The Ghetto Is Public Policy

A generation of young black people saw their families' middle-class values earn their parents pariah-class treatment.

Reader Devin Bunten sent me a note expanding on the problems of contract-buying, redlining, and the kind of segregated housing market that characterized America through much of the 20th century:

I wanted to send you a quick note about the thread today, with some added economics. I could/should just post it as a comment, but it's quite late for that thread I'm afraid. You mentioned in the thread that "the vast majority of these guys found themselves buying houses way beyond the appraised value." A house appraisal is only meaningful in the context of the neighborhood, and the switch from an all-white neighborhood to an all-black neighborhood would have changed the appraisal substantially -- which is of course a large part of the point. 

However, that's separate than how economists think about price and value, and I think adding the econ perspective actually makes the situation worse. I'd think about it like this: in Chicago at the time, there were two fundamental housing markets: one for whites, and one for blacks. 

Removing the black population from competition within the white market was a(nother) large transfer of wealth to whites: whites faced less competition for the large supply of houses, which actually kept white house prices lower than they would otherwise be. 

This enabled a large number of whites to move up the ladder into the middle class. On the other hand, the legal framework, enforced by terror, that prevented blacks from moving into these neighborhoods meant two things: a small supply of houses in the "black housing market", and a large and increasing demand. 

This would have kept prices quite high -- much higher than any appraised value. Any black family would be bidding not against the white speculator, but against the large number of other black families looking to get a house. Because the speculators were few and the black families were many, prices were kept quite high in these black neighborhoods. The rules you wrote about obviously kept these high prices from being realized by black sellers, as blacks so rarely came to own the homes they were paying for.

Devin's last point is basically how the the history actually played out. In the overcrowded ghettoes of Chicago, there was a pent-up demand for housing. The money was there. And the money was pilfered.

I understand why academics have spent so much time studying the black poor. But in many ways, if you want to test how true this country has been to its founding creed, the black middle class is a fertile field of study. When you look at the early black home,buyers in mid-20th century Chicago, you are looking at people who did not exhibit the kind of "pathologies" pundits routinely inveigh against. Marriage rates are high. Men are working. In some cases, women are homemakers. In other words, you have the conservative fantasy of what an American family should be.

These American families were swindled by public policy, white terrorism, and private action. This was done to advantage people who happened to look different from them. And we are only talking about housing here. We are not talking about school segregation. We are not talking about job discrimination. We are not talking about business loan discrimination. We are not talking about the shameful implementation of the G.I. Bill. Or the sharecropping system in the South. This is but one front in the long war. 

For young black people growing up in that era, what was the message? America's promise is that everyone who plays by the rules will have a chance to compete. If you are a black boy, or a black girl, and you watch your parents play by the rules while everyone else cheats, what do you conclude? How do you feel when your parents exhibit middle-class values and your country rewards them with pariah-class treatment? How do you then evaluate your own prospects? How do you see your country? Might you then look around, survey all the double standards and hypocrisy, and find yourself not so proud?