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Category Archives: Black Economics

Inequality and Economic Growth: The Case of America

01 Thursday Sep 2016

Posted by Keith Thompson in Black Economics

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The issue of Economic Inequality (especially with respect to poverty) has never been a main focus of traditional economic theory or policy-making. Somehow that issue never fit neatly with the concepts of labor productivity, utility analysis or the IS-LM curve. Yet the concept of economic inequality is perhaps the most germane towards a deeper understanding of promoting Aggregate Demand and growth within an economy. As Keynesian economics explains increasing the income of the lower strata of society will increase overall Consumption and Aggregate Demand through a higher marginal propensity to consume among those strata, and the impact of the multiplier effect. Yet, despite the empirical confirmation of the validity of this theory as evidenced by post-war Europe’s rise in the 1950s and 60s the United States is still slow to embrace the policy of stimulating economic growth through reducing inequality.

If we break down the income numbers by racial lines we see that White-dominated households earned an average of $60,300 per year in 2014, compared with $35,400 for Blacks and $42,500 for Hispanics. That meant that Blacks earned less than 60% of the income that Whites earned in America, while Hispanics earned a shade over 70%. To put this into context, Black Americans comprise about 13% of the population but earn less than 9% of overall income. This has implications for many things beginning with a lower ability to afford quality housing, attend quality schools, promote healthy food choices, all the way to reducing their likelihood of saving for retirement. The ripple effect of this reduced income level therefore permeates through all segments of our society.

It also means that the incidence of poverty is highest in these racial and ethnic groups. In 2014 the poverty rate for non-Hispanic Whites was 10.1 percent, compared with 26.2 percent for Blacks and 23.6 percent for Hispanics.

Understandably, owing to the higher incidence of poverty and inequality among those racial groups their economic impact is smaller within our economy. However, finding ways to increase the incomes of Blacks and Hispanics will significantly stimulate Aggregate Demand and growth within our economy. For e.g. raising the household income of Blacks to match those of Hispanics in the U.S. will initially expand the economy by 1.7%. While that it a modest expansion, when the multiplier effect fully kicks in it should see the long-term growth trajectory of the economy increase measurably by over 5% per year. Likewise, if both racial groups see their incomes increase to three-quarter of that of Whites the short-term impact on the economy will be a 3% per year additional expansion with the long-term multiplier effect on the growth rate increasing by nearly 7% annually.  Those are gaudy numbers indeed and not ones to be scoffed at. Alleviating poverty and promoting economic equality may sound like virtuous policy aims but they may also provide a sound platform for long-term growth and development within the U.S. economy.

Keith Thompson is a Senior Economist in Transfer Pricing with an agency within the US Department of the Treasury, and an adjunct Economics professor with Ramapo College of New Jersey.

The third phase of Black America’s fight for racial equality

26 Tuesday Jul 2016

Posted by Keith Thompson in Black Economics, Black Lives, Blacks in America

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It is perhaps the most beautiful piece of political prose ever written, rivaling one of Shakespeare’s sensational sonnets. Whilst the opening sentence is memorable for its own contextual significance, it is the second sentence – crafted on July 2nd, 1776 – that resonates throughout the fabric of humankind.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Source: United States Declaration of Independence. Formally adopted on July 4, 1776.

When Thomas Jefferson, with the help of Benjamin Franklin, crafted those immortal words the notion of all men only referred to ‘white’ men since after all a black enslaved man was only considered to be worth three-fifths of a white man. Ninety-two years later (after the 14th Amendment was ratified in 1868) blacks were placed on that same elevated pedestal and granted equal rights status with whites. Yet one hundred and forty-eight years after that ratification Blacks in America are still fighting to lay claims to more of those ‘unalienable Rights’ and testify to those ‘self-evident truths that they too are created equal’. But why has it taken so long, and where did it all go wrong for Blacks in America.

