June 16, 2022
Economists Show Inequities’ Roots in Slavery
Conversations about the vast White-Black disparity in U.S. wealth may acknowledge its roots in slavery. But four economists have now made the case quantitatively by charting changes in the wealth gap since the Civil War.
The political and societal influences on wealth accumulation between 1860 and today are multifaceted but the basic trajectory is this:
The wealth gap shrank by roughly half during the Civil War era from 1860 to 1870 and dropped in half again between 1870 and 1920, the researchers said in their recent paper. The decades of improvements in Blacks’ per capita wealth, compared with Whites’, occurred despite a quick end to Reconstruction after the Civil War and the rise of Jim Crow laws around 1890 that curtailed recently freedmen’s rights in the South. (I’ll explain more about this counterintuitive finding below.)
Progress continued but was more modest after the 1920s and started stalling out around the 1950s. The situation deteriorated after the go-go-1980s on Wall Street as Black Americans’ wealth levels fell behind largely because they own much less stock and haven’t equally enjoyed the bull market gains of recent decades.
The wealth gap is so entrenched today, the study concluded, that reaching equality is “an extremely distant or even unattainable scenario.”
The patchwork of data put together by the economists – from Princeton University, the University of Bonn, and the Federal Reserve Bank of New York – to track the evolution of the wealth gap is unique. It could not have been easy to assemble. Their sources included The Negro Year Book published by the Tuskegee Institute from 1912 to 1952, as well as state tax data collected by the southern states during and after the Civil War, historic Census data, and the Federal Reserve’s modern Survey of Consumer Finances.
Given the data, the picture of Black wealth is painted with broad brush strokes. For a brief period after the Civil War, the researchers found, the wealth gap shrank dramatically as Black property ownership increased in the South. The new owners – farmers, craftsmen and entrepreneurs – added their wealth to the wealth of the North’s existing Black merchant class and real estate investors.
Even so, the post-Civil War improvements look much better only in comparison with the long history of enslavement, the researchers said. “Given extremely low levels of Black wealth under slavery, even modest accumulation can imply a high growth rate for Black wealth that greatly exceeds that of white wealth,” they wrote.
The growth in African-Americans’ wealth continued to outpace that of Whites into the early 20th century, which kicked off the Great Migration of Blacks from the Jim Crow South to the North for jobs. The New Deal social programs helped too – many Black workers were covered by Social Security, with the notable exception of agricultural and domestic workers. But after the war, Black veterans often confronted insurmountable obstacles to obtaining low-interest mortgages under the GI bill.
During the 1950s and 1960s civil rights movement and up until 1970, decades of progress started stalling out as the gains from the Civil Rights Act, the Voting Rights Act and affirmative action in federal hiring were being countered by historic segregation and employment discrimination.
Around 1980, the White-Black wealth gap began to widen again as the stock market doled out its gains mainly to a predominantly White investor class. In contrast, the majority of Black households’ wealth – what little they have – has always come from earning money and saving that money to buy a house – and not from owning stocks, the researchers said. And amid periods of large increases in housing prices, bank redlining made it harder for Blacks to obtain mortgages. In the mid-2000s subprime mortgage crisis, foreclosures also hit Blacks much harder.
The point of this study, the researchers tell their readers, is that today’s disparities are rooted in slavery. “Our long-run view of the racial wealth gap underscores the importance of slavery and post-slavery institutions for the persistence of the wealth gap.”
Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. This blog is supported by the Center for Retirement Research at Boston College.