The Color of Money

by Mehrsa Baradaran

  Thomas Picketty, demonstrates that the postwar era may have been a unique time in terms of economic growth and that the modern era (post-1970s) is a period of stagnant economic growth and possibly of decline. This stagnant economy is at least in part caused by acute wealth inequality, which must be remedied in order to spur the economy toward growth and increased production.5 In other words, to make America great again we should look at the redistributive government programs that made America great during the postwar era and emulate them in a more inclusive way.6

  Proposals to address the wealth gap directly by providing some form of reparations will be met with powerful political resistance. A 2016 Marist / PBS poll found that 81 percent of white Americans opposed reparations (58 percent of blacks supported the idea).7 Yet economic equality must proceed down a path that acknowledges past wrongs and provides compensatory damages.8 An essential first step in dealing with the wealth gap is to acknowledge that it was created through racist public policy. Full justice demands a recognition of the historic breach of the social contract between America’s constitutional democracy and black Americans. And contract breach requires a remedy. Without that recognition, the Constitution itself stands as a roadblock to redress because it demands that all individuals be neither harmed nor benefited based on group characteristics. But it is unfair to be held to a contract that has already been violated. Blacks have been harmed in direct contradiction to the Constitution’s promise of equal treatment, yet they have still have to contend with its requirement for equal treatment in seeking a remedy. It is indeed time for a new social contract with black Americans that deals honestly with the past breach.

  We must confront history directly, to recognize the breach, and provide compensation. There are a few examples of how such a reckoning might take place and what it could achieve. In 2016, Georgetown University admitted that it had purchased 272 slaves in 1838 and promised to give each descendant of these slaves preferred treatment in admissions.9 The university is planning a “Mass Reconciliation" where it will recognize and apologize for its history. University President John DeGioia explained, “We cannot do our best work if we refuse to take ownership of such a critical part of our history."10 Another example involves private companies that benefited financially from the convict labor system. The spoils of the system have enriched some of the largest southern companies, including the First Atlanta Bank, which held the fortune of one of the largest convict-slave holders in the South, James English. After Wachovia acquired First Atlanta, the bank decided to formally recognize its ill-gotten gains. In 2005 Wachovia issued a formal apology to “all Americans and especially to African Americans and people of African descent" and established a scholarship for minorities. Ken Thomas, former CEO and a white southerner, explained that he was “overwhelmed by the emotional impact our apology had . . . for African American employees." After the apology and internal group discussions with employees, “workers cried, held hands, embraced one another regardless of company rank, and, in an unprecedented way, began speaking to one another."11 A formal apology and a scholarship fund do not erase the injustice of the past, but at Wachovia it represented tentative first steps to healing and harmony.

  Beyond a formal apology, however, designing a compensation program would present significant practical and legal hurdles. The recently created myth of color-blindness is so doggedly defended by the courts and the American public that it would prove difficult to dismantle. Yet it is clearly worth the effort to try to untangle some of these complexities. As Al Brophy explains in Reparations: Pro and Con, “the cost of a meaningful program of reparations—and racial justice—will be colossal, though so will the benefits."12

  The point of this book has not been to propose a particular proposal, but rather to demonstrate that past efforts of economic inclusion have fallen short and that any plan to bridge the wealth gap must include integration or a means to acquire capital. Based on these findings, there are many policy designs worth considering. A reparations program could take many forms from simple cash payments or baby bonds to more complex schemes such as subsidized college tuition, basic income, housing vouchers, or subsidized mortgage credit. Evaluating each of these programs is outside the scope of this book, but nonprofits, academics, and policymakers should be encouraged to propose creative proposals that garner full and meaningful financial inclusion that reverse the effects of historic exclusions from wealth creation.