Black America is in her third phase of the fight for freedom. The first occurred during the period of enslavement. That battle was initially won on January 1, 1863 with President Lincoln’s Emancipation Proclamation. It signaled White America’s willingness to go to war to guarantee Blacks those ‘unalienable Rights’. That phase ended with the full abolition of slavery upon the ratification of the 13th Amendment on December 6, 1865.

However, while some political rights were won with that freedom fight the real battle for economic survival and social acceptance ensued. And like all forms of human oppression throughout the history of man, the subjugation of one form of oppression only leads to the rise of another. Post-slavery Black America had to fight against many Black Codes and Jim Crow laws and the then-prevailing legal doctrine of ‘separate but equal’. This implied (and in some cases was overtly stated) that whilst blacks may have been legally equal, they were to be socially and politically separated from White America. This second phase of the fight for freedom that was led by Dr. Martin Luther King, Jr. sought to achieve an end to de jure (or legal and overt) racial segregation, and promote equal access to social institutions such as hospitals, schools, hotels, restaurants, public transportation, and even the ballot boxes. By 1965 it was achieved via the enactment of the Civil Rights Act and the Voting Rights Act.

Since the Civil Rights Movement of the 1960s the form of racial oppression that many blacks now face has morphed into more de facto forms. It is the subtle forms of racism, economic deprivation, police brutality, attitudinal biases, unequal treatments under the law and within the courts. It is easy to fight racism when it manifests itself in overt forms equipped with shackles or official tags such as segregation or apartheid. However, when those labels are removed the struggle becomes harder for the public to embrace. This is the third phase, the battle for the hearts and minds of all whites (and some blacks too) to the ongoing fight for full and complete equality.

If the first phase of the struggle for racial equality could be categorized as a battle for freedom (Liberty) and the second a battle for equal access to social institutions (pursuit of Happiness) then the third phase of the struggle must deal with the fight against unjust killings and could surely be viewed as a battle for equal social, political and economic treatment (a battle for Life, or its worth).

America’s pursuit of the democratic ideal has been a long endearing struggle. Democracy remains under development in this country as it took black men ninety-four years after Thomas Jefferson’s pantheonic words to gain the constitutional right to vote (1870), and another ninety-five years after that for Congress to make it universal across the country (1965). It took white women one hundred and forty-four years before they won their constitutional right to vote (1920), and while African American women earned suffrage at the same time as their white counterparts it wasn’t until the Voting Rights Act of 1965 that their rights were fully enshrined. Finally, it took one hundred and ninety-two years for the first Americans – Native American Indians – to earn full civil rights (in 1968), despite earning citizenship in 1924. And despite these gains Native Americans still do not have universal voting rights throughout the country.

We the People are continuing to form a more perfect Union here in these United States of America. It hasn’t reached full perfection yet, but with each sub population receiving its own slice of those ‘unalienable Rights’, America will eventually define what true democracy looks like. Let us hope that at the conclusion of this third phase Black America will have been blessed with her full complement of inalienable Rights.

Keith Thompson is a Senior Economist in Transfer Pricing with an agency within the US Department of the Treasury, and an adjunct Economics professor with Ramapo College of New Jersey.

The two demands of the Black Lives Matter movement

20 Wednesday Jul 2016

Posted by Keith Thompson in Black Economics, Black Lives, Blacks in America

≈ 2 Comments

The horrific assassinations of 8 police officers over the past two weeks (5 in Dallas and 3 in Baton Rouge) have emphasized just how racially divided this country is becoming. Let’s be clear the targeted assassinations of police officers have no place in our society and must be unequivocally condemned. Despite the fact that the perpetrators were ex-military who may have had psychological problems what they did cannot be tolerated or justified.

