« Freakonomics Radio

426. Should America (and FIFA) Pay Reparations?

2020-07-16 | 🔗

The racial wealth gap in the U.S. is massive. We explore the causes, consequences, and potential solutions. Also: another story of discrimination and economic disparity, this one perpetrated by an international sporting authority. The first of a two-part series.

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
If you'd like to listen to free economic radio without ads the place to do that is sticker premium five dollars a month and you can get a free month trial by going to stick your premium dot com and use a promo code freak. You also get access to all our bonus. Episodes and you'll be supporting our show to that sticker premium: dot: com, promo code, freak thanks, worried about keeping up with your faith, friends all summer or posting every perfectly pink sunset. You see, don't sweat it act. You can have it made in the shade, with four lines of unlimited data for a hundred dollars a month scroll this the occasion pigs. Finding you go to take out spot or get some rays on video chat, whatever you and the crew were into all. The data makes it all that much better smile, you're on cricket cricket, core acquired on four lines, Davis be limited to three megabits per second cricket misleading disputes. When the network is busy additional fees, usage in restrictions apply,
today on for economics, radio, what can a lady soccer team from early twentieth century England teach us about the racial wealth gap in twenty first century America? How is Famous suburb of Levitt, TAT, New York, a textbook example of the jury, discrimination and our reparations for slavery, an idea whose time has come. We hear. Arguments in favour. Soda material redress would in a retrospective way bring about justice by affecting the racial wealth gap, arguments against Do we in America, in the twenty first century, really want to construct a social security magnitude, social innovation based on race and a handful of other aid is to address the wealth gap we need. An affirmative action programme in housing, baby bonds
An idea from people as far back as Thomas Pain will do our best to avoid empty slogan. Hearing. I think you're playing with words and avoiding the hard work of trying to discover complex historic, cause chains we may end up poking a bear or to its not letting white people. Also, where America off the hook, creates historical crimes to observe that some of the stuff that's holding us back is within our reach to be able to deal with the first of a two part episode starting ran after this
from stature and Gunnar projections. This is great dynamics, radio broadcasts and explores the inside of everything. Here's your home, Stephen Governor, the story we're telling over the next couple. Episodes will have some twists and turns so. Where shall we start? The story really starts in the first World WAR, when the men were of fighting at the front and women were brought into factory work and there was a factory which made railway locomotives caused Dick Kerr. The Dick Car factory was pressed in England, North of Liverpool and the women in that factory decide to challenge the men to gave a soccer soccer or football was already incurred. Happily popular in England, at least among men now, the Dick
Ladys formed a team and it down to be very popular. So the women started plague more ball games. They did this too. Raise money for the troops of the front and they continue disrupt the war when the war Did they carried out and again they played for charity in December of nineteen twenty, for instance, they played a game at the ground of effort in Football Club in Liverpool go to some park. This was against another women's team called the Saint Hellenes Ladys and they attracted a crowd of fifty three thousand people, which was a complete seller crowd. The decree Ladys one for new and a sort of crowd. Very few men's teams could have attracted the time how this by the way is Steffens, reminds me right he's an economist at the University of Michigan and the soccer guy people say
If there's an economics, a soccer issue, they say: Stephan he's your guy and today Steffens our guy, because the story of the Dick Kerr Lee He's soccer team is indeed an economic story say here a lot of what I'm telling you is based on a book by gale notion site. You want to give her credit. The book is called in a league of their own. The story of the declared Ladys football team, who were their opponents at this time with the other women's teams, was immense teams, were they other teams from other factories where they semi professional? All of the above they would play exhibition, gives they started playing against foreign national teams. Women were playing other sports like tedious and golf and so on, and so this was a point when the sport might really have taken off, and women soccer become
a sport in its own right, but you didn't why remember. Men soccer in England was already well established with many levels of professional, semi, professional and amateur teams the over. Of the sport was called the Football Association or the effect. The full bonuses issue is the governing body or soccer in England, and it was founded in eighteen sixty three. So it's a potent to state that already the affair was discouraging women soccer, so back as far as nineteen o to date suggested that their affiliated organizations or not permit games against lady teams
so what happened after that match in eighteen, twenty, when the Dick, her ladys team, drew more than fifty thousand fans at ever Jens Holm Park, the owners of the bends professional teams complained about the game at every turn, because they saw it as a threat. If women soccer became popular and could attract those kinds of case that would take away from the mints. Professional, too They persuaded the USA to pass a resolution, and the resolution read as follows: complaints having been bade as to football being played by women. The council feels impelled to express their strong opinion that the game of football is quite unsuitable for females and ought not to be encouraged. For these reasons, the council request the clubs belonging to association to refuse the use of their ground.