  One possibility is to just follow the redlines and focus on home-ownership. Most of the neighborhoods that were initially redlined in 1934 have been perpetually denied credit and thus remain pockets of poverty. Racial ghettos, once created, have had remarkable staying power. Across the country, these ghettos are still the areas where the wealth and well-being gaps are most dramatically visible. These are the districts where poverty is still concentrated, schools are segregated, and properties continue to be devalued. By focusing a reparations program on geography as opposed to identity, policymakers can avoid the sacred cow of color-blindness and link reparations with combatting segregation. Moreover, a program focused on homeownership has the potential to lead to long-term intergenera-tional benefits as the home and land are passed down. A home can also be used as collateral for other life-enhancing loans, like consumer or student loans. Such a program might also be more palatable to policymakers and the public because there is sound historic precedent. Because land grants and mortgage subsidies were the instruments through which white Americans gained a wealth advantage over black Americans, it would be apt to use land grant or mortgage credit programs as the means to level the playing field.

  To evaluate future reforms, we must absorb the lessons of the past and make sure we are not repeating the same mistakes. We might want to apply the following short litmus tests to any policy proposal: does the program require some collective sacrifice or does it place the burden of closing the wealth gap entirely on the black community? If the latter, this is a cop-out that refuses to acknowledge that the black community did not create the problem in the first place. Like black capitalism, such programs are trying to get something for nothing and not acknowledging that there was a benefit gained by the white majority as a byproduct of segregation and exclusion. Political expediency should not be the impetus for policymaking. Rather, policy design should proceed out of an honest accounting of the problem at hand and its history. The reality is that any program aimed at compensatory wealth creation will be unpopular. It will have problems and downsides and complications. And it will take time. But the alternative of allowing the wealth gap to continue to grow and perpetuate suffering is unacceptable and unjust.

  In contemplating the possibility of change, it is crucial to keep in mind that social and political evolution is possible and has indeed been made already. Decidedly, we do not live in a postracial society, but it is important to step back and note the undeniable progress in social, scientific, and political thought. Take the case of interracial marriage. Fears of miscegenation were the backdrop to the Jim Crow framework and the fuel that fed much of the violence toward black men. In 1958, only 4 percent of Americans approved of interracial marriage. By 2013 a Gallup poll found that 87 percent of Americans approve.13 Having mapped the human genome, modern science has now fully dispelled the myth that race is a meaningful genetic trait.14 Racial division has never been a biological fact, but rather a political weapon, and our shared humanity will soon become an obvious fact, hopefully leading to more inclusive policymaking. Politically, Americans are much more tolerant and pluralistic than before, even when it seems as though things never change. The majority of the American public elected Barack Obama to office twice. Putting aside the ugly racist backlash engendered by his presidency, a black president would not have been possible in any previous era.

  Racism is not only harmful to blacks; it is a corrosive influence on white culture. Frederick Douglass explained that he watched his white mistress change as she became a slave master. Her ownership of a human being warped an
d corrupted her previously decent character and turned her into hateful person.15 C. Vann Woodward describes how the South lost its soul in its obsessive and pervasive enforcement of Jim Crow.16 James Baldwin worried about “the death of the heart” that racism had wrought on American culture, for “whoever debases others is debasing himself.”17 Baldwin also understood that the “future of the Negro in this country is precisely as bright or as dark as the future of the country.”18 The sooner Americans recognize that the fate of black America is tied to the fate of white America, the faster it can achieve true democracy and shed the weight of historic injustice.

  Americans must decide whether to keep embracing our history of racial tribalism or to shed these divisions and go forward as one people, indivisible. Can America’s majoritarian democracy support a program intended solely to benefit the black minority? It certainly did not in 1870, 1930, or 1960. However, there is reason to hope that this is more likely now than ever. We are facing another pivot point. The racial detente of the 1960s has fallen apart. The myth of postra-cial America has been dispelled, and renewed tensions have erupted on the national stage as well as in segregated pockets of poverty in America.

  Modernity will inevitably bring us closer together, which can lead to either greater resentment or greater cooperation. Perhaps more people will realize that what benefits a minority will also benefit the majority. Full racial integration will eventually remove pockets of blight, crime, and deprivation across the country. This will advance the entire American population. Integrated schools will improve education for all students, and increased equality will spur economic growth.19 We must shed the destructive myths that separate can be equal, that a segregated economy will reach prosperity on its own, or that black banks can lead to black prosperity without fundamental economic changes. We cannot deflect the responsibility of economic equality onto black communities alone. W. E. B Du Bois declared in 1948 that the problem of American democracy was that “we have not tried it."20 Perhaps it is time to try.