Unfortunately, the climate that those murderers operated in cannot be ignored either. So venomous is the rhetoric and animosity on both sides it seems that neither side is truly listening to the other to hear what they are really saying. If they did they will realize that many proponents of the ‘Blue Lives Matter’ movement are justifiable fearful every time their fathers, mothers, husbands, wives, brothers, sisters, uncles go out to work. Police officers are our family members, friends and neighbors and like our brothers and sisters serving in the armed forces in foreign lands many of these police officers are waging legitimate war here at home against criminal elements. The risk is great that some of them will not return home and yet it appears many in our society don’t fully appreciate the work that they do.

Likewise, the Black Lives Movement is not arguing that all cops are bad, nor are they advocating violence against cops. Far from it, many members of the black community celebrate the presence of police officers within our neighborhoods, and applaud them for the outstanding work that they do. It is the police who protect many of these black communities from the scourge of drugs, gangs and other criminal behavior. It is the police who organize many of these local athletic leagues to keep our children out of trouble, and even volunteer coach in them. However, what seems to get lost in the message is the fact that some of those supporting the police officers seem to be tone deaf to the cries of the black community that their young African American brothers especially are being targeted at an alarming and unjustified rate. Yes, there are some undesirable criminal elements within the black community but many of the killings against African Americans are directed towards innocent men and women. In what universe would a civilized society tolerate that level of injustice to individuals who did no wrong. The cries for justice and respect from both sides are growing louder, yet not being heard.

I’m an African American man who has thankfully never had a negative encounter with the police. Yet it didn’t always feel that way. In the late 1990s I lived and worked in New York City (lived in the South Bronx, a few blocks from Yankee Stadium, and worked on Wall Street). While my interactions with the police were always courteous I frequently felt a sense of unease, especially when I worked late and was commuting back home.

Things hit a crescendo for me when my first son was born in late 1998 and so at the first opportunity (in January of 1999) I moved out of the South Bronx into a safer section in the northern part of the borough. That proved to be very prescient as exactly one month later on February 4, 1999 four police officers fired 41 shots at an unarmed young black man named Amadou Diallo, killing him instantly outside his South Bronx apartment. That brought things into sharp focus for me. At the time of his killing Amadou Diallo’s immigrant status was unknown to those cops. Neither were his educational levels, work accomplishments, nor community involvements. All that the four police officers knew was that he was a black man who they viewed with suspicion. I started to view myself in a similar light. It didn’t matter that I had multiple graduate degrees, or graduated from the most prestigious university in New York City. It didn’t matter that I worked as an economist or a financial analyst. That’s not what the police see when they first see me. They see me as black, and that means I’m a threat whether its real or imagined.

Immediately after 9/11 I moved my young family over to northern New Jersey because, among other things, I could not – in all good conscience – subject my son to living in a world where the city’s political leadership appeared to be fighting a war against blacks. The then mayor would defend the actions of his cops even when they were clearly in the wrong and that was intolerable for me. It shouldn’t matter what color you are, right and wrong should be absolute in certain areas, especially when it related to the sanctity of life.

Since living in New Jersey I’ve lived in predominantly white communities and while I’ve been stopped on a number of occasions, primarily for speeding – I’m now a reformed speedster – the contrast between policing in northern New Jersey to that which I experienced in New York City could not have been any starker. My interactions with the police in northern New Jersey were courteous and always professional on both sides. In fact, for the last eight years or so I’ve served as a volunteer coach for my sons’ local sports teams in my town and on many occasions I’ve been fortunate to work with local police volunteers. They were always gracious, diligent and a pleasure to work with. We’ve never had an issue, and I know that that’s true for many other communities as well. I just wonder why police officers everywhere cannot adopt the same attitude of servitude and respect, however, I’m not naïve to the realities in other communities.

Data from The Washington Post’s project on fatal police shootings showed that of the 1,502 people that have been shot and killed by on-duty police officers since Jan. 1, 2015 (including the recent killings of Alton Sterling in Baton Rouge, LA and Philando Castille in Falcon Heights, MN) some 381 were black (representing 24% of all Americans). Most troubling, exactly 50 of the slain victims were unarmed blacks, the same number as were white. However, given the fact that there are nearly 160 million more white people in America than there are blacks shows that unarmed black Americans are nearly five times as likely as unarmed white Americans to be shot and killed by a police officer.

