Module: HST4605 Race and the Desire for Difference
By: Aleksandra Nikitorowicz
The historical relationship between race and economic inequality can be explained by the origins of capitalism, a system which emerged as a result of the transatlantic slave trade. The basis of slavery was the desire for cheap labour which would produce a higher profit, challenging the assumption that slavery was fuelled by racism. Racism emerged out of slavery as a justification for the oppression of African enslaved people, suggesting that the reasons for slavery were not moral, but economic. This can explain the historic relationship between race and economic inequality as minorities are forced into low paid jobs which enable those at the top of the social hierarchy to benefit from the inherently racist capitalist system. As Martin Luther King Jr said, ‘Capitalism does not permit an even flow of economic resources… a small privileged few are rich and almost all other are doomed to be poor’, suggesting that as long as capitalism prevails, so will inequality[1]. African Americans and other racial minorities therefore encounter an inherently racist system which prevents the accumulation of wealth through a corrupt housing and loan system. This in turn creates a cycle of poverty experienced by generations of African Americans due to the capitalist system.
The relationship between race and economic inequality can be traced back to the purchase of Native American slaves by Iberian powers in the late 15th century. Prior to the transatlantic slave trade, Native Americans and poor Irish were put to work on plantations where they endured similar working conditions to African slaves[2]. Kidnapping of poor white working-class Brits was not uncommon in London and Bristol as planters were on the search for cheap labour which would produce the most profit[3]. This mindset driven by profit, created competition between Western powers and saw the formation of a capitalist system which is built upon the supply of cheap labour and therefore, oppression. After slavery was abolished in the colonies, white planters still needed a supply of cheap labour which led to the implementation of the peonage system. African Americans were heavily punished for minor crimes with fines they were unable to repay, which saw them being forced into debt slavery, a continuation of unpaid work and the cycle of poverty[4]. Therefore, as Eric Williams suggests, the reasons for slavery were not moral but economic, with racism its consequence[5].
The strongest roots of black poverty is anchored in the capitalist system as it is a system that relies on making some poor for the benefit of others[6]. Through systematically degrading and suppressing intelligence, a reserve pool of cheap labour is created, something that is still prevalent in American society[7]. By keeping a portion of society deliberately poor, there is a constant supply of cheap labour as minorities are forced into low paid and skilled jobs as a way to provide for their families. This leaves African Americans stuck in a cycle of inter-generational poverty, suggesting that the relationship between race and economic inequality does not stem from a moral standpoint, rather economic circumstances. This cycle of deliberate economic inequality is further emphasised in the American housing system.
Tied into an inherently racist economic system is also a discriminatory housing system which further disadvantages African American’s economic position. After the Great Depression, FDR established the Federal Housing Administration (FHA) which intended to stimulate the economy by encouraging the growth of the construction industry[8]. Interest rates on loans granted by the FHA were low, aiming to encourage home ownership. However, the distribution of these loans had an effect on the demographics of the population through indirectly racially segregating society. Through redlining districts, African Americans were denied FHA loans and forced to urbanise whilst the white population suburbanised[9]. The Racial Provisions of the FHA Underwriting Manual (1936) is explicitly racist in nature stating there should be a ‘prohibition of the occupancy of properties except by the race for which they were intended for’, implying that houses constructed under the FHA were intended for white families[10]. The only way black families were able to buy homes was through contracts which held the responsibilities of home ownership and disadvantages of renting[11]. A study in Chicago revealed that 85% of black homeowners brought homes through these contracts[12]. Despite redlining being banned under the Fair Housing Act of 1968, its effect is still prevalent today with the emergence of ‘hood culture’ which is distrustful of the ‘white man’ but fosters a strong sense of community through shared experiences of racism and poverty.
