Toxic Inequality – By Thomas Shapiro

Toxic Inequality: How America’s Wealth Gap Destroys Mobility, Deepens the Racial Divide, & Threatens Our Future, by Thomas M. Shapiro
A Review by Chip Sanders for CLUJP, May 9, 2017

Thomas Shapiro is Professor of Law and Social Policy at the Heller School of Brandeis University. He is also Director of the Institute on Assets and Social Policy. This book is a report of a 2010 follow-up with scores of families in three cities who were first interviewed in 1998.

I am here providing an introduction, to be followed by a video of Shapiro in an interview about his book and its implications. Following the video, I will offer some concluding comments and invite your questions and observations.

The Great Recession, which began in 2007 with the housing market crash, provided Shapiro and his team with an unexpected opportunity. They realized that they could provide a longitudinal analysis of data on the effects of inequality on “ordinary families.”   Shapiro uses the stories of those families to illustrate the various themes of his analysis.

Shapio commends the work of two economists we have discussed in the last year and a half, Thomas Piketty and Emmanuel Saez, citing Piketty’s opus magnus, Capital in the 21st Century, as a major source on economic inequality. But Shapiro then insists that the inequality debate include disparities of race as well as of class. In chapter one, he asserts that the broader data on economic inequality by income quintiles masks even greater disparities between races.

Shapiro cites data that shows that the gap between white families’ wealth and that of black families has increased nearly threefold just from 1984 to 2013. This racial disparity persists not only because of continuing racial discrimination but also by senseless policies that protect existing wealth.

“Wealth is not just a matter of money,” Shapiro asserts. Channeling Wilkinson and Picket in The Spirit Level, Shapiro discusses the many impacts of inequality on people’s health and well-being and writes, “… wealth is also about power, status, opportunity, identity, and self-image.” (p. 14)

Early in chapter one, entitled “Wealth Matters,” Shapiro asserts “… that the wealth inequality and racial wealth gap puzzles are actually one and the same, with wealth inequality and racial inequality inextricably linked, as they have been throughout our history.” (p. 27)

In 2013, he reports, “… the average white family owned $13 for every 1$ owned by a typical black family and $10 for every $1 owned by the average Latino family.” (p. 33)       In another measure he writes that in 1963, when Martin Luther King, Jr. led the March on Washington for Jobs and Freedom” – note the inclusion of “jobs” in that march title – “… African American home ownership stood at 38.1%, 26.2 % lower than the rate for white families.

Black Americans were four times more likely to live below the poverty line; …median family income was 60.5% of white families; and 27% of blacks held high school degrees versus 51% of whites.” (p. 34) A “… cluster of policies [especially but not only federal policies]  created vast wealth-building opportunities for whites while tethering blacks to segregated, ;lower-resourced, inner-city neighborhoods.” (p. 35)

Regarding opportunity in America, Shapiro comments, “A deeply held, popular ideal maintains that in America a person can start with little, work hard, and become rich. Closely related is the belief that wealth rises and falls based on hard work, personal character, and individual merit.   Rigorous research on economic mobility tells a different story.” (p. 41) We have seen data in Stiglitz and elsewhere that America has lower social mobility than even the supposedly sclerotic nations of old Europe.

Shapiro contrasts “high-opportunity neighborhoods” with “low-opportunity neighborhoods” in support of the data on limited mobility. “Families living in high opportunity neighborhoods see real gains in financial, social, and physical wellbeing. … In contrast, those living in low-opportunity neighborhoods with poor quality schools and high crime rates face challenge after challenge – less home-value appreciation, fewer mental and physical health services, lower educational outcomes – inhibiting their capacity to live well and move ahead.” (p. 69)

Those neighborhood differences affect measures of wealth. Consider that “Two-thirds of net wealth held by the middle 60% of families is home equity.” (p. 45) Now consider the impact on wealth accumulation by middle-class families of the Great Recession, in which the lower income families and families of color also held the most damaging mortgages. Foreclosure is an economic disaster to them.

Shapiro also addresses the disparities of the workplace, where the higher paying jobs are usually accompanied by a set of benefits that add wealth and limit economic damages of serious illness. Those in lower income jobs usually do not have benefits to protect them or to enhance their wealth, and those jobs are held disproportionately by women and people of color. What chance do they really have to improve their economic or social condition?

Then Shapiro discusses the impacts on inequality of inheritance and the laws protecting inheritance from taxation. Families enjoying even a modest inheritance demonstrate “… wealth’s power to transform lives and sustain advantages, to provide near-immunity against failure, and to supply multiple second chances.” (p. 125) Of course, if a family in unable to generate and retain wealth, inheritance cannot even be considered as a factor.

Well, enough of me! Let’s “go to the videotape” and hear from Shapiro himself.

 

Ok! Did Shapiro make his case for considering the effects of racial disparities on economic inequality? What else would you like to point out or discuss?