It is estimated that the United States economy has lost $16 trillion in gross domestic product (GDP) since 2000. Yes, trillion, with a “T.” What accounts for such a massive economic loss? Racism. According to a recent study conducted by Citigroup, “The analysis in the report that follows shows that if four key racial gaps for Blacks — wages, education, housing, and investment — were closed 20 years ago, $16 trillion could have been added to the U.S. economy. And if the gaps are closed today, $5 trillion can be added to U.S. GDP over the next five years.”
While this economic discord continues to expand, much of it is grounded in discriminatory economic practices dating back to the early 20th century that made it difficult for members of racial minorities in the U.S. to accumulate wealth, or to keep what they were able to acquire. Acknowledging the historical context of this great divide is key to understanding what will be required to make fundamental changes in correcting systems and moving forward. At one of the Federal Reserve’s “Racism and the Economy” events, writer Kirsten Mullen pointed to 40-acre land grants promised to Black Americans during Reconstruction, but were later denied. She also cited the loans for homes, businesses, and farms that were guaranteed to all World War II veterans as part of the GI Bill, but which overwhelmingly were funneled to Whites. Jay Lindsay-Federal Reserve of Boston
Raymond J. McGuire, a vice chairperson at Citigroup wrote, “We believe we have a responsibility to address current events and to frame them with an economic lens in order to highlight the real costs of longstanding discrimination against minority groups, especially against Black people and particularly in the U.S.”
Now that there is an established understanding of some of the various discriminatory practices, what can be done to address them? Some recommendations include:
- Adequate race-specific data collection, necessary for identifying, tracking, and ameliorating race-based gaps.
- Prohibiting discrimination in wages, housing, labor, financial services, lending etc. based upon race.
- Facilitating work, including affordable childcare options, quality K-12 education, access to higher education, and paid family leave.
- Supporting innovation, including enabling access to financing for Black-owned firms and start-ups.
- Changing current tax provisions, including a more progressive tax code including moving away from flat income taxes.
- Additionally, governments can act to promote access to affordable healthcare and housing, which are paramount for supporting work and innovation.
One thing is clear, refusing to address and reverse the established practices will continue to come at a cost. Many studies have been conducted over the years, all with similar results.