Browse Tag

wealth gap

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The Racial Wealth Gap, Political Power vs Economic Power, and Reparations with Mehrsa Baradaran

Mehrsa Baradaran is the author of the best selling book, “The Color of Money: Black Banks and the Racial Wealth Gap”.

This book has become required reading for those who want to get a better understanding of how Black communities have been shut out of the banking system and how wealth creation in the Black community has been stagnated.

In this interview, we discuss the series of events that led to the racial wealth gap and how the gap can be closed.

We also discuss Black banks and their past and present role in creating Black wealth.

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Tony O. Lawson


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Who wants to be a Millionaire? 5 Questions about Black Wealth Accumulation

Ayesha Selden, also known as EldRich Cleaver, Millie Holiday, Fidel Cashflow, Cicely Titles, and Dr. Julius Earning is a real state investor, coach, mentor, and author of the book “Mud 2 Millions.”

She has garnered a large online following no doubt due to amongst other things, her no holds barred, tough medicine style of preaching her message of “owning sh*t”.

We caught up with her to find out her thoughts on the ways that wealth can be created within the Black community.

What does wealth mean to you?

Wealth is the freedom of not having to trade time for money. Wealth is having the cash flow from performing assets support a life you deem comfortable. Wealth is being able to drop everything on a Tuesday and go spend time with your mom on her birthday.

Has becoming wealthy always been a goal of yours?

I grew up in a poor neighborhood in South Philly during the crack era where the wealthiest people we saw were drug dealers. Not only did I aspire to have wealth, I always knew I’d get there (legally or otherwise lol).

As a kid, I wanted a briefcase more than I wanted dolls. I was entirely fascinated by tall buildings, offices, and movies like Wall Street. My mom used to drive us to Gladwyn, an affluent suburb of Philly, to show us how the wealthy lived.

In stark contrast to the row homes and blight I saw in our neighborhood, our drives to Gladwyn showed me castle looking houses with pool houses larger than the modest home we lived in.

It was important for my mom to show us that there was more out there than just our neighborhood. I am so grateful for those car rides because it let me imagine what was possible.

Ayesha Selden

You are very vocal on social media about all things ownership and wealth building. Why are you so passionate about this topic?

I believe that we are the only solution for our community. Help is not on the way. It is the responsibility of “self-made” black people who came out of poverty to then reach back and teach others how to do the same.

Group economics is our way out but, chile, Black flight is just as real as white flight. We “make it”, head for the hills and never look back at those we have left behind. We then fixate on changing the political landscape, as our solution, and forget how powerful we are as a people.

And it’s easier to look at “voting” as a solution because it doesn’t require us to go back to “the hood”. We get to wear “I Voted” buttons and feel good about ourselves. Every election cycle reminds me of The Great White Hope meets Ground Hog’s Day.

Same promises (from normally some old white guy) and not a damn thing changes. We rely on a government system that has shown us for centuries that it shouldn’t be trusted.

Millions of Black people lived in poverty before we had a Black president and millions of Black people continue to live in poverty after we had a Black president. The government is not the solution for poor people and it amazes me that we think this same system we don’t trust will radically implement public policy to redistribute the wealth.

If we want to see real change in our communities, building an economy that allows the Black dollar to circulate and flip in our community the same way it circulates in the Jewish or Asian communities is where we start.

We then lobby with our capital to get done what we need. We buy a voice in Washington which is the only thing this country understands. Until then, a large percentage of black people will stay in poverty, we will continue to be shot by the police and we will keep marching and singing.

What do you feel is the first step on the path to wealth accumulation?

Let me start by saying that Black people are not at fault for the current state of our wealth as a people. Hell, the fact that we have survived generations of trauma is a testament to our resilience. Our income, wealth, and asset ownership are fractions of white wealth.

Systemic racism and the effects of redlining, mass incarceration of black men, racist hiring policies, etc all have a huge impact on black wealth today. I read a study done by Pew Trust that says even in the year of our Lord 2020, in most states, Black and Hispanic communities are taxed at higher rates than comparable predominantly white communities.

We now know that our communities are paying higher property taxes but also continue to see that our resources (schools, roads, sanitation departments, etc) are inferior to predominantly white communities. We are also overpoliced with our own tax money.

I can point out a million ways the playing field isn’t leveled and has never been. But where do we go from here?

I choose to normalize Black wealth because I don’t believe there is a politician or political party that will change this. The path of wealth accumulation is exactly why I wrote my book Mud 2 Millions. It was my journey to a million by 30.

Ayesha Selden

It sounds cliche but our mindset and our relationship with money are the genesis of wealth creation. We need a collective focus on changing the narrative in our communities. We need middle class and wealthy Blacks to come back and show those left behind how to build businesses and assets.

