The Unrelenting Cost of Slavery

This is known as forty acres and a mule. It's often talked about is something that could have changed the trajectory of the racial wealth gap today, if it ever actually happened. After President Abraham Lincoln was assassinated, his successor Andrew Johnson famously rescinded the offer. He lacked all of Lincoln's capacity for greatness. He was deeply, deeply racist. He couldn't have cared less about the fate of the former slaves, and he restored white supremacy as quickly as he could.

That's Eric Fohner. He's a professor emeritus of history at Columbia University in New York and has written several books on Civil War era history. He says this moment was a huge missed opportunity for building black wealth. By some estimates, that land would have been worth as much as three point one trillion dollars today. But it wasn't the end of the conversation about giving an economic future to former slaves.

During reconstruction after the Civil War, um former slaves and some white allies insisted that genuine freedom required some kind of economic base, and that in an agricultural society that meant owning land. In eighteen sixty six, a Congressman named Thaddeus Stevens proposed an amendment to a bill that would have confiscated all the land from plantation owners, split it up, and given it to former slaves and the people who

fought for their freedom. We especially insist that the property of the chief rebels should be seized and used for the payment of the national debt caused by the unjust and wicked war they instigated. The whole fabric of Southern society must be changed, and never can it be done if this opportunity is lost. One reason to redistribute the land was political. The Republicans in Congress wanted to dilute the economic power of Southern landowners. But there was another

reason too. You needed to break up the plantations and distribute the land. This was the only way that African Americans would avoid being economically dependent on their former owners. They wouldn't really then be free. Johnson may have been president, but Congress at that time was run by radical Republicans like Stevens, who are rapidly passing laws to expand the

rights of black people. They passed the thirteenth, fourteen, and fifteenth Amendments that abolished slavery, granted citizenship to anyone born in the US, including slaves, and gave black men the right to vote. Congress debated the land issue, but never took it up seriously. The economic revolution did not go as far as the political revolution. Congress did not pick

up the banner of forty acres in the mule. It was considered too unprecedented, you know, you know, it was just not something that was part of the American tradition in some ways. I know you asking today, how long would it take somebody that thing? How long we're predator flying the pigeons for men. I come to say to you, good afternoon, however, difficult for MoMA, however frustrating the how

it will not be long true. A hundred years later, Martin Luther King Jr. Would lead a civil rights revolution not seen since reconstruction. The movement would help end segregation and laws that made it almost impossible for black people to vote. But even after those victories, he would talk

about the problem they did in solve. Economically, the negro is worth worse off today than he was fifteen and twenty years ago, and so the unemployment rate among whites at one time was about the same as the unemployment rates among negroes, but today the unemployment rate among negroes is twice That's Martin Luther King Jr. Is the Other America speech at Stanford University in April nineteen sixte But we must see that the struggle today is much more difficult.

It's more difficult today because we are struggling now called genuine equality. It's much easier to integrate a lunch counter than it is to guarantee a livable income and a good follow job. Economic justice was next on King's gender, but he was never able to achieve it. A year later, he was assassinated in Memphis, the data shows that the median white family has ten times more wealth than the

average black family. One of the drivers of that wealth gap is redlining, the practice of mortgage lenders denying loans to people based on the race or where they live. We have lived at these and tim nditions for many years that he followed years. I feel that the way to bring about equality of black people in the systems quality white people. Now, don't interrupt. You have Dandue Kate all and black people the cap at the bottom of the economic letter, the bottom of the holding letter, the

bottom of the educational letter. I was prepared to try to get used to having a colored family in the block when I there's another one across the street, and pretty soon I'll be one next door, and before you know what, those peaks are gonna start looking like Harlow. Well. I don't want to live in a colored slum. I don't want to live in a colored slock. Welcome back to the Paycheck. I'm Jackie Simmons and I'm Rebecca Greenfield. Last time we discussed what wealth is, white matters and

how you get it. Today we're going to talk about the four hundred plus years of history that lead to America's wealth gap. If you want to look at the origins of the racial wealth gap, there's a pretty good place to start. Two d fifty years of unpaid labor. That's going to create a pretty large gap between the people who are slaves and the people who are owners. That's Eric Phoner again. Slavery not only robbed black people of wealth, but black people's labor and bodies created a

huge amount of wealth for white people. To understand the enormity of this, Phoner says, there's a stat that he always used to tell his students when teaching them about the history of the wealth gap. The economic value of the four million slaves was an average of a thousand dollars per person, or about four billion dollars altogether. The banks, railroads, and factories in the United States all put together, were

worth about three and a half billion dollars. Not only was all of this wealth in the hands of white people, but a lot of it was in the hands of white people who had a strong economic interest in keeping black people enslaved or at the very least economically subservient. The history of wealth generation in the US is filled with figures like these that help us understand the enormity

of the racial wealth gap. We asked our colleague Katarina Surviva in economics reporter at Bloomberg, is she could do the math to show not just the losses endured by black people, but the huge economic gains created for white people. Hey, Katerina, welcome to the paycheck. Hi, thanks for having me. So, if we're going to go back into US history to look at the wealth gap over time, where do we start? Okay, for our purposes today, we're going to start with pre

