The Astonishing Collapse of Black and Latino Household Wealth

By Adam Hudson, AlterNet, May 31, 2013 

Excerpt

…The Great Recession has increased racial inequality and set back the modest socioeconomic gains of the civil rights movement…while the racial wealth gap has existed for decades, it’s drastically expanded during the last 30 years….The 2007-2009 recession devastated the American economy and all families suffered decreasing wealth. However, African American and Latino families were hit the hardest… the racial wealth gap is not new. It has deep historical roots and current policies perpetuate and exacerbate it….Practices in employment and education also contribute to the racial wealth gap…

Full text

Despite growing economic inequality and mass unemployment, Washington is focused on austerity. Politicians and pundits debate how much to cut and how much revenue to raise rather than creating jobs or alleviating the suffering of millions of people. What also gets lost in the dominant discourse about the economy is the suffering of the black community. The Great Recession has increased racial inequality and set back the modest socioeconomic gains of the civil rights movement.

Recently, the Urban Institute released a study [3] on the racial wealth gap titled “Less Than Equal: Racial Disparities in Wealth Accumulation.” The study found that, while the racial wealth gap has existed for decades, it’s drastically expanded during the last 30 years. It says the “average wealth of white families was $230,000 higher than the wealth of black and Hispanic families in 1983.” In that year, white families had an average wealth of nearly $300,000 in 2010 dollars. Wealth for all families increased, but not evenly.

The 2007-2009 recession devastated the American economy and all families suffered decreasing wealth. However, African American and Latino families were hit the hardest. According to the study, “between 2007 and 2010, Hispanic families saw their wealth cut by over 40 percent, and black families saw their wealth fall by 31 percent.” In comparison, white family wealth “fell by 11 percent.”

The average wealth of white families, in 2010, was $632,000 but $110,000 for Latino families and $98,000 for African American families — a wealth gap of over half a million dollars. Median wealth shows the same trend: $91,000 for white families versus $10,000 for Latinos and $11,000 for African Americans in 1983; for 2010, it’s $124,000 for white families, $15,000 for Latino families, and $16,000 for African American families. These are all in 2010 dollars. Therefore, between 1983 and 2010, the racial wealth gap nearly tripled.

The largest sources of wealth within black and Latino communities are homes and retirement. White families derive wealth from their homes and many other sources, such as stocks and other financial investments. Moreover, one needs to have a certain level of disposable income to make such investments. Low-income families have to spend their income on rent, supporting their families, and other necessities just to survive. As a result, they don’t have enough excess cash to save and invest. Those with higher incomes can afford not only to take care of themselves but have enough money to save and invest. Since white families have higher incomes than black and Latino families, they have more money to invest, hence their larger amounts of wealth.

The housing bubble seemed to provide an opportunity for blacks and Latinos to build up wealth, enter the middle class, and achieve the “American Dream.” However, this proved to be a ruse. Black and Latino communities were targeted by major banks, such as Wells Fargo [4] and JPMorgan Chase [5], for subprime mortgage loans, even if they qualified for normal prime loans. Subprime is a form of risky, high-priced lending to people with poor credit histories, giving the loans higher interest rates.

According to a 2009 NAACP study [6], “even when income and credit risk are equal, African Americans are up to 34 percent more likely to receive higher-rate and subprime loans” than whites. This drove up home ownership in those communities but the foundation was on a flimsy stack of cards. When the housing bubble burst and the recession hit, black and Latino communities were hit the hardest.

The Urban Institute study is not the only one to point this out. Other studies, such as a February 2013 study by Brandeis University [7] and another by Pew Research Center [8] in July 2011, while using different methodologies and coming up with different numbers, show the same trend — the racial wealth gap was large to begin and grew exponentially after the recession.

As shown in the studies, the racial wealth gap is not new. It has deep historical roots and current policies perpetuate and exacerbate it. Black African slaves were first imported from Sub-Saharan Africa to North America by European slave traders in the early 1600s. European colonists used African slave labor to work on plantations growing profitable cash crops like cotton, indigo and sugar. African labor was appealing to European colonizers because, unlike native Americans and indentured white European servants, it was plentiful (if one died, they could be replaced by another African), Africans had no connections to Americans land, and Africans knew how to grow cash crops, like cotton and sugar, that grew on the African continent, the Caribbean, and southeastern United States. Thus, the trans-Atlantic slave trade, which lasted from the early 1500s to mid-1800s, saw the importation and exploitation of anywhere between 12 to 30 million African slaves to European colonies in the Caribbean, South America and North America. 