We also need some self-reflection about our individual relationships with money. Most of us weren’t left a penny of generational wealth. Most of us weren’t taught a thing about how to manage money. Most of what we were taught about money was a lie.

We need to completely deconstruct most of what we know about capital and how we feel about money and reframe with a mindset of building.

Once I change my mindset, where should I start on my wealth journey?

Your net worth builder is in that sweet spot between your income and expenses. We call the amount of money left over after all of your expenses are paid, “discretionary income”.

If you find yourself living paycheck to paycheck, there are generally two ways to tackle this:

Drastically cut expenses or generate additional income through a side hustle after your 9-5 and/or weekends. I prefer a combination of boffum–curbing expenses and a side hustle because I’m trying to get the bag expeditiously.

 It’s important to look at where we are spending our money. Is it on things we need or are we overcompensating for being teased as kids for having trash sneakers?

In my book, I talk about a dozen or so side hustles to generate additional income (vending machines, real estate wholesaling, arbitrage online sales, trucking business, etc.).

If you can earn an extra $500 to $1,000/month in income, that could be all the difference in building wealth and leaving a legacy for generations.

Again, while where we are is not our fault, it is our responsibility to change the narrative for ourselves and future generations.

Why? Because no one else will. Peace.

Ayesha Selden
Ayesha Selden

Read the remaining wealth steps in Ayesha’s book, Mud 2 Millions.

Tony O. Lawson


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Minority Wealth Commission to raise $250 Million to boost Black Owned Businesses

The Minority Wealth Commission—a bi-partisan National Commission of diverse leaders representing a cross section of capital funding, procurement/contracting, economic development, and corporate/nonprofit leadership focused on minority businesses—announced today the launch of the FVLCRUM Fund.

The fund, with initial capital commitments of over $50 million, will raise a total of $250,000,000 to invest as a combination of equity and debt capital into proven, high-growth enterprises operated by people of color.

Clearinghouse CDFI—a national community development financial institution with a strong history of lending in communities of color—will help create and manage the FVLCRUM Fund. The fund brings together an exceptional team of private equity professionals with an established track record of investing in middle market minority owned businesses delivering strong investment returns. FVLCRUM Fund will make a sustainable and measurable impact towards closing the nation’s racial wealth gap by building wealth and business success for minorities.

“For too long minority businesses and communities have been disproportionately excluded from creating sustainable wealth,” said Henry Childs II, Executive Director of the Minority Wealth Commission and former National Director of the U.S Department of Commerce’s Minority Business Development Agency. “Lack of investment, ownership, and wealth in minority communities stifles income potential, school systems, job outlook, and business opportunities.

Minority businesses represent less than 1.3% of the overall assets under management by the investment industry. It is time for us to address the racial wealth gap, invest in minority businesses and to take full advantage of the value, innovation, and competitiveness they bring to our overall economy.”

According to a study by the W.K. Kellogg Foundation on Racial Equity, the U.S. stands to realize an $8 trillion gain in GDP just by closing the U.S. racial equity gap. This is more than the current GDP of every country in the world except the U.S. and China.

The Minority Wealth Commission has three key objectives: (1) to raise a series of minority wealth investment funds targeted toward creating wealth in minority communities, (2) to reduce the startup capital gap for entrepreneurs of color, and (3) to increase Assets Under Management (AUM) for diverse fund managers and increase the number of diverse fund managers in the industry.

“The United States Hispanic Chamber of Commerce (USHCC) joins the Minority Wealth Commission in recognizing and highlighting the importance of creating wealth in our minority business community,” said Ramiro A. Cavazos, President and CEO of the U.S. Hispanic Chamber of Commerce. “As we know, there are 8 million minority-owned small businesses that form the backbone of our American economy. We must create real change to transform our minority entrepreneurs by investing in our businesses through increased corporate procurement, federal contracting, access to capital, and private equity, in order to prioritize more businesses for our African-American, Hispanic, Asian, and more minority entrepreneurs.”

To facilitate investment in minority communities, the Minority Wealth Commission is focused on strategies that stimulate economic opportunity and mobility, encourage entrepreneurship, expand quality educational opportunities, and ultimately eradicate the racial wealth gap. The MWC is leading an effort to level-set capital investment parity for minority businesses and next-generation entrepreneurs of color that can expand our economy and impact our communities.

“Closing the RACIAL WEALTH GAP is an overriding issue of the NATION,” said Marc Morial, President of the National Urban League. “Lifting a generation of BLACK entrepreneurs by linking them to capital, connections, and contracts is a viable wealth gap closing strategy.”

