African Americans, Economics and the American Corporation

My scholarship has examined aspects of the economic health of black America in general, and the important and complex relationship between African Americans and the American corporation in particular.

Any consideration of the economic wellbeing of twenty-first century African Americans must begin with the African slave trade that brutalized millions of Africans for centuries. There is an inextricable connection between the poverty in which disproportionately large numbers of present-day African Americans live and the fact of slavery during which millions of African ancestors worked to establish the U.S. as an economic giant. The work of Africans generated considerable wealth for white enslavers – wealth that has passed from generation to generation. Enslaved Africans, of course, had no wealth to pass on to their children because they received no compensation for their labor. My grandmother turned 107 on December 2nd, 2010. She was raised by her grandparents, Albert and Sally Booker, both of whom were born into slavery. The family for whom my great-great grandparents worked passed onto each subsequent generation a legacy of economic wellbeing. It is not surprising that my mother will inherit nothing from my grandmother, the granddaughter of slaves. The institution of slavery is only one of several factors that explains the significant wealth gap between today’s African Americans and their white counterparts.

Economic deprivation of African Americans continued after enslaved Africans were emancipated in 1865. Most African Americans in southern states became sharecroppers. “In the sharecropping system, it was the planter who took the crops to market or the cotton to the gin. The sharecropper had to take the planter’s word that the planter was crediting the sharecropper with what he was due. By the time the planter subtracted…the seed, the fertilizer, the clothes and food—from what the sharecropper had earned from his share of the harvest, there was usually nothing coming to the sharecropper at settlement….In some parts of the South, a black tenant farmer could be whipped or killed for trying to sell crops on his own without the planter’s permission….There was nothing to keep a planter from cheating his sharecropper. ‘One reason for preferring Negro to white labor on plantations…is the inability of the Negro to make or enforce demands for a just statement or any statement at all. He may hope for protection, justice, honesty from his landlord, but he cannot demand them. There is no force to back up a demand, neither the law, the vote nor public opinion.’”[1]

Because of the blatant injustices and unfairness inherent in the south’s sharecropping system, several generations of African Americans migrated to the north where they found work in factories and urban workplaces. But, even in the north, African Americans faced discrimination and racism that made it impossible for them to earn what they deserved from the labor they contributed. These inequities have endured for decades. In the mid and late 1990s, African American employees brought two of the largest race discrimination class actions in American history against Texaco and Coca-Cola. African American workers at Texaco alleged pervasive discrimination in hiring, promotion, and pay. Texaco settled the class action in 1996. African American employees made similar allegations about unfair hiring, promotion and pay practices against Coca-Cola just a few years after the Texaco settlement. Coca-Cola settled the suit for $192.5 million in 2000.
Hundreds of African American employees filed the race discrimination class actions against Texaco and Coca-Cola. African American plaintiffs have filed individual suits and much smaller class actions in the years after the Coca-Cola settlement, but none of the recent suits come close in size to the Texaco & Coca-Cola actions. The fact that there have been no race discrimination class actions as large as the Texaco and Coca-Cola suits in recent years seems like good news. But the reason why recent race discrimination litigation has shrunk is best explained by the sophistication of corporate employers who learned how to protect themselves from this kind of litigation. Employers are not discriminating less. They are more adept at ensuring that there is no evidence of discrimination. In fact, one of the explicit lessons from the Texaco class action, according to one lawyer writing on the subject, was that corporate employers should not memorialize certain decisions.
A more recent phenomenon that has decimated the economic health of African Americans is the predatory lending that occurred in the first decade of the twenty-first century. State and federal investigations in the U.S. have revealed that mortgage brokers and loan originators targeted people of color for predatory subprime mortgages. African Americans were “four times as likely as whites to pay subprime rates on their mortgages.”[2] Even middle and upper income African Americas were twice as likely as similarly situated white Americans to receive high cost loans, and this occurred even when they qualified for prime loans. African Americans have lost billions during the height of the predatory lending crisis.
Disparities in wealth between white Americans and African Americans have grown in the last few decades even though more African Americans have college educations. For every dollar the median white family owns, the median Black family owns ten cents. Slavery and the exorbitant discrimination that ensued after the institution was abolished explain this wealth gap. Fairness would dictate the payment of reparations for the descendants of enslaved Africans whose uncompensated labor made the U.S. an economic powerhouse. Fairness would require the bailout of African American victims of predatory lending so that they can keep the homes they lose in foreclosure.
Reparations and bailouts for African Americas are extreme and unlikely resolutions for the economic deterioration of the Black community. In their place are tepid reforms such as those found in Section 342 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act creates an Office of Minority and Women Inclusion at various agencies including the Securities and Exchange Commission, The Federal Depository Insurance Company and each of the Federal Reserve Banks. These newly created Inclusion Offices are charged with monitoring diversity efforts at federal agencies, the entities they regulate and the businesses with whom the agencies contract. It is not likely that Section 342 will change much of anything. Covered agencies and companies will submit reports about the diversity efforts in which they engage. But diversity efforts do not confront the continuing problems of discrimination and racism. This section of the Act, however, makes it seem as though women and people of color are getting special access and consideration, and the section does not deal with the unique problems that African Americans in financial services have faced. This is most unfair.
[1] ISABEL WILKERSON, THE WARMTH OF OTHER SUNS 53-54 (2010)
[2] Alan M. White, “Borrowing While Black: Applying Fair Lending Laws to Risk-Based Mortgage Pricing”, 60 S.C.L.REV. 677 (2009).