Why the Racial Wealth Gap Could Spell Doom for America's Superpower Status
Three summers ago, protesters took to the streets of New York City to rally against America’s vast wealth disparity. Before activists flooded Liberty Square in Manhattan’s Financial District, the term "1 percent" meant very little. But since the summer of 2011, discussions of income inequality have made their way from the front lines of an anarchist movement aimed at fighting unfettered capitalism to the highest office in the land. Now the latest report from Washington, D.C.-based think tank Global Policy Solutions argues that ignoring our escalating racial wealth disparities will lead to “national peril.”
The findings of Beyond Broke: Why Closing the Racial Wealth Gap Is a Priority for National Economic Security are startling. According to the report, between 2005 and 2011, the median net worth of minority households remained at recession-era levels, “reflecting a drop of 58 percent for Latinos, 48 percent for Asians, [and] 45 percent for African Americans,” compared with just 21 percent for whites. Moreover, the differences in both net worth and cash on hand are even more striking.
Beyond Broke researchers found the median liquid wealth for Latinos is a mere $340, while African Americans have just $200 in liquid assets. On the other hand, Asians hold $19,500 in median liquid wealth, compared with $23,000 for whites. Furthermore, African Americans and Latinos are twice as likely as whites to have no financial assets.
“The impetus for policy action is the self-interest of every American, regardless of background,” the report states, noting America is projected to become a majority-minority country by 2050. “Given the projected growth of the very households that have been at the margins of the economy, the racial wealth gap should be considered a national economic security concern. It would be short-sighted to expect the U.S. economy to thrive with fully half of its population mired in poverty.”
The findings of this latest report are backed by a slew of academic research. In January, a study led by Harvard economist Raj Chetty found that despite the myth of the American dream, our social mobility is low in comparison with several European nations. Similarly, a 2006 project by Swedish economist Markus Jäntti found that 42 percent of American men raised in the bottom fifth of incomes will remain there as adults.
Back in December, President Obama said that Americans have “often accepted more income inequality than many other nations” because we believe our country “is a place where even if you’re born with nothing, with a little hard work you can improve your own situation over time.” While America purports to be a land of dreams only limited by how hard one works, the facts don’t match the myth.
The report’s authors write that Americans must “disavow the notion that the racial wealth gap exists by mere accident of circumstance or due to broad scale pathologies rooted in financial ignorance or savings behavior.” Instead, they propose we admit wealth differences “came about as a result of centuries of policy action and, as a result, they must be remedied by policy action.”
University of Southern California law professor Jody David Armour, who studies the connection between race and justice, agrees that conversations around wealth inequality need to be about more than just economics. “We’re at a historical inflection point in our thinking about the relationship between economics and social and racial justice,” says Armour. “We have to view the problem through a different lens and not just see it as a problem of a lack of personal responsibility of poor people themselves.”
Beyond Broke’s researchers suggest we sidestep the moral arguments around race and wealth inequality. Their policy recommendations include several ideas that have gained momentum in recent months, including paying workers a living wage, making sure mortgage relief policies are fair, and enacting “baby bonds” for the country’s poorest children.
If the saying “A rising tide lifts all boats” is true, the report’s authors write that America must get serious about ensuring its poorest citizens can attain the dream of financial security. Otherwise, we risk turning into a waning superpower whose best, and most prosperous days, are behind it.