LIB.133 Potorti

1. Poverty and Precarity
Image Source:
https://www.newyorker.com/magazin
e/2023/03/20/matthew-desmond-
poverty-by-america-book-review

2. Why is class in the U.S. racialized?
How did this come to be?

3. A Home Owners’ Loan Corporation map of Chicago.
Source: Mapping Inequality: Redlining in New Deal America
Redlining
This financing practice refers to a Federal
Housing Association (FHA) policy which
began in the 1930s that refused to insure
mortgages in or near predominantly Black
neighborhoods. Banks drew color-coded
maps that marked the “stability” associated
with specific neighborhoods. Predominantly
Black neighborhoods or neighborhoods in
the process of racially transitioning were
colored red, indicating that they were a
financial “risk,” making it difficult for
buyers to secure mortgages in those areas.
At the same time, the FHA subsidized
construction of mass-produced housing
outside cities on the condition that it only be
available to white buyers.

4. Blockbusting
The real estate practice of selling a home
in a white neighborhood to a Black
family, then stoking fear among white
residents that their property values would
decrease so they would sell quickly at a
loss. Realtors then sold those properties at
hugely inflated prices to Black residents.
In effect, the arrival of Black residents
actually made property values go up,
because they were often willing to pay
more than market value for a home
because these discriminatory practices
severely limited their choice of housing.
(1962)

5. Contract Sales
This financing practice required Black homebuyers to make a large down payment
and large monthly payments at high interest rates. The buyer was responsible for
taxes and the cost of upkeep, but accrued no equity in the home and did not own it
until the full term of the contract was paid. A missed payment could result in eviction
with a loss of all money invested to that point. In Chicago during the 1950s and
1960s, 75 to 95 percent of Black home buyers bought on contract, paying an average
of 84 percent above market value for their property (Source: “The Plunder of Black
Wealth in Chicago,” 2019). Many Black families bought on contract because they
were denied traditional FHA mortgages by the practice of redlining.

6. Race and
Wealth in Boston

7. Matthew Desmond, “Why Poverty Persists in America,”
New York Times Magazine (3 Apr 2023).
Over the past 50 years, rates of poverty in the U.S. have remained high,
and largely constant, despite the fact that federal spending on
anti-poverty programs has increased significantly.
How can this be?

8. What does poverty in America look like?
“It is much easier in the United States to be decently
dressed than it is to be decently housed, fed or
doctored.”
--Michael Harrington, The Other America (1962)

9. Responding to observations that many poor people in America have access to
consumer goods such as cell phones, Desmond writes, “You can’t eat a
cellphone. A cellphone doesn’t grant you stable housing, affordable medical
and dental care or adequate child care. In fact, as things like cellphones have
become cheaper, the cost of the most necessary of life’s necessities, like
health care and rent, has increased. From 2000 to 2022 in the average
American city, the cost of fuel and utilities increased by 115 percent. The
American poor, living as they do in the center of global capitalism, have
access to cheap, mass-produced goods, as every American does. But that
doesn’t mean they can access what matters most.”

10. Why does poverty persist in America?
Reason #1: “the American welfare state is a leaky bucket”
• Not all money designated to aid poor Americans actually gets to them.
• Since “welfare reform” in the 1990s, states receive blocks of funding
to aid poor residents, and the states (rather than poor people) have
great discretion over how that money is spent, e.g. abstinence-only sex
education (AZ), anti-abortion pregnancy crisis centers (PA), Christian
summer camp (ME).
• Desmond notes that in 2020, only 22 cents of every dollar of
Temporary Aid to Needy Families (TANF) funds actually made it into
the hands of poor families.

11. Reason #2 (Desmond’s primary focus): “the unrelenting exploitation of the
poor in the labor, housing and financial markets.”
What is “exploitation”?
“When we are underpaid relative to the value of what we produce, we
experience labor exploitation; when we are overcharged relative to the value
of something we purchase, we experience consumer exploitation….When we
don’t own property or can’t access credit, we become dependent on people
who do and can, which in turn invites exploitation, because a bad deal for you
is a good deal for me…Our vulnerability to exploitation grows as our liberty
shrinks.” Acknowledging the restricted agency of those living in poverty as
they make decisions that affect their lives, Desmond notes, “just because
desperate people accept and even seek out exploitative conditions doesn’t
make those conditions any less exploitative. Sometimes exploitation is simply
the best bad option.”

