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How to fix the racial wealth gap, end plutocracy and build Black power.
The protests in every city rallying against police killings and racialized violence directed at Black bodies are inseparable from the economic conditions that Black communities are facing. The fact that a Black man can be killed by a law enforcement officer over an approximately 10-minute period with a knee on his neck in broad daylight while repeatedly screaming for mercy, and that he can’t breathe, speaks to a larger political economy that devalues people’s lives based on their race or ethnicity.
Black Americans, because of racialized stigma and their economic and political position, are not only more vulnerable to state-sanctioned violence, but to a global pandemic as well. Their diminished political position is evidenced by their exposure to unjust police violence, and their economic vulnerability is made most vivid by the persistent and unjust racial wealth gap that leaves Black families with few resources to address a shock like the COVID-19 pandemic. Moreover, the overall public response to the pandemic and to broader economic insecurity has been highly racialized. Black lives are devalued in our economy and our fiscal policies reflect that.
In a nutshell, our racial dilemma is grounded in a political, economic, and identity-based devaluing of Black lives that has persisted ever since the first enslaved African arrived in Jamestown in 1619. The ensuing history of the United States is built on both racial and economic injustice, two related but distinct problems.
These racial and economic injustices, while entrenched, can be addressed. Below are three complementary policies that can make meaningful progress toward undoing centuries of systemic inequities, while prospectively ensuring capital access going forward: (1) Reparations through which the nation acknowledges and redresses its exploitation and extraction of Black resources and personhood; (2) Baby Bonds (publicly funded trust accounts) to establish a birthright to capital; and (3) a wealth tax to break up the concentration of wealth among the capitalist elite and diffuse the political power that goes along with such concentration.
Wealth disparity and the racial wealth gap in America are dramatic. The median wealth for a Black family, $17,600 (inclusive of home equity), is only about one-tenth of the $171,000 median wealth for a White family. What’s more, the mean or average wealth of a White family, $933,700, is nearly seven times that of Black family wealth at $138,200.
But clearly, the “typical” White family are not millionaires and have nowhere near $933,700 in wealth. Instead, mean wealth is driven by a skewed distribution where the wealthy own just about everything. According to one study, the top 10% of American households owns nearly 80% of the nation’s wealth. More specifically, the top one-tenth of 1% of households, those with over $20.6 million in wealth, own about as much of the nation’s wealth as the entire bottom 90%. We haven’t seen this obscene a concentration of wealth and its accompanying plutocracy (i.e. the ability to translate all that economic might into political power) since the Great Depression, and it is being driven by a class of White billionaires.
Wealth concentration is wreaking havoc on our democracy and our capacity to collectively envision and establish a just American society. Our attempts at progress even for those things on which we agree are consistently thwarted. For instance, a large majority of Americans want action on climate change. Yet, a capitalist class of energy tycoons that stands to lose some of its short-term profits if we wean ourselves off of fossil fuels is able to fund aggressive lobbying that impedes democratic action.
Racial justice would mean that White and Black households are seen in equal measure throughout the wealth distribution—with Blacks accounting for 13% of the bottom, the middle, and the top, the same share we represent in the population as a whole. (That notion of racial economic equity, namely that the proportion of persons with wealth above a stipulated amount is the same in both groups, was established by the first and only Black Nobel laureate in economics, W. Arthur Lewis, in his seminal book, Racial Conflict and Economic Development.)
To be clear, we are not advocating for a new class of Black billionaires or for Black wealth distribution to replicate the dysfunctional distribution of wealth among White Americans. Although that might move us closer to racial equity as defined by Lewis, it would still leave unaddressed America’s plutocracy and hoarding of resources among the few—only now that few would be more racially inclusive.
To achieve economic justice, we would have to break up the concentration at the top. We would need a more egalitarian distribution of wealth so that the bottom half of all earners, which is disproportionately Black but is still composed of many White families, would own a lot more than just the 1% of our nation’s wealth that they currently own.
Economic justice cannot take root or flourish when the wealth, power, resources, news media, book publishers, educational curricula, technological surveillance, prisons, business capital, and all of our existing institutions are owned or controlled by a handful of plutocrats.
The way to break up the concentration of wealth and power in the plutocracy is with a substantive redistributive wealth and/or estate tax. But alas, that would still leave unaddressed our unjust and reprehensible racial wealth gap, which is rooted in a history that afforded White families access to resources and the accompanying iterative and intergenerational accumulation and, in contrast, exposed Black families to a history of exploitation and extraction of their resources and personhood by government-complicit fraud, theft, and violence.
Here’s what needs to be done.
To start, we must have an honest and sobering confession of our historical sins, directed or sanctioned by the state, that have systematically deprived Black people of resources and exposed them to theft, fraud, and seizure of their resources. This is in contrast to those systems that specifically facilitate and direct wealth and power to White people, which often also came at the expense of Black, Indigenous, Latinx, and other non-White groups. The original sin was chattel slavery, where Black people literally served as capital assets for a White landowning plantation class. That original sin extends to sharecropping, “white-capping,” Jim Crow, and exclusion of Black Americans from the New Deal and postwar policies that built an asset-based White middle class.
This authentic truth would counter the neoliberal frame, from Oscar Lewis’ “culture of poverty” thesis to Daniel Patrick Moynihan’s “tangle of pathology” thesis, that laid a foundation that caricatures Black, Brown, and poor people as “welfare queens,” “deadbeat dads,” and “undeserving.” Instead, this truth would pave the way for narratives that more accurately frame inequality as grounded in resource deprivation. Inequality and poverty have been intensely racialized in the United States, and this racialization is applied not just to Blacks, but to Latinxs, and poor Asians and Whites. The “undeserving poor” are stigmatized under the umbrella of anti-Blackness, and state interventions to promote their social mobility are seen as incentivizing bad behavior. A comprehensive reparations program diminishes the saliency of the “blaming the victim” narrative that centers inequality in anti-Blackness.
The South African Truth and Reconciliation Commission (TRC) was one recent example among many of a commission charged with bringing to light the collective sins and trauma of the apartheid era. The commission was established by that country’s post-apartheid constitution and was charged with shepherding a populace scarred by decades of legal and extralegal killings, dehumanizing laws, and economic exploitation on the basis of race into a new era of conciliatory nationhood—a tall order, to say the least. The commission collected and archived volumes of personal histories of violence, and held hearings in churches and office buildings in cities, towns, and hamlets across the deeply divided nation. Each Sunday, the commission broadcast a one-hour compilation of stories from the week, with much of the full proceedings being simulcast live on radio stations around the country.
Ultimately, however, truth and reconciliation alone did not create a complete justice. Today’s South Africa continues to fail the economic fortunes of Black Africans. Poverty is a major problem for Black South Africans, 64% of whom live below the poverty level. On the other hand, poverty is barely measurable for White South Africans: only 1% of Whites live in poverty. So, no, truth and reconciliation did not liberate Black people.
What truth and reconciliation did accomplish was a peaceful transition of South Africa into a post-apartheid political and social regime. However, that regime is still widely unequal, with the country’s resources largely controlled by an elite White minority, now with a few elite Black individuals involved in its leadership.
Even while truth and reconciliation sharpen our idea of justice, we should learn from the South African experience that economic justice cannot be left on the back burner. We can only move forward from the long history of racial exploitation with substantial economic compensation for those who have been harmed. In essence, acknowledgment and apology alone (truth and reconciliation) will be incomplete if not accompanied by some form of material redress; it is only with both these factors that America can ever have racial justice.
The fact is, America has a race problem manifesting as a Black economic problem. The racial wealth gap itself is an implicit and cumulative economic measure of our racist past. That past began with Blacks serving as capital and evolved into a system in which whatever capital Blacks may have established, in addition to their physical bodies, was always vulnerable to state-directed or facilitated confiscation. As a result of this, coupled with the state’s failure to protect them against White supremacist theft, destruction, and fraud, Black people have very little ownership of America’s land or means of production.