The trans-Atlantic slave trade built [9] the foundation for modern capitalism and current racial inequality. Wall Street itself was a slave trading market [10] with many companies and financial institutions profiting from it, including [11] the Royal Bank of Scotland, Bank of America, Aetna Insurance, now-bankrupt Lehman Brothers, Wachovia, and J.P. Morgan Chase, with lawsuits [12] against many of them for their role in slavery. Banks, particularly predecessors of Wachovia and JPMorgan Chase, Bank of America, accepted [13] slaves as “collateral” and issued loans [14] to slave owners. If a slave owner defaulted on his loan, the slaves, since they were “property,” became owned by the bank. Aetna Insurance had a policy compensating slave owners for their loss of property, such as when a slave died. Slaves also produced commodities that were sold in international markets for profit, which is characteristic of modern capitalism.

The exploitation of black African labor by white slave owners transferred wealth from black African slaves, and their descendants, to white European slave masters, their progeny, and other whites who benefitted from the system. Since African slaves were not financially compensated, they had very little chance to accumulate and pass down wealth in their communities. Even after slavery ended, that transfer of wealth ensured that blacks would remain socioeconomically subordinate to whites for future generations. This is how the present racial wealth gap was formed.  

Just as there were laws protecting slavery, many policies, practices and institutions maintain the racial wealth gap. According to the Brandeis study [7], “homeownership, income, college education, inheritance, and unemployment” are the “major drivers of the racial wealth gap.” The study points out that “for many years, redlining [denying or raising price of insurance or other financial services to particular neighborhoods based on race], discriminatory mortgage-lending practices, lack of access to credit, and lower incomes have blocked the homeownership path for African Americans while creating and reinforcing communities segregated by race.” Many of these practices are perpetrated by the financial sector — the same sector whose roots go back to slavery.

Practices in employment and education also contribute to the racial wealth gap. Currently, black unemployment lies [15] at 13.8%, while 6.8% for whites. According to a Center for American Progress study [16], the weekly median earnings of African Americans (in 2011) were $674 compared to $549 for Latinos, $744 for whites, and $866 for Asian Americans. Much of this is due to “long-standing patterns of discrimination in hiring, training, promoting, and access to benefits” that make it “much harder for African Americans to save and build assets,” said the Brandeis study. In addition, neighborhoods are deeply segregated [17] by class [18] and race. This leaves many lower-income students, particularly students “isolated and concentrated in lower-quality schools, and less academically prepared to enter and complete college.”

The latest emphasis on austerity disproportionately harms African Americans, as well. Cuts to government spending forces the public sector lay off workers. This hurts [19] African Americans since they are 30% more likely to work in the public sector than the general workforce, according to [20] a United for a Fair Economy study. The private sector has a long history of racial discrimination against African Americans, which is why the public sector has been more reliable for black workers. Austerity, therefore, has a detrimental impact on African American employment. It curtails their ability to accumulate wealth, thereby, reinforcing the racial wealth gap. The latest round of sequestration will only exacerbate [21] this trend. This comes at a time when corporate America and Wall Street recovered very well [22] after the recession, experiencing high profits, while the rest of the country still suffers [23] unemployment, low wages, slow job growth, and poverty.

Wealth provides communities with a stable economic foundation. During hard economic times, when employment is difficult to find, possessing wealth helps people stay economically afloat. People can also have income from certain kinds of wealth, like stock or property, meaning that they can make money without working, simply by owning stuff. In addition, wealth can be passed on to future generations, which makes it easier for one’s children and grandchildren to survive economically. Put simply, wealth builds economically stable communities.

Depriving certain communities of opportunities to accumulate wealth makes it harder for them to survive economically. Those who have massive amounts of wealth do what they can to protect it, even influencing the political system [24]. This drives the wealth gap, especially the racial wealth gap, even wider and undermines democracy by putting political and economic power in the hands of a relative few. Tackling the racial wealth gap would advance racial equality, justice and true democracy.