“This fund represents transformative opportunities for minority-owned businesses, many disproportionately struggling from the devastating impacts of the pandemic,” said Delores Brown—Chairperson of the Clearinghouse CDFI Community Advisory Board—who also runs a nonprofit in South Los Angeles. “There is much work to be done to build a more equitable society. We hope to inspire other organizations and investors to take action.”

The Minority Wealth Commission and FVLCRUM Fund have already established a broad base of institutional and community partners dedicated to fundamental change for wealth creation in communities of color. This includes the National Urban League, the U.S. Hispanic Chamber of Commerce, and the U.S. Black Chambers, Inc., among several other organizations throughout the U.S.

Source: PrWeb.com

Tony O. Lawson


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The 2% Solution: How a Black Billionaire Plans to advance Economic Justice for Black Americans.

Robert F. Smith, the private equity billionaire who is the nation’s richest Black person, said on Thursday that large corporations should use 2% of their annual net income for the next decade to empower minority communities. Smith made the comments after circulating a plan among CEOs that first calls on big banks to capitalize the financial institutions that service Black-owned businesses and minority-run entrepreneurial ventures.

In a keynote address he gave at the Forbes 400 Summit on Philanthropy, Smith, 57, said Black and minority communities have been abandoned by large banks and are starved of the capital needed to build businesses and local institutions. Smith argued that pumping in what he described as “reparative” capital and investing directly in financial architecture would be a fast way to advance economic justice for Black Americans.

“Nowhere is structural racism more apparent than in corporate America,” Smith said. “If you think about structural racism and access to capital, 70% of African American communities don’t even have a branch, bank of any type.”

In recent days, Smith, whose net worth is estimated to be $5 billion, has been sharing a concrete plan with the nation’s business leaders that argues that an investment equal to 2% of net income over the next decade would be a small step toward restoring equity and mobility in America. He has implied that America’s big corporations should feel compelled to support such a plan given the exclusionary practices of many industries over several decades. Smith made the case that the average American household charitably donates 2% of its income annually and is asking corporate America to do the same.

During the pandemic, Smith discovered the structural racism in banking firsthand as he tried to help Black businesses and banks that serve Black communities obtain Paycheck Protection Program loans. Smith found that Black-owned businesses faced numerous structural obstacles and as a result had trouble accessing the emergency financing being provided by the federal government through the banking sector.

The balance sheets of the nation’s 4,700 banks are made up of $20.3 trillion of assets, but only 21 of those banks are Black-owned or led, and they have total assets of just $5 billion, less than 1% of America’s commercial banking assets. Blacks make up 13% of the population of the United States.

In his talk on Thursday, Smith pointed out that the net income of the ten largest U.S. banks over the last ten years was $968 billion. He figured just 2% of that would amount to $19.4 billion, which could be used to fund the core Tier 1 capital of community development banks and minority depository institutions that primarily service Black communities. Smith was also open to the idea that the capital could be donated in a tax-advantaged way to a nonprofit entity that could provide the core bank capital.

Smith thinks the federal government could supercharge the effort by leveraging up the provided capital with the Term Asset-Backed Securities Loan Facility the Federal Reserve established to support consumer and business credit during the pandemic.

“The deprivation of capital is one of the areas that creates a major problem to the enablement of the African American community,” Smith told the more than 200 top philanthropists who attended the 9th annual Forbes philanthropy summit, which this year was held on Zoom. “The first thing to do is put capital into those branch banks to lend to these small businesses to actually create an opportunity set . . . drive it into these small businesses, which employs 60%-plus of African Americans.”

In a way, Smith is proposing a private sector solution to reparations, the idea that the federal government pay financial compensation to Black Americans who are the descendants of slaves. Smith believes Black communities have experienced systemic inequality and exclusion in corporate sectors beyond finance, including healthcare, telecommunications and technology. The net income of the biggest U.S. companies in just those sectors was $1.3 trillion combined over the last decade and 2% of those profits, or some $25 billion, could be used to do things like strengthen healthcare infrastructure in minority communities, equalize broadband access, fund STEM education at historically Black colleges and digitize minority small businesses.

Through his plan, Smith envisions the nation’s banking sector could, over the next ten years, provide billions of dollars of capital to Black-owned banks and community development banks, with some of the funds used to digitize these lenders. His plan calls for the telecom and tech sectors to provide money to help prepare 180,000 students at America’s historically Black colleges for the jobs of the future, and to digitize one million minority small businesses.

Smith, who has an engineering degree from Cornell University, is the founder of Vista Equity Partners, the nation’s biggest private equity firm specializing in software transactions. Part of Vista’s stunning success has been built on Smith’s detailed and secret playbook for running software companies, which has helped Vista achieve some of the private equity industry’s best financial returns.

Now, Smith believes his playbook for economic justice could not only ensure Black Americans have better access to opportunity, but also increase the nation’s economic activity by more than $1 trillion annually.