For such matches, and that was the bad that was the ban, a ban on women playing soccer in England and not just in the professional arena, because women in play, and not only women complete girls can play at school. There were no girls teams in schools, because all the schools are affiliated to the Football Association as well. So I really this ban rooted out the possibility the tea of women soccer in England and in other countries for more than half a century. Why, there were females forbidden to play in other countries as well, because the English Football Association was the most powerful member of the International Football Association known as FIFA. You ve probably heard about visa. Yes, fever is a famously corrupt organization fever runs the World CUP. They had been endless scandals about bribery and corruption within it.
Fee for organization fevers. Previous president, Sepp Blatter, was pushed out in two thousand fifteen and people hoped that this would bring in a new generation of transparency and openness, but it seems to have actually got. So it's a very troubled. On transparent institution. Ok, we ve got bit ahead of ourselves, but here's the point back in nineteen twenty one. It was England's Football Association that declared the ban on ladies football, but it was ultimately supported by FIFA. So the most important thing to understand about women's soccer is that fever bandit until nineteen seventy one, so essentially any organization that was associated with fever. If it allowed women to use their facilities, then they would be excluded from fees.
Lady socket died out completely for half a century. There is little or no evidence of it being played. History is, of course, full of such ruptures, intentional or otherwise. Some are mere wrinkles in the human timeline. Others are cause for. Indignation were far worse. Some ruptures are irrevocable, others are repaired over time in either case. How do you measure the counterfactual how'd you account for what might have happened had the rupture not occurred here is Stephanie Kaminski. Guess I think if they haven't been banned, women soccer today would be like women's tennis. There would be organised leagues, playing commercially
and it would be a global phenomenon. There are professional women soccer meets in many places, but their audiences rather small, compared to the men's game, which is the most popular sport on earth. According to FIFA, roughly one of every to humans watched at least part of the men's twenty eighteen world cup. As for women soccer being a global phenomenon, well, every four years it is certainly this seems to be. If you live in America, they re time World champions take on the european champions. Last year, the? U S, women, national team. Faced the dutch women in the World CUP final in France, the final score to zero, States of America Champions. If it was the? U S, women's Fourth World CUP Victory
for the very first time they ve done it will do. Is women's national soccer team is undoubtedly the greatest team on earth and has been for some time now, since the women's woke up started in ninety ninety on the Eu S. Women have been in the final pretty much every time and they ve won the championship more than any other country. So the? U S, women are world, beaters year in and year out, how about be? U S men's national team? The- U S, bids, actual soccer team has had a relatively poor history. To be frank, in the most recent men's world cup- the- U S, team failed to reach the thirty two team feel
They were eliminated by Trinidad and Tobago Trinidad and Tobago has a population of one point: four million, the? U S! Three hundred and thirty million to be fair, a lot of small countries punch above their weight in soccer, because in many places it is the primary sport in the U S: men soccer competes, Hence the NFL, the NBA mutually baseball. More women soccer, meanwhile, is far more prominent in the U S than in most other countries. So you might think the women's professional League in a man. How could the end W Sl would pay? Well, I asked deafened Kaminski how and W Sl salaries compared to the. U S men's pro league and less so media salary in they ever less is just under two hundred thousand dollars.
