Next month is Black History Month. We will hear stories about black Americans and their successes in this country against the barriers (slavery, Jim Crow, poll tax just to name a few) thrown in their paths. Yet for every success story, there is still the nagging fact that the median net wealth of white households is 12.2 times greater than that of black households.
Because of well-documented gaps in unemployment rates, earnings, poverty and wealth, black working people are sometimes falsely seen as “bystanders” to America’s economy. Unbelievably, there is a tendency to observe the gaps in economic success and blame African Americans for being disengaged and not trying to respond to clear economic realities; a lack of investment in education, skills, training and personal saving. This is patently absurd.
African Americans are fully aware of the barriers they face to success, and have been steadfast to struggle to remove them. Indeed, Dr. Martin Luther King Jr. was assassinated during a campaign by black sanitation workers in Memphis, Tenn., to exercise their right to organize, strike and demand fair wages; a key theme of American worker advancement during the first 80 years of the last century and one repeated this past Dr. King Holiday by airport workers demanding a living wage.
The difference in wealth does not grow smaller when comparing white and black households headed by college graduates, or when controlling for differences in income. Because the easy answers like education and income differences don’t explain the wealth gap—which measures accumulated savings over multiple generations—the fall back is often to blame the savings’ behavior of blacks. And, here, old stereotypes of African Americans being profligate can easily substitute for documentation. But taking a closer look at history tells us the real story.
Those early years after emancipation are key in addressing the deep history of African Americans as their own agents. During the Civil War, African American leaders, most famously, Frederick Douglass, campaigned hard to have black soldiers officially sworn into the fight to end slavery. With issuing the Emancipation Proclamation, Lincoln also finally signed on that in 1863 not only would slaves in the rebellious states be free, but African American men would join the United States Army and Navy in quelling the Southern revolt. Close to 180,000 black men signed-up as official members of America’s Armed Forces to defend the Constitution of the United States against all enemies foreign and domestic. They became the largest paid workforce of African American men to that point in America’s history.
The issue quickly arose as to where could they deposit their paychecks? A few fledgling efforts were made to start banks. And, that effort culminated with the establishment of the Freedmen’s Savings and Trust by Congressional act in March 1865; the Freedmen’s Bureau bank. Recently the U.S. Department of Treasury and Secretary Jack Lew dedicated an annex to honor the Freedmen’s Bureau Bank.
By 1870, the bank operated 37 branches throughout the South, with African Americans trained as branch managers. In all, almost 70,000 African Americans made deposits in the bank, reaching savings of about $57 million. Those facts stand to clearly demonstrate the efforts of a people, subject to slavery, freed with nothing from their previous labors to start anew having built wealth for others for free.
But, fate would intervene. The accumulation of those savings came during a period when the federal government still stood in the way of restoring the South’s old hegemony of white southern planters. And, it came when the nation’s banks were still conservative following the uncertainties of the Civil War. Southern banking laid prostrate, devastated by the collapse of the Confederacy and the meaningless holdings of Confederate dollars, and the long mystery of the disappearance of the gold reserves that backed that currency on its desperate journey south from Richmond, Virginia in April 1865 as Robert E. Lee surrendered the fighting cause at Appomattox Court House under the vigilant eyes of 2,000 black men in seven units of the United States Colored Troops.
By the start of the 1870’s, the expansion west made possible by the Homestead Act and transcontinental railroad—both enacted during the Civil War—restored the nation’s prosperity and financial zeal. The result was over speculation in railroading. In Europe, financial pressures mounted from the Franco-Prussian War. Germany refused to continue issuing silver coins. This resulted in plummeting silver prices, and the eventual move by the United States to go from backing its currency in silver and gold, to use only the gold standard. This led to the collapse of investments in silver mines in the western United States. The result was a global financial collapse that swept Europe and the United States in 1873. With it came the collapse of the U.S. banking system.
Sound familiar? And, that collapse decimated the Freedmen’s Savings and Trust as well. At a time of general financial collapse and no Federal Deposit Insurance Corporation—a creation learned from the Great Depression—many depositors lost their savings. The millions in savings of the newly free went away, too. Not too different than the 240,000 homes that disappeared from the African American community after the financial collapse of 2007.
In 1876, a compromise to resolve the Presidential election resulted in the removal of federal protection of African Americans in the South. The end of reconstruction meant the restoration of southern white hegemony and the evisceration of voting rights for African Americans, the protection of the access to many occupations and the limiting of their equal access to education. This too sounds familiar.
To accurately measure history, it takes measuring all the hills and valleys right. Dedicating a building to the Freedmen’s Savings and Trust allows us to properly assess the toil and efforts of African Americans. It shows the hard work and industrious nature of a determined people. It reminds us of the mountains of betrayal as well.
This blog originally appeared in aflcio.org on January 22, 2016. Reprinted with permission.
William E. Spriggs is the Chief Economist for AFL-CIO. His is also a Professor at Howard University. Follow Spriggs on Twitter: @WSpriggs.