Commentary: Wealth accumulation will not work as long as wealth reduction continues

By Jeremy Greer

Comedy is often the lens through which we confront uncomfortable truths. Chris Rock is one of many comedians who have used his comedy to honestly describe the deep political and economic oppression black people endure. In his routine “Never Scared,” Rock dives headlong into the ever-widening racial wealth gap, proclaiming that “there are no wealthy black or brown people in America. We have some riches, we have no (power) wealth. Shaq is rich; The white man who signs his check is wealthy.”

Unfortunately, he’s right, and his wit is supported by volumes of research documenting that the racial wealth gap has grown exponentially over time. If nothing is done, people of color will be permanently excluded from the middle class. According to a report by the Institute for Policy Studies: “If average black family wealth continues to grow at the same rate as it has over the past three decades, it would take black families 228 years to accumulate the same amount of wealth as white families have today. That is only 17 years shorter than the 245-year duration of slavery in this country.”

In recent years, tackling the racial wealth gap has become increasingly popular. Everyone from political advocates and government officials to nonprofit organizations and corporate responsibility advocates claims to have the answers. Although many act in good faith, most of the solutions offered are rooted in wealth creation initiatives primarily focused on increasing Black home ownership, business ownership, and personal savings.

Throughout his campaign and throughout his tenure to date, President Joe Biden has committed to addressing “the issue of racial equality” and enshrining many of these wealth-building ideas to close the racial wealth gap. Even big corporations, including JPMorganChase, Bank of America and Wells Fargo, have pledged to spend millions of dollars to close the racial wealth gap.

While these wealth-building initiatives are commendable, most of them will fail because they fail to address the root cause of the racial wealth gap: the exploitation of wealth.

The racial wealth gap is a systemic problem, not a product of black people’s personal choices. And no matter how many wealth-building opportunities we create for Black people and other people of color, those efforts will never succeed if we leave the wealth-building processes intact.

Unfortunately, racism is profitable. We live in what my organization calls an “oppressive economy,” in which predominantly white politicians and white-run corporations and academic institutions wield economic and political power over the systems that govern the lives and livelihoods of blacks and browns.

Exclusion, exploitation, and exploitation perpetuate both the economic oppression and the wealth of the white elite. The exclusion of people of color denies them access to the essential financial products and services necessary to navigate our economies, such as bank and credit accounts. Exploitation is the deliberate use of the country’s racial caste system to normalize and deeply ingrain racial financial structures and double standards in our economy (e.g. reliance on credit checks). Finally, the wealthy elite use the resulting insecurity experienced by people of color as a tool of exploitation to steal their income and wealth through predatory financial products and services. The oppressive economy and the leaders who sustain it deliberately target black and other non-black people of color. The system is designed to financially exploit black people, which intentionally helps to criminalize and politically silence them. The priority is always corporate profits over black lives, profits and fortunes that they could not have if racism were not profitable.

Asset recovery in a dual financial system

The financial services industry is central to the oppressive economy. This industry, which includes banks, asset management companies, insurance companies and private equity firms, controls the flow of money in our economy. Through a sophisticated network of financial products, services and tools, this system is designed for extraction – taking capital from the very people who have least. We call it the “dual financial system” because it delivers very different products—and outcomes—for affluent whites and for people of color.

Black people and other people of color are deliberately excluded from access to the very products and services that provide households with financial security. These include bank accounts, retirement and personal savings accounts, premium credit cards, insurance, mortgages, and small business loans. They may be excluded due to geographic location (lack of bank branches or higher car insurance rates in formerly off-limits neighborhoods), lower wages due to workplace discrimination and segregation, the wealth gap itself (e.g. minimum accounts or lack of a cushion to make on-time payments during a emergency) or outright bias in lending.

This exclusion then leads to a vicious cycle: the financial services industry exploits the insecurity it creates by offering predatory products and services that erode income and wealth to black people and other communities of color who have been deterred from accessing better ones.

People of color who have to plug gaps in their monthly cash flow due to low wages, lack of wealth cushions, inconsistent cash flows and dwindling wealth are forced to take out payday loans with interest rates of up to 700 percent. Blacks also get fewer discounts and more penalties when buying auto insurance, which means we pay significantly more than white households. Additionally, if we can access mortgage credit to buy a home, we are more likely to receive mortgage products with adjustable (and often escalating) interest rates, or simply face higher fixed interest rates head-on than white households. This extraction isn’t happening simply because financial players don’t like blacks and browns. It is because there is much profit to be made from despair.

This dual system is reinforced by the credit reporting system, as all the consequences of racial financial exclusion also lead to lower credit scores, which in turn are used for further exclusion. Three credit reporting megacorporations – Experian, TransUnion and Equifax – act as financial regulators, determining who can and cannot access wealth-building financial products, services and capital.

Although it is illegal to use race to determine access to financial services, the credit scores produced by these agencies have become an indicator of racial discrimination. It’s almost burned into these scores because they rely on measures that have a long history of bias. For example, paying bills on time favors mortgage and credit card payments (which many Black people don’t have access to) over rent and cell phone payments (which more Black people have better access to). Types of debt that are more likely to be held by blacks (such as payday or student loans) are treated negatively, increasing the impact of financial exclusion.

People with good credit can build wealth through affordable mortgages, prime lines of credit, and low-cost credit cards. Those who don’t have good credit lose their wealth because they don’t have access to affordable credit. Without affordable credit, they either take out more expensive or potentially predatory credit, or forgo things that normally require credit to purchase – such as B. a car that does not regularly break down or repairs at home. Even doing without these things tends to cost more in the long run and makes wealth accumulation more difficult.

As I testified before Congress, the credit rating system reinforces and exacerbates racial inequalities. Black and other non-black communities pay more for basic financial services than whites, and ultimately experience a loss of wealth as a result.

Other methods of gaining wealth take place in the field of public safety and healthcare. Excessive policing in black communities and mass incarceration siphon wealth through excessive fines and fees, including child support debts to the state that accumulate during incarceration. A racist health care system, some states’ refusal to expand Medicaid, and the toll of living in a white, racist society all result in poorer health outcomes for blacks and also drain wealth in the form of excessive medical debt.

This racist process of marginalization and exploitation is fueled by the financial industry’s thirst for profit and wealth and made possible by the broader existence of our nation’s racial caste system.

These systems of exclusion and exploitation make it extremely difficult for black households to benefit from typically recommended wealth-building strategies. For example, black homeowners experience widespread valuation discrimination, resulting in lower home valuations and less home equity and consequently less wealth than white homeowners. Black businesses are often undervalued relative to white-owned businesses, reducing the overall wealth of black business owners. The inability of blacks and other people of color to build wealth as a result of this systemic racism is forcing homeowners, business owners and broader households of color to rely on predatory debt just to survive.

Many forms of wealth creation take place in America every day. The oppressive economy has been with us since the nation’s founding and is deeply embedded in our economic systems, as seen in our credit systems and labor market. Like any thriving ecosystem, the oppressive economy is constantly evolving, thwarting our individual efforts to overcome oppression and build wealth.

Wealth-building proposals for people of color, especially black people, are important, even necessary. But until we dismantle the many systems of wealth creation and the power structures that support them, the racial wealth gap will remain.

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