African Americans and Trust in Financial Systems

Today is Friday December 1st. As part of minorities and wealth week, I wanted to briefly discuss some of the reasons why African Americans don’t have as much wealth as other ethnic groups and illustrate the issue of trust.

The statistics are pretty clear: African Americans earn less and have lower net worth growth than other ethnic groups. Anyway you look at it, its clear that Blacks aren’t as well off economically. The key question is why?

The reasons why African Americans have less wealth are fairly well know. This includes differentials in education, inheritance, savings rates, family status, health and consumer consumption. A factor that’s largely ignored however, is trust.

Historically speaking, African Americans have been grossly disadvantaged by the US’s economic and social systems. For example, for the first hundred years of our national history, Afro Americans weren’t even considered people, rather property. Not only that, after the civil war, terrorist groups like the KKK were successful in disenfrancising African Americans. Recent history hasn’t been much better. For example welfare programs and rent control have helped create urban ghettos. Finally, the war on drugs has resulted in the incarceration of over a quarter of African American men.

The long and short of this, why should Afro Americans buy into traditional methods for building wealth? It implies buying into a system which hasn’t historically ensured a fair playing field. Trust in the system or belief in the equity of financial and government institutions has got to be a factor financial decision making.

Now, I’m not an expert in these kinds of things, and very likely I could be wrong on this issue, but I do think that lack of trust in financial systems is one factor in why African Americans lower levels of wealth.

Best,

James