Economic History of Black Americans

(Note to the reader: If some portion of this is offensive and wrong, please gently correct me. I’m trying.)

Setting the Stage

About 500 years ago, Europeans started conquering the American continent. It was a messy, disorganized, frequently evil process. Some individual Europeans ventured to the Americas for freedom or adventure, but European elites participated with a clear goal of making money. Their business model was mostly growing crops to sell in Europe. The most successful of these businesses were in the warmer, more fertile parts of the Americas including the present-day southern US.

The extraction businesses that Europeans started – mining and farming – required lots of labor. They wanted to pay as little as possible for labor to maximize their profits. With no government stopping them and an apparent under-appreciation of the coming wrath of God, that meant enslaving people. In some cases, Native Americans were enslaved; but there were limited numbers of Native Americans available, and they died quickly under the barbaric conditions of slavery. Other Europeans were enslaved permanently or temporarily as “indentured servants,” but they were difficult to control and imprison. The most successful and plentiful supply of enslaved people proved to be Africa.

At the time, Europeans would usually die from local diseases if they tried to settle in Africa. However, African cultures practiced slavery and Europeans were eager to buy Africans who had been enslaved. Thus, European traders bought people at African ports, trafficked those people on prison ships to the Americas, and sold them to European farmers in the Americas.

(During their centuries of dominance, Europeans were slave traders in America, arms dealers in Africa, and drug lords in Asia. Those people had to answer to God. Remember, “the fear of the LORD is the beginning of wisdom,” and woe to us if we repeat their sins!)

This system of African slave labor lasted in the present-day United States for about 250 years. That’s roughly the same length of time the U.S. has been a country. During that time, African slaves in the US were treated badly and intentionally debased. Slaves were not allowed education, their African culture was intentionally diminished, and their family structure was disrupted. Owners would often rape enslaved women, and it was not uncommon for family members to be sold and never seen again.

Post-Slavery Discrimination

In 1865, American slaves were set free…and left completely impoverished with no land, education or money to build a life on.

At the time, about 13% of Americans were considered to be black and nearly everybody else was thought of as white. There was lots of diversity among whites and some white groups were discriminated against. However, light-skinned people from discriminated groups could do things to blend in or “pass”. For example, my great grandmother changed my family’s surname from Clark (common among disliked Irish immigrants) to Clarke (common in England). For Americans with dark skin, passing as white was impossible.

Two motives for discrimination against people are discussed in economics: Taste-based discrimination (or “prejudice”) happens when a person simply does not like you for you. It’s not very logical. Statistical discrimination (or “stereotyping”) happens when a person is trying to avoid some negative characteristic of people that they cannot observe directly, so they pick on the people most likely to have that characteristic. It is often noted that Arabic people were aggressively screened in airports after the September 11, 2001 terrorist attacks. Is that an example of taste-based discrimination or statistical discrimination?

It is important to distinguish between these types of discrimination because of how they change over time, based on how the discriminators (“the haters”) are affected. In theory, prejudice should die out over time, like a bad evolutionary characteristic that goes away due to “survival of the fittest.” Those haters are hurting themselves. Stereotyping, on the other hand, persists because the haters actually benefit – even though it’s selfish.

Black Americans have been hurt by both prejudice and stereotyping. In a given situation, these two forms of racism are usually impossible to distinguish.

Selective Migration and Self-Segregation

Why are Mexican immigrants to the US typically poor while Indian immigrants (a poorer country) are typically rich? The circumstances in which people migrate determine which portion of the population migrates and where they go. Each story is different.

In 1865, ninety five percent of Black Americans lived in the southeastern US states where slavery had been permitted. Once free, some of those people started to migrate. During the Great Northern Migration, from 1916 to 1970, six million black Americans moved from the rural South to cities in the North.

Today, America’s cities are racially diverse, although frequently still segregated within neighborhoods. Rural areas are more segregated, with rural areas outside the South being overwhelmingly white. Explanations for this pattern can be roughly divided into demand-side and supply-side.

On the demand side, Black people like to be around others they can relate to just like anybody else. People had varying degrees of preference for racial and cultural self-segregation. But the preference for segregation competes with other priorities, like needing a job. The cities where black migrants moved can be imagined as points in space that offered specialized jobs. Anybody who wanted a lucrative factory job – black or white – needed to live in the cramped housing around that point, leading to racial diversity. Speaking in generalities, rural areas offered homogeneous jobs over a wide area. It was easier for racial groups to self-segregate in rural areas.

On the supply side, most White people in the North were not welcoming of Black migrants. Where they could collude to prevent Black migrants from settling, they often did so using violence, private contracts between homeowners, and outright legal bans. Generally, it’s easiest for groups to collude in small groups with tight relationships. White residents of small towns in the Midwest and rich neighborhoods in cities were usually able to effectively collude to exclude Black migrants; poorer parts of cities did not manage to collude, and that’s where Black migrants settled.

Evolving Stereotypes: Racism Today and Tomorrow

As described above, taste-based prejudice should resolve itself over time as racist “dinosaurs” die out, but racism based in negative stereotyping might be a harder problem. Racist stereotypes protect the “haters” from direct harm but damage the stereotyped group – creating a self-perpetuating cycle. This section explores some ways that cycle might be breaking.

First, progress might not be linear, like acceleration of a (non-electric) car. Imagine for a moment that all black Americans were true to a bad stereotype, except for one brilliant, dynamic, upstanding black person. That first “high” type person would have to fight extremely hard against the “low” stereotype to be accepted. It’s quite possible that the haters would stop him from reaching his potential. However, once he had succeeded, a second black genius would suffer under marginally less racism before succeeding, and so on. As the share of economically successful black Americans increases, the barriers to success become less. The first disappointingly small gains we have seen in the acceptance of black people in America might have been the hardest bit.

(The idea that President Obama’s success has made it easier to succeed in the United States as a black person is an example of this concept.)

Second, increasing diversity among African-descended people in America can break down stereotypes - similar to how travel broadens people’s understanding by increased exposure. James Baldwin predicted that the independence of African countries, which was recent when he spoke in the 1960’s, would shake white Americans’ conception of black people. As with Asian immigrants, many African immigrants to the US are highly educated and economically successful. African refugees, although having fewer formal qualifications, enjoy the same positive social characteristics of many new immigrant groups: entrepreneurialism, strong families, healthier diets, etc.

Third, sadly, many rural areas of America are deteriorating badly. (See Coming Apart by Charles Murray. This is the “American carnage” that has fueled much of President Trump’s political movement.) Those rural areas are overwhelmingly populated by white people, whereas a higher share of black people live in cities that are getting better over time. As crime, drug use, and poverty shift from cities to the country, one might expect the stereotypes of rural white people to suffer relative to stereotypes of urban black people.

Finally, for Americans of any race, economic success is increasingly found in urban areas, which are more racially diverse. Part of fitting in to a diverse city setting is “virtue signaling” an embrace of multiculturalism. That is, perhaps the image of a successful person is shifting away from someone who supports racist institutions toward someone who is anti-racist.

Written on July 11, 2020