The Color of Wealth

Posted on Apr 3, 2013 | 3 Comments

In one version of history, Americans of all races have never enjoyed more equality. In another, spotlighted by law professor Richard Thompson Ford in Zócalo Public Square, we’re worse off than we were 30 years ago.

Ford discusses a Brandeis University study showing that the wealth gap between white and black families in America nearly tripled between 1985 and 2009. What gives?

Certainly, as Ford notes, the housing crash had a lot to do with it. “The Brandeis study found that disparities in home equity account for almost 30% of the wealth gap,” he writes, with homeowners in non-white neighborhoods generally far deeper underwater than homeowners in mostly-white neighborhoods.

But part of the problem is also one of compounded advantages and disadvantages dating back to slavery. Wealth passes on from parent to child; providing basic financial assistance, such as part of a down payment on a house, gives that child a head start. And whites are more likely to have that sort of wealth than blacks are. “The income gap between blacks and whites with similar levels of education has narrowed,” Ford writes. “But the wealth gap reflects disparities that are generations old.”

When Peter Drucker was writing about wealth disparity in the late 1970s and early ’80s, he considered some of the statistics to be misleading. In Drucker’s view, the “single greatest asset of the typical American middle- and working-class family” was its “future contingent claim on the pension fund of the employing company.” This wasn’t personal wealth or property, but it was “increasingly worth a great deal more than the family home or the family automobile.” Moreover, “If it were included . . . the distribution of wealth in this country would show a remarkable and progressive equality.”

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Image credit: thecitizen-dv

But Drucker would probably feel differently today, with many families finding housing to be more important as a source of wealth than pension claims. As a result, he likely would have been concerned by the meager down payments and highly leveraged loans offered to low-income buyers, many of them African-American or Hispanic. “Leverage is a very dangerous thing,” Drucker warned in Technology, Management, and Society. “It works both ways.”

When Drucker looked at the plight of America’s poor, particularly among African Americans, he considered explanations that touted “racial inferiority” or “the legacy of discrimination and slavery” to be “equally racist and equally despicable.” Far more to blame, Drucker maintained in Managing in a Time of Great Change, were perverse incentives put in place by the welfare state.

Still, that doesn’t mean that he viewed African-American history as irrelevant to present-day problems. As Drucker wrote in 1993’s Post-Capitalist Society, “The legacy of the sin of slavery has been the central American challenge for 150 years and is likely to remain the central American challenge for at least another 150 years.”

What do you think accounts for the dramatic rise in wealth inequality between black and white Americans over the past three decades? 

3 Comments

  1. Maverick 18
    April 6, 2013

    The demographics explain a lot. During the past three decades, the percentage of blacks in America has remained at about 10% while the percentage of Asians and Hispanics has risen and the percentage of whites has declined. The average white is older than the average black, is part of a smaller average family, and began life in above average surroundings.

    Analyze the “wealth inequality” in Chicago or Los Angeles and you will see that it has nothing whatever to do with the sin of slavery.

    Reply
  2. George L. Williams
    April 7, 2013

    Peter and I argued over his assertion that black people in the United States were white people with dark skins. I understood what he meant, and took no offense, but I contended that his understanding of the conditions of people with any amount of African descent in this country, or anyplace else on this planet that is dominated by Western influences, was fundamentally and permanently different from mine.

    I was admitted to Peter’s program based on my Master’s Thesis: American Values in Black and White, (1972) Univ of NM. I have learned a great deal in my continued search for answers that neither Peter or I had at the time of our argument (1992). Those answers are rooted in belief systems that are Manichaeistic; beliefs that infect all things, and every person associated with Western Culture. Those fundamental belief systems cause non-white peoples, and those with African roots especially, to work against their basic economic and human interests. They absorb the white message that non-white peoples are somehow lesser human beings. They believe, as did Phyllis Wheatley in the 1700s that non-whites can be “refined” by their association with whites. They fail to acquire that basic amount of self-respect needed to become competitive, even in the 21st century.

    A close inspection of the response to Barack Obama, by black and white citizens, shows the cleavage cause by those beliefs.

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  3. americancw
    August 28, 2013

    This is the perfect blog for anybody who hopes to understand this topic. You know so much its almost hard to argue with you (not that I really would want to…HaHa). You definitely put a new spin on a subject which has been discussed for many years. Great stuff, just wonderful!

    Reply

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