Civil War America. But before we do that, I'm going to give you four numbers to hold in your head. Can you do that? Yeah? Totally? Okay? Forty two trillion dollars, two hundred and seventy million, two hundred million and seventy five. You got that? Yeah, forty two trillion million, two hundred

million and seventy five, You got a jackie. Great. We'll start with the first number, forty two trillion dollars, that four billion dollar figure that Eric Fohoner talked about that would amount to as much as forty two trillion dollars in today's money. That shows you just how much wealth was created for slave owners. So in the high end, that's like double the entire U. S economy today exactly, and that doesn't include all the lost wages and income

that black people never got for their free labor. The US used enslaved labor for almost two hundred and fifty years. Thomas Kramer, a professor of public policy at the University of Connecticut, calculated that from the founding of the country in seventeen seventy six to the end of slavery in eighteen sixty five, that amounted to twenty trillion dollars in today's money. And it's also important to understand that owning slaves didn't just make white people rich, it helped them

get richer. I called up a couple economists and historians to have them help me with some of this math. If you own slaves, that was an asset on which you could gain leverage to buy more stuff. And that's how you get rich, is you have assets that produced wealth and then you can get more credit based on those assets. That's Marisa barader On, a law professor and associate dean at the UC Irvine School of Law and the author of The Color of Money, Black Banks and

the Racial wealth gap. She brings us to the second way we can look at wealth created by slavery. It wasn't just slave owners who profited, it was everyone connected to the slave economy, which, at this point in US his street was most people. Cotton was by and far the largest export at the time. Big banks like JP Morgan and Lehman Brothers got rich financing its trade. There

were literally slave backed securities. The entire economy of some southern towns down to the smallest shopkeepers, depended on the cotton trade. So are we coming to another one of your numbers. No, So I really wanted to find an exact number for this, and I asked a bunch of people. But it's really hard to quantify this because slavery was just such a big part of the U. S. Economy. One of the things most people agree on, though, is that the U. S would probably not be the world's

biggest economy today without its slave history. Okay, but when slavery is abolished, what happens to that four billion dollars of slave labor? Right, So they lost those human assets and that was a massive loss in wealth. But a recent study found that within a generation, the grandsons of slave owners recovered all that wealth. The researchers attributed to

a few things. A network of professional relationships that allowed them to start new businesses, and they created a legal environment that allowed them to continue to exploit black labor. After the Civil War, there was some talk about how to set black people up for their free lives and shore up some of these differences. That forty acres and a mule promise, as we know, that never happens, and there was something else going on in the middle of

America that had big implications for the wealth gap. That condition of the denial of the forty acres was accompanied by a situation in which one and a half million white families received a hundred sixty acre land grants in the western part of the United States. That's William Garritty, better known as Sandy, an economist at Duke University, who I talked to about this. What he's talking about are

the Homestead Acts, and here's my second number. The Acts were a series of bills that were meant to encourage settlement of the American West by giving away two hundred and seventy million acres of land largely stolen from Native Americans. So at this point black people are free. Are they able to get any of that? It's complicated. The original Homestead Act was passed in eighteen sixty two, when most

black people were still enslaved. There was a Southern Homestead Act in eighteen sixty six that was open to black applicants, but the land prices were often still too expensive, so the vast majority of this went to white people. It's hard to quantify the value of the land today, but the social scientists Trina Shanks estimates that forty eight million, mostly white Americans today are descendants of these original homesteaders. But there were some black families like mine who were

able to acquire land. Yeah, but the economic hardships of the post Civil War period, the fact that plantation owners now had to pay for their labor, only increased racial resentment towards black people in the South. This led to the Jim Crow Laws that severely limited black people's freedoms, what jobs they could do, if they could own property, where they could live, which kept them poor and in

many cases indebted to their former owners. Here's Eric Fohoner Again, Blacks found themselves locked into the lowest rooms on the latter in what was now the poorest region in the United States anyway, so they were at the bottom of the bottom was very difficult to move up from there. Plus that was accompanied by violence towards anyone who bucked the racial norms, like black people who accumulated any kind

of wealth. One of the most egregious incidents was the Tulsa massacre of that destroyed a black neighborhood that was so prosperous in its businesses and home ownership that it was known as Blackwall Street. In one day, thousands of white rioters, including police officers, burned down hundreds of homes and businesses, displacing ten thousand black Tulson's. They even used World War One bomber planes to burn the city. And that's where we get to my next number. Two hundred

million dollars. That's how much wealth was destroyed in Tulsa in today's dollars. But it wasn't an isolated incident. Sandy Daty says there were around a hundred of these attacks from the end of the Civil War into the nineteen forties. Hundreds of thousands of Americans were members of the Ku Klux Klan, and there were around three thousand lynchings between

eighteen seventy and nineteen forty. So slavery itself created a multi trillion dollar wealth gap, and the period after slavery didn't do much to close it because of things like the Homestead Acts and all this recial violence. Yeah, that's right, and none of that includes the one thing most people can trace their wealth back to home ownership. There were two important policies that brought homeownership to the masses in

the twentieth century. In the presence of senators, congressmen, and the heads of veterans organizations, President Roosevelt signs g I

Joe's Bill of Rights. The penns will become valuable souvenirs of the occasion that guarantees a returning soldier a year of employment, insurance, guarantees of loans up to two thousand dollars, and helps pay for the completion of his schooling in The National Housing Act created a system where the US government for the first time guaranteed mortgages, and then the g I Bill helped veterans returning from World War Two access low interest loans to help cover certain expenses like homes.

