You cannot resolve poverty within the black population by attempting to put more blacks into credit markets. Poverty is a function of capital: the less capital you have, the greater the likelihood that you that you will be poor. Specifically, the more income-generating capital you own, the less likely that you will be poor. The black political elite believe that if more middle income and poor blacks can borrow money, they would be able to purchase homes, cars, appliances, and the other trappings of consumer life; thus, living the American dream while claiming a stake in assets. This approach is wrong because it fails to properly address the first act that was necessary for capital acquisition in America and also fails to reconcile the original acts of acquisition with the current barriers to capital acquisition and the alternatives available especially to non-affluent blacks.
Original capital acquisition in America was the result of theft. This may sound cynical unless you have looked at the history of capital acquisition in America from the beginning of its colonization by European countries. Take for example the language used by U.S. Supreme Court chief justice Marshall in Johnson v. McIntosh when discussing the principle of acquisition of discovery:
“While the different nations of Europe respected the right of the natives, as occupants, they asserted the ultimate dominion to be in themselves; and claimed and exercised, as a consequence of this ultimate dominion, a power to grant the soil, while yet in the possession of the natives. These grants have been understood by all, to convey a title to the grantees, subject only to the Indian right of occupancy. The history of America, from its discovery to the present day, proves, we think, the universal recognition of these principles.”
Chief Justice Marshall then goes on to describe how England went about implementing this universal law:
“So early as the year 1496, her monarch granted a commission to the Cabots, to discover countries then unknown to Christian people, and to take possession of them in the name of the king of England. In this first effort made by the English government to acquire territory on this continent, we perceive a complete recognition of the principle which has been mentioned. The right of discovery given by this commission, is confined to countries ‘then unknown to all Christian people’; and of these countries Cabot was empowered to take possession in the name of the king of England. Thus, asserting a right to take possession, notwithstanding the occupancy of the natives, who were heathens, and at the same time, admitting the prior title of any Christian people who may have made a previous discovery.”
In short, we came and discovered the place. The natural capital lying above and below the land is ours and you leave when we say so. Chief Justice Marshall said as much when he continued:
“Discovery gave an exclusive right to extinguish the Indian title of occupancy, either by purchase or by conquest … The title by conquest is acquired and maintained by force. The conqueror prescribes its limits.”
This acquisition by discovery drove, in my opinion, the philosophy of manifest destiny; that white America was destined to spread western civilization and republican democracy to unoccupied territories from whence Native Americans had either been eliminated or removed. The Homestead Act of 1862 and resulting grants of land, this time from the American government, put into the hands of people of European descent more natural resources including land and access to minerals and fuel sources for little or nothing.
Americans of European descent had a considerable head start. But other than establishing that original land acquisition in America is mostly the result of theft, what does this have to do with capital and credit markets? Because land and other natural resources are the anchors for debt markets. They serve as the collateral that backs up loans that are invested into the debt markets. In other words, they create the funding used to underwrite consumer and other debt. Make the wrong bet and you could lose the family farm. Make the right bet and you have expanded your commercial enterprise from farming into other lines of business. Occupying the credit generator/underwriter portion of the debt market is where the wealth creation takes place. Asking blacks to occupy the consumer portion of this market, especially when blacks do not have substantial land or mineral resources ownership is the same as putting blacks back on the plantation.
The black political elite cannot take the black population back in time where blacks can set up their own system of original theft in North America. The black political elite could discourage blacks from entering a credit system that charges them an interest rate on loans that exceeds those as whites, that treats a black couple looking for a mortgage as a credit risk even when that couple has more than sufficient income to qualify for a loan.
One policy recommendation is that while blacks pursue as many income opportunities as possible that they avoid credit markets. Blacks do not have the political power nor does the rest of America have the political will to offer up another “Oklahoma land rush” specifically tailored for black Americans. Blacks do have more control over their spending. Paying off debt (much easier said than done) and not purchasing any more money not only leaves more money in the pocketbooks of black people, but sends a message to the bond markets and eventually the U.S. government that if either the markets or the government want blacks to get back into the consumption game, then there will have to be major changes in capital allocation policy.