Hence, a reparations program should include compensatory resources for Blacks whose ancestors were the victims of racist U.S. policies and state-sanctioned “vigilante violence.” In addition to an unconditional cash payment, this redress and redistribution should include transfer of ownership of land and/or means of production, such as direct government purchase and transfer of corporate stock to Black Americans. Without “ownership,” the cash stimulus of reparations could generate a ripple effect that would further enhance racial inequality by multiplying economic gains for White people who disproportionately are owners of America’s land and the means of production.
Reparations provide a retrospective approach to achieving racial justice and directly address the Black-White racial wealth gap. A sufficient reparations program would take the form of a one-time payment or set of installments, but such transfers are not expected to occur in perpetuity. In that vein, we can establish other ongoing channels for all people regardless of race, gender, or family inheritance that build and maintain access to capital and economic security that derives from wealth.
Baby Bonds (or more accurately “Baby Trusts”) would establish an economic birthright to capital for everyone in perpetuity. These accounts would be held in public trust, similar to Social Security, and could be used as a capital foundation for an economically secure life. Without such a baseline approach, the iterative and consolidative tendency of wealth—and therefore capital—would likely trend toward inequality and wealth disparity, even after implementation of a reparations program.
The program would allocate a trust fund to every child in the United States. The average account could be seeded around $20,000 and gradually rise upward to $60,000 for babies born into the poorest families. The account would mature and transfer to those children when they reach adulthood.
Wealth begets more wealth. More of the racial wealth gap is accounted for by inheritance, bequests, and in vivo transfers, than any behavioral, demographic, or socioeconomic indicator. Wealthier families have financial access that buys crucial advantages for their children, such as debt-free college degrees, down payments on home purchases, or seed money to start a business. Lack of wealth prevents many families from accessing these advantages or passing them on to their children, contributing to an ever-increasing distance between those born with resources and those born without.
A publicly funded universal trust fund allocating up to $60,000 to the least wealthy households could substantially reduce the median wealth gap for young adults—where young White adult households currently have approximately 16 times the wealth of young Black adult households—to one where the disparity is just 1.4 times as large. This kind of program could begin to build a solid financial foundation on which generations of young people can plan their lives.
The intergenerational racial wealth gap was structurally created and has virtually nothing to do with individual or racialized choices. Intra-family transfers provide some young adults with starting capital. The capital finance provided by “Baby Trusts” would deliver a more egalitarian economic security, independent of the family financial position into which individuals are born.
Along with financial remuneration, we need an equitably and fairly structured society. Imagine this: We eliminate student debt and instead fully fund tuition-free public colleges and universities, Historically Black Colleges and Universities, and Tribal Colleges and Universities. We have Medicare for All, an economic right to high-quality housing and child care, a job, and enough income support so that no one has to endure poverty. And atop that, every young adult has access to capital, independent of race or generational legacies of exploitation.
That is a vision of a just and free society, one in which young people can afford to build a future and have some chance of thriving across the course of their lives. It’s a society that is within our collective reach.
The obstacle to fulfilling this vision is political will, which has largely been constrained by forces emanating from the concentrated economic and political power of our nation’s plutocracy.
A wealth tax can help temper this plutocracy. If we do institute a wealth tax, we don’t need to be shy about purposefully diminishing plutocracy—in fact, that could be an important outcome in and of itself. We do not begrudge those with wealth, per se. Rather, its obscene concentration is anti-democratic and antithetical to an economically just society.
DARRICK HAMILTON is the incoming Henry Cohen Professor of Economics and Urban Policy and University Professor at The New School.
NAOMI ZEWDE is an assistant professor in the Graduate School of Public Health & Health Policy at the City University of New York and a research fellow at the Roosevelt Institute.
First published in YES! Magazine. Included in Vox Populi on an open license. Illustration: artist unknown.