As alarming as those killing statistics are equally disconcerting is the fact that only 10 of those cases where an unarmed black person was killed by the police resulted in the involved officer(s) being charged with a crime according to data from http://mappingpoliceviolence.org, and in only 2 of these instances (deaths of Matthew Ajibade in January of 2015 and Eric Harris in April of 2015) were the officers involved convicted.

Maybe the leadership shown by the civic and political leaders in the respective communities has a lot to do with the quality of policing we observe across the country. While the political leadership in New York City during the late 1990s may have perpetuated the divide between cops and the black community we have also seen positive leadership like the ones we observed in Dallas in the aftermath of those undeserved officers’ slayings, and in northern New Jersey where I live. It’s not a perfect harmony but the civic and political leadership are clearly committed to making it work.

Since January 2015 – according to The Washington Post’s data – Police have shot and killed 175 young black men (ages 18 to 29); 24 of them unarmed. This compares with 172 young white men shot and killed by the police over that same period, 18 of whom were unarmed. The data shows the gross disparity when adjusted for population, blacks – both armed and unarmed – are being killed at rates disproportionate to their percentage of the U.S. population. Of all of the unarmed people shot and killed by police in 2015, 40 percent of them were black men, even though black men make up just 6 percent of the nation’s population.

Despite arguments made by certain ill-advised segments of our society (spewing the same divisive rhetoric as they did during the late 1990s) most of those police killings are not the result of the increased violence within those black communities.

A recent article published by The Washington Post citing independent analysis of the same police shooting data and conducted by a team of criminal-justice researchers concluded that, when factoring in threat level, black Americans who are fatally shot by police are no more likely to be posing an imminent lethal threat to the officers at the moment they are killed than white Americans who were fatally shot by the police.

According to Justin Nix, a criminal-justice researcher at the University of Louisville and one of the report’s authors, “The only thing that was significant in predicting whether someone shot and killed by police was unarmed was whether or not they were black. Crime variables did not matter in terms of predicting whether the person killed was unarmed.”

“This just bolsters our [view] that there is some sort of implicit bias going on,” Nix added. “Officers are perceiving a greater threat when encountered by unarmed black citizens.”

Police officers in every community should be trained to properly assess threat levels and respond appropriately, not simply react to perceived threats with implicit acts of bias. It is unacceptable to kill someone just because one feels threatened by them without the victim having committed an overt act to justify that threat. Early in this country’s history the worth of blacks was constitutionally enshrined as being less than that of whites (click here to read more). However, with time we all hoped that those attitudes had changed. Unfortunately, the continued needless killings have caused many to question whether black lives have increased in worth over these past 240 years. The Black Lives Movement needs to see black lives valued more highly. What I believe the Black Lives Movement really wants is change on two critically important fronts.

First, we demand that the black members of society not be shot at first then asked questions of later. Properly assess the threat levels before shooting at us. Many blacks know that most police officers (maybe as much as 99% of all cops) are decent law-abiding citizens who conduct their jobs with dignity, decency and respect for all Americans. Those officers, unfortunately are being unfairly lumped in with the other unscrupulous elements who while they are few in number cause the bulk of the infractions and cast a bad eye on the entire police force. Maybe increased training can reduce the number of incidents of unnecessary killings, but we also need to see the cops involved in these unarmed shootings removed from the police force. If consequences do not follow actions, then bad behavior will not change and the good cops will unfortunately continue to be stigmatized with the bad ones.

Secondly, for change to be lasting the Black Lives movement needs to see those cops who exhibit fatally bad judgments – who many believe are in the minority – be punished. It cannot be that with so many unjust killings so few of the officers are prosecuted. America needs to purge herself of these few bad cops so that the many good ones can continue their jobs in relative peace and harmony. The future of the Republic lies in removing those few bad cops. Increasing the prosecution of bad behavior will undoubtedly reduce the number of unnecessary killings. If not, we are creating a form of Moral Hazard within our police communities.

