The fundamental American ideal is that every individual is entitled to “life, liberty, and the pursuit of happiness.” But the fullness of the American Dream has remained persistently elusive for generations of Black Americans.
Recent events demonstrate the devaluation of Black lives by our institutions, from law enforcement to the health care system. Calls for police reform are important components of our response to structural racism, but they are far from enough. To combat racism and achieve justice, we must address even more fundamental economic inequities.
Our country’s history of racial discrimination spans 400 years, beginning well before the Republic’s founding and extending through every administration since. Current income disparities map closely to the areas where cotton plantations worked by enslaved people were most prevalent in 1860. Areas with higher levels of residential segregation in 1880 still experience lower rates of intergenerational mobility. And the Black-White household wealth gap is the same today as it was in 1968, a half-century after the passage of landmark civil rights legislation.
We must confront racism’s staggering breadth and reach to achieve economic justice. But the barriers preventing Black Americans from accessing the American Dream are not insurmountable.
This process will be painful and will require intentional conversations at all levels — personal and professional, community and corporate, neighborhood and national — to uproot racist beliefs and practices. We must also commit to immediate policy actions that are proportionate to the challenge of restorative racial justice, including:
Expanding capital access for businesses in Black communities
Hundreds of thousands of Black companies did not have the cash reserves to survive the economic downturn caused by the pandemic, and the number of Black business owners fell by 41 percent between February and April of this year. Robust capital access initiatives must include credit enhancement programs that enable businesses to borrow more from banks, diversify the asset management industry, and expand Black Americans’ personal savings — a vital source of startup capital for most entrepreneurs.
Proposals to address the savings problem include reviving the postal banking system, but have not been tried on a broad scale and will require the re-valuation of Black assets. In the meantime, the federal government must revisit its recent decision to deregulate the payday loans industry — particularly given the evidence that these lenders create debt traps in low-income communities by charging annualized interest rates over 300 percent.
Promoting full employment in Black communities
The unemployment rate among Black Americans rose ten percentage points between March and April of this year, and it increased in May even as the national unemployment rate fell. A commitment to employment guarantees includes allowing state and local governments to experiment with different approaches. Subsidized hiring programs are frequently underutilized, and evaluating additional pilot programs would help us find policies with the potential to scale up job creation in response to economic downturns. Whatever approach state and local governments select, they must also ensure school funding mechanisms facilitate the equitable development of a skilled workforce in low-income communities. And the federal government must remove punitive work requirements on social assistance that have proven ineffective.
Targeted Housing Investment in and for Black communities
Homeownership is a cornerstone of wealth creation denied to generations of Black Americans. Further, renters are more vulnerable to housing instability, and rent-burdened households face higher eviction rates. A commitment to housing Black Americans must be comprehensive. This includes expanding Small Area rental voucher programs to increase job access, investing in capital improvement programs investments for Black neighborhoods, and more stringent enforcement of Community Reinvestment Act requirements to increase investment in Black communities.
Additionally, we must expand programs that assist with down payments and risk mitigation and thus enable Black Americans to buy homes without relying on subprime mortgages. There is promising evidence that adjustments to credit scoring models could significantly expand access to mortgage credit, and these options warrant further research as well.
We must end the 400-year practice of systematically denying Black futures and devaluing Black lives. That begins with exploring reparations for descendants of enslaved people, such as direct payments, student loan forgiveness, or waivers for college tuition. For now, the actions outlined here can begin the process of achieving justice.
James Baldwin once wrote that “the American future is precisely as bright or as dark as the [Black man’s].” We must reckon with these injustices if we are to create a brighter future and live out our nation’s creed.
Eugene Cornelius is the senior director at the Milken Institute Center for Regional Economics.