Since Covid-19 infected and affected every aspect of our lives, only one issue has been able to elbow its way to the lead news story. That has been the pandemic of police violence against black people and other people of color. The “police violence pandemic” is reflective of a more pernicious strain of infection called racism.
Although we’ve looked at the effects of Covid-19 from every conceivable angle, we’ve not been as deliberative in terms of racism. A few days ago, a friend sent me a link to a story about a recent report by Citi Bank with some jaw-dropping data. If you think the effects of the coronavirus on the global economy has been a killer, the numbers on the effects of racism are even more alarming. According to the report, racism has cost the United States economy $16-trillion in growth over the past 20 years. Talk about a black tax. That effect was not just felt in the US, it also inhibited the growth of the global economy by 0.09%, which means it had an effect on Africa.
Although there is no specific reference in the report that points to the direct effect of US-based racism on Africa, a back-of-the-envelope calculation would suggest the financial impact was potentially in the neighborhood of $40-billion per year.
If racial bias had not been a factor in providing access to credit and capital to African Americans, according to a 2019 report by Illumen Capital, $35-trillion would have been allocated differently. That would have translated into increased wages, increased investment in black-owned businesses and a tremendous boost in black homeownership.
To give a face to what this means, if race weren’t a determinative factor in how credit and capital are allocated, there would have been 770 000 more black homeowners over the past 20 years. Since home equity is one of the ways a college education gets financed in the US, that increase in homeownership would have translated into a corresponding increase in black college graduates. Had those increased graduation rates been realised, those graduates would have benefited by $113-billion over their lifetimes.
Although I called this a “black tax” earlier, the fact of the matter is racism results in everyone being poorer. If disparities in access to everything from venture capital to mortgage financing were eliminated, as much as $5-trillion could be added to the US gross domestic product, which, of course, would drive growth globally as well.
A recent Goldman Sachs report corroborated the Citi Bank findings, noting that rooting out racism in the financial-services sector would result in a 2% boost to the US economy, which would equate to about $400-billion a year.
So, what’s the bottom line?
There are a couple of takeaways from the Citi Bank report and other reports on the same
subject. One clear inference is that the Covid-19 recovery can’t be complete without
universally rethinking how capital has been allocated and reimagining how to do so differently.
The other is, if the financial-services sector wants to demonstrate that it really believes “Black Lives Matter”, it’s time to put its money where its mouth is. When black folk bring a bankable deal to the table, they deserve a fair shake. If African Americans are treated fairly, the US fares well too. Addressing such disparities would go a long way towards correcting a historic injustice.