America, Race and the Economics of the Precipice

Politics is about, among other things, competing storytelling. Nowhere is this more evident than in the realm of economics. The American two-Party dynamic is of the Party in power talking up economic circumstance while the Party out of power trashes it. This practice preys on the heroically short memories of Americans through posing functionally equivalent policies as oppositional. Republicans favored Federal spending when it supported the War in Iraq and government transfers to corporations that they tended to control like Halliburton and Exxon Mobil. Democrats favor Federal spending when it supports military incursions like the ‘liberations’ of Libya, Yemen, Somalia and Syria and government transfers to corporations like the Wall Street banks and health insurers.

The result is the limitation of political possibility through the use of ‘information’ as the language of political control. This modern incarnation differs from classical ‘rhetoric’ through control of the terms of debate. ‘Asymmetrical’ information produced and promoted by political interests, broadly considered, now serves as the basis of social negotiation. Through the prism of the modern corporate-state singular policies are posed as oppositional. The effect is the persistence of unified power no matter which Party serves as its public face. The political preference, as evidenced by political persistence, is for differentiated tones around manufactured facts rather than for intended differences in political and economic outcomes.


Graph (1) above: as measured by what most people are experiencing rather than broader economic aggregates, jobs and incomes started falling in 2000 and, after a brief rise in the mid-2000s, are again flat of falling. The percentage of the working age population (25 – 54 years old) that is employed has fallen by about 4%, or four million workers, since 2000. Real (inflation-adjusted) household income has followed the employed workforce lower. ‘Demographic’ explanations such as an aging workforce are irrelevant to younger workers. And declining household income confirms that people are being made poorer by the decline in employed workers. Data and original image source: St. Louis Federal Reserve.

The unified American strategy since the 1970s has been of crude and conspicuous efforts to promote political, economic and military hegemony at the barrel of a gun by Republicans followed by the ‘soft’ hegemony of Democrats who are ‘forced by circumstance’ to build / rebuild the political and economic architecture of capitalist democracy as cover for the American imperial project. The problem at present for the singular ‘opposition’ Parties is that the economic circumstances of most people are in conspicuous decline with no clear resolution in sight. In an ambiguously class-conscious sense these circumstances are beginning to counter-balance corporate-state propaganda through a generalized angst with growing political content.


Chart (1) above: illustrated is the percentage of ‘underwater’ homes divided into three price categories to illustrate that housing has ‘recovered’ only for the most expensive houses. The chart is based on data from 2015— it reflects current conditions. In one sense the three house price categories can be seen as representative of economic classes— poor, middle class and rich. In another sense house prices follow the distribution of income with most houses being in the lower and middle categories and only a relatively few being in the most expensive category. In addition to destroying the wealth of the poor the practical problem with underwater houses is that they can’t be sold without severe consequences for poor and middle class families. Because poor neighborhoods were specifically targeted by mortgage bankers a ‘class’ unity of circumstances was created. To be clear, the term ‘poor’ used here is relative. Data and original image source:

The American intersection of race and class has American Blacks acting in the #Blacklivesmatter movement through a perspective on race that reflects the particulars of American history. ‘Class’ explanations of race from Progressives like Presidential candidate Bernie Sanders are inadequate because they attempt to universalize this history into terms that don’t take its particularity into account. Part of the problem is that Progressives don’t know their own history as the movement of ‘scientific’ racism. Additionally, the frame of reference is ‘external’ to specific issues of race and racism. This tendency to ‘universalize’ class de-historicizes it against unities that declining economic circumstances are bringing to the fore.

Wall Street specifically targeted neighborhoods of color with predatory loans in the housing boom. This brought predatory lending to historically ‘unbanked’ communities with the effect of inflating house prices just as people gained the credit needed to buy them. The broader context was of racially-driven Federal government policies leftover from FDR’s New Deal housing programs that ‘saved’ White neighborhoods while leaving Black neighborhoods to their own devices. Because neighborhoods of color had been the targets of predatory lenders in the 1990s and 2000s these are the neighborhoods that have been most affected— ‘racist’ outcomes are not necessarily due to racist Federal government (Obama administration) intent.


