Building Black wealth: the downside of Finance

It's February, which means it's Black History Month. A month where important people and events in the history of African diaspora are remembered. I learned that Black History Month has been around since 1926 and each year has a different central theme. This year's topic is Black Resistance. However one of the previous central theme's was The History of Black Economic Empowerment. This triggered me to dig into one of the many industries that has highlighted and contributed to inequalities: the finance industry. And to this day we still see the results of this.

As a descendent of enslaved ancestors, it is important for me to know the history and present. With this article I want to create awareness around the financial position of Black people. I am also brainstorming about ways I can contribute to the community in a more permanent way.

History

For centuries long African Americans (but also Africans in South-America/the Caribbean) were exploited and dehumanized. Until 1865 (abolishment of slavery), Black people were prohibited from earning wages in the USA. At the end of the 19th centuries in most countries the enslaved gained their "freedom" but were still tortured by racism. Blacks were tortured by laws that restricted them from buying/owning land and denied from job opportunities leading them to mostly unskilled labor like farmers and domestic workers. Social security (initiated in 1935 in the USA) did not apply to these workers, which were 65% Blacks (!!!). Before 1964 (the Civil Rights Act) black codes and Jim Crow laws dictated what jobs were allowed for Black people, their wages and more.¹

Financial achievements

Despite these horrible barriers thrown at Black people, finance history has had succesful Black leaders that changed the game. I highlight four Black achievers briefly but their story is much more than a few sentences:

• Maggie Lena Walker² noticed that deposits from Black organizations where not really taken by White-owned banks so she started her own bank in 1903. She became the first Black woman to start a bank in the U.S.A. and also serve as president of a bank.

• In 1906, O.W. Gurley² purchased 40 acres of land in Tulsa. This would later become a community called Greenwood, also known as Black Wall Street. "It is said within Greenwood every dollar would change hands 19 times before it left the community." The 18-hour Tulsa Race Massacre, also known as the Tulsa Race Riot, destroyed the whole town in 1921.

• Ernesta Procope² founded a insurance company in 1953, called the E.G. Bowman insurance company. In 1979 the business became the first Black-owned business on Wall Street. The business became the biggest minority-owned insurance company in the U.S.

• In 1953, Lilla St. John² passed the New York Stock exchange exam as the first Black woman. She was a mother of two and only studies for two months. Afterwards, she became the first certified female investment counselor in the U.S.

Reading these stories really makes me proud. It inspires me that these individuals made really bold choices despite systems that were not working in their favour.

Current situation

Despite the financial achievements in Black history there is still work to do. Research shows there is still a large wealth gap between Black and white families. But what is wealth actually and why is it so important?

Wealth is the measure of an individual’s or family’s financial net worth³.

Wealth enables people to change jobs, move to a new neighborhood, respond to unexpected situations or even start a business. It helps people to provide in their own retirement and help their kids with education or housing.⁴ It is good to know that wealth and income are two different things; a person can have a very high income but poor wealth. Take an example of famous singers or athletes who have had large salaries but ultimately went bankrupt.

A 2019 study from the American Federal Reserve showed that the average Black family’s wealth is 10 times less than the wealth of an average white family⁵. According to research of Hanks, Solomon & Weller (2018) Black family's have had less opportunities in building their wealth because of systems that enable discrimination and racism. To name a few examples:

• to this day Black people still face housing and mortgage discrimination;
• Black people have less access to jobs that carry benefits like retirement savings;
• research shows that Black families have more high interest debt than whites.

Systems of injustice have and still are causing Black people to fall behind with building wealth. In order to close this gap, these systems need rigid reformation to eliminate build-in racism. I believe it will be difficult to change these systems as they have been working this way for centuries. In future blogs I will focus more on how wealth can be build.

Endnotes

¹ Perkins, E. (2023, July 2). Tackling Disparities in Finance for Black and African Americans. Money Geek. https://www.moneygeek.com/financial-planning/resources/black-african-american/

² Skipper, K. (2023, February 1). 11 Black Finance Leaders in History. BECU. https://www.becu.org/blog/black-finance-leaders-in-history

³ Investopedia (2022, July 10). Understanding Wealth: How Is It Defined and Measured? https://www.investopedia.com/terms/w/wealth.asp#:~:text=Wealth is an accumulation of,owned%2C then subtracting all debts

⁴ Hanks, A., Solomon, D. & Weller, C. (2018, February 21). Systematic Inequality. CAP. https://www.americanprogress.org/article/systematic-inequality/

⁵ Lisa J. Detting and others (2017, September 27). Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.html

⁶ Black History Month 2023 header picture by: Image by pikisuperstar on Freepik