See more stories tagged with:

household wealth [25],

black [26],

latino [27],

urban institute [28],

washington [29],

usa [30],

dc [31],

economy [32],

african-american [33]


Source URL: http://www.alternet.org/economy/black-and-latino-household-wealth-has-collapsed

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/adam-hudson
[3] http://www.urban.org/UploadedPDF/412802-Less-Than-Equal-Racial-Disparities-in-Wealth-Accumulation.pdf
[4] http://www.nytimes.com/2009/06/07/us/07baltimore.html?pagewanted=all
[5] http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html?_r=1
[6] http://www.naacplv.org/lending.pdf
[7] http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/racialwealthgapbrief.pdf
[8] http://www.pewsocialtrends.org/files/2011/07/SDT-Wealth-Report_7-26-11_FINAL.pdf
[9] http://www.bloomberg.com/news/2012-01-24/how-slavery-led-to-modern-capitalism-echoes.html
[10] http://adamhudson.org/2012/01/28/wall-street-was-founded-on-slavery/
[11] http://www.africaresource.com/rasta/sesostris-the-great-the-egyptian-hercules/the-slavers-of-wall-street-investment-banks-and-trans-atlantic-slave-trade-oguejiofo-annu/
[12] http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/SlaveryreparationslawsuitreUSA
[13] http://www.workers.org/2008/us/lehman_1030/
[14] http://www.nbcnews.com/id/15037694/#.UZWPyyvwIRg
[15] http://www.huffingtonpost.com/2013/03/29/black-unemployment-nancy-ditomaso_n_2974805.html
[16] http://www.americanprogress.org/issues/poverty/report/2012/04/12/11423/the-state-of-communities-of-color-in-the-u-s-economy/
[17] http://www.huffingtonpost.com/2011/08/02/study-race-plays-bigger-r_n_916391.html
[18] http://www.pewsocialtrends.org/2012/08/01/the-rise-of-residential-segregation-by-income/
[19] http://www.nytimes.com/2011/11/29/us/as-public-sector-sheds-jobs-black-americans-are-hit-hard.html
[20] http://www.faireconomy.org/files/State_of_the_Dream_2011.pdf
[21] http://www.nytimes.com/2013/05/03/business/economy/government-spending-cuts-contribute-to-slower-growth.html
[22] http://www.nytimes.com/2013/03/04/business/economy/corporate-profits-soar-as-worker-income-limps.html?hp&_r=0
[23] http://www.theatlantic.com/business/archive/2013/03/corporate-profits-are-eating-the-economy/273687/
[24] http://adamhudson.org/2011/12/13/occupy-wall-street-a-movement-against-oligarchy/
[25] http://www.alternet.org/tags/household-wealth
[26] http://www.alternet.org/tags/black
[27] http://www.alternet.org/tags/latino
[28] http://www.alternet.org/tags/urban-institute
[29] http://www.alternet.org/tags/washington-0
[30] http://www.alternet.org/tags/usa-0
[31] http://www.alternet.org/tags/dc
[32] http://www.alternet.org/tags/economy-0
[33] http://www.alternet.org/tags/african-american-1
[34] http://www.alternet.org/%2Bnew_src%2B

Global Warming Systemically Caused Hurricane Sandy

AlterNet [1] / By George Lakoff [2]  October 30, 2012

Yes, global warming systemically caused Hurricane Sandy — and the Midwest droughts and the fires in Colorado and Texas, as well as other extreme weather disasters around the world. Let’s say it out loud, it was causation, systemic causation.

Systemic causation is familiar. Smoking is a systemic cause of lung cancer. HIV is a systemic cause of AIDS. Working in coal mines is a systemic cause of black lung disease. Driving while drunk is a systemic cause of auto accidents. Sex without contraception is a systemic cause of unwanted pregnancies.

There is a difference between systemic and direct causation. Punching someone in the nose is direct causation. Throwing a rock through a window is direct causation. Picking up a glass of water and taking a drink is direct causation. Slicing bread is direct causation. Stealing your wallet is direct causation. Any application of force to something or someone that always produces an immediate change to that thing or person is direct causation. When causation is direct, the word cause is unproblematic.

Systemic causation, because it is less obvious, is more important to understand. A systemic cause may be one of a number of multiple causes. It may require some special conditions. It may be indirect, working through a network of more direct causes. It may be probabilistic, occurring with a significantly high probability. It may require a feedback mechanism. In general, causation in ecosystems, biological systems, economic systems, and social systems tends not to be direct, but is no less causal. And because it is not direct causation, it requires all the greater attention if it is to be understood and its negative effects controlled.

Above all, it requires a name: systemic causation.

Global warming systemically caused the huge and ferocious Hurricane Sandy. And consequently, it systemically caused all the loss of life, material damage, and economic loss of Hurricane Sandy. Global warming heated the water of the Gulf andMexicoand theAtlantic Ocean, resulting in greatly increased energy and water vapor in the air above the water. When that happens, extremely energetic and wet storms occur more frequently and ferociously. These systemic effects of global warming came together to produce the ferocity and magnitude of Hurricane Sandy.