You no longer needed a pile of money to buy a house. This not only allowed many more people to own homes, but because people could leverage these assets to take out a loan to start a business or pay for their kids college education, it became a huge way to build more wealth. Black people were almost entirely left out of this, and it did not accidentally leave out people of certain races. It did so explicitly um methodically.

What Mare Separadoron is talking about is redlining. Now that the government had a vested interest in making sure its loans got paid back, it came up with a system for assessing risk to do just that. It created maps that deemed certain neighborhoods safe bets and others so risky that banks wouldn't readily lend to people looking to buy there. And this system, more than anything, was based on racism.

So when those f H. Mottain makers went out to survey risk for the mortgage market, they were protecting the insurance fund and they were creating a risk map across the country. You were going to go into a neighborhood, You're gonna look around and say, is this a good neighborhood? It is a bad neighborhood, And so you look at these forms and they say, you know, there's a lot

of quote unquote lower races in this neighborhood. And this was called redlining because they literally color coded so called high risk, predominantly black neighborhoods. Read so black people were either denied mortgages or they could only get very high rate loans. So in some ways it becomes a self fulfilling prophecy. When you're stuck in a so called undesirable zip code, it's difficult to upgrade or even improve your lifestyle exactly. And this had huge implications for the wealth gap.

Most Americans wealth today comes from homeownership. This systemic exclusion of black people from buying many of the country's most desirable homes and from affordable loans is the reason we have such a large racial wealth gap today. Nearly seventy of white family's own homes, while less than half of black families do. That was my last number. And you might be wondering why I'm stopping before we get to

the civil rights era. That's because while the civil rights movement had a lot of success in ending legal segregation, there was much more resistance to fixing the housing problem and other economic issues. That directly contributed to the wealth gap. Do you think a Negro family moving here will affect the community as a whole? Definitely? In what way? I think that? Well, the property values will immediately go down if they are allowed to move in here in any numbers.

Can you give a basis for that judgment? Yes, we used to live in Washington, d c. And we saw a very good example of that there. For years, various bills languished in the House and Senate until April of the day after Martin Luther King Jr. Was assassinated. President Lyndon Johnson sent a letter to Congress urging the passage of the Fair Housing Act, and less than a week later, the bill finally passed. Now with this bill, the voice

of Justice speaks again. It proclaims that fair housing for all all human beings who live in this country is now a part of the American way of life. This law and others later on make discriminatory practices like redlining illegal, But they were weak and they didn't correct for the decades of damage already done. In nineteen sixty seven, white families had five times the wealth of black families. Today they have seven times the wealth That's why Martin Luther

King Jr's words still ring true. It is a cruel jest to say to a bootless man that he ought to lift himself by his on bootstraps. And the fact is, millions of Negroes, as a result of centuries of denial and neglect, been left bootless. They find themselves impoverished aliens in this affluent society. And that is a great deal that the society can and must do if the negro is to gain the economic security that he needs. Now, one of the answers, it seems to me, is a

guaranteed annual income, a guaranteed minimum income all families. A confluence of things put the country on track for today's racial wealth gap, and the legacy of these moments continues to play out. For the next couple of episodes, we're going to dig into how black people are still being left out of major vehicles for wealth building. First up, land, So here this farmer have received it farm operating on

a hundred fifty seven thousand dollars. He hadn't even done the paperwork, the correct paperwork on the loan, and I was pretty much begging and pleading for five thousand dollar operating loan, and he had this conversation with Farmer Earl as though I wasn't visible before we go. We have a request for you. Experts estimate that closing the racial wealth gap would take around thirteen trillion dollars, give or take a trillion or two. That works out to about

three hundred thousand dollars for every Black American. We'd like to know what would you do with that three hundred thousand dollars? How might it change your life? How might your life stay the same? Record a voice momo with your answers to these questions and email it to me at Our Greenfield at Bloomberg dot net, or call and leave us a voicemail at six or six three to four, three four and nine. Oh thanks for listening to the Paycheck. If you like the show, please rate, review, and subscribe

wherever you get your podcasts. This episode was hosted by Me, Rebecca Greenfield Emmy Jackie Simmons. Today's episode was edited by Rebecca Greenfield and reported with the help of Katarina Surviva in Lenan Newin. Our producers are Magnus Henrickson, Lindsay Cratowell, and Ethan Brooks Our original music is by Leo Sidgen. Francesco Levi is Bloomberg's Head of Podcasts. Special thanks to Toefer Foreheads. We'll see you next time. Who a