Economic Setbacks of Black People in America and How They are Affecting Us Today

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Written by Zoe Scott

The wealth gap between black and white Americans is a subject commonly referred to, but not commonly understood. The wealth gap is often referenced in regards to lack of total wealth compared to other races in the U.S. Politicians of all parties have stated their plans for it’s abolition and nearly everyone has an opinion on it, but few can answer the question, where did it start? This question simply cannot be answered by naming just one point in black history. It is all connected and has resulted in the lack of equal opportunities for black people. The lasting effects of black oppression are still prevalent in today’s America.


After Slavery’s abolition in the U.S. with the 13th amendment, Reconstruction of the South began. President Lincoln and the U.S. Congress constructed their plans for progression in the South. With the ratification of the 14th and 15th amendments as well as the increasing social value of Black Americans, things started to look up. However, after the controversial election of 1876 (prior to the party switch), Reconstruction fell. Leaders of both the Democratic and Republican parties came together to form the Compromise of 1877. Changes previously made in the south were essentially reversed. In return for reversal, Democrats would allow Hayes to be president. As a result of the fall of reconstruction, white supremacy grew. The beginnings of the Ku Klux Klan, Black Codes, and the Amnesty Act had arrived. Black Codes further restricted the rights of black people. They couldn’t rent land, borrow money, testify against a white person in court, and were forced into strict work agreements. These work agreements were contracts stating that black people would work cotton fields under white supervision for extremely low wages. This was called sharecropping and was done by black people to avoid arrest for vagrancy. Because of the lack of education previously available to black people, it was extremely difficult to find any other job to support them and their families. Because black people had just begun to be paid for their labor, generational wealth in black families was nonexistent. This made it extremely difficult to buy homes and sustain a family.


After the stock market crash of 1929, the great depression hit. In 1933, US President Franklin D Roosevelt signed the Home Owners Loan Act to provide “emergency relief” to homeowners and help them refinance. With this act, the Home Owners Loan Corporation (HOLC) was created. This act did help many Americans, in fact, the home ownership rate went from 50% to 70% and granted over 1 million loans totaling about $350 billion by 1936 (approx. $750 billion today). However, it did very little if anything at all to help black people and others of color, this is partially because of redlining. Redlining is when the availability of loans and insurance are restricted to certain areas of communities. The term “redlining” comes from the practice of outlining neighborhoods of many people of color, especially black people in red while outlining white neighborhoods in blue or green on maps created by the HOLC. This practice was hidden by the premise that these neighborhoods housed people who were much less likely to pay back a loan. However, the main criteria for a neighborhood to be redlined was it having black or brown people living in it. Living in a redlined neighborhood made it nearly, if not impossible to get a loan or refinance.


In 1934, Roosevelt signed the National Housing Act in attempts to make housing and mortgage more accessible and affordable to the American people during the depression. In addition, this was supposed to lower foreclosure rates. The National Housing Act is a law a part of the New Deal. With this law, the Federal Housing Administration (FHA) and the Federal Saving and Loan Corporation (FSLC) were created. Around this time in most redlined areas, crime began to increase and property value decreased. Landlords and other white property owners began to abandon their properties in redlined areas and purchase homes in newly built suburbs. Covenants, agreements or contracts issued by developers and investors were made that strictly forbid homes to be sold to black or brown people in many of these suburbs.

In 1968, the Fair Housing Act was signed by President Lyndon Johnson. This act was supposed to prohibit discrimination during the sale, rental, or financing of residential property based on race, religion, sex, etc. In addition, it was supposed to promote integration and reverse housing segregation. Unfortunately, this did very little to fix the existing problems and was selectively enforced. During this time, segregation was at its peak. This is so important because home ownership is a crucial method to generating wealth in the United States. This helps to explain why the collective wealth of the wealthiest black families is so little compared to the collective wealth of the wealthiest white families. White families hold 7x the wealth of black families do in the United States. Black people hold only 3% of the wealth in the US today while making up 13% of the population.


This can oftentimes be traced back to one cycle: a black child grows up in a low-income household in a historically poor or “bad” part of town and attends an underfunded school. The schools are underfunded because they are primarily funded by tax money paid by the residents of the district. Statistically, many of these neighborhoods have a significantly higher relative population of people of color than their surrounding suburbs which are often white dominated. This way, more expensive or wealthy neighborhoods will have nicer schools with higher budgets and poorer neighborhoods will have underfunded schools and lower budgets. With a lower budget comes less resources and less opportunities for students. Studies found in 2019 that students who graduate from non-low income schools are more than twice as likely to earn a degree within six years after graduation than a student from a low income school. Without opportunities for a sufficient education and a chance at college, that child is not qualified for higher paying jobs. So, if they decide to have children, that child ends up exactly where they were starting the cycle all over again. This directly plays into the opportunity gap and is part of the reason why black families are continuously pushed into worsening situations and being subjected to far less opportunities for betterment of their situation than white families. “Making it out” should not be so rare or such a common yet unachievable goal for so many young black Americans. Black and brown children deserve the same opportunities casually thrown at white children.


A common example of the lasting effects of redlining and financial oppression of black people are the disproportionate population sizes of black people living in inner city neighborhoods. These places often referred to as the “ghetto” by outsiders are presented alongside the thought of rampant violence, crime, and poverty. These stereotypes only add to the difficulty of financial improvement as they often inhibit residents from landing better jobs, better housing, and necessary resources. These resources include basic necessities like sufficient food, clean water, shelter, and parental care. Other resources include education, protection of the community, safe spaces for activities, available counseling for issues such as mental health, drug and alcohol abuse, instances of sexual and physical abuse, and unsafe home environments. Without these resources, the opportunity for black youth to succeed becomes less and less.


Knowledge of the origin of the wealth gap for black people in America is key if we want any chance in fixing it. Over the years, oppression of black people has become more evolved and well hidden. It is commonly blown off as an issue of class. In some ways, it is, but it all started with racism. Even when we made our own communities and thrived, they were taken away from us. Black and brown people are forced to work harder than their white peers in order to gain half as much success.

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