And the media in salary. The end up you sell is around thirty thousand dollars, so that's quite a big gap, a big gap. Indeed, although quite typical for men's verses, women, sports tennis is the outlier in the major tournaments. At least men and women get equal prize money, but look at pro basketball last year in he players made on average about seven and a half million dollars. Apiece W Nba average was one hundred sixteen thousand dollars. How these wages determined As we all know, wages are typically set by some combination of supply and demand, along with other factors like risk in productivity. In most Industries supply and demand create what seems like a sensible equilibrium that produces the sensible wage, but pro sports is a bit different like other fields of entertainment, its morbid tournament model
with a handful of big winners, who win really big? Are the big winners really that much? better than the one you don't even get into the arena, consider beyond say. Last year she earned about eighty million dollars, She worked very hard and she super talented, but is she one thousand times more talented did you work one thousand times harder than say a singer. Who records in your basement and maybe runs her church choir and teaches music, and now an entry school. The actor Bradley Cooper made about fifty seven million dollars last year. He seems like a really nice guy, but is Bradley Cooper. Really, fifty six point: nine five million dollars nicer and better looking and more talented than some other actor whose making fifty I wasn't dollars a year tips included. We ve been
not a conversation bless coupled decades about equal pay for equal work is to be oh- are doing pretty much the same jobs should they make the same money? Should no woman make The same as a man, if they're doing the same work, shouldn't a non white person make the same as a white person if they're doing the same work. Of course, you do have to factor in the quality of their work and their productivity in some job. Quality and productivity are tricky to measure. Think about a school teacher or a politician, but other fields Linda cells to the sort of measurement incredibly well right fields like sports boats What's a special in many ways, because productivity, something is easy to identify You can see how could somebody
You can see how much they contribute to winning and so forth, and you can measure that quite accurately, which is generally the problem when I thinking about pay in most workplace circumstances. So what do you say economists, like Steppin Kaminski, no the relationship between productivity and pay in sports. What we know is that there are very close correlations for men between them. Productivity and what they get paid and there also reasonably close correlation between the productivity of women in the sports they play and what they get paid. Where there's a difference, though, is that women tend to get paid less, sometimes a lot less than the men playing be comparable sport. Yes, that does seem to be one I'll be true? Now you could point to the demand component of wages. It is clear that, for whatever reason, many more people watch men play basketball, then watch women. This
leads to more revenue and the men side, some of which is distributed as wages. But how would you like it? If your wage were set primarily by the demand for your services? Demand is largely out of your control. What you can control is your productivity. So how should your wage beset? Even if you are plainly more productive than another worker, but demand is lower. This brings us back to the: U S: women's National Socrates, winners, afore world cups, which is half of all the women's world cups ever held, including most recently in for train joins in the United States, the Eu S women steam was in the news not only for their dominant performance but afterward for their frustration, but how they are compensated.
This morning, negotiations breaking down between women soccer and the? U S, soccer federation over the fight for equal pay here is captain Megan repeat: no, I think it's fair for us to ask that when we play the game, and we win that game, or we tie that game or we lose that game that we should be paid the same as our male counterparts. Even before their latest world CUP, the women had filed a lawsuit seeking higher pay. The female players have been consistently paid less money than their male counterparts. The suit read this is true, even though their performance has been superior to that of the male players. Yeah, so the women initially try to go to arbitration over the compensation and that then moved into a lawsuit under the equal pay acts, and the women claiming they were being paid less for equivalent work than the men. The main issue really is the recognition of
superior level of performance of the. U S: women compared to the: U S meant in May of this year, a judge ruled against the women, noting that they had actually earn more than the man once you include World CUP Prize money, although the judge did aloud to proceed, a narrower claim of discriminatory workplace conditions. The women intend to peel the ruling on wage discrimination, since the reason they earn that money was that they won the World CUP, while the? U S, men, didn't even qualify for their world CUP, so it fine. Those that the women would earn more, but the argument was that they are and far less then the men would have earned if they had won their world cup. A large part of the pay for the players appearing in the World CUP comes from the prize money distributed by FIFA. Fifa remember is the historically corrupt and opaque, but nevertheless, omnipotent governing body of soccer fever allocated four hundred and forty billion
