In order to effectively increase the knowledge of personal finance in young adults, it is imperative to identify the roots of personal finance in America (or lack thereof) and acknowledge the Racial Wealth Gap; i.e. the financial inequalities, absent education, and discriminatory systems and regulations the BIPOC community has faced for generations. The understanding of the systems and regulations put into place for these individuals is imperative to a comprehensive knowledge of finances as one will only benefit in the future from understanding the past.
A (Very) Brief History of BIPOC in America
During the 17th and 18th centuries, Africans and Indigenous people were kidnapped and forced into slavery and exploited as labor sources for colonists.
1830 Indian Removal Act
This act started the forced relocation of indigenous peoples, known as the Trail of Tears.
More than 46,000 Indigenous were removed front their ancestral lands and relocated to what is now Oklahoma. More than 4,000 died due to starvation, disease, and exposure.
1851 Indian Appropriation Act & 1887 Dawes Act
The reservation system was implemented, and Indigenous were forced to live on reservations and restricted from their hunting, fishing, and gathering of traditional foods. The U.S also introduced food rations introducing sugar, grease, and wheat flour.
The removal of the indigenous allowed settlers to use their land.
The Dawes Act or the General Allotment Act allowed the government to break up reservation land into small allotments and give small parcels of land to individuals on the tribal roll. The government hoped they would farm and assimilate to “white culture” so the government wouldn’t have to oversee “Indian affairs.” Most of the land was unsuitable for farming.
Manifest Destiny 1860’s 1900’s Indian Boarding Schools
Carlisle Indian Industrial School operated from 1879-1918 and was the first institute using forced “Americanization.” Children were removed from their families and sent to boarding schools to eradicate their indigenous ideologies and traditions. Many of the schools required them to wear American-style dress and hairstyles and encouraged them to abandon their native religion for Christianity. They were also “taught” marketable skills for society.
The founder of Carlisle, Richard Henry Pratt, coined the phrase “kill the Indian, save the man. As we know, these schools abused, neglected, and killed many children who attended these institutions.
On April 16, 1862, Lincoln signed a bill ending slavery in the District of Columbia. The enslavers loyal to the Union were compensated up to $300 for each freed enslaved person for their property loss. ($1 in 1862 is equivalent to about $29.34 today)
“One of the biggest [myths about American Slavery] is that it was an archaic practice that only enriched a small number of men.” P.R. Lockard. The confederacy’s 11 states had 316,632 enslavers; however, this only accounts for the person who “legally” owned the enslaved person. The entire family (sons, daughters, and the enslavers’ spouses) also benefited from their family’s ownership or inheritance of enslaved people.
The enslaved served as America’s most significant financial asset; the Mississippi River Valley had more millionaires per capita than any other region.
Reconstruction Era 1863 to 1877 – Reconstruction was the period following the Civil War, which attempted to address the inequalities of slavery and its legacy.
Forty-Acres: The federal government confiscated 400,000 acres of land from Confederate land owners on the Charleston coastline and redistributed the land to the formerly enslaved. Each family could have a plot no more than 40 acres, and the newly formed communities would self-governed. By June 1865, 40,000 had settled the land. However, after Lincoln’s assassination, Andrew Jackson rolled back most of the reconstruction efforts by allowing former enslavers to reclaim the property.
January 1865: 13th Amendment
The 13th amendment was added before the south rejoined the union.
“Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.”
Congress shall have power to enforce this article by appropriate legislation.
July 1868: 14th Amendment
The 14th amendment extended the protections of the Bill of Rights to the states and granted citizenship to all people “born or naturalized in the United States,” including formerly enslaved people. It also guaranteed all citizens “equal protection under the laws.”
February 1870: 15th Amendment
Although states could not deny people the right to vote “on account of race, color, or past condition of servitude”, the amendment allowed states to impose voting requirements that applied equally to all races. Several former confederate states implemented poll taxes and literacy exams, among other requirements, creating barriers for BIPOC individuals, specifically African Americans.
March 1875: Civil Rights Act
“That all persons within the jurisdiction of the United States shall be entitled to the full and equal enjoyment of the accommodations, advantages, facilities, and privileges of inns, public conveyances on land or water, theaters, and other places of public amusement; subject only to the conditions and limitations established by law, and applicable alike to citizens of every race and color, regardless of any previous condition of servitude.”