“I think that will show Americans there is hope, there is an opportunity for the American dream to now be revitalized,” Smith said on Thursday. “And frankly, to give us all confidence that we can actually make this a better country and a better place to live.”

 

Source: FORBES


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6 Black Issues That Public Policy Must Address Immediately

Despite the importance of economic empowerment, I would argue that political power plays a bigger role in wealth creation.

Political power influences public policy and legislature that address many socioeconomic issues that affect our ability to even start building a strong economic base.

Here are a few issues affecting the Black community that public policy must address right now.

1)Prison Industrial Complex

The prison industrial complex can be described as the overlapping interests of government and industry that use policing, and imprisonment as solutions to economic, social, and political problems. To fuel the growing demand for profitable prison labor, Black people, in particular, are disproportionately incarcerated and given longer sentences than any other race.

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This is not new news though. Neither is the fact that there are several corporations that benefit from the mass incarceration of Black people. In many cases several of these corporations have become part of our daily lives. However, its time to cut the cord and divert our money into alternative options, preferably Black owned.

2)Education

In his book,  Mis-Education of the Negro, Dr. Carter G. Woodson wrote, “Blacks are the only group of people who take their most precious possessions, their children, and ask their oppressors to educate them and mold and shape their minds.”

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Currently, the education system waters down our history and completely ignores many of our accomplishments. Black students all over the country also face verbal and physical abuse not only from students, but from those hired to educate and protect them.

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In addition to this, many Black students are increasingly becoming victims of theschool to prison pipeline” that pushes them out of classrooms and into the juvenile and criminal justice systems.

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Educating Black children should involve more than teaching them math and reading skills. They must also be taught how to produce goods and services and not just be consumers.  They must also be taught the skills needed to become business owners and job producers not just job seekers.

3)Lack of Affordable Housing

By affordable housing I don’t just mean Section 8 or low income housing. I literally mean housing that is affordable. Being able to afford your home or apartment is vital to the Black community’s economic strength. It provides the foundation for families and individuals to succeed in their careers or at school, as well as to thrive in retirement.

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There is a epidemic of gentrification that is occurring in Black neighborhoods all over the world, causing sharp increases in rents and home values and resulting in actual or imminent displacement of residents.

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There are several ways to combat gentrification using policies but in this instance I’ll suggest how to utilize economics to do so. Invest in Real Estate Investment Trusts(REIT’s). REIT’s are corporations that own and manage a collection of real estate properties and mortgages. Individually or as investment groups, we can invest or even form REIT’s that acquire and own residential homes and apartment buildings in Black neighborhoods across the country.

4)Food Deserts

In many Black communities, access to grocery stores, supermarkets and other food retailers that offer affordable and nutritious food is limited. These food deserts force members of the community to be more reliant on convenience stores, fast food or similar retailers.

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After almost 20 years of unsuccessful attempts to attract a corporate grocery chain to their community, The Renaissance Community Co-op of  Greensboro, NC raised over $2.4 million and was able to build a grocery store that served the community and provided jobs.

We need more examples like this in other areas that are deprived of healthy food options. One could purchase a van, buy produce from Black farmers and make scheduled stops in these areas to sell healthy produce. The American Community Garden Association (ACGA) provides resources for over 18,000 community gardens in the U.S. and Canada.

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5) Supporting Black Farmers

Black farmers have been facing discrimination from the USDA for decades. The National Black Farmers Association offers resources and programs that teach “the basic, sustainable practices of building and maintaining a garden.”

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They offer workshops on seed and variety selection, planting practices as well as how to plan and manage your crops throughout the seasons. We listed some Black owned farms in a previous post about health and wellness.

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6)The Growing Wealth Gap

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“To be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardships.” W.E.B. Dubois – Souls of Black Folks

Pew Research Center data from 2014 states that that the wealth of white households had reached 13 times the median wealth of black households, compared with eight times the wealth in 2010.

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Let’s not be fooled by reports that Black income has risen. Income does not equal wealth. According to a recent working paper, high-earning married black households have, on average, less wealth than low-earning married white households.

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The ever widening wealth gap exists for several reasons including racial discrimination,  tax policies that favor the (disproportionately white) rich and lack of sound financial education and practices. The wealthy get wealthier through tax cuts on investment income and inheritances, retirement accounts, home mortgages and college savings.

 

The Role of Elected Officials

Who creates and has the power to influence policies and legislature that affect us positively or negatively? Your elected officials do. They were elected to serve us. Therefore, we need to make sure they are doing so and not taking our votes for granted.

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Ask them, “What have you done for me lately?” Hold them accountable and make sure they address the issues that are important to you.

 

Tony Oluwatoyin Lawson (IG: @thebusyafrican)