dollars as prize money to be shared amongst the competing teams. For the men's woke up, but only thirty million dollars for the women, so in terms of the? U S: national teams, for example, in terms of reaching the court, a final which, the? U S, men, don't and which the? U S, women always do getting to the quota files loss will cup would have been worth over five hundred feet two thousand dollars to the men, but only ninety thousand dollars to the women. Ok said the total revenue pool four hundred forty million dollars the men's. That's all countries in the men's World CUP finals versus thirty million. Those numbers are derived from one. In other words, does the man's World CUP earn something like fourteen fifteen times what the women's does? What are the problem? limbs with evaluating parity between men and women. S favorite doesn't even really offer very clear data on how much money, the wood
its World CUP generates. We know the men's woke up generates about six billion dollars and the women's work computing generate significantly less than that. However, many people have observed that this is partly a failing, a promotion on the part of fever failing of promotion on the part of beef, in other words women soccer? might be a lot more valuable if FIFA and other institutions had been Growing the game, the way men soccer has been grown or, at the very least, not forbidding women- to participate for fifty years. So the most imports big twelve standings out women's soccer is that FIFA banded until one thousand nine hundred and seventy one- and this brings us back. Finally, I know to the ladies soccer team of the Dick Kerr, Locomo
factory. When the male soccer fraternity band women from playing a nineteen twenty one, it effectively quashed the competition they can organise themselves, they can create a following. They called attract investors. They can't do anything that a commercial business might do in order to grow so for which there is a demand, so stuffing you're, an economist and you guys are always teaching us that competition is what makes markets thrive, but throughout history we see that many firms who subscribe to economic theory when it's good for them when they seek Competition that dating is not good for them all the sudden they don't want. You cannot mix to work the way it's supposed to work, or they don't want the competition. I'm curious whether this resolution against women's team
calls to mind any examples from history. Other economic competition that was attempted to be shut down by some existing guild were to me as an economist. This sounds like an anti trust case. So Anti Trust is a set of laws which specifically intended to prohibit businesses from stopping other businesses from competing against them, and these laws reinforce fairly rigorously if they had an anti trust suit back in the nineteen twenties and one it then they could have stopped is dead in the tracks and history would have been different, but what people will say now is well, you know who we're going to prosecute. How are we going to hold some a responsible and that obviously problematic? But on the other hand, if you have a clearly identified wrong which has come
here consequences. I think something should be done about it and what do you think should be done about it? Well, I believe that the right answer here is reparations. I think women's, so can grow now, even with a handicap, it had fallen for century into being a fully competitive self sustaining enterprise, but it needs a lot of support to make up for that fifty years, a ban and I think the Sakharov authorities, the grew rich with men soccer- should be diverting significant amount of their results. In two to women, soccer reparations have historically been paid by the losers of a boy Napoleonic France, after its defeat at Waterloo, paid reparations to Austria, Russia, Britain and Prussian Germany was
forced to pay reparations after its defeat in World war, one and again after world war, two, including the jewish survivors of the Holocaust and the state of Israel, to help fund its establishment Definition of reparations has expanded. Since then, today, there are calls for Your reparations for human rights violations lost opportunity lost wages as in The calls for reparation surrounding slavery and Rachel discrimination in the United States. I think the concept of reparations is something that we need to explore. We ve reached a stage of acknowledging significant injustices in our society, the long term injustices that had been perpetrated, and the question is now. What do we do about that in the U S, there have been calls for years for reparations to address the moral and financial injustices of slavery. Those calls have recently been amplified by at least three things: the protests
following the police, killing of George Floyd blackmail in Minneapolis, the cuban nineteen pandemic, which has claimed a disproportionate number of black lives and the economic fall out of the pandemic, which is disproportionately affected. Black Americans, especially low income black Americans, when you study, has found that employment for people in the bottom quintal of the wage distribution has fallen by thirty percent compared with just a five percent drop among those in the top quintal, the rich man b for the time being getting richer, but the poor definitely getting poorer and the racial divisions of wealth in America are incredibly start The racial wealth gap is such that the typical black family has about ten cents on the dollar. As a typical white family, that's Derek Hamilton, an economist at Ohio State University,
the magnitude of the racial wealth gap at the median is about a hundred and fifty thousand dollars If we look at the main difference, it be comes even more dramatic. Their actual disparity is around eight hundred thousand dollars in essence about eighty five percent of the black population. Would be below the median wealth in America. Below the median coming up after the break will hear about the causes and consequences of this massive wealth gap What Hamilton things should be done about it and why not? Everyone agrees with also, if you haven't subscribed yet to our new spin off podcast new stupid questions. I hope you, do that right now you are listening to for radio and Stephen Donor, we'll be right back.