12. Labor Exploitation
• Deindustrialization and outsourcing  wage stagnation
• Decline of unions (today, only six percent of private sector workers are
unionized) – fewer protections, lower wages, less job security
• Desmond writes, “…capitalism is inherently about owners trying to give as
little, and workers trying to get as much, as possible. With unions largely
out of the picture, corporations have chipped away at the conventional
midcentury work arrangement, which involved steady employment,
opportunities for advancement and raises and decent pay with some
benefits.” Unions have historically served as a buffer between the
imperatives of capitalism to cut production costs and the need for workers
to earn a fair living in safe working conditions.

13. Change in U.S. Wages Over Time

14. Housing Exploitation
• Rent has more than doubled since 2000, far outpacing increases in wages.
Median rent: $483 in 2000 vs. $1,216 in 2021.
• Rents continues to rise even in places where housing demand is low (e.g.
Buffalo, NY).
• Property owners profit greatly. In fact, “after accounting for all costs,
landlords operating in poor neighborhoods typically take in profits that are
double those of landlords operating in affluent communities.” (In such
areas, owners’ mortgages and property taxes are typically much lower.)
• Poor families are “shut out of homeownership because banks are disinclined
to issue small-dollar mortgages, and they are also shut out of public
housing, which now has waiting lists that stretch on for years and even
decades. Struggling families looking for a safe, affordable place to live in
America usually have but one choice: to rent from private landlords and
fork over at least half their income to rent and utilities.”

15. Source: iProperty Management (6 Nov 2022).
https://ipropertymanagement.com/research/average-rent-by-year

16. Source: Boston Mayor’s Office of Housing (30 Mar 2022).
https://www.boston.gov/sites/default/files/file/2022/05/Presentation.pdf
(Boston)

17. Wealth and Home Ownership
Most Americans who have wealth
hold it in the form of equity built
through ownership of the house
they live in. Federal policies and
local practices have historically
made it possible for white families
to buy homes while making it
difficult, and at times impossible,
for nonwhite families to do so.

18. Financial Exploitation
“Anyone who has ever struggled with poverty knows how extremely expensive it
is to be poor; and if one is a member of a captive population, economically
speaking, one’s feet have simply been placed on the treadmill forever.”
― James Baldwin, Nobody Knows My Name (1961)
• Banks have minimum balance requirements and charge over-draft fees
(the vast majority are charged to people with average balances below
$350). Black and Hispanic families are five times more likely than white
families to have no bank account.
• Check-cashing businesses take from between one to ten percent of a
check’s total, requiring workers without bank accounts to pay to access
the money they have earned.

19. Financial Exploitation (cont’d)
• Bad credit or no credit can make it difficult or impossible to qualify for or
secure housing, insurance, or even employment.
• Exorbitant interest rates on loans foster a cycle of debt. Most states
(thirty-three) have no restrictions on the amount of interest a bank can
charge, esp. on short-term (“pay-day”) cash loans. Desmond notes, “The
annual percentage rate for a two-week $300 loan can reach 460 percent in
California, 516 percent in Wisconsin and 664 percent in Texas…The
average borrower stays indebted for five months, paying $520 in fees to
borrow $375.” If a borrower cannot repay the loan, the lender can overdraw
their bank account, leading to overdraft charges that perpetuate a cycle of
debt driven by poverty.

20. Desmond references the concept of “predatory inclusion”—coined by
historian Keeanga-Yamahtta Taylor—to describe “the longstanding American
tradition of incorporating marginalized people into housing and financial
schemes through bad deals when they are denied good ones. The exclusion of
poor people from traditional banking and credit systems has forced them to
find alternative ways to cash checks and secure loans, which has led to a
normalization of their exploitation. This is all perfectly legal, after all, and
subsidized by the nation’s richest commercial banks. The fringe banking
sector would not exist without lines of credit extended by the conventional
one. Wells Fargo and JPMorgan Chase bankroll payday lenders like Advance
America and Cash America. Everybody gets a cut.”

