fbpx

Top Reparations Scholar Dr. Darity Drops Science On How Inflation And Fed Efforts To Fight It Disproportionately Hurt Black America

Top Reparations Scholar Dr. Darity Drops Science On How Inflation And Fed Efforts To Fight It Disproportionately Hurt Black America

Inflation

Core inflation by Nick Youngson CC BY-SA 3.0 Pix4free / Dr. William "Sandy" Darity Jr. (by Justin Cook/Minneapolis Fed)

Dr. William “Sandy” Darity has dedicated his life and career to studying the racial wealth gap and harms done to Black Americans in hopes of finding solutions to fix it. Recently, Darity called out how inflation and the Federal Reserves’ efforts to fight it through interest rate hikes and other methods are disproportionately hurting Black Americans.

On Dec. 12, Darity tweeted out commentary he wrote in response to a paper discussed by the Brookings Institute during the Brookings Papers on Economic Activity (BPEA) in March.

Titled “Monetary Policy and Racial Inequality,” the study’s authors posit that “monetary policy seems ill-suited to the task of reducing racial economic inequities.”

“The reduction in the earnings gap pales in comparison to the effects on the wealth gap,” the authors wrote in the paper. “Our analysis therefore does not bode well for the suggestion made by politicians and central bankers that a more accommodative monetary policy helps alleviate racial inequalities.”

Darity agreed that the Fed’s efforts to fight inflation with interest rate hikes and monetary policy don’t bode well for alleviating the wealth gap but took issue with some of the findings because the data used is primarily from Scandinavia, where racial demographics differ greatly from America.

“Although the authors’ conclusion about the impact of accommodative monetary policy on the degree of racial inequality is plausible, there are reasons to doubt that the effect of restrictive policy is symmetrical,” Darity wrote. “After all, it is always possible for a central bank to conduct the latter policy, but it is not always possible to conduct the former. Monetary authorities always can press the brakes by raising interest rates higher, but they cannot always step on the accelerator by lowering interest rates.”


Black Americans Have the Highest Mortality Rates But Lowest Levels of Life Insurance
Are you prioritizing your cable entertainment bill over protecting and investing in your family?
Smart Policies are as low as $30 a month, No Medical Exam Required
Click Here to Get Smart on Protecting Your Family and Loves Ones, No Matter What Happens

Darity explained that it is crucial to pay attention to “the initial conditions under which the policy is introduced.” He further noted since Black Americans have always experienced higher unemployment and lack of wealth than their white counterparts, a symmetrical view absent of these considerations is faulty.

“I contend that the impact on racial inequality is more unsettling when the Federal Reserve pursues tight monetary policy when inflation is present or imminent than when the Federal Reserve pursues loose interest rate policy to stimulate the economy,” Darity wrote.

“It is clear that a [Paul] Volcker-style aggressive use of the Federal Reserve’s traditional instruments for fighting inflation can produce a savage downturn, with harmful effects for most Americans, but disproportionately so for Black Americans,” he continued.

Darity suggested a federal job guarantee as a form of social insurance to help balance the effects of monetary policy by the Federal Reserve out.

“From the standpoint of the Black community, inflation can have disproportionate adverse effects,” Darity wrote. “However, a recession induced by the Federal Reserve’s anti-inflation measures also is likely to have disproportionate adverse effects on Black Americans, for example, the racial wage gap widens as Black compensation falls more than white compensation.”

“If we want to unbridle the Federal Reserve’s inflation-fighting capabilities, we must minimize the repercussions of an economic downturn. A federal job guarantee is essential toward that end,” Darity concluded.

A Twitter user identified as Mark Black applauded Darity’s analysis. “Dr. Darity with the hard hitting analysis again! As long as the Fed doesn’t consider the effects of the racial wealth gap on Black Americans, any monetary policy that negatively effects the US will ALWAYS hit us harder, for longer periods of time,” Black wrote.

PHOTOS: Core inflation by Nick Youngson CC BY-SA 3.0 Pix4free / Dr. William “Sandy” Darity Jr. (by Justin Cook/Minneapolis Fed)