Bigger, I'm down I host of science rules where we talk about all the ways in which science rules our universe- you never know which might learn or show evolution, does some pretty funky things take about birds, learning from other birds. This is what we call a delicious dilemma in astrophysics: hey, here's the thing this field doesn't actually understand state to turn up. While there are worlds outside our solar system. There are thousands and thousands of other world. I can totally talk to this kind of fish. We're also bringing you expert analysis on the biggest science story of them all the corona. What this is about the helm of the whole planet? Everybody has to take a calculated risk. I've just reviewed this literature. How bad is it after again before everybody pays attention. Whatever your problem, wherever you are, the universe, science rule
science rules, is out right now subscribe and Apple, podcast Spotify or wherever you listen, Derek Hamilton, runs the Koran Institute for the study of race and necessary at Ohio, State University and expelled thee r r, I see, K and then Hamilton J M I tell tee o in Hamilton is consulted, for the presidential campaign of Bernie Sanders Lisbeth wore an uncommonly harris. He says that even before covered, even before George Floyd- Twenty twenty was already looking like the year that the racial wealth gap would get a lot of attention. Race has been treated as a periphery issue,
a lot of economic, whether its market, economic, weathers, mainstream economics reverts to some class based understanding of inequality or some human capital base, understanding, as if we are simply add a mystic individual agents, without a real good understanding of structural contact, Hamilton studies, what has come to be called stratification? economics. Stratification economics is in response to mainstream economic, not doing a good job of explaining persisting group based equality. In my work, along with many others, we find that race, gender immigrant status, group. Identity in general is not something on the periphery, but is a pillar is a pivot to how we understand political economy. So we take it
We try to understand the ways in which hierarchies are created. And maintain Hamilton is black and has first hand experience with the disparities that exist between group. Would be melodramatic, they say a tale of two cities, but I did girl up in Bedford, spy ricin. That's a neighborhood in Brooklyn, not known especially back then for its prosperity, and I went to a fairly elite. Private school Brooklyn for in school, I lost both.
My parents, when I was in high school one during my junior year and the other during my senior year, they had both worked for the city of New York and they held other jobs on the side. So technically I was award of the court at that point, but I was going to an elite private school like I mentioned and lived with my sister, so I was never institutionalize. I would be remiss not to say that that has had influence or my desire to promote justice, because I believe that the loss of appearance was largely due to social conditions it they faced in life stress in trying to ensure that their children had a better life, Hamilton originally studied economics to build a better life for himself. I don't economics would be a good feed or major to law. School or busy
School, but the reality was that I was not motivated, go to business law school and that I became very fond of the academy and also I began to fall in love with the approach. Did economists have to try and steady subject matter the idea of trying to maximize some objective function, subject to constraints, so it was a very structured approach. The problem solving one big problem that Hamilton is intent on solving, or at least addressing, is the gap in wealth between way, in black Americans? Now the black white income gap is already substantial, even when controlling four factors like age engender black workers on average around fifteen percent, less than whites. That gap has been growing lately,
and set to grow even more with automation, disproportionately affecting black workers, but Hamilton, says this. Income gap is only the first layer of the problem. Think about income in comparison, the wealth income is a flow income, allows us in one period of time, be able to pay out bills, be able to have subsistence in our life, but wealth wealth as a concept. We as an indicator allows you to take risk it funds in seeds, any ingenuity you might have, and it also allows you to find it big purchase items like inexpensive. Education. It allows you to if you're confronted with a criminal justice system, be able to hire the best council possible. It allows you if you confront it, would have a medical issue
You're insurance is not up to par. It allows you to be able to deal with that health issue. Without the risk of going bankrupt effort matters, ingenuity matters, but hurt and ingenuity is limited and, frankly play is a minuscule role if you have no capital to begin with
main determinant of wealth is wealth itself, the old adage that wealth begets more wealth. I think that's accurate. The origins of the black white wealth gap plainly date back to slavery, but that history of racial disparity as a relate to wealth building, certainly didn't in wood slavery. There was the homestead act. There was the g I bill. There was a system of sheer cropping. There's a system of Jim Crow. There is a system of red aligning. It was government, facilitated government, so heavily involved in the creation of segregation, and it's what lawyers called the jury: segregation unconstitutional segregation created by governments and violations, the fifth and fourteenth amendments to the constitution. That is the historian. Richard Rothstein he's the author of the color of law, a forgotten history of how our government segregated America rusting set