Let us begin the process of racial healing by first removing those cops involved in these unarmed shootings from the police force. Some mistakes are worse than others, and for officers to get a promotion after killing an unarmed person is unconscionable such as what occurred in 2015 when Kenneth Boss – one of the officers involved in the Amadou Diallo killing – received a promotion to the rank of sergeant. Secondly, we cannot be throwing individuals in prison for simple crimes and not prosecute others for unjustly taking a life. Law and order requires that all of us in America be held to the same level of justice, otherwise justice is not blind. After 150 years of Emancipation from slavery it is time for Black Lives to matter too.

Keith Thompson is a Senior Economist in Transfer Pricing with an agency within the US Department of the Treasury, and an adjunct Economics professor with Ramapo College of New Jersey.

Three-fifths of a person: the economic value of blacks in America

08 Friday Jul 2016

Posted by Keith Thompson in Black Economics, Blacks in America

≈ 6 Comments

Many African Americans have long felt that they are not treated as equal to whites in this country, a view that no doubt has its genesis in the scourge of slavery and was further promulgated at the birth of the Union. Article I, Section 2, of the U.S. Constitution for eg. declared that an enslaved black would be counted as three-fifths of a white inhabitant of that state. That assertion was first proposed by James Wilson, Pennsylvania’s delegate to the Constitutional Convention in 1787 and a future Supreme Court Justice. While such a valuation was primarily used to determine State representation in Congress it nonetheless appeared to subconsciously associate a lower value for blacks than that of whites in our society that pervades even to this day.

As an economist I generally do not interject into matters of a highly emotive nature. After all economics is very objectively driven with rational responses to challenging issues, whereas issues of social justice tend to ignite emotions and inflame the passions. Nevertheless recent crises within our society have called into question the worrying question of the true worth or value of Blacks in America today, one that I would be loathe to ignore. By way of full disclosure I’m a valuation specialist. My expertise is in valuing what are termed ‘hard-to-value’ assets. I assess a value for intangible assets and intellectual property rights. I research values for non-traded technology and marketing assets that are transferred to related parties. I’ve also developed an expertise in evaluating athletic performance and related skill-sets. However, I’ve never attempted to value the economic worth of Blacks in America. That is a complex task. It requires a thorough understanding of the differentials in lifetime earnings potentials, promotion possibilities, barriers to entry into certain fields of endeavor, even access to institutions for career advancements. Clearly it is very challenging indeed.

Yet for all these challenges there is enough anecdotal evidence that Black lives are not worth as much as we as a society would like to believe. an analysis of FBI data from 2012 by Vox showed that police killing of blacks accounted for 31 percent of all killings in 2012, even though blacks made up just 13 percent of the U.S. population, a two-and-a-half times disparity. While this data may indeed reflect the fact that many of those killings were related to criminal behavior, and some may even be justified killings another chilling statistic is even more damning. Of those police killings that occurred when the victims were NOT attacking at the time when they got killed (read that victims like Michael Brown, Eric Garner, Freddy Gray, Alton Sterling and Philando Castille) the data suggests that 39 percent of them were black. That’s fully three times higher than the black population, a truly disproportionate number.

