U.S. Economy Forces Many Black Americans Into Third-World Status
Recently the U.S. Census Bureau reported what much of Black America already knows: Black people in America are not just poor by American standards; many of us are third-world poor. The story of Black economics in 2012 is one of massive wealth loss because of the national foreclosure debacle and the catastrophic levels of income lost with the associated recession.
The Center for Responsible Lending estimates that Black Americans will lose $194 billion in wealth from 2009 through 2012 because of the mortgage meltdown. Additionally, the Center for Economic and Policy Research estimates that Black Americans will have lost about $142 billion in potential wages and salaries from 2008 through 2012. This $336 billion loss is equivalent to one-third of $1 trillion of combined lost wealth and lost potential-earned income.
These loses mean that more Black people are struggling in 2012 with such basics as paying rent or a mortgage, utilities and insurance; obtaining affordable health coverage and access to health care; and buying food and medicine. In 2006, Thomas Shapiro, director of the Institute on Assets and Social Policy at Brandeis University, stated that only 26% of Black families could survive more than three months after a major income interruption. The other 74% of Black families would be forced to seek government assistance, dip deep into savings, sell assets, file bankruptcy, move in with a friend or relative, or become homeless. By 2012, Black families that might survive a major three-month income interruption may well drop to below 15 percent.
As American cities become more expensive to live in, many Black people, with our declining wealth, are forced to leave these cities. According to the latest census data, more than 180,000 Black people left Chicago between 2000 and 2010. Although basic quality-of-life factors might be good for others in America, the majority of Black people are living through their worst economic depression since slavery.
Ironically, even as Black people earn more money in the United States, the wealth gap between Blacks and Whites grows dramatically. The indices that catalogue misery in the Black community—poor-to-useless educational preparation, mass unemployment, low-quality housing stock, disintegrating communities, and broken families—are becoming more horrendous. According to the 2010 U.S. Census, Black net worth declined to a paltry $4,955 per household compared to $110,729 for White households. The average White household had 22 times the wealth of the average Black household.
In this economic depression for Black America, college seems an unaffordable luxury. Higher education, once the reliable key to moving from low-income to middle-income status, is much less an option. Portals that lead away from poverty, crime, and despair are fast closing or have closed. Generational poverty is inextricably intertwined with race, and, as hope for breaking the poverty cycle diminishes, another impoverished generation is born. Many Blacks in America are slipping from already deep poverty to third-world status poverty!
We as Black American families cannot wait for the government to save us. We must make changes! Annually, Black Americans generate about $1 trillion within the American economy. However, a 2010 report by Target Market News shows that we don’t use our dollars wisely to improve our plight in America. For example, in 2008, some of our collective purchases included $26.9 billion for clothes, $12.9 billion for household furniture and equipment, $31.5 billion for cars and trucks, $17.2 billion for phone service, $4.5 billion for consumer electronics (excluding computers), $3.1 billion for entertainment/leisure and 2.8 billion for alcoholic beverages. Unfortunately, the only category where we showed spending restraint was on books for which we spent only $289 million. We spent more on our fingernails and our hair—$6.6 billion on beauty care—than on books and reading materials.
We must take control of our economic destiny. Please consider Ten Key Solutions for Black Economic Well-Being as a way to improve Black personal finances, our family wealth, and our community economies, and to help lift many of us out of our new third-world status
1. Start your own business. Few people acquired wealth working for someone else. By starting your own business, you can hire family, friends, and community members. Additionally, you will build the economy of your community and become a model for what’s possible. Finally, you may be able to pass on a successful business as a family inheritance to your children and grandchildren.
2. Get as much education as you can. Higher levels of academic and technical education readily translate into better employment, higher income, and more wealth. Education begins with you reading to your children as infants, teaching your children to read before they are school age, and encouraging a good deal of on-going reading. Education must become a life-long pursuit! The new hierarchy of human needs after air, water, and food is education. Without a good education, you have few viable, legal options for earning money.
3. Stop renting an apartment. Save enough money to make a down payment on a house. Then buy a house. The largest portion of the net worth of most families is in home equity, not cash assets.
4. Manage your health and your well-being carefully. Watch the quality and quantity of the food you eat and the water you drink. Exercise rigorously and regularly. Choose your physician wisely—one who listens and holistically addresses your concerns, and consult your physician annually on disease prevention and longevity. Strive to develop physical, emotional and spiritual harmony.
5. Open savings accounts for your children. Teach your children the value of money and how to earn, save, and invest it at an early age. Take personal finance classes so that you will become the best teacher for your child on the issues of money, saving, investing, and credit.
6. Invest your money and your time first in self-improvement by building your skills and your knowledge base—not in cars, clothes, furniture, frivolous electronics, sports, games, vices, the lottery, etc. Second, learn how to let big companies work for you, through stock ownership, rather than you only working for them. And third, invest your money in the U.S. and global stock markets. The world is much bigger than the United States.
7. Manage your credit carefully and avoid unnecessary debt. Beware of spending beyond your means and consume smartly on holidays, birthdays, graduations, vacations, weddings, and funerals. Learn to pay cash for what you need or don’t buy it. And forget about things you want and don’t need. Create a household budget that includes such essentials as food, safe living space, and utilities—and live by it. Save for a rainy day. It’s coming!
8. Two-person headed households are more viable economically than one-person headed households. Marriage can be an economic advantage when both parties align on financial priorities and fiscal realities. Seventy percent of Black children are born into single-parent households and begin life ensconced in poverty. Most never make it out.
9. Tithe. Give to your church or to a social cause.
10. Create a will to pass on your accumulated wealth to the next generation. Studies suggest as much as 70% of most households’ current wealth was inherited from a previous generation.