more for themselves than either whites or the government can do for them.
But many commentators are loath to acknowledge this, preferring instead to believe that whatever was done to blacks can be undone by reversing the process. Rothstein, for instance, suggests using federal policy to “desegregate” every suburb in America. If the greater New York metropolitan area is 15 percent black, he reasons, then we should employ a “plus-or-minus-10-percent rule” such that “any suburb whose African American population was less than 5 percent should be considered segregated and required to take steps to integrate.”21 If segregation was a form of racist social engineering, then what is required, in his view, is an equal and opposite form of anti-racist social engineering. As with social engineers of other eras, the specter of unintended consequences and infringements on individual liberty are mere afterthoughts, if they are considered at all.
During the half century since the end of the civil rights movement, the academic Left has been asking the question—who is to blame for the state of black America?—on the assumption that, once we identify the guilty party, we can petition it for a solution. Baradaran typifies this mindset. In her view, the “essential first step to dealing with the wealth gap is to acknowledge that it was created through racist public policy.”22 But what do such “acknowledgements” achieve, other than to imbue those doing the acknowledging with a sense of virtue? Acknowledging historical racism is no more of an “essential first step” to closing the wealth gap than acknowledging the driver’s culpability is an essential first step to healing the injured pedestrian.
The salient question should never have been who to blame for blacks’ predicament, but who is able to fix it. If the problem were simply a lack of cash, then the government would be the ideal candidate. But if we learned anything from the explosion of violent crime and single motherhood following welfare expansion in the late 1960s, it was that cash transfers cannot solve a problem that the absence of cash didn’t cause. Herein lies one of the many issues with reparations: it would not address the root causes of black underachievement. Fans of the concept should ask themselves: what will happen the day after reparations are paid, when black students still spend less time on homework than their white peers, blacks are still making poor financial decisions, and two out of every three black kids are still living in single-parent homes? On that day, I’d hope to see progressive scholars acknowledge that they had been asking the wrong question for 50 years. But I would not be shocked to hear them insist that, if only the reparations checks had been a bit larger, black America’s problems would have been solved.
Those who agree that top-down cultural reform is naïve might still object that bottom-up reform is equally quixotic. How, exactly, does one go about changing something as complex and distributed as culture? On this point, the history of formerly lagging ethnic groups is instructive. Whether measured by rates of alcoholism, high school graduation, or income, Irish-Americans used to lag far behind other American ethnic groups.23 As one point of reference, the incarceration rate for Irish-Americans was five times higher than for German-Americans in 1904. The response? While some Irish leaders blamed society, others, notably those in the Catholic Church, launched an inward-looking campaign to change behavioral patterns within the Irish community.24 Similar efforts were made by acculturated German-American Jews, whose stern programs of assimilation for their less-cultured Eastern European co-religionists included giving them “pointed lessons on the use of soap and water,” according to Sowell.25
That’s not to say that the details of these particular self-help campaigns are either replicable or wise. It’s only to say that historical examples of successful self-help campaigns exist. By contrast, I do not know of a single instance in which an underachieving ethnic minority rose to economic prominence by asking the government for cash transfers, preferential policies in education and employment, or apologies for past injustices. Given how skewed the historical scorecard is, it’s strange that the burden of argument is so often placed on advocates of self-help to prove that our strategy is the realistic one. Common sense would place the burden of argument on the advocates of programs which have never worked anywhere to prove that, for whatever reason, this time is different.
On the racial wealth gap and similar issues, we seem to have reached a political stalemate. The Left, which has the power to start an intelligent conversation about culture, refuses to admit that culture accounts for many of the racial gaps typically ascribed to systemic racism. The Right, which acknowledges the role of culture, is too far from the media channels through which blacks tend to communicate, to have any chance of starting a robust conversation about culture in the black community. On one side we have ignorance, and on the other, impotence. And stuck in the middle we have the next generation of black Americans, who will grow up far more likely than their non-black peers to hold values inimical to wealth-building because the previous generation could not figure out how to speak honestly about black American culture.
References:
1 Thomas Sowell, Wealth, Poverty, and Politics, 235.
2 Ibid., 235, 414.
3 See the “Lump Fallacy” in Steven Pinker, Enlightenment Now, 80, 99.
4 Mehrsa Baradaran, The Color of Money, 6, 108, 126-127.
5 Richard Rothstein, The Color of Law, 161, 179-180, 182-183.
6 Baradaran, Money, 109; Rothstein, Law, 179.
7 Rothstein, Law, 181.
8 Ibid., 161.
9 Jason Riley, False Black Power?, 79.
10 Ibid., 80.
11 Baradaran, Money, 109.
12 Sowell, Black Rednecks and White Liberals, 50; Riley, False Black Power?, 81.
13 Baradaran, Money, 126-127.
14 Sowell, The Economics and Politics of Race, 187.
15 Ibram X. Kendi, Stamped from the Beginning, 11.
16 Rothstein, Law, 222.
17 Amy Wax, Race, Wrongs, and Remedies, 14-17.
18 See Sowell, “Black Rednecks and White Liberals” in Black Rednecks and White Liberals.
19 See Jill Leovy’s Ghettoside.
20 Charles Murray, Losing Ground, 56-146; Thomas Sowell, Vision of the Anointed, 9-15, 21-30.
21 Rothstein, Law, 205.
22 Baradaran, Money, 281.
23 Sowell, Intellectuals and Race, 10; Sowell, Black Rednecks and White Liberals, 87-88, 227.
24 Ibid., 18-19; Ibid., 252-253.
25 Sowell, “Are Jews Generic?” in Black Rednecks and White Liberals, 90.