Picture (1) above: largely due to a century of propaganda to this effect, housing has a special place in the American psyche. Government programs specifically created to promote home ownership have added economic incentives like interest tax deductions that subsidize house prices, and with them bank profits, under the guise of ‘helping’ homeowners. Subprime lending in historically unbanked communities was largely illegal until bank de-regulation led to a frenzy of reduced consumer protections. The level of mathematical skill needed to understand the terms of many predatory loans was beyond the ability of most college graduates. Housing devastation caused by bankers-gone-wild can be seen house-by-house on in urban and lower cost rural areas. What quickly becomes evident is that the housing crisis is nowhere near solved.

The motives behind the Wall Street-engineered housing boom and bust were economic, and not necessarily directly racist. Institutional racism still goes far in explaining the economic circumstances that American Blacks face. But to capitalists in the present— mortgage bankers, Pay-Day lenders, realtors, employers and landlords, economic vulnerability is the larger determinant of economic exploitation. The residual of America’s racial history has led to ongoing economic vulnerability in the present. This isn’t to diminish institutional racism as an explanatory factor, but rather to argue that class-based economic vulnerability provides a unity of interests that goes beyond race alone. Capitalists exploit economic vulnerability wherever they find it, not just in communities of color.

As Chart (1) above illustrates, the carnage left behind from the housing bust is straightforwardly class based with lower priced houses remaining at Great Depression levels of negative equity, middle tier houses less so and top-end houses relatively unscathed. The practical implication of deeply ‘underwater’ houses for the lower middle class and poor who borrowed money to buy them is long-term debt servitude, ghettoization through clustered targeting of poor neighborhoods, the inability to move in search of work and the redistribution of the wages of labor into the pockets of the bankers who made the predatory loans. The negative equity of the large percentage of bank-owned houses in poor and rural areas has already been ‘written down’ meaning that what remains is even more economically devastating than what is illustrated.


Chart (2) above: a problem with Progressive ‘class’ explanations of racial economic disparities is that class alone is a poor explanation. A college education, sold as the key to economic ‘success,’ provides a much smaller ‘return’ to Blacks and Latinos in terms of future wealth than it does to Whites. As of 2011 the White return in terms of future wealth was $60,000 versus less than $5,000 for Blacks and Latinos. If College were the economic equalizer it is often proclaimed to be these disparities wouldn’t exist. There are ‘external’ factors like inheritance that perpetuate wealth disparities that do find more robust explanation in class. But in the U.S. race continues to determine economic outcomes in a way that class alone doesn’t explain. Original image source:

Ongoing wealth and income disparities still don’t reduce to issues of economic class— race remains a determining factor. What this suggests, and what the #Blacklivesmatter movement appears to be effectively putting forward, is that political solutions that avoid the hard issues of resolving American racial history aren’t real solutions. Defining racial economic disparities away as a special category of economic class both gives credence to the existing political / economic order as a problem to be ‘internally’ resolved through redistribution rather than through a more fundamental realignment of economic relations and it leaves the hard issues of race unresolved. But the converse is true as well— capitalism feeds on power differences; until capitalism is ‘resolved’ the tendency will be to maintain racial disparities for the benefit of predatory capitalists.

As Bruce Dixon of Black Agenda Report has effectively argued, the effort to bring real and potential Black radicals into the political mainstream has a long history of cooptation without constructive results. Bernie Sanders was more likely than not sincere, if superficial, in his initial reduction of race to class. But any real resolution is going to require White Liberals and Progressives to confront race as more than simply an economic issue. I leave the potential political limitations of the #Blacklivesmatter movement to Glen Ford and Bruce Dixon. The #Blacklivesmatter movement is an essential leader / part of any unified front to create real political and economic democracy in the U.S. And in fact, Black intellectuals are the central driving force behind innovative left political theory in the U.S. at present.