High interest rates also plague the black community preventing the accumulation of wealth which is associated with economic security. On average African Americans pay a 3% higher interest rate on car loans and 1% more on mortgages than white families, which loan companies justify by arguing African Americans are ‘riskier’ borrowers as they are apparently more inclined to make late payments[13]. Higher interest rates combined with the need to borrow more prevents African Americans from accumulating wealth which would keep families protected from negative income shocks. An association can be made between parental wealth and children’s educational attainment[14]. On average 80% of African Americans verse 64% of white young adults need to borrow to attend college, which can be explained by looking at parental wealth, which African Americans are less likely to have in abundance[15]. This puts African American children at a disadvantage as the cost of college alone discourages African Americans to enrol. This is still a prevailing trend as a study in 2005 revealed that only 56% of African Americans immediately enrol into college in comparison to 70% of whites[16]. Another problem low parental wealth creates for young African Americans is the ability to put down a payment on a house. White parents are 42% more likely to help put a down payment on a house in comparison to 10% of black parents[17]. This means young African Americans are less likely to own a home which prevents the accumulation of wealth, further reinforcing the relationship between race and economic inequality. Therefore, by analysing these statistics, it can be concluded that institutional racism is still prevalent in society, restricting African Americans ability to enjoy the same economic advantages as white people.
A further factor in the relationship between race and economic inequality is the types of employment African Americans typically hold. Marable states that slavery was the only period when black employment reached 100% as even those who were not slaves, were employed in domestic services[18]. Employment in these jobs prevailed until recently. In 1880, 75% of the black community lived in the rural South, working as agricultural workers on cotton farms[19]. However, when the cotton industry collapsed in 1914, African Americans were forced to migrate to the North in search of industrial jobs which were characteristically low paid and skilled[20]. The deindustrialisation period of the 1970’s proved to be very damaging to black males as they were twice as likely to be unemployed compared to white males[21]. However, deindustrialisation had the opposite impact on African American women as they were now being pushed into service sector jobs which had the characteristics of domestic services, giving them the required experience[22]. This high demand in female labour saw the number of black women employed in FIRE industries rise by 39%, offering black women the opportunity to have economically rewarding jobs[23]. However, despite there being more opportunities for black women, as a whole, African Americans were still concentrated in the lowest paid and skilled jobs which prevented the accumulation of wealth. However, statistics show that high income doesn’t translate to wealth as black families making $100,000 live in neighbourhoods inhabited with white families earning only $30,000[24]. This suggests that the relationship between race and economic inequality can also be linked to the types of employment African Americans are typically in. Employment in low skilled jobs also impacts African American children as they are less likely to attend college and therefore less likely to break the cycle of poverty. However, black scholars suggest that by attaining a college degree, young African Americans are more likely to break the cycle of intergenerational poverty and attempt to equal out the racial wealth gap.
It has been said that higher education has the power to close the black-white income gap. Studies conducted in 2002 have revealed that black students, specifically women, earn over twice the amount of money than those with only high school diplomas. Those with high school diplomas earn on average $17,000 a year whereas those with college degrees earn $35,000[25]. This clearly suggests that higher education qualifications have the power to increase the incomes of African Americans, therefore promoting the accumulation of wealth and breaking the cycle of poverty. However, only less than 7.8%, 1 in 10, African Americans hold a college degree, implying that the majority of the African American population is still plagued with poverty[26]. This can be explained by the likelihood of African Americans attending schools in poverty ridden areas which means there is a lower quality of teaching and less access to technology and resources to assist learning[27]. Attendance to schools in areas suffering with poverty significantly lessens the chances of students enrolling into college. However, many black scholars have argued that the attainment of a college diploma is crucial in escaping poverty, but more needs to be done about the quality of school’s minorities attend. Despite the attainment of a college degree, there is an income gap between white and black graduates, with white females earning $37,000 compared to $35,000, implying there is still a racial income gap[28]. This suggests that it is fundamentally the American system preventing African Americans from attaining the same economic status as white people, as despite having the same qualification, it is their race that prohibits success. Therefore, the relationship between race and economic inequality will be difficult to change because of the inherently racist system of capitalism.
