COMMENT: Wealth creation will not work as long as wealth extraction continues

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By Jeremie Greer

Comedy is often the lens through which we deal with uncomfortable truths. Chris Rock is one of many comedians who has used his comedy to honestly depict the deep political and economic oppression that Black people endure. In his routine, “Never Scared,” Rock dives headfirst into the widening racial wealth gap, proclaiming that “there are no rich black or brown people in America.” We have some rich, we don’t have any (expletive) wealth. Shaq is rich; the white man who signs his check is rich.”

Unfortunately, he’s right, and his joke is backed up by volumes of research documenting that the racial wealth gap has grown exponentially over time. If nothing is done, people of color will be permanently excluded from the middle class. According to a report by the Institute for Policy Studies: “If the average black family wealth continues to grow at the same rate as it has for the last three decades, it would take 228 years for black families to accumulate the same amount of wealth that white families have today. . . That is only 17 years short of the 245 years of slavery in this country.”

In recent years, it has become increasingly popular to address the racial wealth gap. Everyone from policy advocates and government officials to nonprofits and corporate responsibility officials claim to have the answers. Although many are acting in good faith, most of the solutions being offered are based on wealth creation initiatives, focused predominantly on increasing Black home ownership, business ownership, and personal savings.

During his campaign and throughout his tenure thus far, President Joe Biden has committed to addressing “the issue of racial equity,” incorporating many of those same wealth-building ideas to address the racial wealth gap. Even major corporations, including JPMorganChase, Bank of America, and Wells Fargo, have pledged to invest millions of dollars to close the racial wealth gap.

While these wealth creation initiatives are laudable, most of them will fail because they fail to address the root cause of the racial wealth gap: wealth extraction.

The racial wealth gap is a systemic problem, not a product of Black people’s personal choices. And no matter how many wealth creation opportunities we create for Black people and other people of color, these efforts will never pay off if we leave the processes of wealth dispossession intact.

Unfortunately, racism is profitable. We live in what my organization has called an “economy of oppression,” in which predominantly white politicians and white-led corporations and academic institutions wield economic and political power over the systems that shape the lives and livelihoods of Black and Latino people.

Exclusion, exploitation, and extraction underpin both economic oppression and the wealth of the white elite. The exclusion of people of color denies them access to essential financial products and services needed to navigate our economies, such as bank and credit accounts. Exploitation is the intentional use of the nation’s racial caste system to normalize and deeply ingrain racist financial structures and double standards in our economy (eg, reliance on credit ratings). Ultimately, the resulting insecurity experienced by people of color is used by the wealthy elite as an extraction tool to steal their income and wealth through predatory financial products and services. The Economy of Oppression and the people in power who uphold it intentionally target Black people and other non-Black people of color. The system is built to take financial advantage of Black people, which contributes, by design, to politically criminalizing and silencing them. The priority is always corporate profits over Black lives, profits and riches that could not be made if racism was not profitable.

Wealth extraction in a dual financial system

The financial services industry is central to the Economy of Oppression. This industry, which includes banks, asset management companies, insurance companies, and private equity firms, controls the flow of money in our economy. Through an elaborate network of financial products, services, and instruments, this system is built for extraction, taking capital from precisely the people who have the least to begin with. We refer to it as a “dual financial system” because it offers very different product sets and outcomes for wealthy whites and people of color.

Black people and other people of color are excluded by design from access to the very products and services that provide households with financial security. This includes bank accounts, personal and retirement savings accounts, preferred credit cards, insurance, mortgages, and small business loans. They may be excluded by geography (lack of bank branches or higher auto insurance rates in previously red-flagged neighborhoods), lower wages due to job discrimination and segregation, the wealth gap itself (e.g. , account minimums, or lack of a cushion to keep payments on time during an emergency), or an outright lending bias.

This exclusion then leads to a vicious cycle: The financial services industry exploits the very insecurity it has created by offering predatory products and services that dispossess income and wealth to Black people and other communities of color who have been prevented from accessing better .

People of color who need to plug holes in monthly cash flow due to low wages, lack of an asset cushion, inconsistent cash flow, and low wealth are forced to take out payday loans that charge interest rates up to 700 percent. Black Americans also get fewer discounts and more penalties when they buy auto insurance, meaning we pay much more than white households. In addition, when we can access mortgage credit to buy a home, we are more likely to receive mortgage products with adjustable (and often rising) interest rates or simply face higher fixed interest rates than the rates enjoyed by white households. . This extraction is not happening simply because financial actors don’t like Black and Latino people. It is because there is much to be gained from despair.

This dual system is amplified by the credit reporting system because all the consequences of racial financial exclusion also lead to lower credit scores, which in turn are used for further exclusion. Three mega credit reporting corporations—Experian, TransUnion, and Equifax—act as financial overseers who determine who can and cannot access wealth-generating financial products, services, and capital.

Although it is illegal to use race to determine access to financial services, the credit score produced by these agencies has become an indicator of racial discrimination. It is fully embedded in these scores because of its reliance on measures that have a long history of bias. For example, the measure of paying bills on time favors mortgage and credit card payments (which many black people cannot access) over rent and cell phone payments (which more black people have greater access to). . Types of debt that are more likely to be owned by Black people (eg, student or payday loans) are treated negatively, compounding the impact of financial exclusion.

Those with high credit scores can build wealth through affordable mortgages, prime lines of credit, and low-cost credit cards. Those who don’t have high credit scores have their wealth taken away because they can’t access affordable credit. Without affordable credit, they take on more expensive or possibly predatory credit or run out of things that normally require credit to buy, like a car that doesn’t break down regularly or home repairs. Going without these things also tends to cost more in the long run and makes it harder to build wealth.

As I testified before Congress, the credit scoring system reinforces and exacerbates racial inequalities. Blacks and other non-black communities pay more for basic financial services than whites and ultimately experience a loss of wealth because of it.

Other methods of wealth extraction occur in the public safety and health care sectors. Over-policing in black communities and mass incarceration extract wealth through excessive fines and fees, including child support debt to the state that accumulates during incarceration. A racist health care system, the refusal of some states to expand Medicaid, and the cost of living in a white supremacist society all lead to worse health care outcomes for Black people and also extract wealth, in the form of excess medical debt.

This racist process of exclusion and extraction is driven by the financial industry’s thirst for profit and wealth, and made possible by the broader existence of our nation’s racial caste system.

These systems of exclusion and extraction make it much more difficult for black households to benefit from the wealth building strategies that are normally recommended. For example, black homeowners experience pervasive appraisal discrimination, resulting in lower home valuations and less home equity and, as a result, less wealth than white homeowners. Black businesses are frequently undervalued compared to white-owned businesses, reducing the overall wealth of black business owners. The inability of Black people and other people of color to accumulate wealth as a result of this systemic racism forces homeowners, business owners, and households of color in general to rely on predatory debt just to survive.

Many forms of wealth extraction occur every day in America. The Economics of Oppression has been with us since the founding of the nation and is deeply embedded in our economic systems, as seen in our credit system and labor market. Like any thriving ecosystem, the Economy of Oppression is constantly evolving, frustrating our individual efforts to overcome oppression and build wealth.

Proposals to build wealth for people of color, especially black people, are important, even necessary. But until we dismantle the many wealth extraction systems and the power structures that support them, the racial wealth gap will remain.

The opinions on this page are those of the writers and not necessarily those of AFRO. Send letters to The Afro-American • 145 W. Ostend Street Ste 600, Suite #536, Baltimore, MD 21230 or send a fax to 1-877-570-9297 or send an email to [email protected]

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