A very brief and incomplete history of African American economic repression.

My goal with this piece is to learn more myself and then explain to others how the historical intent and/or execution of American legislation was to support and enfranchise various majority communities, specifically omitting African Americans, and thus keeping them from the financial gains enjoyed by their non-black counterparts in the last century and a half. 

I was compelled to put this together because I feel powerless and deeply saddened seeing the pain and suffering my black countrymen and women deal with every day. I cannot imagine what it’s like to live like that. I don’t want anyone to live like that. I want to make my country a better, more equitable place. 

 
 

Police actions like harassment and brutality, especially when it is racially-targeted, is unconscionable. George Floyd’s death was easily avoidable. I am sorry for his friends and family who have to not only deal with the pain of a loved one’s death, but have to see it, to see how avoidable it was. They will have to live with this for the rest of their lives. My heart goes out to them.

As a personal finance educator, teaching others about the laws that were created to maintain inequity in our society is what I can do to help. It’s impossible to write the whole history of black financial disenfranchisement in a blog post; this is simply information worth knowing to better understand the path that brought us to today.

Although it’s a depressing list (so depressing and long that in two and a half days of research and writing I only got from the Civil War to WWII), when I see the power of the law in action, it gives me hope that the power of the law can also be effectively used to move society towards justice for all. 

Note: I am not a historian, sociologist, or economist. This isn’t anywhere near complete. It isn’t perfect. It leaves out all the other minority groups that have been economically hurt by legislation, including peoples we now think of as white. It is, however, accurate. It’s the briefest of introductions to a fraught, divisive, complicated, and emotional topic. 

A brief and incomplete list of laws that siphoned money from African Americans to portions of the majority population.

  1. Until 1865, our federal government said it was legal to own people.

It took between 620,000 - 800,000 people to die in the Civil War before everyone could agree, many begrudgingly and under duress, that owning people shouldn’t be allowed. To boil down a much-argued topic, this was a war about the economics of state-supported free labor, aka, slavery. (From The Confederate Constitution, “No bill of attainder, ex post facto law, or law denying or impairing the right of property in negro slaves shall be passed.” Don’t say it was only about state’s rights - the core reason is right there in their constitution.)

Why were they so entrenched in requiring slavery? The wealthy did not want to pay for labor. They made more money that way. They wanted it to stay that way. Lifetimes of black labor resulted in no remuneration for the laborers, only for the slaveholders. 

Despite years of toil, once they were freed, they had to start from nothing.

2. Reconstruction - Great idea. Terrible execution.

Requires a fair amount of history sprinkled in with the laws. (For a thorough breakdown, check out Encyclopedia Britannica)

Until 1877, things were going okay reconstructing the South - not well, not good, but okay. Freedmen and women were buying farming property, getting educated, getting involved in politics thanks to a series of federal laws and amendments in an attempt to reconstruct the South as a more equitable society - not quite a Sisyphian task, but damn close.  

At this time, there was much debate about what to do with the newly freed people. The law failed the newly freed people. Forty acres and a mule never happened for the vast majority of freedpeople. Although it would have been a pittance in terms of back wages, it would have been SOME compensation for years worked, and given freedmen and women a chance to build a better life for their families, to have something of their own. Sadly, when all was said and done, most confederate land went back to the original owners or to Northern speculators. Many of the former slaves went back to laboring as sharecroppers or for wages. 

Sharecropping was a system in which tenants (of every color) rented land/tools to grow their crops. It was a useful way to get started when you didn’t have any money to buy these things yourself but it earned a very bad reputation for very good reasons. From PBS: 

High interest rates, unpredictable harvests, and unscrupulous landlords and merchants often kept tenant farm families severely indebted, requiring the debt to be carried over until the next year or the next. Laws favoring landowners made it difficult or even illegal for sharecroppers to sell their crops to others besides their landlord, or prevented sharecroppers from moving if they were indebted to their landlord.