A review of selected killings of unarmed blacks at the hands of the police reveals the following:

Date Person Result Verdict
March 1991 Rodney King Beaten by 4 LA cops All 4 cops acquitted of State charges but 2 officers found guilty in federal court of violating King’s civil rights.
Feb 1999 Amadou Diallo Shot & killed by 4 NYC cops who fired 41 bullets at him Acquitted by Jury in Albany, NY.
July 2014 Eric Garner Choked to death by a NYC cop Grand jury decided not to indict the police officer.
August 2014 Michael Brown Shot to death by a Ferguson, MO policeman Grand jury decided not to indict the police officer.
April 2015 Freddie Gray Died at the hands of 6 Baltimore cops (depraved indifference) At present 3 of the 6 officers involved have been acquitted with 2 others yet to stand trial, and 1 expecting a retrial.
July 2016 Alton Sterling Shot to death by 2 Baton Rouge policemen To date no charges have been brought against the officers involved in the shooting
July 2016 Philando Castille Shot to death by a St. Anthony, MN policeman To date no charges have been brought against the officer involved in the shooting

The struggle for many blacks is that these killings for the most part continue to go unpunished which compounds the issue of the unjustified killings. The pain gets amplified within the black community.

Many African Americans had always felt that James Wilson’s valuation of Blacks in America was wrong. We all felt that Blacks were not worth three-fifths of a white. Alas what we did not realize was that judging by the acquittals after the ghastly killings James Wilson’s valuation may now prove to have been too high.

Keith Thompson is a Senior Economist in Transfer Pricing with an agency within the US Department of the Treasury, and an adjunct Economics professor with Ramapo College of New Jersey.

Black Economic Empowerment is still the primary concern…

27 Saturday Feb 2016

Posted by Keith Thompson in Black Economics, Blacks in America

≈ 1 Comment

As the U.S. concluded yet another enthralling celebration of Black History month we also paused to acknowledge the large black primary electorate in South Carolina turn out to exercise their hard-fought political rights, and exhale ever so slightly that Dr. Martin Luther King Jr. would feel a sense of pride in how far we as a nation have come. Yet for all of those accomplishments we’re once again confronted with the ugly spectacle of Blacks in America and their struggles for political and civil equality. However, as pointed as these discussions are (even in 21st century America) the issue of economic equality continues to escape the public discourse.

Considering that the voting rights that were granted to blacks were earned as far back as 1870 via the 14th & 15th Amendments to the Constitution which followed Emancipation, and the Voting Rights Act of 1965 which followed the Civil Rights Movement merely reinforced those rights it is sometimes baffling and of grave concern to many that fully fifty years later some among us are still fighting those Civil Rights battles of yesteryear. Over the decades while these civil rights issues were being gallantly fought for the economic plight of blacks across the U.S. has largely been ignored, resulting in the gap between the races widening instead of closing over the last few decades. Consequentially, the unemployment rate among blacks has historically trended at over twice the rate of whites (currently 8.8% for blacks vs 4.3% for whites in January). This disparity permeates through all segments of the educational strata and “suggests a race penalty [among] blacks at each level of education” according to The Atlantic.

In addition, the wealth gap is growing even more cavernous. According to the Urban Institute wealth among white households is over seven times higher than those of blacks (over $677,000 vs $95,000 in 2013). And the biggest root cause for this growing divide is firmly cemented in the housing market with blacks enjoying only a 43% home ownership rate, fully 26 percentage points below their white counterparts. These home ownership rates have not improved since 1983 despite decades of government policies supposedly promoting the same.

Other debilitating economic metrics that appear to get overlooked are the present value of lifetime earnings for whites currently standing at $500,000 more than that for blacks over the course of their working lives. This is primarily due to the disparity of income upon hiring, and subsequent promotional opportunities afforded to members of both races. Also (and as a direct consequence) retirement savings are nearly seven times lower for blacks; with blacks carrying over 25% more student loans.

As society begins its quadrennial review of the state of the Black Union (coinciding with the presidential electioneering activities) it’s important that we broaden the debate from merely black political disenfranchisement to the bigger issue of economic subjugation. Until the economic divide is addressed in serious and material ways then Blacks in 21st century America will continue to find that political freedom without commensurate economic liberties is only a half-won battle.

 

Keith Thompson is a Senior Economist in Transfer Pricing with an agency within the US Department of the Treasury, and an adjunct Economics professor with Ramapo College of New Jersey.

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