21. “Rent-a-Center, one of the country’s largest
rent-to-own consumer goods companies, will
pay a $8.75 million fine to the state to settle
allegations that it engaged in a pattern of
abusive misconduct targeting low-income
communities.
The office of Attorney General Andrea Joy
Campbell alleged that Rent-a-Center ‘filed
criminal charges as a means of debt
collection, engaged in harassing, obscene, and
abusive collection calls, and threatened
repossession against consumers who missed
rental payments on household items and
goods,’ according to a press release.
In addition to paying the fine, Rent-a-
Center will make ‘significant changes to its
business practices’ to comply with the state
consumer protection laws, including fair debt
collection and repossession practices, the
press release says.”

22. “Poverty isn’t simply the condition of not
having enough money. It’s the condition of
not having enough choice and being taken
advantage of because of that. When we
ignore the role that exploitation plays in
trapping people in poverty, we end up
designing policy that is weak at best and
ineffective at worst.”
--sociologist Matthew Desmond,
Poverty, by America (2023)

24. Desmond’s Prescription to Address Poverty
1. “Empower workers” (esp. though unions and sectoral bargaining).
2. “Expand housing options for low-income families” and make home
ownership more affordable in general.
3. “Ensure fair access to capital” by restricting predatory banking and
lending practices.

25. How should we work to understand
socioeconomic inequality?
“The question that should serve as a looping incantation, the one
we should ask every time we drive past a tent encampment, those
tarped American slums smelling of asphalt and bodies, or every
time we see someone asleep on the bus, slumped over in work
clothes, is simply:
Who benefits?
Not: Why don’t you find a better job? Or: Why don’t you move?
Or: Why don’t you stop taking out payday loans?
But: Who is feeding off this?”

26. Who Benefits? Most of us do.
“Those who have amassed the most power and capital bear the most
responsibility for America’s vast poverty…Acknowledging this is both crucial and
deliciously absolving; it directs our attention upward and distracts us from all the ways
(many unintentional) that we — we the secure, the insured, the housed, the college-
educated, the protected, the lucky — also contribute to the problem.
Corporations benefit from worker exploitation, sure, but so do consumers, who
buy the cheap goods and services the working poor produce, and so do those of us
directly or indirectly invested in the stock market. Landlords are not the only ones who
benefit from housing exploitation; many homeowners do, too, their property values
propped up by the collective effort to make housing scarce and expensive. The banking
and payday-lending industries profit from the financial exploitation of the poor, but so
do those of us with free checking accounts, as those accounts are subsidized by billions
of dollars in overdraft fees.
Living our daily lives in ways that express solidarity with the poor could mean
we pay more… Unwinding ourselves from our neighbors’ deprivation and refusing to
live as enemies of the poor will require us to pay a price. It’s the price of our restored
humanity and renewed country.”

28. Does the documentary Growing Up
Poor In America (2020) support or
challenge the concept of “pandemic
precarity,” the idea that the pandemic
had a more severe economic impact on
those who were already struggling?
How might the families portrayed in the
film have benefited from the revised
childhood tax credit, which was initiated
in July 2021 and expired at the end of
that year?
What factors in the early months of the
pandemic “squeezed” poor and working-
class families?

29. How can a problem like child poverty be addressed? From July to December 2021, the federal government
temporarily implemented a revamped child tax credit, which sent monthly cash payments to families with minor
children. This took the place of the regular child tax credit paid annually as a credit against a household’s tax
liability, which is therefore only beneficial to families with enough income to owe taxes. In six months, this
program proved remarkably effective in reducing the number of American children living in poverty despite the
economic dislocation caused by the pandemic. The child tax credit was not renewed because Congressional
leaders could not forge enough political will to do so. As a result, from Dec 2021 to Jan 2022, the number of
American children living in poverty rose by more than 40 percent.