  NOTES

  ACKNOWLEDGMENTS

  INDEX

  1. Martin Luther King, “The Other America,” Grosse Pointe High School, March 14, 1968.

  2. “The typical Black household now possesses just 6 percent of the wealth owned by the typical white household.” http://www.demos.org/publication/racial -wealth-gap-why-policy-matters.

  NOTES

  3. Rakesh Kochhar, Richard Fry, and Paul Taylor, “Wealth Gaps Rise to Record Highs Between Whites, Blacks, Hispanics,” Pew Research Center, September 26, 2011, 2, http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs -between-whites-blacks-hispanics/.

  4. Booker T. Washington, “The Awakening of the Negro,” Atlantic Monthly, September 1896.

  5. Martin Luther King Jr., “I’ve Been to the Mountaintop,” Speech, Memphis, TN, April 3, 1968; cited in A Testament of Hope: The Essential Writings and Speeches of Martin Luther King, Jr., ed. James M. Washington (New York: HarperOne, 2003), 283.

  6. Malcolm X, “The Ballot or the Bullet,” Speech, Cleveland, OH, April 3, 1964.

  7. “Nixon Urges ‘Black Ownership’ to Help Solve Racial Problems,” New York Times, April 26, 1968, 27.

  8. Ronald Reagan, “Remarks in Denver, Colorado, at the Annual Convention of the National Association for the Advancement of Colored People,” Denver, CO, June 19, 1981, http://www.reagan.utexas.edu/archives/speeches/1981/62981a .htm.

  9. Ibid.

  10. James Baldwin, Nobody Knows My Name: More Notes of a Native Son (New York: Vintage International, 1993).

  11. “The Humble Beginnings of a Large Bank,” Office of the Comptroller of the Currency, http://www.occ.gov/ about/what-we- do /history/giannini-bank-article -html-version.html.

  12. Kristin Broughton, “Black-Owned Banks Must Revisit Their Business Models, M&F Chief Says,” American Banker, June 9, 2015, https://secure.mfbonline.com /wp-content/uploads/2015/07/jimsills-news.pdf.

  13. Christy Ford Chapin, “ ‘ Going Behind with That Fifteen Cent Policy’: Black-Owned Insurance Companies and the State,” Journal of Policy History 24(4) (2012): 644-674.

  14. Russell D. Kashian, Richard McGregory, and Derrek G. McCrank, “Whom Do Black-Owned Banks Serve?,” Federal Reserve Bank of Boston, Communities & Banking, Summer 2014, http://www.bostonfed.org/commdev/c&b/2014 /summer/whom-do-black-owned-banks-serve.htm.

  15. Federal Deposit Insurance Corporation, 2013 FDIC National Survey ofUnbanked and Underbanked Households, October 2014, 16, https://www.fdic.gov /householdsurvey/2013report.pdf.

  16. Paul Kiel and Annie Waldman, “The Color of Debt: How Collection Suits Squeeze Black Neighborhoods,” ProPublica, October 8, 2015, https://www.propublica.org /article/debt-collection-lawsuits-squeeze-black-neighborhoods.

  17. Billie Holiday, “God Bless the Child,” Okeh, 1942.

  18. Manning Marable, How Capitalism Underdeveloped Black America (Chicago: Haymarket Books, 2015), 1.

  19. Dalton Conley, Being Black, Living in the Red: Race, Wealth, and Social Policy in America (Berkeley: University of California Press, 2010), 25.

  20. Martin Luther King Jr., “I Have a Dream," Speech, Lincoln Memorial, Washington, DC, August 28, 1963.

  Chapter 1 Forty Acres or a Savings Bank

  1. Andrew Delbanco, The Abolitionist Imagination (Cambridge, MA: Harvard University Press, 2012), 68-69.

  2. Abraham Lincoln, “Second Inaugural Address," Washington, DC, March 4, 1865, http://avalon.law.yale.edu/19th century/lincoln2.asp.

