I recently contributed a chapter to this book “What It’s Worth” on ways to strengthen the financial well-being of families and communities that are too often left behind in opportunity-zapping ways. Some of these economic barriers relate to jobs, wages, and incomes, but a lot of them derive from lack of access to credit markets, financial services, and guidance on borrowing and investment.
I was reminded of the need for this type of thinking by an article from the Washington Post the other day about Baltimore seven months after the riots that were triggered by the death of Freddie Gray while he was in police custody.
In the piece, a 27 year-old African-American man from a high-poverty part of the city clearly evinces the entrepreneurial spirit:
“This house right here,” he says, chin-gesturing to a shabby, three-story tenement on West North. “There was an auction the other day. The house was going for, like, $5,000 initially.” Young, 27, says he pestered some of his pals in the corner drug trade, begging them to chip in cash with him. “I’m like, ‘Hey, we can get together $5,000. Buy it! Five bedrooms! And the first floor’s zoned for business!’ ”
He says: “Not only can we fix it up, rent out the five bedrooms, we can open up a business. You feel me? A legitimate business.”
Sneering, he lets out an exasperated hiss. “No one wants to. It’s like, who can I go to? I’m talking to drug dealers who do not understand the value of real estate.”
If this man came from a different background with a broader opportunity set, he wouldn’t be stuck “talking to drug dealers who do not understand the value of real estate.”
So how do we help him and other would-be entrepreneurs get the support and credit access they need? On the one hand, you have the Raj Chetty results that say one of the best things you can for kids stuck in such neighborhoods is get them the heck outta there. But that won’t help either the guy cited above or his community.
For that, we need to scale up ideas from What It’s Worth, like Liftfund, which provides microloans and financial guidance to start-ups headed by people who haven’t been able to build up a pristine credit score. Or there’s the Mission Asset Fund in San Francisco, which provides financial education and ultimately, stronger credit histories to Latinos in the Bay Area.
The book also includes broader pieces on ways private markets can better serve the unbanked (or badly banked, as in getting ripped off by high fees and usurious interest rates), on the relationship between financial health and public health (“If you want to lower my blood pressure, help me pay my electricity bill”) and my own piece on linkages between financial healthy families and stronger, more stably macroeconomic growth.
The chapters are all available online. If we’re ever to push back on inequality and its pernicious effects on opportunity, we’re going to have to find a way to make sure people like the guy quoted above have the access they need to legitimate opportunities, the same as I, and maybe you, have had.