The Bedrock of Racial Inequality

A Too Much book review: October 25, 2004

Thomas M. Shapiro, The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.

The typical minority household in the United States, a new report from the Pew Hispanic Center documents, now owns less than one-tenth the wealth of a typical white household.

Even worse, this gap between minority and white households is actually growing, an increase that's confounding America's mainstream public policy analysts.

These analysts treat racial inequality as purely a function of unequal access to jobs, skills, and education. The more access, the less inequality.

That certainly sounds reasonable enough. But if this analysis were correct, then racial inequalities ought to be narrowing, since people of color in the United States today have far more access to jobs, skills, and education than they did just a generation ago.

So why is racial inequality, as measured by how much minority and white households are worth, expanding?

Brandeis University sociologist Thomas Shapiro has an answer in his insightful new book, The Hidden Cost of Being African American. Racial inequalities are widening, Shapiro argues, because Americans continue to ignore our nation's incredibly unequal distribution of wealth.

That maldistribution, Shapiro contends, has essentially trumped the expanded access to jobs, skills, and education won through years of civil rights struggles.

This is not a message that goes down easy in our early twenty-first century America. We like to believe that we all now have, thanks to our years of civil rights progress, an equal capacity to pull ourselves up from our bootstraps.

But in reality, Thomas Shapiro explains in The Hidden Cost, we do not have anything close to that equal capacity. How could we — in a nation where wealth is so unequally distributed?

Consider two young people. Both study hard in high school. Both go on to attend college. One has parents with enough household wealth to foot the bill for college tuition. The other graduates with thousands of dollars in student loan debt.

These two young people get hired by the same company. Both make the same income, and both look to buy their first home at the same time. But only one has parents who can help with the downpayment and closing costs. The other, still burdened with student debts, gets dirty looks from mortgage lenders — and ends up with a mortgage at a higher monthly interest rate.

Our lucky young person, buoyed by abundant parental help, can afford to buy a home in a nice neighborhood with good schools. Our unlucky young person can only afford a home in a considerably less desirable neighborhood.

Fifteen years later, the home in the nice neighborhood has appreciated nicely. The other home has not. Our two now-no-longer-young people still have the same skills and make the same income. But they are not equally wealthy. One lives in comfort and financial security, the other worries and frets.

One is white, the other black.

In the United States today, Shapiro details in The Hidden Cost, "half of all whites come from families with the ability to deliver head-start assistance versus only a fifth of blacks."

The result? Black and white families of the same age, income, and education bracket can hold strikingly different net worths. The "cost of being black" in the United States today, Shapiro calculates, amounts to $136,174.

This $136,174 differential, The Hidden Cost makes clear, stems overwhelmingly from a historic distribution of wealth that has disadvantaged people of color throughout American history. Racial minorities, Shapiro shows, have been denied access to our nation's most important wealth-building opportunities — at every key juncture since the Civil War era.

Shapiro traces this history of denial back to the 1862 Homestead Act, the federal legislation that gave property-poor families up to 160 free acres. Up to a quarter of America's current adults, he points out, owe their economic security to this one federal program, a program "that in practice essentially excluded African Americans."

The great federal wealth-building initiatives of the twentieth century — the FHA reforms and VA loans that made home ownership affordable for tens of millions of families, the GI Bill that made college accessible for veterans after World War II — would all follow this same pattern.

These programs handed white families a ticket straight into the middle class. But most people of color, Shapiro relates, "were excluded from participation."

Most whites don't know this sordid story, and many whites simply believe, as Shapiro notes, "that African Americans do not do as well as whites because they spend too much money rather than save and invest in the future."

Many whites of means, Shapiro notes, also credit whatever success and security they have achieved to their own efforts, and not to the parental help they may have received along the way. This attitude, The Hidden Cost notes, "makes progress toward equality more difficult."

How so? People blessed with ample resources, Shapiro shows with the help of over 200 in-depth family interviews he conducted for this book, need not join with others to struggle for better schools or community services — or "worry about or invest in the public infrastructure that would help everyone." To enhance their family financial security, people of means need only move to a community with better schools and services.

How can we begin to turn this dynamic around? Shapiro sees "no means of seriously moving toward racial equality without positive asset policies to address the racial wealth gap." He supports "children's savings accounts" and like-minded programs that would guarantee every American a nest-egg that could be used for college or buying a home.

And Shapiro also emphasizes the importance of leveling down privilege at the top of America's economic ladder. He strongly opposes efforts to repeal the estate tax, our nation's only federal levy on grand fortune.

"What is really at stake," Shapiro writes, "is the power of very wealthy individuals to assure succeeding generations economic success and material comfort through unearned advantages, regardless of any achievements or contributions they may make."

Our national drive toward equality, Shapiro adds, requires "turning around our national drift toward plutocracy."

"We can no longer ignore tremendous wealth inequities," he sums up. "as we struggle with the thorny issue of racial inequality."

He's right.

— Sam Pizzigati, editor, Too Much