  3. As Edward Baptist recounts, “3.2 million people enslaved in the United States had a market value of $1.3 billion in 1850." Edward E. Baptist, The Half Has Never Been Told (New York: Basic Books, 2014), 352.

  4. Cotton Mather wrote that the Law of Christianity allows slavery. Cotton Mather, Negro Christianized: An Essay to Excite and Assist That Good Work, the Instruction of Negro-Servants in Christianity (1706), Second (North) Church, Boston.

  5. George D. Armstrong, The Christian Doctrine of Slavery (New York: C. Scribner, 1851), 134.

  6. John Jones, Confederate Currency: The Color of Money, Images of Slavery in Confederate and Southern States Currency (New York: New Directions, 2002). Images available at http://www.colorsofmoney.com/.

  7. Baptist, Half Has Never Been Told, 244-248.

  8. Historian Betty Wood explains, “economic self-interest dictated that all the fruits of a slave’s labor should accrue to the owner. . . . Slaves were not allowed to hire out their own labor. Neither could they ‘buy, sell, or exchange any goods, wares, provisions, grains, victuals or commodities of any sort or kind whatsoever’ without first obtaining the permission of their owners." Betty Wood, “White Society and the ‘Informal’ Slave economies of Low-Country Georgia: 1763-1830," Slavery and Abolition: A Journal of Comparative Studies 11 (1990): 313.

  9. According to historian Leon F. Litwack, the situation of blacks in the north during the 1800s was “at best deplorable" due to their restricted access to even menial employment. Moreover, “in virtually every phase of existence, Negroes found themselves systematically separated from whites" in the North. Leon F. Litwack, North of Slavery: The Negro in the Free States, 1790-1860 (Chicago: University of Chicago Press, 1965), 97; see also Leon Litwack, “The Emancipation of the Negro Abolitionist," in The Antislavery Vanguard, ed. Martin B. Duberman (Princeton, NJ: Princeton University Press, 1965), 141-143. Historian Charles Wesley explains that in the 1850s in the North, though blacks were physically free, “they were enslaved and placed in degraded economic positions by the apathy of their friends and the hostile attitude of their fellow workers." Quoted in Charles L. Franklin, The Negro Labor Unionist of New York (New York: Columbia University Press, 1936), 21.

  10. Alexis de Tocqueville, trans. Henry Reeve, Democracy in America, vol. 1 (Clark, NJ: Law Book Exchange, 2007), 339.

  11. In 1805 Maryland prohibited free blacks from selling corn, wheat, or tobacco without a license. In North Carolina, any free black who wanted to trade or sell any goods
needed a license, and these licenses were practically impossible to obtain. In 1844, Virginia revoked the license of a mulatto innkeeper without explanation. John Seder and Berkeley G. Burrell, Getting It Together: Black Businessmen in America (Boston: Houghton Mifflin Harcourt, 1971), 5.

  12. Manning Marable, How Capitalism Underdeveloped Black America, 126.

  13. Harris, Negro as Capitalist, 8.

  14. John Henry Harmon Jr., Arnett G. Lindsay, and Carter G. Woodson, The Negro as a Business Man (College Park, MD: McGrath, 1969), 7.

  15. The origin of black banking is described as “beginning with the pioneers who not only loaned their money but also the savings of their fellowmen, which were entrusted to their care." Harmon et al., Negro as a Business Man, 42.

  16. Ibid. For example, there was John Stanley of North Carolina, who was a barber and a farmer and who sold tradable debt on the side. He was backed by white men in town who preferred not to get their hands dirty with the “social stigma attached to sharp [lending] practices," which included lending to blacks with interest. Thomy Lafon of New Orleans was a dry goods merchant who lent money out of his considerable wealth, valued at around $400,000. Harris, Negro as Capitalist, 21.

  17. John Sibley Butler, Entrepreneurship and Self-Help among Black Americans: A Reconsideration of Race and Economics (Albany: State University of New York Press, 1991), 46-48, 106.

  18. The South Carolina Act of 1800, The Anti-Slavery Record, vol. 3 (New York: The American Anti-Slavery Society, 1838).