Excerpt from “Economic Growth Is Not Zero-Sum”

Over the past three decades, families across the US have become wealthier, yet racial wealth gaps have widened. Upward economic mobility is difficult to achieve, particularly for those starting life in poverty. And over half of Americans struggle to afford basic needs, including those in the middle class. It is unsurprising, then, that belief in the American Dream is at a record low. This barrier to prosperity becomes more urgent at a time when states and cities have fewer federal funds than before, while their residents have greater need amid major economic changes to work, school, and care systems.

It is clear the country is at an inflection point. If cross-sector leaders and decisionmakers work together to disrupt a status quo that is stymieing prosperity, they could improve the economic trajectory for many people. The broad nature of economic changes invites policy thinkers to explore evidence-based solutions that expand access, funding, and opportunity.

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One reason economic mobility and prosperity remain unequal is that many policies rest on the false premise that economic opportunity is zero-sum—that for one group to win, another group has to lose. But income and wealth disparities have real consequences for society as a whole; income inequality reduces GDP, lowers consumer spending, decreases investment in employee development, and hinders innovation by limiting competition and risk-taking.

In short, inequality suppresses demand, creating a barrier to long-term economic growth. At the household level, lack of wealth decreases housing stability, increases indebtedness, makes families more vulnerable to macroeconomic shocks, and diminishes upward mobility. For businesses, lack of capital limits long-term success and job creation by deterring organizations from making productivity-boosting investments and diminishing innovation. All this adds up to an estimated $16 trillion loss to the American economy over the last two decades alone.

But it does not have to be this way. Addressing just the Black-white racial wealth gap could increase US GDP by up to 6 percent, adding about $1.5 trillion in output—a gain that benefits everyone, rather than taking away from some. There are also many solutions that address the racial wealth gap while also addressing other types of inequality felt across all racial groups. Simply put, programs that successfully improve outcomes for the Black community create a virtuous cycle that helps all communities.

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Homeownership, education, wages, and access to financial markets are four policy areas that affect and reach the majority of Americans. They intersect with each other and are critical to economic mobility and wealth building. Housing represents the largest portion of household wealth for all but the highest-income households; access to financial markets can enable homeownership and other asset ownership; and education plays a foundational role in driving wages and financial well-being, which are critical first steps for people to accumulate wealth.

One of the country’s most effective economic development achievements of the last 60 years is the implementation of policies at the national, state, and local levels—a multipronged approach necessary to align and respond to new labor markets and economic opportunities. Below—and described in greater detail in accompanying fact sheets—are examples of interventions and policies that together

• raised the floor for some communities and, in so doing, improved overall economic prospects;
• when implemented for Black communities, also worked for all groups or were expanded to other groups; and
• did not resort to zero-sum trade-offs between groups, and instead chose options that benefited all communities.

These real-world examples are a starting point for wide-scale adoption of promising pathways to prosperity. The interventions described in the fact sheets are about expanding opportunity, not redistributing scarce resources, and therefore illustrate ways to move beyond zero-sum thinking. If designed and implemented effectively and scaled, they can narrow the racial wealth gap and spur economic growth.

This essay was funded by the Black Economic Alliance Foundation. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission.