The Wealth Gap Between White and Black in America - The American Spectator | USA News and Politics
The Wealth Gap Between White and Black in America
by

Now for a few words about money and race.

It’s hardly a secret that black households in this country as a group are substantially less well off than white families. The income gap between white and black families has narrowed over recent decades. But the disparity between what black households own in dollars and cents as compared with what white families own is startlingly large.

On average, as persons near retirement age, black families and individuals have about one fifth as much in the way of assets as white families. Even when black incomes start to approach white incomes, the wealth gap remains immense.

Economists have long been trying to figure out exactly why this is. Part is because blacks do not own their own homes as much as whites do. Plus, there is considerably less inheritance between and among generations in black families and with regard to individuals. But even correcting for these factors, as statisticians can do, the gap between blacks and whites in terms of wealth remains immense.

There do seem to be three factors that do explain it: One is that married couples pool their incomes and thus can find the wherewithal to save. Whites marry at a rate about three times that of blacks. By itself, that explains a lot. Pooling of income is a serious step towards financial security.

Next, families that stay together and do not disperse their savings tend to have more money available to save and invest. White families tend not only to marry more often but also to stay together more than black families and that, too, is an explanation for a lot.

But the most interesting finding, at least to me, is that black families tend to avoid owning common stock. While a very large fraction of white families own stock, only a small percentage of blacks as individuals or families own stocks. This is crucial. Stocks tend to generate by far the most impressive returns of any investment class available to investors as a group. They fluctuate, and sometimes fluctuate greatly. But over decades, they tend to return much more than savings accounts or bonds or real estate.

This is a free enterprise, capitalist society. Its assets, except for those owned by government, tend to be held by stock corporations. Often, not always, that stock is available only to certain insiders. But most stock is owned by individuals and families and it’s available to be bought by anyone who has a few nickels to rub together.

The stock market is a daunting and exotic place to many people who are new to it. They may think of it as too risky for them, may think of it as manipulated by insiders and a forum for plunder. But much more often, it’s a way for the ordinary citizen to buy into the immense capitalist machine that is America and to reap rewards as the economy grows.

For some reason, this is not being taught to black Americans, at least not in large numbers. But it should be. Stocks are not racist. They don’t care who owns them. They can be bought as index funds, in which the buyer owns a minuscule portion of all of the largest companies in the nation or in the world or of all the Internet companies or any other area the buyer chooses. That takes all the guesswork out of it. For my money, just buying the index of the 500 largest companies in America, in which the buyer owns a microscopic share of Intel and Ford and Exxon/Mobil and the other super big companies, is a reliable way to go. The commissions are negligible and boom, once you own them, if you keep buying them, you’re a capitalist pig.

That’s a good thing to be. It’s really bad that blacks, who make up about 50 million of our nation, are almost all on the outside looking in at the stock market. The doors are open. Capitalism beckons. It will surely have some risk and a sharp downturn in the near future is highly possible. But over long periods, blacks owning stocks can and will make a major difference in closing the wealth gap.

Get married. Stay married. Buy and hold index funds of stocks. Try it. Your grandchildren will thank you. The retired will thank you.

Capitalism works, and capitalism works wonders for persons of every race.

 

Ben Stein
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Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He writes “Ben Stein’s Diary” for every issue of The American Spectator.
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