Race and Economics

Wednesday, July 13, 2011

Black Americans have come a greater distance, over some of the highest hurdles, in a shorter period of time than any other racial group. This unprecedented progress can be verified through several measures. If one were to total black earnings and consider black Americans a separate nation, he would find that they earned $726 billion in 2008. That would make them the world’s sixteenth-richest nation, just behind Turkey but ahead of Poland, the Netherlands, Belgium, and Switzerland.

Individual feats, in terms of “power,” are equally impressive. Black Americans are, and have been, chief executives of some of the world’s largest and richest cities, including New York, Chicago, Los Angeles, Philadelphia, and Washington, D.C. It was a black American, General Colin Powell, appointed head of the Joint Chiefs of Staff in October 1989, who directed the world’s mightiest military and later became U.S. secretary of state. And he was succeeded by Condoleezza Rice, of the same race and national origin. As a group, black Americans include many of the world’s richest and most famous personalities.

On the eve of the Civil War, a slave or a slave owner would hardly have believed these gains possible in less than a century and a half, if ever. That progress speaks well not only for the sacrifices and intestinal fortitude of a people but also for a nation in which the gains were possible. One cannot imagine any other nation in which these gains could have been achieved. However, if one listens to spokesmen for civil rights organizations, self-anointed black leaders, and various politicians, one would get a different impression about black progress.

By earnings, black Americans would make up the world’s sixteenth richest nation, just behind Turkey but ahead of Poland, the Netherlands, Belgium, and Switzerland.

It is indeed true that for many black Americans, such gains have proved elusive. The U.S. Bureau of the Census classifies those people, who represent perhaps 30 percent of the black population, as poor. Poverty among them today differs significantly from the poverty of yesteryear. There is a difference between material poverty and what may be called behavioral or spiritual poverty. The former is a money measure that the Census Bureau in 2006 defined as $20,444 for an urban family of four. The latter, on the other hand, refers to conduct and values that prevent the development of healthy families, a work ethic, and self-sufficiency. The absence of those values virtually guarantees pathological lifestyles that include drug and alcohol addiction, crime, violence, incarceration, illegitimacy, single-parent households, dependency, and erosion of the work ethic.

For the most part, material poverty is no longer the problem it once was. Generally, people whom the Census Bureau defines as poor have almost the same level of consumption of protein, vitamins, and other nutrients as upper-middle-income people. In 1971, only about 32 percent of all Americans enjoyed air conditioning in their homes; by 2001, 76 percent of poor people enjoyed that comforting amenity. In 1971, 43 percent of all American households owned a color television set. By 2001, 97 percent of poor households had a color television set and over half of those had two or more sets. Forty-six percent of poor households now own their homes, and only about 6 percent of them are overcrowded. Indeed, the average poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens, and other European cities.

Money measures of poverty seriously understate income, because they omit in-kind transfers such as food stamps and medical and housing assistance. Money measures are suspect in other ways: as early as 1990, it was estimated that the poor were spending an average of $1.94 for every dollar in welfare income received. That additional income might have come from unreported employment or illegal activities.

While material poverty in its historical or global form is nonexistent in the United States, what I call behavioral poverty has skyrocketed. Female-headed households increased from 18 percent of the black population in 1950 to well over 68 percent by 2000. As of 2002, 53 percent of black children lived in single-parent households, compared with 20 percent for whites. As of 2006, roughly 45 percent of blacks fifteen or older had never been married, in addition to 17 percent who had been divorced or widowed; that contrasts with only 27 percent of whites fifteen and older never married and 16 percent divorced or widowed.

There is a difference between material poverty and what may be called behavioral or spiritual poverty.

Some argue that today’s weak black family structure is a “legacy” of slavery. Such an explanation loses credibility when one examines evidence from the past. Even during slavery, where marriage was forbidden, most black children lived in biological two-parent families. One study of nineteenth-century slave families (The Black Family in Slavery and Freedom, 1750–1925, by Herbert Gutman) found that in as many as three-fourths of them, all the children had the same mother and father. In New York City in 1925, 85 percent of kin-related black households were two-parent households. In fact, “five in six children under the age of six lived with both parents,” Gutman wrote.

A study of 1880 family structure in Philadelphia showed that three- quarters of all black families were nuclear (composed of two parents and children). What is significant, given today’s arguments that slavery and discrimination decimated the black family, is the fact that years ago there were only slight differences in family structure between racial groups. The percentages of nuclear families were: black (75.2 percent), Irish (82.2), German (84.5), and native white American (73.1). Only one quarter of black families were headed by women. Female-headed families among Irish, German, and native white Americans averaged 11 percent.

Also significant was the fact that in 1847, just one of ten Philadelphia blacks had been born in slavery. However, those ex-slave families were more likely than freeborn blacks to be two-parent families. Theodore Hershberg found that 90 percent of households in which the head purchased his freedom included two parents. He found that those households existed 80 percent of the time among ex-slaves in general and 77 percent of the time among freeborn blacks. Gutman, who analyzed data on families in Harlem between 1905 and 1925, found that only 3 percent of all families “were headed by a woman under thirty.”

