On November 2, 1983, President Ronald Reagan signed a law establishing a federal holiday for the birthday of Martin Luther King Jr., to be celebrated each year on the third Monday in January. As the legislation that passed Congress said: “[S]uch holiday should serve as a time for Americans to reflect on the principles of racial equality and nonviolent social change espoused by Martin Luther King, Jr..” Of course, the case for racial equality stands fundamentally upon principles of justice, with economics playing only a supporting role. But here are a few economics-related thoughts for the day clipped from posts in the previous year at this blog, with more detail and commentary at the links.
1) “The Black-White Wealth Ratio Since 1870″ (October 14, 2022)
Ellora Derenoncourt, Chi Hyun Kim. Moritz Kuhn, and Moritz Schularick have done a deep dive into historical record to develop some estimates in ” Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020″ (Federal Reserve Bank of Minneapolis, Opportunity & Inclusive Growth Institute Working Paper 59, June 10, 2022). Back in 1860, the average white person had more than 50 times the wealth of the average black person on a per capita basis, but now the multiple is more like six times. The white-to-black ratio levels out from 1900 up to about 1930, during a time of legalized discrimination and segregation for black Americans. There is some move toward greater equality of wealth after World War II, and an additional move after the passage of the Civil Rights Act of 1964. But there has been a move toward greater inequality since about 1980, which seems mainly due to the fact that those who already had the resources to own housing or to have stock market investments have done especially well since then, while those who did not already own such assets had no way to benefit from the capital gains that have occurred.
2) “Some Economics of Blockbusting” (July 12, 2022)
Blockbusting was made illegal in 1968. For a couple of decades before that, it worked like this: A real estate company would pick out a predominantly white neighborhood in a city. It would start advertising through the neighborhood that it was “changing,” to use a gentle term, or it would be more explicit that blacks were buying houses in the neighborhood. Some of the white residents would sell their houses and relocate. The real estate firm would sell these houses to blacks, often at a considerable mark-up. White residents in these neighborhoods were apparently unwilling or unable to sell to blacks directly, and thus accepted a lower prices for their houses. The process unspooled from there, with the real estate firm increasingly able to play on white bigotry to buy houses cheaply and then to play on limited real estate options for blacks to sell to them at higher prices. Katherine Bennett, Daniel Hartley, and Jonathan Rose provide some background in “How common was blockbusting in the postwar U.S.?” (Chicago Fed Letter, Federal Reserve Bank of Chicago, July 2022). They find some evidence of the practice in 950 census tracts across 39 cities.
3) “The Evolution of Labor Force Participation by Race” (February 7, 2022)
Back in the early 1970s, labor force participation rates were quite similar for white, black, and Hispanic populations. Labor force participation then rose for all three groups in the 1970s, 1980s, and 1990s, in large part because of the mass entry of women to the (paid) labor force. However, the rise in labor force participation for whites and Hispanics was faster than the rise for blacks. Roughly around 2000, the labor force participation rate for all three groups started declining. However, the decline was slowest for the Hispanic population. In the lead-up to the pandemic, labor force participation was highest for the Hispanic population, but had roughly equalized for the white, black, and Asian population.
4) “Slavery and Economic Development in Brazil” (April 12, 2022)
Roughly half of all the slaves who made the trans-Atlantic passage from Africa to the New World from the 1500s to the 1800s disembarked in Brazil, where slavery was not abolished until 1888. How did slavery affect the economic development of Brazil? Nuno Palma, Andrea Papadia, Thales Pereira, and Leonardo Weller discuss the evidence and research, with occasional contrasts to the US experience of slavery, in “Slavery and Development in Nineteenth Century Brazil” (Capitalism: A Journal of History and Economics, Summer 2021, 2:2, pp. 372-426, subscription or library access needed). As the authors discuss at some length, Brazilian cotton farms that depended on slave labor competed with farms that relied on free labor. The Brazilian coffee industry did not grow to global prominence in the 1880s and 1890s until the period in which slavery was diminishing, and when most of the coffee plantation workers were recent European immigrants rather than slaves. In general, the regions of Brazil where slavery was greatest were slowest to mature economically, as was also true in the United States. The presence of slavery tended to discourage free labor–which after all, preferred not to find itself competing with slave labor. Areas of Brazil with more slavery also tended to a lower investment in education and human capital.
The Fall 2022 issue of the Journal of Economic Perspectives included an article about some of economic work of Sadie T.M. Alexander, the first African-American to receive a PhD in economics. This essay discusses Sadie T. M. Alexander’s analysis of Black women and work based on her 1930s speeches and writings. A proponent of women’s gainful employment and economic independence, Alexander’s views on the benefits of industrial employment for women and family life stood in stark contrast to White social welfare reformers who discouraged maternal employment in favor of households with male breadwinners. Alexander criticized the unequal treatment of Black and White women under protective labor law, particularly with respect to domestic servants’ exclusion from New Deal minimum wage and maximum hour protections.
6) The Spring 2022 issue of the Journal of Economic Perspectives included a three-paper “Symposium on the Economics of Slavery.”
“American Enslavement and the Recovery of Black Economic History,” by Trevon D. Logan
From the abstract: This paper reconsiders the evidence needed to answer pressing questions of economic history and racial inequality, the Third Phase of research on American Enslavement and its Aftermath. First, I briefly summarize how economists have sought to understand slavery as an institution. Second, using my family’s narrative as a lens, I show how answers to questions from economic history and economic theory can be answered by expanding our evidentiary base and methodological approaches. In the process, I highlight some areas of what these “traditional” economic perspectives miss. Finally, I briefly provide some examples from other fields—such as recent work by historians—that have sought to provide texture on some of the key dimensions of slavery and racial inequality that have been under-studied by economists.
“The Cumulative Costs of Racism and the Bill for Black Reparations,” by William Darity Jr., A. Kirsten Mullen and Marvin Slaughter
Two major procedures for establishing the monetary value of a plan for reparations for Black American descendants of US slavery are considered in this paper: 1) Enumeration of atrocities and assignment of a dollar value to each as a prelude to adding up the total, and 2) Identification of a summary measure that captures the dollar amount of the cumulative, intergenerational effects of anti-Black atrocities. Under the first approach, the itemization strategy, we assess wage costs to the enslaved of bondage; financial gains to the perpetrators of slavery; damages to Black victims of post-Civil War white massacres and lynchings; losses from discrimination in the provision of the home buying supports from the Federal Housing Administration and the G.I. Bill; and income penalties due to racial discrimination in employment. Under the second approach, the global indicator strategy, we calculate the present value of providing 40 acres of land to freed slaves in 1865 and the current wealth gap between Black and White Americans. We conclude that the latter standard, the racial wealth gap, provides the best gauge for the size of the bill for Black reparations.
The essay considers the claim that slavery played a leading role in the acceleration of US economic growth in the nineteenth century. Although popular among pro-slavery apologists, the proposition fails under rigorous historical scrutiny. The slave South discouraged immigration, underinvested in transportation infrastructure, and failed to educate the majority of its population. It is not even clear that the region produced more cotton than it would have under a counterfactual alternative settlement by free family farmers, on the free-state pattern. The grain of truth in recently popular narratives is that many northerners and business interests were complicit in the crime of slavery: routinely engaging in transactions with slaveholders, even promoting activities that facilitated slavery and the domestic slave trade. Complicity complicates simple historical moralism, but it is quite different from the notion that the prosperity of the nation as a whole derived from slavery in any fundamental way.