Generational wealth, often considered the lifeblood of financial stability and prosperity, is a complex and multifaceted concept in the United States. It represents the wealth and assets passed down through generations within a family. These assets can take numerous forms, including cash, stocks, bonds, investments, real estate, and family businesses. This accumulation of wealth has far-reaching implications, not only for individual families but also for society as a whole. While generational wealth can be a source of financial security for some, it also plays a central role in the increasing concentration of wealth, further exacerbating the racial wealth gap.
According to an official 2023 memo from the City of Detroit Legislative Council Policy Division, Black people in America have about a $1.3 trillion gross national income, but only 2% of that money, about $26 billion, is recirculated in the Black community. This stark reality underscores a significant challenge facing the Black community in the United States and prompts reflection on the importance of wealth circulation in order to close the wealth gap.
David Whitaker, Director, Research and Analysis, writes, “In Detroit, the nature and degree of wealth among the African Americans has evolved over our history and was shaped by systemic racism and discrimination that limited opportunities for economic mobility and wealth creation.”
Wealth circulation, often referred to as the “multiplier effect,” is the process through which money spent within a community continues to recirculate, stimulating economic growth and financial stability. In thriving communities, wealth typically cycles through local businesses, organizations, and individuals, fostering prosperity and opportunity for all. In Detroit, generational wealth, primarily derived from owning homes and receiving insurance benefits, encounters obstacles linked to the swift turnover of funds within the African-American community.
“Looking at Detroit’s wealth and economy from an African American perspective, we must acknowledge that Detroit is the city with the largest percentage of Black residents in the nation,” Whitaker writes. “During the great migration when many new Detroiters settled into the area on Detroit’s lower eastside known as Black Bottom, housing was segregated, due to real estate steering, redlining and racial restrictive covenants, preventing Black families from buying homes and accessing credit. Therefore, at this time, the overwhelming majority of African Americans rented.”
While generational wealth has the potential to be a tool for prosperity and economic security, it is essential to recognize the disparities that exist, particularly along racial lines. The racial wealth gap is a pervasive and deeply ingrained issue in the United States. It is a consequence of centuries of systemic racism, discriminatory policies, and economic inequalities.
Whitaker explains, “There were approximately one hundred thousand Black people living in the area and three hundred Black owned businesses, including but not limited to, Bars, restaurants, Doctor offices, Barber shops, Hair Salons, Hotels, and Drug Stores.1 In Detroit, during the early 1900’s, generational wealth for Black families could be found in the form of a business or skilled trade handed down to the next generation. In the 1940’s when Black Bottom and Paradise Valley were destroyed in the name of urban renewal, many of the hopes and dreams of generational wealth for Black families in Detroit were also destroyed.”
The vast majority of African Americans in the city have historically had limited access to resources and opportunities, making it more challenging for them to accumulate and pass down wealth. The economic challenges faced by the African-American community have resulted in a cycle of poverty and a higher dependence on social safety nets, further limiting their ability to build generational wealth. However, in the resilient spirit of Detroit, the city is actively seeking innovative approaches to bridge this wealth gap. Most notably, a renewed emphasis on entrepreneurship and business ownership has emerged as a promising avenue to achieve this goal.
The Metro-Detroit Black Business Alliance (MDBBA) has launched a groundbreaking program aimed at promoting financial security and wellness among the region’s small business community. The Small Business Investment program, backed by a generous $1 million grant from Prudential Financial, will provide $2,500 investment accounts on the Stackwell digital investment platform to up to 200 small business owners, employees, and entrepreneurs who are active members of the MDBBA.
Investing in stocks has long been recognized as a vital means of building wealth over time and securing financial stability, particularly for retirement. However, data from the Federal Reserve reveals a significant disparity in stock ownership between Black and White Americans. While more than half of White Americans own equities, this figure drops to just one-third for Black families. The Small Business Investment program aspires to rectify this imbalance by enhancing investment confidence and participation within Metro Detroit’s small business ecosystem, ultimately serving as a catalyst for inclusive economic growth in the region.
Trevor Rozier-Byrd, CEO of Stackwell Capital, emphasized the significance of the program, stating, “Black-owned businesses are a growth engine for the economy and community, yet they continue to face challenges in accessing funding and opportunities to grow. For many, the unavailability of business capital leads to a greater reliance on credit cards and personal funds. This, in turn, impacts one’s credit and the ability to access business capital in the future. Through this program, we hope to end this cycle and enable more members of the Metro Detroit Black small business community to achieve greater personal and business financial stability so that they can sustainably grow their businesses and their wealth over time.”
The program’s launch is a significant step in addressing the deeply entrenched racial wealth gap, as Charity Dean, president and CEO of the MDBBA, pointed out. She highlighted that systemic and structural racism has given rise to an unequal racial wealth gap, which is the largest of all economic disparities in the United States, according to the National Bureau of Economic Research. The Federal Reserve’s findings are equally alarming, showing that White households, on average, hold eight times more wealth than Black households. This figure magnifies to a staggering 17 times for the Millennial and Gen Z population.
Prudential Financial, a key partner in this endeavor, sees the program as an opportunity to make a positive impact on Detroit’s small business community. Shané Harris, vice president and head of social responsibility at Prudential Financial and president of The Prudential Foundation, noted, “Small businesses are the heartbeat of our communities, and this program aligns with our commitment to expand access to wealth-building pathways for the Metro Detroit community and for all our stakeholders.”
The Small Business Investment Program is open to all races and ethnicities, welcoming both existing and new members of the MDBBA to apply. The application deadline for this groundbreaking initiative is November 17, 2023.
The launch of the Small Business Investment Program is a significant and welcome development for Metro Detroit’s Black business community. It represents a positive step toward narrowing the racial wealth gap, empowering small business owners and entrepreneurs, and promoting economic inclusivity in the region. By providing the necessary resources and support for these individuals to build financial stability and lasting wealth, this initiative is poised to make a lasting impact on the local community.
Generational wealth is both a source of economic security and a reflection of historical inequalities. By working together to create a more equitable economic landscape, Detroit can take a significant step toward bridging the racial wealth gap and ensuring that generational wealth becomes a source of opportunity for all its residents.
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