Bigotry: A Cost/Benefit Analysis

There are fairly obvious reasons that posts and comments to this blog have increasingly centered on bigotry–well-meaning individuals are (reluctantly) facing up to the extent of the tribal animus that continues to fester in far too many of our fellow Americans.

Much of the reaction to that animus is expressed in moral or religious terms– the belief that racial and religious hatreds are immoral or sinful. Others point to the destabilizing, anti-democratic consequences of such bias, and still others point to the human costs to individuals who suffer from discrimination or may even be prevented from pursuing their life goals for no reason other than their religion, gender or the color of their skin.

But bigotry has economic costs as well, and they are substantial, as a Brookings Institute paper points out.

The research concludes that racial and ethnic disparities in the United States–disparities resulting from official and social discrimination–haven’t simply hurt the people who experience that discrimination. They’ve hurt us all, by depressing U.S. economic output by trillions of dollars over the past 30 years.

The researchers controlled for five variables: 

employment (the percentage of people with jobs); hours worked; educational attainment (the level of education completed); educational utilization (the extent to which people are in jobs that fully use their education); and earnings gaps not explained by those factors.

Then they calculated how much larger the U.S. economic pie would be if opportunities and outcomes had been more equally distributed by race and ethnicity. Their answer?  $22.9 trillion over the 30-year period.

When we fail to utilize the talents of millions of people, we shouldn’t be surprised that the result is lower prosperity for everyone. (We began to recognize that reality when large numbers of women finally entered the workforce and we were no longer failing to use the smarts and talents of fifty percent of the population.)   

As J.P. Morgan & Co.–hardly a socialist enterprise– has documented, Black people represent 12.7 percent of the U.S. population, but only 4.3 percent of the 22.2 million business owners in the country. A significant reason for that disparity is the difficulty minority business-people encounter when they are trying to raise capital; Black entrepreneurs are almost three times more likely to have business profits negatively affected by access to capital.

Furthermore, barely six percent of small businesses in majority-Black communities and 11 percent of small businesses in majority-Hispanic communities have more than 14 days worth of cash on hand, compared to 65 percent of businesses in majority-white communities. Similar disparities are found in comparison of first-year business revenues: Black-owned small businesses earned 59 percent less and Latino-owned small businesses earned 21 percent less in first-year revenues than white-owned counterparts.

The J.P. Morgan report noted the effect of these disparities on the overall economy:

Closing this racial wealth gap could grow the U.S. gross domestic product (GDP) by an estimated four to six percent by 2028, adding an additional $1 to $1.5 trillion to the economy, according to McKinsey. An economy that works for more people could break down barriers to opportunity and improve how people live, from life earnings to life expectancy.

As I read the research documenting the various ways in which ostensibly neutral financial decisions reflect bias–the extent to which decisions by investors and banks are influenced by attitudes about race and gender– I keep coming back to the episode recounted by Heather McGhee, about the town that filled in its swimming pool rather than share it with Black people.

Hard as it is for me to get my head around, it’s obvious that there are a lot of Americans who choose to go without–who choose to be poor, or poorer than necessary–if the alternative is that some of their Black or Brown neighbors succeed. 

If the “benefit” in that cost/benefit analysis is an outcome ensuring that Whites and people of color are equally denied an otherwise available asset, then the costs of bigotry are massively disproportionate to the benefits.

 

 

 

 

 

15 thoughts on “Bigotry: A Cost/Benefit Analysis

  1. Professor-an efficient way to rapidly get a Return on Investment would be to deliberately begin filling key slots on the Executive floors of businesses with Minorities and to begin recruiting people of color and women to corporate Boards of Directors.

  2. Looking historically at Black neighborhoods & towns destroyed by interstates, Euro-mob violence, or State sanctioned takeovers, that number is likely to be even greater.

  3. I find it ironic that McKinsey and JP Morgan Chase are talking about how much higher GDP would be if we didn’t discriminate against minorities. Is this part of their annual contribution to minority-owned businesses — writing a report about it?

    Maybe Jamie Dimon could teach a class to minorities on using the Federal Reserve to bail out all his derivative transactions that went belly up and all the fraudulent schemes he’s masterminded over the years and never gone to jail for, while black males do 10 years for practicing capitalism in the streets selling cannabis to their neighbor.

    It’s a crazy world.

    Let’s look at the “democracy project” we just completed in Afghanistan after spending $2.3 trillion over 20 years. After Biden evacuated the military from Kabul, the handpicked, groomed president absconded with $169 million in cash. Meanwhile, the country is in dire need of international humanitarian needs. #SMDH

    How did our brand of capitalism actually work out for the people in the country?

    Let’s send Jamie Dimon and all the consultants at McKinsey to Kabul so they can tell us how capitalism worked in building a democracy in Afghanistan. And let them show that if we stayed longer, it would have worked out differently. We need that segment for all the media who are screaming at Biden for leaving early. LOL

    #Dystopia

  4. It’s politically inconvenient to treat everyone not just as equal before the law, but as equal before the banks. While it might just make us all richer, it leaves us with no one to hate. What will become of the Republican Party if all the red meat is gone?