In conclusion, the relationship between race and economic inequality can be traced back to the origins of capitalism, a system that relies on keeping a section of society poor for the benefit of a few. The system itself is also inherently racist as racism justified slavery, maintaining the consistent flow of cheap labour. This created the negative relationship between race and economic equality as African Americans were systematically oppressed in order to ensure the survival of the capitalist system. The discriminatory housing system further embedded racial inequality in the America through redlining districts and forcing African Americans to urbanise. This forced urbanisation allowed poverty and economic inequality to further manifest, as urban areas typically received less school funding which prevents African American children from breaking the cycle of poverty. As well as an inherently racist housing system, from which the effects are still felt, loan companies also discriminate against African Americans, inhibiting the accumulation of wealth which is crucial in achieving financial security. African Americans pay higher rates on loans because they are labelled as ‘risky’ borrowers, emphasising the extent of racial discrimination in the American system. This indirectly affects young African Americans as they are less likely to enrol into college because of the fear they will not be able to pay back the loan, trapping them in a vicious cycle of poverty, trapped in low paid and skilled jobs. Therefore, it is clear that the relationship between race and economic poverty is not necessarily rooted in racist attitudes, but also the needs of a capitalist system. Capitalism created the need for racism and until it is abolished, inequality and racism will remain.
Footnotes
[1] Martin Luther King Jr, March on Washington speech, August 28, 1964 [2] Eric Williams, Capitalism and Slavery, University of North Carolina Press, 1944, p.10 [3] Ibid., p.11 [4] Manning Marable, How Capitalism Underdeveloped Black America, South End Press, 1983, p.9 [5] Ibid., p.6 [6] Ibid., p.32 [7] Ibid., p.8 [8] Hazel A. Morrow-Jones, Federal Mortgage Insurance and the Characteristics of Intraurban Movers in the United States, Population Research and Policy Review, Vol. 2, No. 1, 1983, p.86 [9] Ibid., p.89 [10] FHA underwriting manual 1936 [11] Ta-Nehisi Coates, The Case for Reparations, https://www.theatlantic.com/magazine/archive/2014/06/the-case-for-reparations/361631/ [12] Ibid. [13] Ngina S. Chiteji, The Racial Wealth Gap and the Borrowers Dilemma, Journal of Black Studies Vol. 41, No. 2, 2010, p.356 [14] Alexandra Killewald, Return to “Being Black Living in the Red”: A Race Gap in Wealth That Goes Beyond Social Origins, Demography Vol. 50, No. 4, 2013, p.1177 [15] Chiteji, The Racial Wealth Gap and the Borrowers Dilemma, p.358 [16] Jokata L. Eaddy, The Correlation Between Race and Poverty: Income Inequality, Education, and Access to Technology, Thirteen Session on the Intergovernmental Working Group on the Effective Implementation of Durban Declaration and the Programme of Action, 2015, p.6 [17] Chiteji, The Racial Wealth Gap and the Borrowers Dilemma, p.358 [18] Marable, How Capitalism Underdeveloped Black America, p.25 [19] Kenneth Ng, Nancy Virts, The Black-White Income Gap in 1880, Agricultural History, Vol. 67, No.1, 1993, p.1 [20]Marable, How Capitalism Underdeveloped Black America, p.30 [21] Angela D. James, David M. Grant and Cynthia Cranford, Moving up but How far? African American Women and Economic Restructuring in Los Angeles, 1970-1990, Sociological Perspectives, Vol. 43, No. 3, 2000, p.402 [22] Ibid., p.405 [23] Ibid. [24] Coates, The Case for Reparations [25] Theodor M. Berry, The Power of Higher Education to Close the Black-White Income Gap, The Journal of Blacks in Higher Education, No. 30, 200-2001, p.26 [26] Ibid., p.28 [27]Eaddy, The Correlation Between Race and Poverty, p.8 [28] Ibid., p.26
Bibliography
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