Understanding The History Of The Present Systemic Barriers and How They Work

designraAlternative Finance, Community Capital, Crowdfunding, Social Media


The often and well-touted $1.5 trillion spending power of the Black community is very puzzling when in the same breath, we talk about the massive racial wealth gap that exists side-by-side. One big question I have is how is it possible to have all of the tools and trapping of the American dream, a highly coveted six-figure salary, an advanced degree, and an executive position at a large US corporation and still not have the same level of wealth as your white co-workers?  

Understanding The Difference Between Wealth and Income

One distinction is between income and wealth, defined as a family’s accumulated assets minus their total debt and payment, such as annual salary. Looking at median wealth also ensures an apples-to-apples comparison that looks specifically at middle-class families across different races. We have to begin this conversation with an evident understanding of the historical context of the racial wealth gap and its impact on the present. 

The More Things Change The More They Stay The Same

After 12 generations of slavery’s institutionalized theft, 4 million African Americans were now free to earn incomes and degrees, hold property, and pass wealth to the next generation. But Eight generations later, the racial wealth gap is growing. The typical black family has just 1/10th the wealth of the usual white family.  In 1863, Black Americans owned one-half of 1 percent of the national wealth. Today it’s just over 1.5 percent for roughly the same percentage of the overall population. The cause of that stagnation has primarily been invisible, hidden by the assumption of progress after the end of slavery and civil rights achievements. But for every gain Black Americans made, people in power created new bundles of discrimination, largely hidden from sight, that thwarted the economic promise of emancipation. 

The Legal Plunder of Black America

 “The quiet plunder.” In the grand narrative of freedom and civil rights, the persistent disadvantages are invisible precisely because people in power continuously innovated new forms of discrimination. Slavery’s violent theft was replaced by convict leasing, sharecropping, redlining, disenfranchisement, legal discrimination, or Jim Crow. But Jim Crow followed Black people out of the South with New Deal legislation, so it was a built-in white privilege when the federal government created economic entitlements.

Redlining Denied Black American’s Homeownership & Wealth

African Americans seeking home loans found themselves redlined and thus ineligible for credit because the government would not guarantee the loans. Housing costs rose without giving black residents a stake in the value of their homes, while neighborhoods decayed from lack of investment. Since housing equity makes up about two-thirds of median household wealth, excluding Black Americans from establishing equity during a time of unprecedented rises in home values locked in and exacerbated wealth disparities legally. The other side of the legal discouragement of Black’s to own homes not only prevented wealth-building opportunities but it ushered in an enormous transfer of wealth from Black renters to White landlords. Redlining excluded Black families from building wealth but also created another wealth-building pathway for White landlords.

Black WWII Veterans Denied Access To Their GI Benefits

Black World War II veterans returned to find their GI benefits were not for them even after fighting for global freedom denying home and business loans to Black applicants. When accepted, black veterans typically attended historically black colleges, many of which were underfunded, while whites steamed into flagship universities. By 1947, veterans made up half the national college enrollments. Veterans who attended college tended to have children and grandchildren, creating a pipeline to white-collar careers. And the disadvantages of missing out on GI benefits were like negative interest compounding in each generation. Black people missing out on that enormous expansion of new middle-class wealth meant not benefiting from investments in home and education that became a lever on the opportunity for the next generation.

Tech: The Next Frontier For Economic Inequality  

According to Deutsche Bank, the digital racial gap is growing, and more than half of Black and Hispanic people could be under-prepared for 86% of jobs by 2045. “If this digital racial gap is not addressed, in one generation alone, digitization could render the country’s minorities into an unemployment abyss. Due to the structural and infrastructural inequities, Blacks and Hispanics are ten years behind Whites in levels of broadband access, and almost four times more Blacks have poor Tech connectivity than Whites. In the era of tech innovation, a year can be a lifetime. The impact of being ten years behind is a staggering manifestation of multiple aspects of economic and societal development. 

Digital Redlining 

Research on the topic of “Digital Redlining” called attention to the individual, systemic, and institutional racism still prevalent in our country. Gilliard compared what is happening online now to redlining. That’s the practice of dividing up a city, making it harder for poorer areas, and areas with larger minority populations, to access banking, insurance, healthcare, or other services. Redlining was practiced in the United States and Canada. It was officially outlawed in the US in 1968 by the Civil Rights Act. Digital redlining differs from traditional redlining in that it is often hidden. What typically happens is an algorithm that determines that, for some reason, denies access to Black communities that made the most sense algorithmically to maximize profit or time. There are often very few people at companies who have the ability, willingness, or knowledge to look at these things and make them public.  

The Lack of Access to Capital

The lack of diversity in startups and the venture capital industry is alarming and is a problem we cannot ignore. Underestimated founders, a term coined by Arlan Hamilton, must work 10x harder than their white, male counterparts and still seem to come up short. Black founders lead 1% of VC-backed startups, and 80% of VC funds don’t have a single black investor. According to TechCrunch, the other side of these numbers is that Apple is now worth $2.21 trillion, Microsoft $1.88 trillion, Amazon $1.76 trillion, Alphabet $1.60 trillion, and Facebook $0.93 trillion. That’s around $8.4 trillion for the five companies. Their aggregate value had reached the $3 trillion mark. That became $4 trillion in mid-2018. And then in the next three years or so it more than doubled again.

Key Takeaways

My first question is the motivation for restricting Black Americans’ access to wealth-building and economic opportunities generally? As the United States’ demographics change and the country becomes less white, it is myopic and self-destructive to the country and global economic hegemony. As China continues its rise in global economic power and hegemony, the US reduces access to capital and innovation to over one-third of its population. Should the Black community continue to try to change the hearts and minds of the majority population to provide the Constitutional rights to access wealth-building and economic freedom, or look for alternative means of raising capital and building wealth as a community? There are legal mechanisms such as investment crowdfunding and community investment funds? For more information on using community capital as a means to thrive in the global economy, please visit Crowd-Max.