William A. Darity and Darrick Hamilton: Bernanke ignores history of black and white wealth rift
[William A. Darity is the Arts & Sciences Professor of public policy studies and professor of African and African American Studies and economics at Duke University.
Darrick Hamilton is an assistant professor of management and urban policy at Milano – The New School, and an affiliated faculty member in the department of economics at The New School for Social Research, and an affiliate scholar at the Center for American Progress.]
Last spring when Federal Reserve chair Ben Bernanke visited Morehouse College, an undergraduate student asked him what accounts for the enormous racial disparity in wealth. Bernanke responded that the source of the problem was the lack of "financial literacy" and "financial education" on the part of blacks, particularly with respect to savings decisions.
He said nothing about the lack of access to inherited wealth, such as inheritances and other intergenerational transfers. Most wealth acquisition today takes place by such asset shifts. Even more astonishing, Bernanke never mentioned the notorious history of white violence that included the seizure, destruction and appropriation of black property.
Acknowledging this unfairness is not an excuse but a powerful truth; remedying it requires straightforward government action, rather than lectures on the value of saving. In fact, the racial wealth gap can be decreased - and without using a race-specific strategy of wealth redistribution...
... Bernanke expressed a perspective that locates the source of the black-white wealth gap in a fundamental deficiency in black behavior. The Bernanke perspective fits comfortably with the highly popular but incorrect view that in general, racial economic disparities in the U.S. are due to black ignorance or stupidity.
But the source of the black-white wealth gap has little, if anything, to do with bad financial judgments on the part of blacks. Savings behavior does not come close to explaining disparities this large. Arguably no one, regardless of race, creed or color, does much saving in America. Indeed, a number of studies over the past 40 years reveal that there is no difference between black and white household savings rates after controlling for income. Instead, the principal explanation for the enormous black-white wealth gap is the systemic denial of black households the capacity to accumulate wealth across generations.
Apart from the 250 years of slavery in which blacks themselves were both capital and financial assets for whites, and even upon emancipation, the national failure to endow black ex-slaves with the promised forty acres and a mule, blacks systematically have been denied the ability to accumulate property. Land acquired between 1880 and 1910 frequently was taken by government complicity, fraud and outright seizures by white terrorists. With the consolidation of the Jim Crow period, prosperous black communities and associated property were razed by white rioters in cities ranging from Wilmington, N.C., to Tulsa, Okla.
Restrictive covenants, redlining and general housing and lending discrimination also circumscribed black wealth accumulation. Today, as demonstrated by the ongoing evidence of predatory targeting of creditworthy black households and black neighborhoods for high-cost, subprime mortgage loans, blacks continue to face discrimination in credit markets...
Read entire article at The Grio
Darrick Hamilton is an assistant professor of management and urban policy at Milano – The New School, and an affiliated faculty member in the department of economics at The New School for Social Research, and an affiliate scholar at the Center for American Progress.]
Last spring when Federal Reserve chair Ben Bernanke visited Morehouse College, an undergraduate student asked him what accounts for the enormous racial disparity in wealth. Bernanke responded that the source of the problem was the lack of "financial literacy" and "financial education" on the part of blacks, particularly with respect to savings decisions.
He said nothing about the lack of access to inherited wealth, such as inheritances and other intergenerational transfers. Most wealth acquisition today takes place by such asset shifts. Even more astonishing, Bernanke never mentioned the notorious history of white violence that included the seizure, destruction and appropriation of black property.
Acknowledging this unfairness is not an excuse but a powerful truth; remedying it requires straightforward government action, rather than lectures on the value of saving. In fact, the racial wealth gap can be decreased - and without using a race-specific strategy of wealth redistribution...
... Bernanke expressed a perspective that locates the source of the black-white wealth gap in a fundamental deficiency in black behavior. The Bernanke perspective fits comfortably with the highly popular but incorrect view that in general, racial economic disparities in the U.S. are due to black ignorance or stupidity.
But the source of the black-white wealth gap has little, if anything, to do with bad financial judgments on the part of blacks. Savings behavior does not come close to explaining disparities this large. Arguably no one, regardless of race, creed or color, does much saving in America. Indeed, a number of studies over the past 40 years reveal that there is no difference between black and white household savings rates after controlling for income. Instead, the principal explanation for the enormous black-white wealth gap is the systemic denial of black households the capacity to accumulate wealth across generations.
Apart from the 250 years of slavery in which blacks themselves were both capital and financial assets for whites, and even upon emancipation, the national failure to endow black ex-slaves with the promised forty acres and a mule, blacks systematically have been denied the ability to accumulate property. Land acquired between 1880 and 1910 frequently was taken by government complicity, fraud and outright seizures by white terrorists. With the consolidation of the Jim Crow period, prosperous black communities and associated property were razed by white rioters in cities ranging from Wilmington, N.C., to Tulsa, Okla.
Restrictive covenants, redlining and general housing and lending discrimination also circumscribed black wealth accumulation. Today, as demonstrated by the ongoing evidence of predatory targeting of creditworthy black households and black neighborhoods for high-cost, subprime mortgage loans, blacks continue to face discrimination in credit markets...