Monday, September 28, 2015

Wealth Inequality Gap Widens Across Racial and Ethnic Lines

The Pew Research Center reports that the wealth inequality gap has widened since the Great Recession.  According to Pew:  "The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families. But even as the economic recovery has begun to mend asset prices, not all households have benefited alike, and wealth inequality has widened along racial and ethnic lines.  The wealth of white households was 13 times the median wealth of black households in 2013, compared with eight times the wealth in 2010, according to a new Pew Research Center analysis of data from the Federal Reserve’s Survey of Consumer Finances. Likewise, the wealth of white households is now more than 10 times the wealth of Hispanic households, compared with nine times the wealth in 2010."  The median net worth of white families at the end of 2013 was $141,900, while the median net worth of black families at the end of 2013 was $11,000, while the net worth of Hispanic familes was $13,700 as shown in the chart above.  Essentially then, white family net worth is 13x greater than that for black families and 10x greater than that for Hispanic families.

Since 2010, white household wealth has increased by about 2.5% while black and Hispanic household wealth has fallen by 33.7% for black families and fallen by 14.3% for Hispanic families.  Why?  Stock markets have rebounded since the crash in 2008 and generally while households own more stock in retirement accounts than black or Hispanic households, according to Pew.  Further, all households have reduced asset ownership since the Great Recession, but black and Hispanic households have shed assets at greater rates than white households, including lesser homeownership.

Inequality in the United States continues unabated and the trend is that the gap is getting worse, not better.  Again, according to Pew:  "[T]he racial and ethnic wealth gaps in 2013 are at or about their highest levels observed in the 30 years for which we have data."

Wednesday, September 23, 2015

Rupturing the School-to-Prison Pipeline

On Friday, September 25, 2015, the Robert H. McKinney School of Law at Indiana University Indianapolis will host a timely symposium on Rupturing the School-to-Prison Pipeline: State Government Efforts Toward Expungement Reform.  This conference will focus on one of the leading issues in the country: the relationship between the juvenile justice system and the education system.  From the conference description: "Starting a few decades ago, we witnessed school districts across the nation adopt and adhere strictly to zero-tolerance policies in relation to students behavior.  As a result, hundreds if not thousands, of youth are funneled into the criminal justice system for grievances that, in prior years, would have warranted grade penalties, detention, or in-school suspension, but now carry with them a possible juvenile criminal conviction.  Since many state governments do not see the utility in expunging these adjudications, many young people are hampered in their efforts to advance their education, gain employment, or obtain housing because of existing juvenile adjudications.  State governments can act to make minor indiscretions a learning experience and not a life-altering label." 

The symposium will focus on juvenile record keeping, confidentiality and expungement, and will introduce best practices for state governments, local law enforcement agencies and school districts.  The agenda for the program can be accessed here:  Agenda

One constant refrain at the Corporate Justice Blog is how to best enhance the human economic potential of all our nation's citizens.  Often the CJB focuses on policies or practices that act to destroy the human potential and capacity of our citizens to reach their highest capabilities due to short-circuiting entanglements with the criminal justice system in the U.S.  It is difficult to imagine a greater disrupter of human potential than the criminalization of typical adolescent behavior that is trending in the ongoing school-to-prison pipeline.  This program at IUPUI McKinney aims to debate and resolve these problems and tensions.

Thursday, September 17, 2015

NEW LAW REVIEW ARTICLE: New Guiding Principles for ERM

Kristin Johnson and I just posted a new article addressing the new standards for enterprise risk management (ERM) imposed by Congress and regulators in the wake of the Great Financial Crisis of 2008. The article is entitled: "New Guiding Principles: Macroprudential Solutions to Risk Management Oversight and Systemic Risk Concerns."   

The article is the first to comprehensively assess the entire legal and regulatory response to the financial crisis in terms of enterprise risk management in the financial sector. It is also the first analysis to express skepticism of the new risk management regime due to flaws in general corporate governance law and regulation. Professor Johnson and I pioneered legal scholarship in the ERM arena, with prior works like thisthis, and this, and this piece extends our research into this key area of growing importance in financial regulation and corporate governance. Many of our prior works argued for improvements in ERM that ultimately became law. 

Here is the abstract for our most recent publication on ERM:

The financial crisis of 2008 revealed massive failures in risk management throughout the financial sector. Congress and federal regulators responded to these manifest failures with initiatives to reconstruct risk management structures within large financial institutions and public firms. Nevertheless, these initiatives rely upon proper corporate governance frameworks creating proper incentives for senior managers and directors to attend to risk management. As such, these initiatives are unlikely to succeed and expose our economy to continued macroprudential risks and resulting financial instability. In sum, these corporate governance-oriented reforms are too weak to stem the tidal wave of enterprise risk and systemic risk that risk management failures at financial firms engender. Continued reliance on these types of reforms is not inherently problematic. The failure to recognize the limits of this approach, however, may well lead to even more devastating risk management failures, market disruptions, and the realization of irreversible systemic risks.

