Policy, Plunder, Pain & Profit — Brief US History of Black Economics
By: Ronnie Sean Cameron
Tags: Inequality, Tech, BlackLivesMatter, Economics, Business

“The inseparable twin of racial justice is economic justice” — Martin Luther King Jr. “The history of civilization shows that no people can well rise to a high degree of mental or moral excellence without wealth. A people uniformly poor and compelled to struggle for barely a physical existence will be dependent and despised by their neighbors and will finally despise themselves” — Frederick Douglass “America has given the Negro people a bad check, a check that has come back marked ‘insufficient funds’” — Martin Luther King Jr.

Black people did not get to this point on accident, for better or for more often times worse. While we didn’t get here through the actions of ALL white people, all white people in the U.S. have benefitted from the systems of inequality that brought us to this point. In the United States there has been a long history of hate & oppression but oftentimes it is only talked about in terms of biases & social differences. The national dialogue around racism is often focused on feelings, opinions and differences which leaves it to be amorphous in terms of actionable remedies, when in reality the birth of oppression here in the United States has always been for profit.

Historically to ensure the system persisted, racism isn’t spoken about in terms of dollars & cents because it would objectify the pain & plunder that took place. If dollar amounts were more often associated with the effects of racism, lawmakers and enterprises would have a clear path to addressing these issues instead of pushing it off as an incurable illness of people.

What’s outlined below barely scratches the surface of what has taken place in the United States. Racism has been a largely economic issue where the economics are largely ignored. These events listed below also doesn’t take into account the opportunity cost the Black families have had to endure which largely has cost the nation as a whole.

If you ever hear a Black American say “This country wasn’t meant for me” there is ample evidence to back that claim.

Laying out these issues isn’t one to be another sad story of the Black existence, but to fully understand what has happened in order to begin to implement remedies. As free enterprise and lawmakers are in large part responsible for what has transpired over the last 400 years, we need to hold those parties accountable for the remedies.

There were clear steps taken by both free enterprise & the US government that has led us to a point where 40M Black Americans (~13% of US Population) hold less than 2 percent of its wealth after residing in this nation for over 400 years [1].

Below are some examples of what has taken place with relatively objective values placed on each action of free enterprise or government to date that has negatively impacted the Black community here in the US (all amounts adjusted for inflation):

Value of 4 million slaves in 1860: Estimates range from $100B to Tens of Trillions [2]

Slave labor was the backbone of the US economy allowing the US to prosper globally with wide profit margins while offering low prices due to the lack of labor costs

Homestead Act which offered millions of American families up to 160 acres if they were willing to work and live on the land for 5 years [3]

Black families received less than 1% of the value provided by the US government, even though Blacks made up 12% of the total population

The average land grant was worth ~$1 million

This resulted in an approximately $180B shortfall to the Black community.

During the original Jim Crow era, after the abolition of slavery, Black Americans were subjected to entering Sharecropping contracts that forced them to work on farms of wealthy whites [4]

Black farmers were forced to enter contracts that charged them over 70% interest rates in order to pay for the land they worked. White landowners often times moved the goal post never allowing Black farmers to pay down their debts virtually placing them in slavery all over again.

Any Black man who was not actively working a farm was subject to Vagrancy laws where they were arrested for not working. While in prison they were the victims of convict leasing, leased out to work farms, which was another form of virtual slavery.

During the early 20th century, Black owned banks began to take shape throughout the North & South. Some began to flourish but fell victim of its own form of discrimination, when the US government refused to bail out Black owned banks as they did white owned banks during the Great Depression [5].

Massive speculation & irresponsible financial products from Wall Street caused the Great Depression but only one banker was arrested, a black man.

Black banking in the US suffered many more trials as they often weren’t backed by government programs

Black banks also served lower income populations who often didn’t keep their money in accounts which choked their ability to offer credit & loan products to those communities

In order to get the New Deal passed, FDR conceded to allow Southern states to control the allocation of funds. This led to a majority of Black families excluded from the benefits of the New Deal which resulted in Black families missing out on an estimated $143B, while $570B went to white American families [6].

The GI Bill suffered similar consequences which denied $45B to Black soldiers and their families, while injecting $700B into the homes of white Americans [7].

