The Register Citizen (Torrington, CT)
Black business, the wealth gap and the case for reparations
America is taking a collective course on American history this summer because of the George Floyd murder and the subsequent protests.
The subjects covered this summer have been the Tulsa Race Riot of 1921 where whites destroyed the vibrant African American community known as Black Wall Street. Many Americans have also learned that memorials and statues of Confederate generals and leaders like Jefferson Davis and Robert E. Lee were not constructed before the Civil War or immediately after the Civil War; most were built in the 20th century during the height of the Jim Crow era of government-sponsored American apartheid. In fact, America was the model for South African apartheid, and Hitler even acknowledged Jim Crow as a model for his vision of Germany.
Americans have also learned that the last Black Americans were freed from slavery on June 19, 1865, (Juneteenth) more than two years after the Emancipation Proclamation. And white Americans have learned there is deep systematic bias by police departments across the country that has resulted in the deaths of thousands of Black Americans. However, one thing that has not been prominently discussed is the relationship between this history and its connection with the racial wealth gap and state of Black businesses.
According to the Federal Reserve, the typical white household has $171,000 in net worth while the typical Black household has $17,600. Net worth is calculated as the difference between what you own and what you owe. This racial wealth gap manifests itself in lower rates of homeownership and greater levels of poverty passed down from one generation to the next. Yes, just as wealth can be passed from one generation to the next, so too can poverty.
And because homeownership is one of the primary methods of funding a business, Black entrepreneurs typically start with significantly less capital, resulting in smaller, unstable enterprises. A recent report showed that 41 percent of Black businesses have shut down since the start of the pandemic compared to only 17 percent of white businesses. The Minority Business Development Agency of the U.S. Department of Commerce estimates that only 4.2 percent (109,000) Black-owned businesses out of the over 2.6 million nationwide have employees. Over 21 percent of whiteowned businesses have employees.
Unfortunately, the racial wealth gap is not going to close “naturally”; in fact, it is only going to get worse. This is not a political statement, this is math. Assuming both Black and white household wealth increases by 7 percentage points every year for the next 30 years, white household wealth will grow from $171,000 to $1.3 million by 2050, while Black household wealth will grow from $17,600 to $134,000. The racial wealth gap will increase from $153,400 to $1.17 million in 2050.
The only way to close this wealth gap and give Black entrepreneurs a chance to form businesses and for Black communities to have a chance to experience better schools, better health care, better housing and better public services is for there to be a massive wealth transfer to Black households. In other words, it is time for a national conversation on the case for reparations.
Many opponents bristle at the word reparations. Some argue that they were not party to the crime of slavery and should not have to pay for those historical wrongs. Some state that is nearly impossible to identify who should be eligible for those payments. Some argue that reparations would only heighten tensions. And some even argue it would not make a difference in the material conditions of Black Americans.
My brief response to each of these arguments is that if each of the 14 million Black American households were to receive $100,000 in reparations (for a total cost of $1.4 trillion), it could be completely financed by a onetime 3 percent wealth tax on the wealthiest 1 percent of Americans who own more than $36 trillion of wealth. Therefore, 99 percent of Americans would not have to pay one cent to correct part of the damage caused by the history of slavery and Jim Crow. These resources would make a material difference in the lives of not only every Black American, but would drastically reduce if not eliminate the need for much of the current social welfare system that imperfectly addresses the problems of this wealth gap that do cost most white Americans.
In January 1865, Gen. William Tecumseh Sherman asked Black leaders in Savannah, Ga., what they wanted. Those leaders had a one-word answer — land. General Sherman then issued Field Order No. 15 that authorized 400,000 acres of land from Savannah to Jacksonville, Fla., be given to the newly freed slaves. Each former slave household was to receive 40 acres of tillable land. Unfortunately, President Andrew Johnson rescinded Sherman’s order and gave the land back to the Confederate slaveholders.
If America wants to finally end the Civil War, we must provide reparations to Black Americans. Only then can we as a country move beyond race.