A study of 1880 family structure in Philadelphia showed that three quarters of all black families were nuclear (two parents plus children).

Thomas Sowell has reported that “going back a hundred years, when blacks were just one generation out of slavery, we find that census data of that era showed that a slightly higher percentage of black adults had married than white adults. This fact remained true in every census from 1890 to 1940.”

Coupled with dramatic breakdown in the black family structure has been an astonishing growth in the rate of illegitimacy. The black rate was only 19 percent in 1940 but skyrocketed in the late 1960s, reaching 49 percent in 1975. As of 2000, black illegitimacy stood at 68 percent and in some cities over 80 percent. High illegitimacy rates not only spell poverty and dependency but also contribute to the social pathology seen in many black communities: high incidences of adolescent violence and predatory sex, and as sociologist Charles Murray has noted, a community not unlike that portrayed in Lord of the Flies.

Several studies point to welfare programs as a major contributor to several aspects of behavioral poverty. One of these early studies was the Seattle/Denver Income Maintenance Experiment, also known as the “SIME/DIME” study. Among its findings: for each dollar increase in welfare payment, low-income persons reduced labor earning by eighty cents. Using 1979 National Longitudinal Survey of Youth data, Anne Hill and June O’Neill found that a 50 percent increase in the monthly value of welfare benefits led to a 43 percent increase in the number of out-of-wedlock births.

We can see some of the effects of welfare on the work experience of poor families. In 1959, 31.5 percent of heads of poor families worked full time year-round; by 1989, the percentage had fallen to 16.2. In 1959, 30.5 percent did not work at all (either full time or part time); by 1989, that figure had risen to 50.8 percent. Some argue that such high unemployment stems from lack of job opportunities in inner cities. That observation is questionable. During 1979–80, the National Bureau of Economic Research conducted a survey in the ghettoes of Boston, Philadelphia, and Chicago. Only a minority of the respondents were employed, yet almost as many said it was easy or fairly easy to get a job as a laborer as said it was difficult or impossible; and 71 percent said it was fairly easy to get a minimum-wage job.

The most difficult problems faced by black Americans, particularly those who are poor, cannot adequately be explained by current racial discrimination.

Despite frequent assertions to the contrary, many of the seemingly intractable problems encountered by a significant number of black Americans do not result from racial discrimination. This is not to say discrimination does not exist. Nor is it to say discrimination has no adverse effects. For policy purposes, however, the issue is not whether or not racial discrimination exists but the extent to which it explains what we see today. For example, it is clear that low academic achievement by black youngsters poses serious handicaps. If we assume that the problem is one of racial discrimination, where blacks are being denied educational opportunities, then civil rights strategies might produce a solution. However, if poor educational achievement is a result of other factors, resources spent pursuing a civil rights strategy will yield disappointing results.

The thrust of the argument in my new book, Race and Economics, is that the most difficult problems faced by black Americans, particularly those who are poor, cannot adequately be explained by current racial discrimination. Instead, most problems are self-inflicted or a result of policies, regulations, and restrictions emanating from federal, state, and local governments. Free markets and the profit motive have not reduced opportunities. The drivers have instead been the power of vested interest groups to use, as a means to greater wealth, the coercive powers of government to stifle market competition.

Free markets and the profit motive, far from being enemies to blacks, have been friends. The reason is quite simple. Customers prefer lower prices to higher prices, and businessmen prefer higher profits to lower profits. The most effective tools for a seller to gain a customer are to offer a lower price and better services than his competitor. Similarly, the most effective tool for a worker to get an employer to hire him is to offer to accept a lower wage (with wages being a form of pricing). Many employers will find higher profits a more attractive alternative to indulging personal preferences or maintaining racial loyalty.

The ability to prevent a less-preferred worker from accepting a lower wage is one of the most effective tools in the arsenal of racists everywhere. Racial antipathy is not a necessary, or even the primary, incentive for using government power to prevent others from offering a lower price. People simply want to earn higher income and profits. The use of government restrictions, violence, or intimidation to prevent others from competing and offering prices below the “desired” price is consistent with that end. The fact that some blacks were able to earn a comfortable living and indeed become prosperous—in both the antebellum South, in the face of slavery and grossly discriminatory laws, and in the North, where there was at best only weak enforcement of civil rights—testifies strongly to the power of the market as a friend to blacks.

Further evidence of the free market as a friend is suggested by all the legislation and extralegal measures taken to prevent free, peaceable, voluntary exchange between blacks and whites. After all, why would laws and extralegal measures be necessary to restrict whites from hiring blacks or blacks from selling to whites, or whites serving blacks in restaurants, if whites did not want to make these transactions in the first place? Whenever one sees laws written, or extralegal measures taken, to prevent an activity, he should immediately suspect that not everyone would voluntarily behave according to those legal requirements.

In short, market restrictions are a far more important limitation on black socioeconomic progress than racial discrimination.