From 1935–1965, home ownership was encouraged in America as that was the path to the middle class. $1 Trillion was provided to mostly white American and white immigrant families, while Black families received less than 2% of those funds [8].

Banks at the time refused to offer any credit to Black families which was and still is the backbone of modern capitalism. If offered, those financial products were predatory and excessive in nature.

This also kicked off the era of redlining which forced Black families only to be able to buy in specific areas that were designated ghettos. This practice was so insidious that the Federal Housing Administration refused to insure mortgages in and near black-owned areas which eliminated access to mortgages for most Black families even when they could easily afford a mortgage.

Black families, even wealthy ones, were relegated to ghettos and were forced to leverage predatory mortgages that often times were 50–75% higher than those received by white families

Homes were immediately undervalued after purchase due the fact that white families would never purchase in these areas, severely limiting future upside.

This had a trickle down effect on public services as white communities enjoyed robust education & social programs, spending on children in black communities were 5–10x less due to the lack of tax dollars.

That lack of spending resulted in massive gaps in education and eventually employment.

The 1960’s ushered in the era of crack-cocaine & mass incarceration. Politically this was used as a decoy to skirt responsibility for the poverty that took place in the Black community [9].

As Adam Walinsky, President Kennedy’s speechwriter, exclaimed: “If we blame crime on crack, our politicians are off the hook. Forgotten are the failed schools, the maligned welfare programs, the desolate neighborhoods, the wasted years. Only crack is to blame. One is tempted to think that if crack did not exist, someone somewhere would have received a Federal grant to develop it.”

Government programs to support the Black community were vilified in order to appease southern & white voters who were against taxation for the benefit of under represented groups

In order to combat the rising political movements like the Black Panther party & Nation of Islam, mass incarceration practices were put into place. This both cut those movements at the knees and decimated millions of Black homes by imprisoning Black men who were the chief source of income [10].

By 2014, Black Americans made up 34% of the US prison population, while being less than 13% of the total US population [11].

[11]. Presidents Kennedy, Johnson, Nixon, Reagan, Bush & Clinton all used very similar tactics that led to small incremental progress amongst small populations of Black people while skirting responsibility for the gravity of Black poverty in the latter half of the 20th century.

Free Enterprise policies, government legislation (or lack thereof) and inherent biases limited the opportunities provided to Black Americans throughout the 20th century which continued to roll into the 21st century.

Black families went from not being able to access any credit that would have spurred home ownership & businesses to being targeted by something much more insidious.

The advent of subprime credit & subprime mortgages began to flood Black communities. Offered as opportunity, these financial products led Black families to enter a revolving door of debt that was inescapable. Lenders made 11 to 17% more profit on mortgages to Black families vs. white families [12]

[12] The New American dream required a college degree that resulted in another means to put Black families further in debt with the offer of government backed loans. Black populations grew in colleges but with limited post grad opportunities, college debt became an additional burden. Black college student debt doubled that of the average white student ($52k vs $25k) [13]

As white families enjoyed the exponential wealth creation on family assets procured with government aid in the beginning of the 20th century, Black families were dealt another blow being stuck under wealth destroying financial products.

Pay discrepancies lead to vast discrepancies in total wealth — the average Black woman’s net worth is less than 1% of the average white man’s

Recently, business & tech has helped shine a light on communities that reflect the pride, values & content of Black culture but I do think it is our duty to go beyond facilitation and move towards empowerment. Counteracting the pain that has taken place is a massive undertaking that everyone despite their race may not be prepared for and that is ok.

For those who choose to take on this pursuit, it is of grave importance and will require thoughtfulness and care unlike many other endeavors. It will require suspension of your own past experiences in order to fully understand the issues that Black Americans face. I, myself as a black man who works in tech have enjoyed privilege that disallows me to use my own experiences as a proof point.

The one remarkable point I would like to note is that despite all the pain, pillage & plunder listed above Black Americans have still been able to contribute to the richness of our overall society. With a proverbial “one arm tied behind their backs” Black Americans have been able to overcome so much to make amazing contributions in every area of American life. Imagine a world where Black Americans were allowed to use both hands, I believe it’s a world we ALL benefit from.

“Out of the huts of history’s shame, I rise. Up from a past that’s rooted in pain, I rise.” — Maya Angelou

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