the jury, segregation against de facto segregation, which is the result of private actions and personal choices. American policies of the jury, segregation. He says the policies are so numerous, so interwoven so mutually reinforcing that I concluded that the notion of de facto segregation was unreal. It was not accurate government sponsored segregation in housing. What came to be called red lining goes back to the great depression and the new deal The federal government was not involved in housing prior to new deal, the first Pharaoh involvement in the civilian housing market, was one of the first new deal agencies. The public works administration that built the first public housing in this country for civilians. This is public housing for middle class workers, not for poor people. We had enormous unemployment and repression of twenty five percent. The were forces unemployed, the public housings
the seventy? Five percent to a good jobs could afford housing, but for whom no housing was available, because there was no construction going on there. Housing shortage. Public housing was often segregated by local government housing agencies, and then another agency was established. The federal housing administration that was designed to issue long term amortize mortgages, two new home, first time, homeowners, the Effie J also guaranteed construction loans and subsidize the development of suburbs outside of cities like San Francisco and Chicago in New York, but Levitt hens are good exam That's on long Island, New York, Levitt, town with seventeen thousand affordable homes, pray early for world war, two veterans and their families. Think of your quintessential midcentury tracked housing little bump Zalm, let alone may not yet be tackling the kind satirizes
even back then by the folks in your mouth, Vienna, Reynolds snapping and we and the builders level William, live. It was a big. It is left to his own devices. He would not a soul to african Americans and let the town, but this was not the fact, though segregation, in other words, Levitt town, was bill almost exclusively for whites. But let's bigotry wasn't the cause. Looking but could not get any bank to lend him the money to buy the land or construct that development. The only way to live it could build liver town was by going to the Federal Housing administration. Submitting has plans from at time. The Faro Housing Administration had said to lever well will guarantee your bank loan, but you have to tell those homes on a non discriminatory basis, whether it might not have liked it but left town within an integrated, develop They are ready to to go to
that's not how it happened. As Rosty says, Levin had to submit his plane as to the future. Plans include the architect, tool designed the way out of the streets, the materials he was going to use and the commitment it made to the Faro Housing Administration never to sell a home to an african American? Yes, you heard that right, a commitment he made to the Faro Housing Administration never to sell a home to an Africa American and that wasn't the worst of it, the federal housing and ministries and even required liveth, and these builders all over the country to place a clause.
De the very home prohibiting resale to African Americans or rentals African Americans? There are made out of TAT dna. Ah love that Rothstein says is what d jury. Segregation looks like the fact that this happened under the Democratic Administration of Franklin. Roosevelt may surprise some modern Democrats, but it shouldn't the Democratic Party nationally. Not just sudden Democrats was a party of segregation, the war, political considerations and the rows of administration. With its implemented policies, segregation there was afraid of opposition. From now
Democrats, not soften Democrats, wounded segregated programmes in the northern states. You have to remember that the Democratic Party, up until nineteen thirty six and very little african american support nineteen thirty two african Americans Vodafone over not for Roosevelt. The republican Party, was the Party of Lincoln the emancipated slaves. The democratic party was a party of segregation. Wait families fled cities on mass for these new suburban communities like limit town. The homes were very inexpensive they sold when they were built for about eight thousand nine thousand dollars. That's roughly a hundred thousand dollars in today's money, any work class, family, black or white could afford to buy Homelike ahead at that price. Returning war veterans we're not even required to make a down payment, but of course, black families were allowed in a suburb like
let it down and what are those homes worth today goes home now sell for three hundred four hundred five hundred thousand dollars. In some cases more, the white families gained wealth. From the equity appreciation and the value of their homes, the effigies red mining continued, even after Prince John F Kennedy issued an executive order in nineteen sixty two prohibiting federal agent, these from subsidizing racial segregation in nineteen sixty a Congress past the Fair Housing act which gave the executive order some teeth, but the economic damage to black families had already been done. The suburbs that were created in the midnight in fifties, for example, are now in theory open to african Americans, though suburbs and now on, affordable to white for blacks, who are working class, lower middle class, so simply saying, as the fair Housing ACT says, that the prohibition
