The Intergenerational Transfer of Wealth
by John Lawrence, July 26, 2020
Too often when we talk about "family economics" it's all about budgeting, saving for the future, making payments on debts etc. It's never about wealth accumulation. It's as if the average person is not supposed to be accumulating wealth - just paying their bills. There are staggering differences in intergenerational transfers of wealth between black and white families. According to the Brookings Institute, "At $171,000, the net worth of a typical white family is nearly ten times greater than that of a Black family ($17,150) in 2016. Gaps in wealth between Black and white households reveal the effects of accumulated inequality and discrimination, as well as differences in power and opportunity that can be traced back to this nation’s inception." Most middle class families accumulate wealth by means of home ownership. Poor people, both black and white are usually renters who don't accumulate any wealth to pass on to their children. So each generation starts from scratch, from zero.
Government programs by and large, while supporting the poor at some basic level have nothing to do with putting them in a position to accumulate wealth. It is assumed that, if they can just pay their bills, they will be able to rise above the poverty level. But then the intergenerational transfer of wealth is zero. A good program would be not just affordable housing, but affordable ownership of housing. The government could have expedited this in 2008 by supporting mortgages instead of letting them be foreclosed on. It bailed out banks instead. Government sponsored programs which subsidize home ownership for black people would be an effective form of reparations. Not to mention that it would also be an effective means to lift poor white families not only out of poverty in the sense of being able to pay bills to support a comfortable lifestyle, but also as a means to create wealth so that, intergenerationally, children would be starting off from a higher level - not zero.
There are many ways that black families have been denied the ability to participate in the American Dream. Efforts by Black Americans to build wealth can be traced back throughout American history. But these efforts have been impeded in a host of ways, beginning with 246 years of chattel slavery and followed by Congressional mismanagement of the Freedman’s Savings Bank (which left 61,144 depositors with losses of nearly $3 million in 1874), the violent massacre decimating Tulsa’s Greenwood District in 1921 (a population of 10,000 that thrived as the epicenter of African American business and culture, commonly referred to as “Black Wall Street”), and discriminatory policies throughout the 20th century including the Jim Crow Era’s “Black Codes” strictly limiting opportunity in many southern states, the GI bill, the New Deal’s Fair Labor Standards Act’s exemption of domestic agricultural and service occupations, and redlining.
Wealth was systematically taken from black families or impediments were placed in their way so that things that white people were able to do were not allowed to black families. Consequently, a legacy of poverty was passed down from generation to generation. A culture of poverty perpetuated itself with possibly some government help to obtain the bare essentials. Too often single parent families became the norm. Too often the discourse was kept at the level of paying for the necessities of life and not wealth creation. Being poor has even been thought of as something noble. It's even praised in the Christian tradition. The Bible says: “No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money." And "It's easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of heaven."
I am not talking about "wealth" as the accumulation of things like expensive real estate, yachts and the playthings owned by the very rich. I am talking about wealth in the sense referred to earlier that a middle class family accumulates by virtue of home ownership and then passes on to their children when they die. So this might be a few hundred thousand dollars or more, but not enough to support a "lifestyle of the rich and famous." The point is that the cycle of intergenerational poverty can be broken by this transfer of wealth. Of course another way out of poverty is education but not when you have to go into hundreds of thousands of student loan debt in order to get it. That is a debt trap, and there are many others laid for poor people - payday loans, for example - in the same way that once the slaves were freed and became share croppers, they ended up indebted to their landlords who in most cases were their former owners.
Habitat for Humanity has a great program for building houses and then making a formerly poor famiiy the owner of the house. This makes it possible for wealth creation for that family in the traditional way that most white families have created wealth for themselves - home ownership. This is not merely the creation of affordable housing but the creation of the affordable ownership of housing. There's a big difference. This program should be greatly expanded and replicated by government if government wants to help black families in particular end the intergenerational cycle of poverty.
