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The Visible Hand: How Federal Policy Created Segregation--and How to Fix It

Yesterday, I was driving through the State of Connecticut. Heading northeast, I took the Merritt Parkway, a scenic route through the State's tony enclaves, including Greenwich, Westport, and Weston, that skirts the gritty cities of Bridgeport and New Haven. On my way home, I took Route 84 westbound, past the pleasant suburbs of West Hartford and Stonington as well as the tougher urban centers of Hartford and Waterbury. It is no accident that these towns and cities exist as they are. There is a long-standing intent and design to this bifurcated system or relatively well-off, white suburbs and underdeveloped black and brown cities.

Lest my Connecticut readers think I'm being too harsh, I am well aware that a similar pattern exists in my own state, and in the country as a whole. New York has nice, safe suburbs with nationally recognized schools, along with inner cities of New York, Buffalo, Albany, Rochester, Syracuse, and Yonkers, and smaller lower income cities such as Hempstead, Newburgh, and Ossining. Within city boundaries, there are well developed and well-resourced neighborhoods, but these are clearly separated from other areas where most white citizens don't generally go.

To understand how such segregation came about, I suggest reading a recent New York Times editorial, America's Federally Financed Ghettos. Take 15 minutes to go through this piece and understand the basis of segregated housing in the United States. But if you don't have time, here are some key points:

  • Federal policies dating from World War I intentionally introduced Jim Crow segregationist policies to housing in the North, where they had not existed before. The government built housing for defense workers that explicitly excluded African American families.

  • Under FDR's New Deal, federal money was used to build separate housing for white and black citizens. Moreover, "racially integrated communities were razed to make way for Jim Crow housing.”

  • The Federal Housing Administration, created in the 1930s to promote home ownership by insuring mortgages, denied mortgages to African American lenders. During this period, federal policy allowed local governments to create restrictive covenants designed to keep African Americans out of their communities.

  • The Fair Housing Act of 1968 was supposed to prevent further segregation. However, since its creation, the federal Department of Housing and Urban Development (HUD) has allowed "cities to confine families to federally financed ghettos that offer little or no access to jobs, transportation or viable schools.” In addition, the bill stripped any enforcement mechanisms from HUD which could have allowed the government to enforce anti-discriminatory policies.

So when you look at the state of housing and community development in America, keep in mind that government at all levels intentionally forced African Americans and, later, Latino immigrants, into segregated communities. Money needed to build up these communities was severely limited. The possibility of home ownership, and the enhancement of family wealth that comes with it, was largely absent from these neighborhoods. You can see the effect of this if you go through any of the urban areas I referenced above. In the 1960s, President Johnson spoke about a War on Poverty. However, the reality is that federal, state, and local policies deliberately created these conditions, in what I have consistently referred to as America's War on the Poor.

When new policies are proposed to try and rectify this situation and increase investment in inner cities, opponents raise arguments against doing so. One line of attack goes like this: "We've poured countless federal dollars into anti-poverty programs, and they've had no effect." Well, the above facts demonstrate the exact opposite. We haven't invested in these urban areas; we have in fact directed investment away from them and into places that needed it far less.

Another argument alleges that this is not government's role to play, especially at the federal level. We should just leave it to the invisible hand of the market, which has allowed people to accumulate wealth on an even playing field. Again, the facts run completely counter to this mindset. White families have been able to build property wealth through direct government intervention and policy. Government plays a role; there is no invisible hand.

Finally, I've had debates with people who declare that people of color cannot be trusted with development money and have a lower work ethic; those who make this contention generally add that they are not racist, ignoring that the entire basis of wealth distribution has been racially biased and has favored the dominant white community. Just the opposite argument can easily be made--that people in the most deprived areas have to work extra hard just to get by.

I'm not likely to change a racist mind in this post, but facts are facts, and the reality is that our country has barely even tried to improve the lot of inner city communities; at worst, we have deliberately worsened conditions. The standard of living for these communities, indeed for the country as a whole, can only benefit from sound, fair investments in these areas. Doing so can also have longer-run effects of improving education, family structures, and the local tax base.

Here are some general policy ideas:

  • How about allowing people to purchase properties in deprived neighborhoods at drastically reduced rates (pennies on the dollar) and give them 0% lines of credit to make physical improvements?

  • How about this idea which was raised by conservatives back in the 1980s: create empowerment zones, offering businesses substantial tax incentives to open in the poorest neighborhoods?

  • Goldman Sachs and other large investment firms supposedly have the greatest financial minds in the world. We've helped these businesses prosper through federal support and generous tax policies. How about requiring them to give back by forming in-house think tanks to create policies that would bring about urban economic development?

I'm sure that folks with more expertise in urban economic policy have even better ideas than these. The point is that we can't ignore our nation's culpability in creating negative conditions in urban areas, and we shouldn't ignore our responsibility to address the situation. Under this administration and Congress, it's hard to imagine such a thing happening. But if people looked at actual fact and reality, they would have to conclude that it is time to implement sound urban policy and reverse America's War on the Poor.

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