Earlier this week, The Pew Research Center released a report showing that our nation’s recent Great Recession expanded the White/Black wealth gap to record highs, with Whites holding $20 in assets for every $1 held by Blacks, the worst ratio since they began recording these figures in 1984. The frenzied news reporting and hand-wringing punditry in response to this report would have been comical, were it not for the serious economic and societal implications.
What?! White people have more wealth than Black people? How in the world did that happen? And the Great Recession did nothing to close the gap? We need to get on top of this right away! But first
–the NFL is back!What we at Black Enterprise call the Black wealth gap is nothing new. As Rhodes Scholar Rakim Brooks points out in his blog for the Huffington Post, after reaching a low of 7:1, the wealth gap had begun to widen long before the Great Recession, growing to 11:1 by 2004. Closing the Black wealth gap has been at the core of the Black Enterprise mission since our magazine was launched by our Founder and Chairman Earl Graves Sr. in 1970, long before The Pew Center began to issue its reports on White/minority wealth disparity. Black Enterprise even assembled its own Board of Economists, including former Federal Reserve Governors Emmett J. Rice and Andrew F. Brimmer, to study and address the issue as far back as 1982. The Black wealth gap is also why we launched the Black Wealth Initiative (now Wealth for Life) in 2000, to refocus our mission for the 21st century.
But let’s be real about how old the Black wealth gap really is: It dates from before the very founding of our nation, built on an economic model that equates ownership of property with power–as it does to this day. Problem is, for the first couple of centuries of America’s creation, not only was it often next to impossible for Blacks to acquire and retain property, we were the property! I’m pretty sure that, compared to the wealth gap of, say, 1870 (seven years after President Abraham Lincoln issued the Emancipation Proclamation), today’s 20:1 ratio represents enormous progress. Of course, the roots of racial wealth disparities are rarely discussed (even the reparations for slavery debate has been reduced to a barely audible hum on the fringes of the political spectrum), not even by the hundreds of newscasters, reporters and pundits who’ve weighed in on the Pew Research Center’s study this week.
All that said, the Black wealth gap must be closed. It’s at the core of the Black Enterprise mission. It’s the key to the continued progress
of African Americans toward full equity and participation in the national and global economies. And it is critical to the future economic competitiveness and security of our entire nation. The question is: How do we do it? Of course, we need to recognize that a chasm that was created and fossilized over the course of centuries will not be closed in just a few decades. As my colleague and brother Derek T. Dingle, editor-in-chief of Black Enterprise magazine, says in his Power Moves blog, this is a marathon that will require hard work and innovation in areas including education, job creation and building more Black-owned employer businesses. It is a humongous task, so complex, so potentially overwhelming, so intertwined with the status quo of our national economy and politics that it may seem impossible to know where to begin. Except it’s not. Click to the next page for a couple of clues:The problem with Black people is not money. It’s what Black people do with their money. –Dr. Dennis Kimbro
The only thing worse than not having what you need is not using what you have. –Rev. Deforest Soaries Jr.
That’s right. Closing the wealth gap does not start with the White House or Congress. It doesn’t start in corporate America or Wall Street, or even public schools or higher academia. It starts with you and me. Step 1 of closing the wealth gap: Make better, more responsible decisions with the money we have.
As I said in an earlier post, “How Badly Do You Want Financial Freedom?”, the definitions of poverty and wealth do not change:
- Wealth is spending less money than you make, saving and investing the difference in things that increase in value and/or pay you interest, thereby increasing your assets and net worth.
- Poverty is spending more money than you make, spending on things that decrease in value and borrowing to cover the difference, paying interest to others, thereby increasing your liabilities and decreasing your net worth.
The truth is, we are in a much better position to narrow the wealth gap than our ancestors ever were. The poverty experienced by previous generations of African Americans was based on lack–lack of assets, legal protections, political power, educational opportunity, career options, you name it. With the possible exception of the roughly 25% of African Americans living below the poverty line, the poverty experienced by the rest of us is increasingly a result of poor stewardship–doing stupid things, including things we know from experience and observation that we should NEVER do with our money–not lack. The power to change what we do with our income, our credit habits and our spending decisions lies not with the government or corporations, but with us. To put it bluntly, we must do better.
If you don’t read Black Enterprise and other financial magazines every month, why not? Why aren’t you regularly visiting BlackEnterprise.com and similar Websites to make better choices with your money and boost your own financial literacy? And if you do both, why are you not challenging everyone in your family and network to follow suit?
Have you made reading books about money, such as Rev. Soares’ dfree: Breaking Free of Financial Slavery, a monthly habit? Why not? And if you have, what steps have you taken to share what you’ve learned and get such books into the hands of others?
Are you still spending money you don’t have, using credit to buy the things you don’t have the cash for? (Credit was not created as a substitute for cash you don’t have, but to help you avoid having to carry around excessive amounts of the cash you do have. Any other use constitutes credit abuse.)
When are you going to stop living beyond your means? And if you refuse to create and follow a spending plan or stick to a budget, how will you ever know whether or not you are?
When are you going to stop making excuses for not putting cash aside for emergencies and saving for your own retirement?
When are you going to take insurance and estate planning seriously? How can we close the wealth gap if you refuse to protect your assets so that they can be transferred to future generations? What are you doing to teach your kids about money so that they can be wise stewards of our legacies?
These are tough questions, ones I’ve been forced to ask myself. The truth is, I’ve fallen short and I have to do better–and so do you. The person responsible for what happens to the money in your pocket is not President Barack Obama or Rep. John Boehner. It’s not Timothy Geithner or Ben Bernanke. Step 1 in closing the wealth gap is our responsibility.