The wealth and income gaps in the U.S. will be difficult to fix without drawing a line to the U.S. government’s role in creating them, the author of a new book on those policies said at the Federal Reserve Bank of Minneapolis Thursday.
Federal housing and labor laws that discriminated against blacks after World War II are well-documented and their effects persist, Richard Rothstein said at the bank’s latest public event on economic opportunity and inclusive growth.
“But somehow we’ve washed it from our memories,” Rothstein said. “Unless we relearn this history … we’re not even going to begin to be able to have the conversations about the kinds of policies to remedy it.”
Rothstein, an education policy specialist and fellow at the Economic Policy Institute in Washington, chronicled the history in a new book, “The Color of Law: A Forgotten History of How Our Government Segregated America.” In addition to tracing better-known policies — such as discriminatory deeds in planned suburbs like Levittown, N.Y., and Daly City, Calif. — Rothstein explored rules that kept blacks out of public housing and labor unions, the tax exemptions the government gave to institutions that promoted segregation and the effect of persistent differences in wages.
Today, incomes for blacks are 60 percent that of whites, but the gap in wealth is far greater. The typical black household is likely to have just 10 percent of the wealth of the typical white one. Rothstein traces that gap to the discriminatory housing practices of the 1940s to 1970s, which denied blacks the opportunity to build wealth at the same rate.
“That enormous disparity is entirely attributable to unconstitutional federal housing policy perpetuated in the 20th century,” he said. “This difference is because most middle-class families in this country gain their wealth from their housing equity.”
Rothstein spoke at the second daylong conference on economic opportunity held this year at the Minneapolis Fed. The bank earlier this year created the Opportunity and Inclusive Growth Institute, staffed by in-house and visiting economists who identify areas where the central bank can drive research and policy to narrow economic gaps.
Neel Kashkari, the bank’s president, said the institute will soon launch a community advisory board to ground some of the academic and theoretical work in the everyday work of civic and nongovernmental leaders. Other participants in Thursday’s conference also focused on disparities in housing and education that were shaped by segregation practices.
“Some of the most serious social problems we have in this country stem directly from residential segregation,” Rothstein said in the keynote speech at the conference. He pointed to violence in poor neighborhoods, the lack of income mobility and the achievement gap in school systems.
Asked how the U.S. compares to other countries in grappling with segregation, Rothstein noted the U.S. is the only major industrialized country with a history of slavery based on race.
“We created a caste system as a residue of slavery,” he said. “In other countries, you’re talking about immigrants when you deal with low-income families and that’s a highly different problem than what we’ve got.”