During this time, the southern states immediately began passing laws by loopholes in the language of the amendments to justify the re-enslavement of the formally freed population. The southern states codified Black Codes into law.
These codes were a legal way for the South to remove voting rights and lock people into labor camps and indentured servitude. Nine states used “Convict-leasing,” meaning states “leased” prisoners to plantation owners where many black prisoners lived and worked for no pay for many years after the end of the Civil War. (Alabama, Texas, Louisiana, Arkansas, Georgia, Mississippi, Florida, Tennessee, and South Carolina)
U.S. v Ryan, U.S. v Nichols, U.S. v Singleton; U.S. V Stanley, Robinson and wife v Charleston railroad company.
These five cases were consolidated because of their similarity. Each case involved Black Americans being denied entry to a public area that was privately owned. The Supreme Court, in an 8-1 decision, found the 1875 Civil Rights Act was unconstitutional and not protected by the 13th and 14th Amendments.
Justice Joseph P. Bradley wrote the majority opinion, stating that private businesses should have the right to regulate who has access to their business—paving the way for “Jim Crow” laws to exist.
Separate But Equal: Plessy v Ferguson
After the Plessy v Ferguson (1896) decision, numerous segregation laws were enacted by state and local governments. For 60 years, segregation was part of the day-to-day.
The “separate but equal” was only overturned in 1954 by the U.S. Supreme Court.
Brown v Board of education stated that “separate schools for African American students were “inherently unequal.”
It took until 2016 for Cleveland High School in Cleveland, Mississippi, to desegregate, making them the last school in the United States to do so.
Racial Discrimination: Servicemen’s Readjustment Act
The Jim Crow era lasted from 1865 until the Civil Rights Movement in 1968. However, that does not mean the end of the idea of “separate but equal”…
The GI Bill was officially known as the Servicemen’s Readjustment Act of 1944. The creation of the GI Bill helped those who wanted to continue their education, and unemployment benefits for veterans looking for jobs. The government-guaranteed loans for veterans who borrowed money to purchase a home, business, or farm.
While the bill was extended to all veterans regardless of race or gender, many struggled to collect their benefits. House member John E. Rankin insisted that the legislation be administered at the state level to ensure that southern states could continue to practice discrimination against black veterans.
How they do this:
- Limiting college choices: There were not many college options due to segregation, and HBCUs were historically underfunded. They could only accept a small portion of those who applied.
- Veterans Affairs often steered Black veterans to vocational training instead of college.
- Men who applied for unemployment benefits were kicked out of the program if there was any work available to them, even if it was less than the $20 unemployment payments (about $336.72 in today’s dollars)
- Some banks refused to loan money to Black service members even though the loan was government-backed
- Redlining: Many neighborhoods prohibited black families from moving in by lenders not approving mortgages, refused to sell a home to black individuals, and more for black families
When the original GI Bill ended in 1956, 4.3 million home loans were worth 33 billion dollars. However, most Black veterans had been excluded. Ira Katznelson, an American political scientist, wrote there was “no greater instrument for widening an already huge racial gap in postwar America than the GI Bill.”
The Federal Aid Highway Act of 1956 created physical barriers by directing highways through BIPOC communities. There has also been a lack of infrastructure built in Black communities. A clear example was when Hurricane Katrina hit New Orleans.
Some public colleges and universities offered free college education. Several states, including California, offered free tuition to in-state students until the 1970’s when more black individuals were attending. In 1966 Governor Reagan proposed the University of California system should charge for tuition to “get rid of the undesirables” as BIPOC individuals were less likely to be able to afford tuition. People who engaged in protests, demonstrations, and strikes related to civil rights, discrimination, and woman’s liberation.
Economic status has historically been based on racial disparities. Many groups throughout our history have experienced legal discrimination under the laws set by societal attitudes. According to the 2019 Federal Reserve survey of Consumer Finances, White families have greater wealth than other racial groups, with Black families and Latinx/Hispanic families having the least. Many people in the BIPOC community lack generational wealth because they were locked out of the many programs created to build it.
To create meaningful and sustainable change we must acknowledge that our country was built around financial injustices for the BIPOC community, and then work to create new systems that no longer allow for these financial injustices and help to close the very real Racial Wealth Gap.
If you would learn about additional resources to educate yourself on these topics, please feel free to reach out to Nicole Del Percio, 3rd Decade’s Operations Manager, at [email protected].