Disrupting Legacies of Wealth: How Funders Can Address Philanthropy's Role in the Racial Wealth Divide

The racial wealth divide is upheld by interlocking systems rooted in racism and anti-Blackness. From a racially oppressive carceral system to exclusionary financial institutions, these systems predominantly impede communities of color from building wealth and achieving economic prosperity. With Black and Latinx wealth predicted to fall to zero by the middle of the century, philanthropic leaders need to uplift and implement new solutions to dismantle the forces maintaining these vast economic inequities. 

SCG’s 2021 Virtual Conference, RISE UP: Closing the Racial Wealth Divide, hosted a plenary session focused on elevating some of the root causes of the racial wealth chasm as they relate to philanthropy’s work. Disrupting the Racial Wealth Gap: Root Causes and Systemic Solutions invited Solana Rice (Co-Founder & Co-Executive Director of Liberation in a Generation), Vivienne Lee (Managing Director, Common Future), Taina Vargas (Founder & Executive Director, Initiate Justice), and Anne Price (President, Insight Center) to broadly discuss the multi-pronged strategies needed —  from building political power to demanding prison abolition to elevating healing justice — to close the gap and ensure justice and prosperity. 

Moreover, our panelists urged the philanthropic sector to acknowledge how its acquisition of assets and its grant expenditures have contributed to — and continue to sustain — the racial wealth divide in our nation. The speakers encouraged funders to continue to disrupt their own legacies of wealth and oppressive practices while investing in community-led solutions to tackle long-standing systemic problems. 

Recognize the Wealth Building Opportunities Given to White Communities 

The story of our country begins with the theft of land from Indigenous people and with profit from Black slave labor. Since its founding, America’s economic systems have exploited communities of color and extracted resources to support and strengthen Whiteness. The Homestead Act of 1862 is an early law that awarded 270 million acres to white families for free, equipping them with a ‘starter kit’ for wealth accumulation. The Homestead Act is still generationally linked to nearly a quarter of all American wealth today. Additionally, between 1946 and 1960, the government-financed 350,000 homes in Northern California through the Federal Housing Authority (FHA) and only gave Black people one hundred of those homes. Furthermore, across the country, Black homeownership and neighborhoods are increasingly devalued. 

Today, our modern tax systems paired with property appraisal and lending systems only exacerbate people of color’s inability to build wealth through homeownership. Across successive generations, homeownership and property have remained fundamental to economic privilege in this country. Corporate pledges to pour billions of dollars into homeownership for these communities continue to be insufficient solutions because they only sustain the systems that already disproportionately benefit white property lenders and owners and ultimately expand the wealth divide itself.

Proactively shift the power and capital toward BIPOC communities

American’s economy has systematically excluded people of color — particularly Black communities — from building wealth and achieving prosperity. Many communities of color still don’t have reliable access to mainstream financial institutions or the relationships and capital needed to allow them to make ‘risky’ investments. For example, these communities are often subject to an array of predatory lenders that charge obscene rates (sometimes over 300%) just for the privilege of accessing funds. Additionally, Black-owned businesses experience a 23% denial rate from banks, whereas white-owned businesses experience only a 9% denial rate. And yet, many grantmakers continue to invest their assets in the same economic systems and structures perpetuating racial inequities. 

Funders and investors are encouraged to seek out BIPOC entrepreneurs and business owners, especially those routinely excluded from participating in our financial systems and directing capital directly into their hands at a local level. White philanthropists in particular who benefit from a two-tiered economic system can make a tangible and lasting difference by directly investing in BIPOC communities and providing them with the capital and assets they have historically been denied. 

Additionally, funders are encouraged to fund pilot programs that prioritize community growth over the promise of profit. Philanthropy can play a life-changing role by supporting local projects confronting indebtedness, championing basic-income or guaranteed-income pilot programs, or advancing young adult trusts and “baby bonds.” It is also necessary to tackle, head-on, the predatory schemes and extractive practices that plague non-white communities and which so often keep them “running up the down escalator.” And beyond all this, be willing to reframe what it means to take a “risk” in general. Recognize that if some of your investments don’t prove to be as effective as you expected, they may still be more effective than many of the inequitable and punishing systems that are currently in place.

Adopt a nuanced view of all your investments

More than ever, funders are urged to examine the complex impact of their overall philanthropic funding portfolio. If, for example, a foundation is directing 5% of its funding toward one particular cause or community, funders should ensure that the other 95% won’t contradict their efforts by extracting from the power and wealth of those or similar communities. Additionally, there is an opportunity to consider how the exponential growth of philanthropic endowments contributes to the widening economic divide in our country. Philanthropy is encouraged to consider how it participates in wealth accumulation, especially as it fails to provide BIPOC communities with the necessary, long-term resources to build wealth and forward community-led solutions. This soul searching means that traditional philanthropic structures and solutions may need to change for many of our best solutions to be effective in the long term. 

Combat a culture of incarceration that falls disproportionately on communities of color

In America, White people who have spent time in prison hold more wealth than Black or brown people who have never been to prison. Simultaneously, lower-income Americans are likely to experience a wide variety of factors — trauma, drug dependency, and mental illness, to name a few — that raise their risk of incarceration well beyond that of their mid-to-high-income peers. And, even upon release from prison, many ‘rehabilitated’ people soon find their convictions have heightened their challenges on the path to employment, homeownership, and general financial stability. Many of these concerns are often treated not with therapeutic care and compassion but with further criminalization and imprisonment, creating an endless cycle of harm and incarceration. In other words, the prison system doesn’t just exacerbate poverty conditions; it also systematically punishes people for falling victim to those same conditions.

Addressing our culture of incarceration goes beyond reform — it requires combating the need for the incarceration system itself.  Advocates urge us to mobilize around ending our prison industrial complex, fighting against over-policing (or for police abolition), eliminating detention centers, and re-examining our immigration system that routinely dehumanizes people of color. Underpinning this array of solutions is a common theme: recognition that a culture of accountability and care, not of incarceration, should become a new norm in our justice system.