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UCI law professor discusses racial wealth gap rooted in decades of discrimination

| Monday, September 21, 2020

Discussing the racial wealth gap in America, law professor Mehrsa Baradaran said the American economy does in fact discriminate despite popular belief.

Baradaran is a professor at University of California Irvine and author of the acclaimed book “The Color of Money: Black Banks and the Racial Wealth Gap.” She spoke at a reoccurring webinar series hosted by the Klau Center for Civil and Human Rights Friday.

“To say that our public policy efforts to eradicate the wealth gap had been a total failure would be an understatement,” she said while explaining the share of Black wealth to total wealth in the United States in 1865 to the present day.

At the time of emancipation, Black people owned 0.5% of the nation’s wealth, she said. Today, Black Americans own 1-2% of America’s wealth.

In 2016, the Federal Reserve reported white families have a median family wealth of $171,000, while Black families have a median net worth of $17,600. Hispanic families net worth was $20,700.

The biggest challenge to closing the race gap, she said, is the promise that the free market does not discriminate. While free markets are thought to operate with equal opportunity without control from government or other authorities, Baradaran does not believe the American economy bears a resemblance to a free market economy because Black men and women have been deprived of opportunities throughout U.S. history.

“In each historical moment, when wealth was being created, whether it was through the Homestead Act, the FHA mortgage credit on Black communities and other instances, Black communities were shut out and land and wealth accumulation,” she said.

Serena Zacharias | The Observer
University of California Irvine law professor Mehrsa Baradaran spoke about the racial gap in America rooted in slavery Friday for the Klau Center’s ongoing webinar series, “Building an Anti-Racist Vocabulary.”

Reconstruction era

Baradaran characterized the Civil War as a standoff between the armies of the North and the South, but she also sees the conflict as a battle between two currency systems. The South’s economy was not just based on Black labor, she said, but rather Black slaves themselves were capital for white owners.

When Black people were emancipated former president Andrew Jackson vetoed the Freedmen’s Bureau bills which would help former slaves gain housing, education, healthcare and employment opportunities. He reasoned the free market would allow Black people to bargain for their own wages and buy their own land.

“This was either unbelievably naive or incredibly cynical. The southern economy was nothing like a free market,” Baradaran said. “White’s refused to sell property to Blacks. As Southern legislators, lawyers and judges drafted laws governing every aspect of black labor, they restricted Blacks from skilled trades, vagrancy laws were prevalent, wages were capped by law and by cabal between employers.”

Black people were forced to grow cotton because there were no other jobs available to them.

“You don’t dedicate your entire lands to cash crops because that is a way to hunger and debt and exploitation,” she said. “If everyone grows cotton, the price is lowered. It’s a debt cycle.”

Black people were continually denied access to wealth, Baradaran explained, and much of the little wealth owned by Black people was lost when the Freedman’s Bank collapsed in 1874.

Today this day, Baradaran said, there are staggering race differentials in the unbanked and underbanked. She said up to 10% of white people are unbanked or underbanked in the South in comparison to 60% of Black people.

Early 1900s

Black banks formed in response to the Jim Crow laws because Black men and women needed to create their own institutions. However, these banks struggled to create wealth or even maintain wealth in their communities, she said.

“All of the bank deposits were small and small and volatile,” Baradaran said. “Higher operating costs lower their ability to lend because they had to offset the risk of their deposits by holding safe assets, more capital, more reserve.”

The first Black families who moved into white areas were forced to pay a premium to purchase, and when a neighborhood attracted enough Black people to be considered a Black neighborhood the property values fell, which still persists today.

Baradaran cited a New York Times article published in August about an interracial couple who received a housing appraisal in Jackson, Fla. When Abena Horton, who is Black, received an appraisal of $330,000 when meeting with an appraiser and her husband, who is white, received an appraisal of $465,000, the couple suspected race as the differentiating factor.

Baradaran went on to discuss the Home Owner’s Loan Corporation’s Redlining maps, which documented how mortgage lending risks were assessed. These maps can show how discrimination shaped inequality in cities across America.

“This is looking at a neighborhood and saying, ‘Is this a safe neighborhood where homes increase [in value] or is this a risky neighborhood?’ And the number one thing that they used was race,” she said.

Civil Rights Movement

During the Civil Rights Movement, Black leaders recognized the importance of revising the economic system in order to allow Black communities to create wealth by means of creating Black institutions.

“I call upon you to take your money out of the banks downtown and deposit your money in Tri-State Bank,” Martin Luther King Jr. urged the crowd in his “I’ve Been to the Mountaintop” speech in 1968.

Baradaran said this call for Black capitalism through boycotts and through supporting Black banking and Black credit unions helped illuminate the where the true disparities between Black and white people lay.

“Martin Luther King and others very well understood that the point of segregation was not to separate people,” she said. “This was an economic situation. They are not able to create wealth, and it’s just vastly different credit systems happening.”

To this day, a significant wealth gaps persists between white and Black communities. Much of this gap, Baradaran said, is embedded into neighborhoods.

“Where a child is born, that zip code determines their life outcome, their health outcome expectancy, potential schooling, their income potential, their likelihood of ending up in prison, more than any other factor,” she said.

Although people in America who experience poverty as children are still more likely to experience poverty as adults, Baradan has hope.

“We need to end the racial wealth gap, we need to stop segregating,” Baradaran said in closing. “These are slow burn issues that are hard to sloganize, but I do think it’s changing.”

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About Serena Zacharias

Serena is a member of the class of 2021 majoring in Neuroscience and Behavior and minoring in Journalism, Ethics and Democracy. She hails from the great cheese state of Wisconsin and is a former ND News Editor for The Observer.

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