Black Americans are estimated to have more than a trillion dollars in buying power in coming years, marking the highest amount of spendable cash they have ever wielded in U.S. history.
Still, that money won’t necessarily translate into an opportunity to build wealth, experts told Finurah, adding that building wealth isn’t solely about having dollars to spend year after year. It’s going to take sweeping federal policy combined with Black Americans investing in themselves in order to truly close the Black-White wealth gap, according to experts.
“The problem is so large and has lingered for so long that it will take sustained, large and targeted policy intervention from a federal government perspective,” said Christian Weller, a political economist and senior fellow at the Center for American Progress.
A McKinsey study released in early December 2021 predicts that Black America’s buying power will grow to $1.7 trillion by 2030, up from $910 billion in 2019. Black consumers are a critical part of the U.S. economy now and will continue to be in coming years, McKinsey researchers said.
To place that figure into perspective, $1.7 trillion is about the gross domestic product of Mexico, according to McKinsey researchers. Most of the enhanced spending power will be concentrated in predominantly Black cities — including Atlanta, Detroit, Houston, Philadelphia and Washington, D.C.
Weller and other experts said many Americans incorrectly believe spending more money at Black-owned businesses will solve the wealth gap problem. It’s going to take more than just redirecting $1.7 trillion dollars to help generate more Black wealth, the experts said. Starting and supporting more Black businesses alone won’t do the trick because “if you’re a Black business owner, you’re starting from further behind than a white-owned company,” Weller said.
Even if boosting Black businesses was the main cure, doing so effectively is just too monumental of a task, Weller said.
“In order to make that happen, you would have to have coordination among a massive amount of people who all have different spending needs and you have to sustain that for years to create a dent and create wealth,” he said.
Student loan cancellation, baby bonds housing assistance and the federal government giving reparations all play a more important role in boosting Black wealth, experts said.
“We need to basically rethink how can we create wealth as a starting point,” Weller said. “How can we give young African-American families a leg up in homeownership the way white families do for their children.”
Black Americans spend more money on consumer items like cooking oil, gum, beauty aids and women’s fragrances, according to 2018 data from Nielsen.
Experts said today’s massive wealth gap between Black and white Americans has less to do with what Black people have spent their money on and more to do with the ways the federal government has allowed wealth to be siphoned from Black neighborhoods. The 1921 Tulsa Massacre of Black Wall Street, almost 40 years of redlining policies and little access to startup capital for today’s Black businesses are recent reasons why there’s a gap, experts said.
Yes, Black people outspend on certain consumer goods, but creating more wealth has nothing to do with changing those consumer habits, said reparations scholar William Darity, Jr., a research economist and inequality expert at Duke University. Darity co-authored “From Here to Equality: Reparations for Black Americans in the Twenty-First Century” with A. Kirsten Mullen.
“We could spend less and save more, but it’ll be virtually impossible to bridge the wealth gap just by saving more,” Darity told Finurah.
Darity echoed Weller’s comment about needing lawmakers in Washington, D.C., to push for reparations. It’s in the federal government’s best interest to help Black Americans because economically stronger Black communities help the U.S. economy grow faster.
“We need the same type of support and handouts that the federal government has given to white Americans — from the 19th century through land and the 20th century through finances to support home buying,” Darity said.