  5. Imagining is a wonderful exercise to take us away from the reality that ain’t going anywhere no time soon. So let’s imagine how much value there would be if the rich didn’t beget themselves in a thousand ways to hold the rest down – education, jobs, property, etc. They love it when we only see things in racial/ethnic terms which gives them cover…

  6. This is no surprise to me. I wonder what was the financial damage from the Tulsa race riot when whites destroyed Black Wall Street.

  7. Last week I watched a presentation on C-Span about women in NASA in the 1950’s and later. It was apparently not uncommon for a woman to be fired if she was pregnant. Women were also limited by higher education institutions which favored male applicants. The movie Hidden Figures not only showed the gender but also the racial bias that confronted women.

    Today we have perfectly legal gender discrimination practiced by religious institutions. A woman cannot be a pope in the Catholic Church no matter how brilliant she maybe. There are the Christian bible thumping churches that are also Macho-Male Authoritarian. Here in the US at least a person cannot be forced to join some religious institution. However, the religious zealots have and are still attempting to impose their religious ideology on others through elected officials.

    The Taliban are openly championing their cause of second class status for women – Opposition can mean the death penalty or some other medieval punishment.

  8. Montonous if you wish to see a church that has elevated women as priests and leaders, listen to the services of All Saints in Pasadena,Ca. Theirs is a very progressive Christianity focused on social justice issues.

    This economic research simply supports what many social justice activists and prophets have said. When we deny justice to one, everyone is affected. I wonder how much the global GDP would improve if the people of S America and Africa had equal financial support to create businesses. What would happen to the economies in the Middle East if women had equal rights and equal opportunities in business? There are companies that provide microloans in Africa and S. America. I saw one article that said women tend to do better than men in running their businesses and are more likely to pay back the microloan.

    We still have along way to go with ridding ourselves of bigotry. It’s very costly to all of us.

  9. “Diversity”, like “sustainability”, has been redefined from critically important aspects of society to meaningless memes. Why? Disinforming the public is a very lucrative venture for owners and trainers of politicians.

  10. When I was in the law school in the early 50s we had two women in our class. Two! Now I understand that women are in the majority in law schools across the country. The times they are achangin’, and for the better in that isolated example.

    Unfortunately, that example (and several others) are not being replicated as the old if unstated view of many males is that women are only valuable as cooks and having babies. Such unstated view also has application to blacks, Orientals and other disfavored segments of our society ranging from hillbillies to same sex marriages. Pretense abounds, of course, and many give superficial approval to the changes we are undergoing while silently retaining their dated prejudices (though with Trump’s approval many are coming clean with their bigotry).

    To the topic – I as an amateur economist have often thought that when you constrict the entreprenewal spirit and its resources based on artificial criteria such as gender and race that you are constricting economic growth in an economy in which all of us are stakeholders and thus all losers. The study cited by Sheila today removes my suspicion into the world of fact.
    Thanks, Blogger extraordinaire!

  11. This is reminiscent of the way so many of the Muslim countries lose the economic, and other, participation of 1/2 of their population.
    Peggy, you nailed it, once again. It appears that the entire Trump energized, blatant bigotry on the right is about needing to have someone to look down upon.
    It may be that the J.P. Morgan report will turn out to be the first next step in bringing “wakens” to this issue…we will see.

  12. This is also relevant in the suburban “CRT panic” controversies. Up in Carmel, the reactionary forces say “We are not racist, but we don’t want teachers wasting time on social-emotional learning etc, because we are all about academic excellence. Our excellent-rated public schools support our property values, and letting any values other than academic excellence into our schools will hurt us economically”.

    What these people are unaware of (or unwilling to acknowledge) is how much of the excellent test scores in Carmel are provided by the Asian, Indian, and other well-educated non-white families in the district. If you want to maintain the reputation (as determined by standardized test scores and college admissions) of the school district, you must make families like this feel welcome, or they will go elsewhere. Back in the 70s, property values in Hamilton County may have been enhanced by their nearly-all-white population mix. But that’s not the case any more. Families who value education now prefer a community with more diversity. Providing a school system that actively encourages diversity and inclusion is precisely what is needed to keep places like Carmel on the “desirable” list, even if your only goal is economic prosperity.

  13. Here in Indiana, we can’t accuse the Republican Senate of tribal animus on any level with the bill they passed this spring ending the 13th Check for all public employee retirees and replacing it with a 1% COLA beginning January 2022. Of course they ended the 13th Check beginning this year which means thousands of public employee retirees lost a portion of our retirement income. Included in retirees are all races, religions, ethnic backgrounds, women, LGBTQs, disabled, Democrats, Independent voters, those who didn’t bother to vote and Republicans. Among those who served this state for many years and paid into the retirement account are public employees, teachers, judges, police officers, firefighters, Excise, Gaming and Conservation officers, prosecutors and legislators.

    This action by the Indiana Republican Senate will also cut into the economy in local, city and state areas this year with the total loss and in years to come with that 1% COLA which the 13th Check replaced since 2010. Where is the benefit in this?

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