The precise details of Hurricane Sandy cannot be predicted in advance, any more than when, or whether, a smoker develops lung cancer, or sex without contraception yields an unwanted pregnancy, or a drunk driver has an accident. But systemic causation is nonetheless causal.

Semantics matters. Because the word cause is commonly taken to mean direct cause, climate scientists, trying to be precise, have too often shied away from attributing causation of a particular hurricane, drought, or fire to global warming. Lacking a concept and language for systemic causation, climate scientists have made the dreadful communicative mistake of retreating to weasel words. Consider this quote from “Perception of climate change,” by James Hansen, Makiko Sato, and Reto Ruedy, Published in the Proceedings of the National Academy of Sciences:

…we can state, with a high degree of confidence, that extreme anomalies such as those inTexas and Oklahomain 2011 and Moscow in 2010 were a consequence of global warming because their likelihood in the absence of global warming was exceedingly small.

The crucial words here are high degree of confidence, anomalies, consequence, likelihood, absence, and exceedingly small. Scientific weasel words! The power of the bald truth, namely causation, is lost.

This no small matter because the fate of the earth is at stake. The science is excellent. The scientists’ ability to communicate is lacking. Without the words, the idea cannot even be expressed. And without an understanding of systemic causation, we cannot understand what is hitting us.

Global warming is real, and it is here. It is causing — yes, causing — death, destruction, and vast economic loss. And the causal effects are getting greater with time. We cannot merely adapt to it. The costs are incalculable. What we are facing is huge. Each day, the amount of extra energy accumulating via the heating of the earth is the equivalent of 400,000 Hiroshima atomic bombs [3]. Each day!

Because the earth itself is so huge, this energy is distributed over the earth in a way that is not immediately perceptible by our bodies — only a fraction of a degree each day. But the accumulation of total heat energy over the earth is increasing at an astronomical rate, even though the temperature numbers look small locally — 0.8 degrees Celsius so far. If we hit 2.0 degrees Celsius, as we may before long, the earth — and the living things on it — will not recover. Because of ice melt, the level of the oceans will rise 45 feet, while huge storms, fires, and droughts get worse each year.

The international consensus is that by 2.0 degrees Celsius, all civilization would be threatened if not destroyed.

What would it take to reach a 2.0 degrees Celsius increase over the whole earth? Much less than you might think. Consider the amount of oil already drilled and stored by Exxon Mobil alone. If that oil were burned, the temperature of the earth would pass 2.0 degree Celsius, and those horrific disasters would come to pass.

The value of Exxon Mobil — its stock price — resides in its major asset, its stored oil. Because the weather disasters arising from burning that oil would be so great that we would have to stop burning. That’s just Exxon Mobil’s oil. The oil stored by all the oil companies everywhere would, if burned, destroy civilization many times over.

Another way to comprehend this, as Bill McKibben [4] has observed, is that most of the oil stored all over the earth is worthless. The value of oil company stock, ifWall   St. were rational, would drop precipitously. Moreover, there is no point in drilling for more oil. Most of what we have already stored cannot be burned. More drilling is pointless.

Are Bill McKibben’s and James Hansen’s numbers right [5]? We had better have the science community double-check the numbers, and fast.

Where do we start? With language. Add systemic causation to your vocabulary. Communicate the concept. Explain to others why global warming systemically caused the enormous energy and size of Hurricane Sandy, as well as the major droughts and fires. Email your media whenever you see reporting on extreme weather that doesn’t ask scientists if it was systemically caused by global warming.

Next, enact fee and dividend, originally proposed by Peter Barnes at Sky Trust and introduced as Senate legislation as the KLEAR Act by Maria Cantwell and Susan Collins. More recently, legislation called fee and dividend has been proposed by James Hansen and introduced in the House by representatives John B, Larson and Bob Inglis.

Next. Do all we can to move to alternative energy worldwide as soon as possible.

Source URL: http://www.alternet.org/environment/global-warming-systemically-caused-hurricane-sandy

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/george-lakoff
[3] http://www.ted.com/talks/james_hansen_why_i_must_speak_out_about_climate_change.html
[4] http://www.rollingstone.com/politics/news/global-warmings-terrifying-new-math-20120719
[5] http://math.350.org/
[6] http://www.alternet.org/tags/hurricane
[7] http://www.alternet.org/tags/sandy
[8] http://www.alternet.org/tags/climate-change
[9] http://www.alternet.org/%2Bnew_src%2B