The Racial Wealth Divide: America's Story

5 Sep 2009

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Meizhu Lui talks at a seminar (in 2006, but still extremely relevant today) about issues covered in a book she co-authored with four others, The Colour of Wealth, which examines the racial wealth divide in contemporary America. Lui is currently director of the "Closing the Racial Wealth Gap Initiative" at the Insight Center for Community Economic Development. 

In the presentation featured in this post, Lui traces the historical antecedents of the racial wealth divide in America. She outlines how government policies and regulations favoured asset building among the White population, while denying the accumulation of assets among people of colour. She illustrates how the policies and practices of the past have left a lasting legacy on the economic outlook of various race groups today.

Her presentation examines disparities in income as well as wealth (assets), how these came to be and what is needed for redress to take place. Lui makes suggestions for policy interventions that would encourage investments at the base of society where poor people who are also overwhelmingly people of colour are located.

Below you will find a short synopsis of some of the key points highlighted in parts one and two of her presentation.

The book, The Colour of Wealth, tries to answer the question, how is it that two and a quarter centuries since the US was founded on the principal that all men are created equal; 150 years after enslaved people were freed and 40 years after the civil rights movement -- why is it that there is still an economic gap between White families and families of colour?

For example, with respect to income, in 1968 an African-America person made 55c on the White person's dollar. By 2004, this had moved up by just 3c to 58c on the White person's dollar. At this rate of progress, it is going to take 362 years to reach income parity.

According to Lui, the picture is more shocking if one looks at wealth. In other words, "assets" above and beyond income. Income helps you get by, but assets are things that help you to get ahead. They are permanent (such as land) and can be drawn on and/or passed on to future generations -- for example, to give our children a head start in life -- that is what wealth does, it builds future generations. People of colour in contemporary America only have 15c on the White person's dollar in terms of their assets.

How did this situation arise? In some cases, people of colour were simply stripped of their assets, while in others they were not allowed to own assets.

For example, the theft of land from Native Americans via the 1830 Indian Removal Act and the 1862 Homestead Act, which had the combined effect of removing Native Americans from their land, while dividing and gifting the land to European immigrants. This was one of the biggest transfers of wealth from one group to another.

The foundation of all wealth in the US is the ownership of land. About a quarter of White citizens in contemporary America can trace the beginnings of their asset building to the Homestead Act of 1863, which gave away 160 acres of free land to White families.

For African-Americans who were taken to the US as slaves, not only were they not allowed to acquire wealth, they were also not allowed to see the fruits of their labour accrue to themselves. Worse still, they were property themselves -- they were someone else's wealth.

It’s been estimated that the value of slaves in 1860 was about US$3 billion and if they had been paid wages that would have equalled about US$1.4 trillion. So if the fruits of that labour were allowed to circulate in the African-American community, we would be seeing a very different economic picture in the US today -- and that's just in relation to wages, not even ownership of assets.

According to Lui, one of the myths we hear today is that it is people of colour that are using all the benefits -- that tax dollars benefit poor people, but she says, if we examine US history (and still today), the biggest subsidies are going to White families and to those who are already wealthy.

Watch parts three to six of Lui's presentation, which you can access below for more information about how America’s historical policies built the wealth of one racial group at the expense of others -- as well as for suggestions for achieving redress through pro-poor policy interventions today.

To watch part two of this presentation, please click here.

To watch part three of this presentation, please click here.

To watch part four of this presentation, please click here.

To watch part five of this presentation, please click here.

To watch part six of this presentation, please click here.

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