The Economic and Social Costs of Racism: Racism and the Path to Shared Prosperity

The Intersection of Public Policy and Economic Data

• The speaker identifies as a public policy wonk who investigates data regarding problems in the American economy, such as:
  • Rising household debt.
  • Declining wages and benefits.
  • Shortfalls in public revenue.
• Primary Goal: To pinpoint solutions that create a more prosperous economy for a broader population.
• Areas of expertise and interest include tax policy, infrastructure investments, and gracefully designed regulatory regimes.

Personal Interaction and Individual Change: The Case of Gary from North Carolina

• In August $2016$, during a live public television call-in show, a man named Gary from North Carolina called in with a specific admission.
• Gary's Statement: He identified as a white male who was prejudiced against black men, explicitly mentioning stereotypes related to gangs, drugs, and crime.
• Gary's Request: "But I wanna change, and I wanna know what I can do to become a better American."
• Speaker's Response: Despite her career focusing on "dollars and cents" rather than "personal thoughts and feelings," she thanked him for his admission and his desire to change.
• Viral Impact: The exchange was viewed over $8,000,000$ times, sparking news coverage and social media commentary.
• Long-term Relationship: Gary and the speaker became friends. Gary reported that the speaker's words were like "someone wiped the dust from a window and let the light in."
• Lesson Learned: The speaker realized Gary's prejudice caused him personal suffering, including fear, anxiety, and isolation, leading her to rethink how racism backfires on those it was designed to privilege.

The "Drained Pool" Phenomenon and the Erosion of Public Goods

• Core Thesis: Racism leads to bad policymaking that harms the entire economy, not just people of color. It is not a zero-sum game.
• State of Infrastructure: The American Society of Civil Engineers gives U.S. infrastructure a grade of $D+$. The U.S. invests less per capita in infrastructure than almost every other advanced nation.
• Historical Context (Montgomery, Alabama):
  • In the $1930s$ and $1940s$, the U.S. funded massive public amenities via tax dollars.
  • Oak Park Pool in Montgomery was the largest and grandest for miles, but it was restricted to "whites only."
• Destruction of the Public Good:
  • When federal courts deemed segregated pools unconstitutional, the Montgomery town council decided to drain the pool rather than integrate it.
  • Effective Date: $01/01/1959$.
  • This pattern of "draining the pool" (closing public schools, parks, and pools) was replicated across the country in the $1960s$ in response to desegregation orders.
  • In Montgomery, the parks department was shut down for a decade, recreation centers were closed, and animals in the zoo were sold off.
  • The Oak Park Pool was never rebuilt.

The $2008$ Financial Crisis and Racial Predatory Lending

• Timeline: On $09/15/2008$, Lehman Brothers collapsed, signaling the start of a massive financial crisis.
• The Role of Subprime Mortgages:
  • The crisis was driven by toxic financial instruments based on the formerly safe $30$-year fixed-rate home loan.
  • Predatory terms included inflated interest rates, balloon payments, and prepayment penalties.
  • These loans were aggressively marketed in black and brown middle-class communities.
• Case Study (Glenn):
  • Glenn owned a home in the Mount Pleasant neighborhood of Cleveland for over a decade.
  • He was targeted by a broker for refinancing and ended up near foreclosure despite having good credit.
• Stereotypes and Policy Blindness:
  • The misperception that borrowers like Glenn were "risky" prevented policymakers from identifying the crisis early.
  • Statistics: African Americans and Latinos were $3$ times as likely as white people to be sold toxic loans, even when they had good credit.
• Economic Scale of the Crisis:
  • Big lenders like Wells Fargo and Countrywide were eventually fined for racial discrimination.
  • Toxic loans spread to "wider, whiter" mortgage markets; at the peak, $\frac{1}{5}$ of all mortgages in the country were following this toxic mold.
  • The total cost of the crisis reached $19,000,000,000,000$ in lost wealth, including pensions, home equity, and savings.
  • $8,000,000$ jobs were lost, and the homeownership rate has never fully recovered.
• Conclusion: The speaker asserts that the financial crisis would not have occurred if not for institutionalized racism.

Labor Organizing and Zero-Sum Thinking in Mississippi

• Observations from Mississippi ($2017$): Workers at an auto factory attempted to organize a union for higher pay, pensions, and better healthcare.
• White Worker Perspectives:
  • Joey stated: "White workers think I ain't voting yes if the blacks are voting yes. If the blacks are for it, I'm against it."
  • Chip described a "crab in a barrel mentality," where uplifting black people was perceived as harming white people.
• Outcome: The union vote failed. Wages at the plant remain lower than unionized peers, and healthcare concerns persist.
• The speaker emphasizes holding accountable those who "sell racist ideas for profit" rather than the workers themselves.

Prosperity through Inclusion: The Case of Lewiston, Maine

• Demographic Context: Maine is the whitest and oldest state in the U.S., with more annual deaths than births.
• Revitalization: The mill town of Lewiston is being revitalized by African, Muslim immigrants and refugees.
• The Franco Heritage Center:
  • Cecile, a retired white woman of French Canadian descent, organized Congolese refugees and white retirees to connect.
  • Refugees helped the retirees remember their childhood French.
• Economic Data on Newcomers:
  • A bipartisan think tank found the local refugee community created $40,000,000$ in tax revenue.
  • The community generated $130,000,000$ in income.
  • While other towns in Maine are closing schools, Lewiston is building a new one.

Summary and Philosophical Choice

• The speaker argues against "zero-sum thinking"—the idea that progress for one group must come at the expense of another.
• Linkage of Fates: "An injury to one is an injury to all."
• Future Outlook: The United States is transitioning toward having no racial majority.
• Policy Prescription: Reject the hierarchy of human value and invest in the nation's greatest asset: all its people.