American ‘oppositional’ politics, as defined by the gradated rhetoric used to sell functionally equivalent policies, depends on conflation of economic with political outcomes to claim political difference within the unified context of capitalist democracy. Ronald Reagan began his 1980 Presidential run in Philadelphia, Mississippi to signal ‘states rights’ as a strategy of racial division with history in White repression of Blacks. In the 1990s and 2000s Wall Street used the residual of this history in a strategy of economic exploitation to recolonize and re-ghettoize neighborhoods of color for economic gain. One strategy was politically divisive and the other reconstituted the material conditions of political division through exploitation premised on economic vulnerability.

A similar scenario has played out globally with the German military occupation of Greece in WWII followed by economic recolonization through European-based (including Greek) Wall Street banks using debt as a weapon. Despite the temporary nonsense about debt ‘sustainability’ across the European periphery, the base question from Detroit, Chicago and Philadelphia to Athens, Madrid and Lisbon is why people passively accept neo-colonial strategies put forward through either political or economic means? With Wall Street and large Western corporations following the ‘footprint’ of Western imperialism around the globe, the particulars of American racial history are tied to the four hundred years of imperial history that took place both inside and outside of the U.S. The unifying characteristic is exploitation based on economic vulnerability.

A significant part of the political success of capitalism comes through selling economic exploitation as free-choice. For instance, the people in neighborhoods of color in Chicago and St. Louis ‘chose’ to take predatory, exploitative loans, never mind that well-to-do bankers who knew how to calculate loan repayment schedules knew that many of the loans couldn’t be repaid. This ‘information asymmetry’ between bankers whose explanation for their fat paychecks is expertise in making loans and people whose expertise lies in other areas places the onus on bankers to either make good loans or to take the losses when they aren’t repaid. From Detroit and Chicago to Athens and Madrid it is bankers who have used their political power to force repayment of loans that never should have been made.

So far this analysis has been backward looking. What has occurred is use by a global plutocracy of historical social relations to promote political and economic hegemony through an agglomeration of state and corporate power. Unless the view is that history has ended past is prologue, historical continuity has been the basis of these relations and unless rupture is achieved it will continue to be the basis going forward. The economic tsunami of 2008 – 2010 offered the possibility of rupture that was turned instead to restoration. It hardly seems an accident that the political slogan of ‘hope and change’ served as effective cover for this restoration. But with each passing crisis the façade of inevitability is reduced by some portion of the economic decline that ensues.

While precise prediction is difficult and disaster pornography is as tedious as any other, the circumstances that led to previous crises have been reproduced globally by degree. The unifying tendencies of economic exploitation and vulnerability only work as long as they are allowed to work. At this point in history the failure to form a united opposition carries with it exponentially increasing social risks. The powers that be demonstrated that they understood the risk of political rupture in 2008 – 2010 and they took the necessary actions to preclude it. But what wasn’t / isn’t understood is the potential for rupture embedded in their economic practice. When politicians and bankers explained the sequential crises of 1988 – 1993, 2000 – 2003 and 2007 – today as natural disasters they likely believed what they were saying.

The #Blacklivesmatter movement is evidence that the existing order isn’t working for a significant number of American Blacks. The rise of left-lite Parties across the European periphery is evidence that the European incarnation of finance capitalism isn’t working for large numbers of citizens there. The political miracle of the age is that so much declining circumstance has been met with such limited social resistance. Part of the explanation, as the restorationists have demonstrated, is that social mythology remains with the existing order. However, as recovered economic fragility is most likely making inevitable, a lot more people will soon have a lot less to lose from rebellion. The choice then is what will follow?

Finally, as regards comments on this recent piece: what determines the relation of tax receipts to government expenditures is the capacity to issue fiat currency, and not the level of government (see European Monetary Union for examples of national governments that by choice can’t issue fiat currency). The problem with being more specific is that doing so is often to be less specific. Had I specified ‘Federal’ government it would have required further explanation. Given that the context of the piece was Federal expenditures by Presidents Clinton, Bush and Obama, it is time to revisit the word pedantic for a refresher.

Rob Urie is an artist and political economist. His book Zen Economics is published by CounterPunch Books.