The Origins of the Racial Wealth Gap, Racial Justice as Economic Stimulus, and Reaching Our Economic Potential
August 16, 2019
By Matt Hughes
The Roosevelt Rundown is an email series featuring the Roosevelt Institute’s top 5 stories of the week.
1. The Origins of the Racial Wealth Gap
As part of its 1619 Project analyzing the legacy of American slavery, the New York Times Magazine examines the 400 years of policy choices that have driven the racial wealth gap—from segregation to redlining to evictions. Quoted in the piece, Roosevelt Senior Fellow William A. Darity Jr. traces the origins of the gap to the government’s failure to provide land grants to the formerly enslaved. “To the extent that Blacks have the capacity to accumulate wealth, we have not had the ability to transfer the same kinds of resources across generations.” To confront this systemic and historical injustice, we must rewrite the racial rules.
2. This Land Was Our Land
Further exploring the effects of land loss on the racial wealth gap, an Atlantic piece details the dispossession of 98 percent of Black agricultural landowners and 12 million acres over the last century—most of which occurred after 1950. The article also spotlights analysis by a research team including Roosevelt Fellow Darrick Hamilton and Dania Francis of the University of Massachusetts: “The dispossession of Black agricultural land resulted in the loss of hundreds of billions of dollars of Black wealth. We must emphasize this estimate is conservative . . . Depending on multiplier effects, rates of returns, and other factors, it could reach into the trillions.”
3. Racial Justice as Economic Stimulus
A new McKinsey report quantifies the economic benefits of closing the widening racial wealth gap: as much as $1.5 trillion in GDP growth by 2028. In its discussion of the income gap, the report also warns of the racially disproportionate impacts that automation may have on Black workers in the coming years: “Broadly, we calculate that Black Americans are at risk of losing 459,000 more jobs than white Americans are because of these jobs’ higher automation risk.” In a recent Roosevelt issue brief, Insight Center Vice President of Programs and Strategy Jhumpa Bhattacharya analyzes how a guaranteed income could redress these divides.
4. Low Interest in Investment
A Bloomberg Businessweek article on stock buybacks draws on the work of Roosevelt Fellow JW Mason in explaining the fractured relationship between corporate debt and capital expenditures. Because of an increasingly shareholder-first mentality, corporations are now likelier to funnel borrowed billions to stock buybacks, rather than capital investment. The result: Federal Reserve interest rate cuts don’t pack the same punch they used to. “If you can borrow on more favorable terms, you don’t necessarily invest more,” Mason says. “You might think this is an opportunity to give bigger payouts to shareholders. This is a big reason why monetary policy isn’t as effective as it used to be.”
5. Reaching Our Economic Potential
In an op-ed for Project Syndicate, Roosevelt Chief Economist Joseph Stiglitz argues that Trump’s deficit economy has harmed our economic potential. “Redistribution from the bottom to the top—the hallmark not only of Trump’s presidency, but also of preceding Republican administrations—reduces aggregate demand, because those at the top spend a smaller fraction of their income than those below.” In an issue brief published this year, Roosevelt’s JW Mason makes the case that public spending and investment should fill the vacuum—and that we can afford it. For the blog, Roosevelt Forward’s Vice President of Strategy and Policy Nell Abernathy urges 2020 Democratic candidates to defend the efficacy of public spending. “If we truly learned the lessons of the past, the question should no longer be “How will you pay for it?” but “How will you ensure that our economy is reaching its full potential?”
What We’re Watching
Last Sunday’s episode of Patriot Act with Hasan Minhaj examines how Big Pharma has profited from the fentanyl overdose epidemic. On Friday, August 20, Roosevelt will participate in a day of action (#PeopleOverPharma) to fight back against the greed taking lives and sapping wallets. Click here for more information and to find an event near you.