By shedding historical light on the development and practices of black banking, Mehrsa Baradaran’s excellent and thought-provoking The Color of Money demystifies some fundamental free market myths and strongly cautions against the widespread faith, among policymakers and activists alike, in banking as a means of overcoming long-entrenched and worsening racial disparities in wealth. In this response, I suggest that the history of black banking, even for its many failures, holds a unique perspective on property and its contradictions of value. It also contains a deep lesson about how economic strategies generate and are reinforced by affective practices—and how racist economic laws rested on public feelings of their own. The personal and the structural are closely interlinked.
From the debacle of the Freedmen’s Bank, to the rise of black-owned banks under Jim Crow, to the promotion of “empowerment zones” in more recent times, economically isolated black communities have consistently been urged to engage in “capitalism without capital.” Because black banks were cordoned off from their mainstream peer institutions, Baradaran shows, they could not effectively tap into the money multiplier effect, the means by which a bank stood on the good credit, financial security, and proprietor status of its patrons and generated value by lending its deposits through the system more broadly. Because black people did not own large stores of property, any wealth accumulated by black banks swiftly left black control as it sought greater prospects elsewhere: “once in the banking system,” Baradaran writes, “money flows towards more money.”
It is difficult to overstate the policy implications of Baradaran’s work. The story she tells of the institutional segregation and siphoning off of black wealth disarms the widely held premise that black poverty derives from some sort of cultural deficiency or a lack of personal financial literacy. By exposing the lure of “for-us, by-us” banking and “community empowerment” as “a decoy,” “an empty promise,” and a faulty basis for banking legislation and activism, she paves the way for a bolder vision and more creative experimentation in attempting to remedy a seemingly intractable racial inequality. Indeed, proposals such Darrick Hamilton’s and William A. Darity Jr.’s endorsement of “baby bonds” and Baradaran’s own call for the return of postal banking flow from such an understanding of the structural impact of racism on US political economy.
To begin this response, I would like to shift from a consideration of the banking system to a closer look at the history one of the key forms of property that it rests on, the slave regime of property in persons and a slave-based racial capitalism spanning the breech of 1865. When enslaved, Black people had represented upwards of $2 billion of the South’s wealth. After emancipation and the dissolution of slave property as a reliable and generative form of capital, the presence of free and freed African-American signaled a peculiar crisis of value: Now that blacks could not be listed on a plantation ledger or a bill of conveyance next to an agreed upon sum of money, how would they be counted? When freed from their status as property, on what terms would black people count?
In Black Reconstruction, W.E.B. DuBois argues that the period of emancipation and the dissolution of property rights in slaves presented a unique opportunity for property redistribution, a politics that newly freed people and their allies forcefully pursued. He also details the swift counterrevolution property interests embarked on in an effort to recoup the value lost with the end of slavery, and even to extend it. On the grounds of the postbellum plantation, black indebtedness constituted a new form of bondage and underwrote the expansion of the nation’s financial system. Over the second half of the nineteenth century, the “condemnation” of blackness as criminality in the minds of Southern “redeemers” and progressive reformers alike, the establishment of black mortality as the measure of non-value in the life insurance industry, and the enshrinement of whiteness as a particularly valuable form of status property ushered in both an unprecedented corporate ascendency and the “nadir” of African-American history. Disenfranchised, segregated, and terrorized, black Americans failed to approximate the possessive individualism then in U.S. markets, political culture, and social life. In the public imagination, they constituted a “problem people” rather than a “people with problems.”
That black people, under these conditions, managed to establish a number of above board and under-the-radar institutions and practices—including banks, mutual aid associations, insurance companies, church “building funds,” and numbers rackets, among others—is remarkable. Baradaran is right to point out the extent to which the practices of black economic institutions have often re-inscribed the oppressive racial logics of the US economy more broadly and to caution us against celebrating these efforts as an unqualified heroism. However, I do think it is worth elaborating as far as possible the moral contradictions, countercultural logics, and fugitive possibilities these efforts have presented.
What feats of imagination, re-description, and transformative action helped to generate among African-Americans a semblance of security, solvency, and the hope of posterity, particularly in the darkest days of Jim Crow? Having experienced the market as property, how did African Americans seek to navigate it as workers, consumers, producers, and proprietors? How did their economic and affective practices helped to challenge and reshape the meaning of work, consumption, production, proprietorship, and attendant values such as freedom, justice, and equality? I would contend that the strategies African Americans pursued against the grain of “second class citizenship” and the futures they imagined for the race reveal the messy underbelly of liberal values and commitments. Understanding these efforts on their own terms is, therefore, a source of instructive critique.
A closer look at these deep historical contexts can also help us articulate how social affect and public feelings have worked their way into law and economic policy. While it is true that racist economic and legal structures rather than the racists feelings of individuals do the most lasting harm to black communities, it is also true that the personal and the structural bear undeniable relationship to one another. For instance, the segregation laws that kept black banks consigned to black communities found fullest expression in the U.S. Supreme Court’s majority opinion in Plessy v. Ferguson (1896) to prioritize white “comfort” and the “established usages, customs, and traditions” of (white) people over the civil rights of African Americans.
Taking one of the more colorful examples in The Color of Money, we learn of the Nixon administration’s “cynical” embrace of “black capitalism,” a set of policies that should be closely correlated to the “Southern strategy” as articulated by Lee Atwater, which masked and harnessed the racist vitriol of segregationists and made it available to conservative and libertarian political economy. By finding subtle economic dog-whistles, Nixon’s political strategists effectively transposed garden-variety racial antipathy into a comparatively rational justification for “white flight” from desegregating neighborhoods (in order to maintain property values) and for chipping away at the effectiveness of the welfare state. As this history shows, such public affects as white fragility and rage, willed ignorance masquerading as racial innocence, and personal vigilance over keeping blacks “in their place” both reinforce and are reinforced by law and policy.
In wedding a technical understanding of the law and economics of banking to the methods of social and cultural history, interdisciplinary and widely accessible works of scholarship such as The Color of Money model the kind of analysis it will take to make effective and convincing demands for social change.
[This post is part of a symposium on Mehrsa Baradaran’s The Color of Money. Read the complete symposium here.]