Laws created a system that made it easy to get into debt and hard to get out of it. It essentially becomes slavery by another name but now with more white people as 2/3 of sharecroppers were white. Think of sharecropping this way, it’s like Visa garnishing so much of your wages to pay towards your balance that the only way you can get supplies for your family to live is by charging purchases to your Visa card that you essentially can never pay off. You get further in debt, you work harder, they take the money from your pay, the cycle continues.

In 1877, just 12 years after the end of the war, with enormous amounts of work yet to do, the last federal soldiers left the South to end a political stalemate. This was a time when blacks in the South needed the full force of the federal government to ensure the spirit of the new laws supporting equality were fulfilled. The lack of government enforcement is what went wrong here. There was a lot of work to do and the federal government gave rule over the henhouse to the foxes.

Discriminatory laws and violence slowly began to crop up to strip African Americans of their rights, starting with their right to vote. The South was left to their own devices to reconstruct their society. It went about as well as you can imagine. 

It’s not like the North was a beautiful haven of racial equality. Racism allowed the federal government to disproportionately deny black Union soldiers their disability pension. If this doesn’t sound familiar, wait ‘till we get to the GI Bill.

3. This leads to the Jim Crow era. And oh f*ck is that bad.

Here are a few of the laws that disproportionately kept wealth from black people. Most of the following are federal laws that affected black people across the country - not just in the south.

a. “Separate but equal” was given legal blessing by the Supreme Court in 1896 in Plessy v Ferguson. It allowed for separate public facilities for different races, as long as they were equal (spoiler: no such thing.). Like so much else, this meant black children were sent to schools of far lower quality. Lower quality education meant black kids weren’t taught the skills they needed for a skilled job with higher pay, so they couldn’t get the good jobs. They were left to become unskilled labor, which pays far less and, as you’ll see, has little protection or benefits. How are you going to get out of poverty if the tools required are withheld from you? It’s like asking you to build a house with a tarp and a rope. At best, that will build a lean-to if you’re in a forest. And it will leave you little to hand down to your children.

b. Redlining. UGH. This one is huge. I’ve put some links below to give it more of the attention it deserves. Basically, the federal government, in an effort to reduce the economic freefall of the Great Depression poured money into refinancing mortgages and new homes. However, the maps used to designate which areas got the money were classified by race, without looking at the residents’ qualifications or creditworthiness - the areas with minorities, declared “high-risk”, were marked in red, hence, redlining. The result was that minorities were excluded from the loans available for others to secure the American dream of homeownership. The blatant racism within these maps is breathtaking, you really should check out that link.

(Please note, as race is a social construct, lots of people who we now see as “white” were not considered so at that time. Their neighborhoods were also downgraded due only to their minority status - Poles, Jews, Italians, etc.) 

Home ownership is probably the most common form of wealth building in America. If you were not a part of a minority group, you could get the new 15-year, affordable mortgages to move to the “safe” suburbs. You started building wealth for your family that would echo for generations. In 1934, almost one in five mortgages was held by the federal government under this program.

The middle class fled the cities since it was now cheaper to live in a new home in the suburbs rather than renovate an old, inner-city home. The only people left in the inner city were poor minorities who had no access to the funds that the majority group was getting, which would allow them to keep their homes and improve their neighborhoods. The homes of blacks were foreclosed on. Their neighborhoods deteriorated. The ramifications are multi-generational and wide-reaching (think of the problems inner cities still have with school funding, violence, drugs, and food deserts, among so many others) and redlining still happens today. 

See also: 

c. During the thirties, New Deal social programs were beginning to lift millions out of poverty. But jobs held by predominantly black workers were left out of these programs. Agricultural and domestic work, remember their schools don’t offer skilled job training, were denied minimum wage, social security benefits, unemployment insurance, and workers’s compensation. This was put into the design of the bills. It was not an unintended consequence. During one of the worst economies in America, the government intentionally let these particular people suffer while giving aid to others. 

d. With no federal oversight of distribution of the Aid to Dependent Children Act (predecessor of what is commonly known as Welfare), minority single mothers were often disqualified from receiving the same aid their white counterparts received. This started during The Depression but continued for decades. At this time, women did not often work outside of the home. The job opportunities for these women were generally limited to domestic work with low pay. 