The article was part of a symposium on financial regulation sponsored by the St. Thomas Law Journal, and is available for free download here.

Saturday, September 12, 2015

NEW LAW REVIEW ARTICLE: Capitalism, Inequality, and Reform

Richard Delgado is one of the nation's foremost legal scholars. So, it is with great hesitation that I disagree with him. Nevertheless in the course of debating my book, Lawless Capitalism, we reached a fundamental impasse regarding the nature of capitalism and its adaptability to egalitarian reform under law.

I argue that because of its fundamental values of meritocratic competition, broad-based economic opportunity, and economic growth, capitalism can achieve durable egalitarian reforms under conditions of low economic inequality. On the other hand, high economic inequality means that powerful elites control sufficient resources to subvert law and regulation in their favor while short-circuiting any semblance of meritocracy and real economic opportunity for the mass of fellow citizens. Naturally, such behavior leads to retarded economic growth. Of equal importance, I argue that high inequality corrodes the rule of law, as economic elites wield more resources to free themselves from the constraints of law and regulation in ways that others cannot. With very high inequality the rule of law ceases to exist and instead elites use law as an instrument of oppression. Rule by law displaces the rule of law.

Professor Delgado is skeptical that capitalism can ever achieve durable reform under law. His disagreement is stated far better than I could summarize, here and here.

Lawless Capitalism constitutes a legal and regulatory case-study in how financial elites subverted law and regulation before and during the Great Financial Crisis of 2008. As such, it builds upon the work of Mancur Olson and the work of other high-profile economists that shows how high inequality subverts the rule of law. Essentially, elites gain control of the law rather than operating under the rule of law. Nowhere is this dynamic more evident that with respect to Wall Street megabanks today, as this blog has chronicled, here and here. Indeed, it is fair to say that this blog leads the world in cataloguing the abuse of the rule of law by those holding concentrated economic resources.

American capitalism can rightly be criticized for failing to reform itself in any meaningful way following the Great Financial Crisis of 2008. Yet, this is not an inherent flaw of capitalism as some, such as Richard Delgado, suggest. Historically, such as during the Great Depression, American capitalism did achieve egalitarian reforms. In other nations, such as Denmark and Japan, more egalitarian forms of capitalism have taken root. These more egalitarian forms of capitalism occurred within systems featuring much lower economic inequality than that which prevails in the US in recent years. This suggests that capitalism can devolve into lawless capitalism under conditions of high economic inequality, whereby economic elites can dominate law and regulation to entrench themselves in ways that retard general macroeconomic growth. This is consistent with theoretical and empirical work from economics. The article concludes that high economic inequality (not capitalism per se) presents a unique danger to core values of capitalism, such as meritocratic competition, sustainable economic growth, and a broad distribution of economic opportunity. This is all consistent with the thesis of Lawless Capitalism which posits that high economic inequality led to legal and regulatory subversion for great profit for small bands of financial elites and great cost to the entire global economy during the Great Financial Crisis of 2008. Further, the US now faces the prospect of an entrenched elite with massive economic power and the incentive to sabotage economic growth for profit.
The full article just came out in the Wake Forest Law Review and is available on SSRN for free download, here.

Tuesday, September 1, 2015

"Hip Hop and the Law" Just Published

Dear Readers,

I am excited to share with you that the Carolina Academic Press has just published HIP HOP AND THE LAW, an innovative scholarly collaboration and textbook edited by our colleagues andré douglas pond cummings, Donald F. Tibbs, and the late Pamela Bridgewater.  

The book is dedicated to Pamela Bridgewater in recognition of her work in editing this book, her final scholarly effort, and in honor of the lasting contributions she made to our community.

The book features MANY of the members of the minority professor listserv (and I am proud to be a contributor).  Its chapters explore the varied ways hip hop music and culture interact with and comment on American law. These essays speak to a multitude of substantive issues, including the content of a hip hop and the law perspective and the interaction between the hip hop consciousness and 21st century legal activism. These chapters also provide incisive hip-hop driven accounts of various doctrinal issues ranging from intellectual property to mass incarceration.  

This volume is available now from Carolina Academic Press.  It is not only a substantive contribution to this growing area of scholarship, but it also provides a substantial text for classroom use for those interested in offering a Hip Hop and the Law course.

Please join me in congratulating dré and Tibbs and the many contributors to this volume for this accomplishment.


Atiba R. Ellis
Professor of Law
West Virginia University College of Law
101 Law Center Drive | P.O. Box 6130 | Morgantown, WV  26505-6130
Office:  304.293.4810 | Fax:  304.293.8102 |