instead, the federal government imposed on African Americans living in these communities are no longer in the fact doesn't do much to undo them. Economists have, on pointed two homeownership as a major avenue for building family wealth for White Americans. Thirty two percent of their network is in their home. Equity for blacks is even higher. Thirty seven percent, but the percentage of net worth doesn't tell the whole story. The average housing wealth for waits is too, and in fifteen thousand dollars for blacks, just ninety four thousand dollars to Rothstein. This disparity goes back to redline policy. The white families created wealth gained well through homeownership because they lived in communities with appreciating housing values, and so they gained equity in homes without further
first thing in those homes. African american homeowners typically have not gained such wealth because their communities have not appreciated. In the same way, then there was a series of legislation in the nineties at both the Clinton and Bush administration, where they actively sort to improve homeownership for black, that again, is the Ohio state, economist, Derek Hamilton, and this legislation created some of the exotic financial products that lead to some sub. Prime mortgage is sub. Prime refinancing was far more common in black neighbourhoods, and those products in it of themselves might not necessarily be a bad thing. What was problematic wisdom
if you use of them was when the private sector was able to manipulate and use these types of tools so ass to enrich themselves and expose others to risk that they otherwise might not have needed to take on this sub. Prime manipulation contributed mightily to what became the global financial crisis before the crisis. Black homeownership had risen. Significantly afterward it fell. Blacks are now a majority renter population, while seventy three percent of weights in U S own their primary residents. That numbers only forty five percent for blacks and As you travel down the income spectrum well into did housing policies, often have the side effect of maintaining segregation, the lowest income African Americans who are living in urban,
areas have the benefit of a programme called the low income housing tax credits, which is a subsidy to developers to build housing for low income families. The federal Treasury department that runs this programme places a priority on pudding low income. Housing, tax credit developments for low income families, nor ready low income segregated neighborhoods. On the theory that that's going to revitalize those neighborhoods, it reinforces segregation that never works to revitalize those neighborhoods, but it's a policy the doors if we were to dissect whether its contemporary versus historical factors in driving the racial wealth gap or driving wealth inequality. Today, I think we'd have to say that it's not one historical it is a compounding of historical acts. These historical, each with a different, had agree, perhaps or a different set of motivations have resulted
in a collection of disparities that go well beyond housing. Black Americans have disproportionately worse comes in the labour markets in education and access to health care. We can no longer talk about race in a youth My way we had to take it head on, and so in this moment Derek Hamilton thinks the solution is obvious and, as a result of taking it had on, we are now in a position where an idea like reparations, which is certainly not new and have been countless people who have advocated and worked hard to develop this policy grounds. Injustice, but it now has mainstream salient see as well. For nearly thirty years there has been a bill. Kicking and among Democrats in Congress to study and develop reparation proposals. It has recently
inconsiderable momentum to Hamilton a successful reparation programme would need to major components. One is acknowledgement clear, throated, full acknowledgement of the atrocities that have taken place in the past and the fact that these were atrocities that were committed with the will of the government the complicity of the government and sometimes actions of the government and component number two now about apology alone would be empty. If not accompanied with some form of reach. Dress, soda material redress would, in a retrospective way bring about justice by affecting
The racial wealth gap that we see today and, as I pointed out, the racial wealth gap is iterative, so it would redress the pass and also provide some resources to have greater equity going forward. This is worth stars. Get tricky. Support for financial reparations is far from universal. In fact, naughty. And all black economists are in favour of it. What would it be? but Glenn Lowry of Brown University. We got there Finally, it is all African Americans and if each african American were to receive, let's say a payment. In the MID five figures, in a way into the trains, were social security magnitude, social intervention? If we were to go down that road Do we in America, in the twenty first century, really want to construct a social security magnitude, social innovation? based on race? I don't think so.
I worry about the consequences for my country of the reunification of racial category, innovation is the basis of state action our exploration of reparations and other ideas to address the racial wealth gap will continue next time on for economic renewal. Till then take care of yourself and if he can, someone else to for economics, radio is produced by teacher and w productions. This episode was produced by Zack. The pinkies are staff also includes Allison Craig Bill Gregg Ribbon met Hickey, Daphne Chin, married Duke incurring Wallace, enter is material and we have held this week from James Foster. Our theme song is MR fortune by the hitchhikers. All the other music was composed by Luis scare. You can get free economic radio and any podcast cast up. If you want the entire back catalogue use the stitches, we're going to free economics that come. We also published Trance
In short, we are on social media and you can write to us and radio for economics dot com, as always thanks, you listening Teacher.
Transcript generated on 2020-07-25.