4. Post-WWII: The GI Bill

Gave returning soldiers an unprecedented opportunity to go to college, buy a home, get job training, start businesses, and, as President Clinton said, it "helped to unleash a prosperity never before known." It was like a fever dream of the Enlightenment. 

a. However, remember those redlining maps? Black veterans often wanted to build or buy in black neighborhoods. Those neighborhoods were rated “D - Disastrous,” the lowest rating possible, only because of the color of the residents’ skin. The VA had to abide by the same rules as existed during the Depression, so they would not lend their vast amount of GI Bill funds for residences in these neighborhoods. Due to neighborly racism, blacks also had a very hard time buying in any other neighborhood. Therefore, they could not buy or build a home anywhere with the GI funds promised.

As homeownership was and remains the foremost path to wealth-building for many Americans, especially of this post-war generation, black people were cut off from a critical opportunity offered to their “white” counterparts. 

b. I’m kind of exhausted and I didn’t even have to live this. Here, read  what the  New York Times said better than I ever could about racism and the GI Bill:

But Katznelson demonstrates that African-American veterans received significantly less help from the G.I. Bill than their white counterparts. "Written under Southern auspices," he reports, "the law was deliberately designed to accommodate Jim Crow." He cites one 1940s study that concluded it was "as though the G.I. Bill had been earmarked 'For White Veterans Only.' " Southern Congressional leaders made certain that the programs were directed not by Washington but by local white officials, businessmen, bankers and college administrators who would honor past practices. As a result, thousands of black veterans in the South -- and the North as well -- were denied housing and business loans, as well as admission to whites-only colleges and universities. They were also excluded from job-training programs for careers in promising new fields like radio and electrical work, commercial photography and mechanics. Instead, most African-Americans were channeled toward traditional, low-paying "black jobs" and small black colleges, which were pitifully underfinanced and ill-equipped to meet the needs of a surging enrollment of returning soldiers.

The statistics on disparate treatment are staggering. By October 1946, 6,500 former soldiers had been placed in nonfarm jobs by the employment service in Mississippi; 86 percent of the skilled and semiskilled jobs were filled by whites, 92 percent of the unskilled ones by blacks. In New York and northern New Jersey, "fewer than 100 of the 67,000 mortgages insured by the G.I. Bill supported home purchases by nonwhites." Discrimination continued as well in elite Northern colleges. The University of Pennsylvania, along with Columbia the least discriminatory of the Ivy League colleges, enrolled only 46 black students in its student body of 9,000 in 1946. The traditional black colleges did not have places for an estimated 70,000 black veterans in 1947. At the same time, white universities were doubling their enrollments and prospering with the infusion of public and private funds, and of students with their G.I. benefits.

Up to this point has taken me two and a half days of research and writing. It has been draining and depressing for me, and I’m only writing about it. If I wait to publish this until I cover through to today, it’ll be months before this is out. So, for now, I’m stopping here.

I improved my own knowledge of just how twisted our system has been over the years and I hope that having read this short and incomplete history, you now have a better understanding of systemic racism as it relates to personal economics and how we got to this point today. There are also lots of examples of the law dismantling systemic racism (Civil Rights Act, Voting Rights Act, Fourteenth and Fifteenth Amendments) - there is hope.


When you look at the inequality, and the consequent frustration of those who are exploited by that inequality, it is worth remembering that the people at the bottom of the economic ladder are not there because they don’t work hard enough, because they don’t have a culture of pursuing education, or that they’d rather let the government take care of them. The people who suffer from inequality in our society are there because of the long history of efforts to make sure that is just exactly where they remain. 

Tell others. Be outraged. Make our country a better place for black people to live in. 

Thank you for reading.


Ms. Moody

Kate Moodyrace, African Americans, disenfranchisement