capitalism and wealth lead to systematic racism

Unchecked Capitalism Root Cause of Systemic Racism

First-time author Randall L. Hull shares his views taken from his recently published book ‘Political Malpractice in America,’ which was selected by as one of the “Best New Politics Books of 2020.”

The United States is the richest nation in the world, based on total GNI (gross national income) and GNI per capita, yet the distribution of economic gains increasingly goes to a smaller and smaller segment of our society. According to recent (2017) World Bank data, the GNI per capita in the U.S. is over $60,000 per person, while in the UK, France, Germany and Japan it is only about $40,000 per person, and in Brazil, Russia and China, it only amounts to about $10,000 per person. Capitalism is indeed a wealth creation engine…but that wealth is unfairly distributed, with wealthier families enjoying lower effective tax rates as well as access to accountants, lawyers and stockbrokers that increase their wealth advantages further.

The chart below shows that since the 1950s, real, inflation-adjusted growth in wealth has only happened for, at best, the top 20% of the American population. 

“The rich get richer”

Income and wealth inequality in the U.S. are approaching record levels not seen since the “Gilded Age” of the late nineteenth century (source: “Capital in the Twenty-first Century’ by Thomas Piketty). We have created, in effect, a new aristocracy, with little or no control over how this group “buys” a government that works for them at the expense of the common good and the vast majority of Americans. History teaches us that aristocracies inevitably come to an end, and that process is usually harsh and painful.

Wealth gaps generate gaps in housing affordability, healthcare access, and perhaps most damaging to our society long-term, the quality of education provided to our young people.  It is a damaging, self-reinforcing, vicious cycle. Beyond economic divisiveness, we also find our political and cultural disunity is greater than at any time since the Civil War. That’s not a coincidence and not just my opinion—other esteemed leaders, across a wide spectrum, including retired Gen. James Mattis, Sen. Joe Manchin (D-W.V.), global hedge fund manager Ray Dalio, and George Mason University Professor of Government Bill Schneider, have all said the same. How has this happened? What can we do to reverse this damage and create an America that works for the majority of its citizens? And specifically, how can we eliminate systemic racism in America, which is reinforced by rising levels of economic inequality?

The following ideas represent a starting point for solutions to these issues.

First, how did we get here? If there were a watershed year for the American economy, it was 1980. After surviving the race and anti-war riots of the 1960s and the energy shocks to our economy in the 1970s, America was ready to unleash the power of capitalism. beginning with Ronald Reagan’s supply-side tax cuts and trickle-down economics. Corporate tax cuts were substantial, and private investment was unleashed. Productivity accelerated as capital investment surged, as can be seen below:

Unchecked, free-market capitalism began in 1980.

As productivity accelerated, capital investment and automation replaced labor, and as a result, skilled jobs and wage gains disappeared. Corporate profits increased significantly. Free-trade agreements flourished under the Reagan, Bush and Clinton administrations. American firms significantly increased their imports of materials and assemblies required in their final manufacturing steps. Manufacturing began a long decline that has not stopped to this day. Automation and imports have displaced about 30 million front-line manufacturing jobs in the last 40 years, particularly in the automotive sector. Many of these job losses disproportionately impacted minority communities. In a June 6, 2020 New York Times article, economists Ben Casselman and Patricia Cohen wrote: 

“Hiring prospects for African-American and Latino workers have long been hobbled by factors that stretch from poorer educational options and lopsided incarceration rates to outright discrimination by employers. Even last year, as the national jobless rate fell below 4 percent to its lowest level in half a century, the rate for black men in Illinois was nearly 10 percent. African-Americans also earn less, are quicker to be laid off, are slower to be rehired and are less likely to be promoted. Historically, the black unemployment rate is twice that of whites.”

The problem with capitalism is not wealth creation — no economic system works better in that regard — but one of wealth distribution. In short, the rich have gotten richer at the expense of a poorer, smaller, and disproportionately larger Black and Brown working class. Our system provides added benefits and incentives to those who need it least. Reagan’s trickle-down economics, popularly called “Reaganomics” at the time, was supposed to pull all communities upward on the socioeconomic ladder. Sadly, this never happened, and in fact, as the data above show, socioeconomic inequality has only worsened. Yet to this day trickle-down economics is still embraced by many Republicans…it was a fantasy then and remains so today. 

The wider family wealth gap has translated to a widening socioeconomic gap between communities, and since schools are largely funded locally by property taxes, these poorer school districts are suffering more than ever as well. These challenged communities have proportionately larger Black and Brown populations than the nation as a whole. In those communities we see higher crime rates, and poorer educational outcomes. It is the very definition of a vicious circle that reinforces racial stereotypes and systemic racism. 

The Harvard Business School has been conducting an on-going study of U.S. competitiveness since 2011. It is a fascinating series of annual reports. One of the key findings of this study is that a nation’s long-term economic health is dependent on “shared prosperity,” and the authors warn that as a nation we are not meeting this goal, and in fact we are going in an opposite direction. Furthermore, the study shows how political gridlock and rising inequality have prevented any meaningful action on reversing this downward spiral in our nation’s ability to compete in a global economy. One surprising conclusion of this study was what participants felt to be the single most important remedy for these problems: universal access to high-quality public education.

Rising inequality has hurt our Black and Brown communities hardest. As noted earlier, rising crime rates and failing educational outcomes simply reinforce past racial prejudices that have persisted for too long. Systemic, pervasive racism is just one, albeit serious, symptom of our economy failing to create shared prosperity. The George Floyd murder this past summer was literally the “straw that broke the camel’s back.” After at least a decade of Black and Brown communities experiencing a disproportionate number of police shootings, people all across the nation, Black and white, said “enough” and erupted in protest.  It was reminiscent of the 1960s. It was quite breathtaking to watch a million or more Americans exercise their right to free speech.

In short, our economic and cultural failures are a result of a failure in political leadership.  Unlimited “dark money” flowing into the political process punishes compromise and rewards extreme ideological positions. Identity politics is the antithesis of bipartisanship, and as a result, solutions to our socioeconomic malaise, including systemic racism, remain elusive. 

The African-American voter turnout in 2020 was a key factor in the election of Joe Biden. Let’s hope that the Biden administration will attack the root causes of poverty, crime and the resulting systemic racism which results. Early indications from the Biden-Harris platform are encouraging. Two years of federally funded, universal early childhood education and a massive increase in infrastructure investment are two initiatives that will directly challenge systemic racism. These initiatives are just a start, but together will begin to prepare all students more equally to participate in economic opportunities and create more of those opportunities — “push-pull” strategies, as it were!

Leaders are expected to lead by example. If our political leaders can find their way back to cooperation and bipartisanship, they can help fulfill the full measure of equality in the truest sense of the American ideal — not just equal opportunity but also equal preparation of all our citizens to take advantage of those opportunities — an “equality of conditions.” Alexis de Tocqueville, in his seminal work “Democracy in America,” observed that “equality of conditions,” and not outcomes (that would be socialism), was the defining factor of American success in the nineteenth century. If our leaders can increase opportunities, and prepare all communities equally to pursue those opportunities, then great progress will be made in dismantling the systemic racism that exists in America today. 

Randall L. Hull is a retired executive. He worked in the global energy and chemicals industries for over 40 years. He's a first-time author, and his book ‘Political Malpractice in America’ was recently selected by as one of the “Best New Politics Books of 2020.” His full bio is here.

Randall L. Hull is a retired executive. He worked in the global energy and chemicals industries for over 40 years. He's a first-time author, and his book ‘Political Malpractice in America’ was recently selected by as one of the “Best New Politics Books of 2020.” His full bio is here.

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