Net worth can be an important factor in quantifying who is rich and who is poor.

Net worth, defined simply, is the measure of assets one owns (Car, home, stocks) minus the costs of debt owed by the same person/entity (aka, Liabilities). In other words, Net worth = assets – liabilities. Whatever money is leftover describes a person’s net worth.

That’s all fine and dandy, but what does it have to do with Left-wingers and debates on race in America? Well, the answer is simple: the gap between white net worth and black net worth is fairly large.

That being said, the first thing we need to acknowledge is just how big this gap is and what it means in the context of America’s debate on racism. The Left points to the net worth gap and calls it a “racial wealth gap” stating that it is empirical proof that historic discrimination has left its marks on black and brown folks to the point where the gap can only be closed by Federal government intervention. This argument is nothing new, (I like to call it the “generational wealth” argument, but since we are on the topic of net worth, I will call it the “white net worth” argument for the time being).

There are several key problems with the “white net worth” argument as evidence for historic ramifications of discrimination. Firstly, net worth does not take into account cost of maintaining owned assets. Mechanical equipment, vehicles, and electronics are all assets and can give the impression that white families have more wealth simply because they have more things. However, many of these things require investment in maintenance and repair. Just because white families have a lot of things doesn’t mean that they don’t spend almost equally as much maintaining them. To maintain equipment is a hefty investment to say the least.

Additionally, net worth is not very likely to be passed down from one generation to the next.  A 25-year study by The Williams Group found that among the 3,000 examined cases of attempted transfer of assets from one generation to the next, 70% of those transfers failed to make it a single generation. This serves as evidence that the history of racism in America has not benefited white Americans on an economic level nearly as much as many on the Left claim.

With that being said, black poverty is certainly not an issue to ignore. Just because black poverty is not a direct result of racism does not entail that the country should not attempt to design policies that alleviate suffering. As a matter of fact, it is even admitted by a personal finance company called The Balance in their left-leaning article entitled “US Welfare Programs, the Myths Versus the Facts” that flaws in the TANF program established by Clinton in the 90’s were a main contributer of historic black poverty due to the fact that they actively prevented low-income families from investing any more than $2,000 in assets. As a result, it became more beneficial to avoid wealth creation, thus increasing the black-and-white net worth gap.

It truly is note-worthy how very little direct connection has been made between historically racist policies and the racial wealth gap. This is reflected by the Social Security Administration’s study entitled “Racial and Ethnic Differences in Wealth and Asset Choices” in which they, scientifically enough, admit that the root cause of the disparity is unknown. Contrast this with researchers such as Mehrsa Baradaran who use a lack of confounding variables as evidence that redlining and similar policies are the root of the racial net worth gap. Ironically enough, she states that black banks are part of the solution to this problem, even though many of the cases of so-called bank-loan discrimination have occurred when the black borrower was applying from a black-owned bank. That being said, the general idea that black-owned banks are good for black communities is certainly true, but it is premised on the idea that white banks were actively establishing themselves in black neighborhoods in an effort to specifically target exclusively black bank-loaning applicants–a premise that simply is not true enough to be the root cause of the racial net worth gap.

Perhaps we may never know the direct cause of the racial net worth gap, mostly due to the fact that generational wealth is extremely difficult to track. Regardless, people on the Right are well aware that inner-city poverty is a problem, which is why we should continue to support pro-safety, pro-investment policies that help low-income families have the economic freedom available to invest in notable assets. Only when the cities of America pursue good policy can we see a brighter future where wealth gaps are the result of freedom and freedom alone.