Eddie Slaughter: My uncle and aunt had the farm. And so when they passed on, it was in debt, so I ended up taking up the loan and that's pretty much how I began to understand all of the injustices and racism that was going on with blacks owning land in this country.
Carla Harris: This is Eddie Slaughter, a Black farmer based in Buena Vista, Georgia. Today, we'll hear about the discrimination that almost cost him his family's land. And later, I'll speak to McKinsey Partner Shelly Stewart III about Black economic mobility in America.
Shelley Stewart III: I actually think that a lot of folks intuitively understood that there was a racial wealth gap and that there's income disparity. But I was, I was actually surprised that even folks who study it and even folks who spend time thinking about it didn't realize the magnitude of the gap.
Carla Harris: Welcome to Access & Opportunity. I'm your host Carla Harris. We're telling the stories of individuals driving change to address racial inequities and sharing tangible examples of how ideas around access and opportunity are being made real every day.
On today's episode of Access & Opportunity, we continue the conversation about the racial wealth gap. We’ll focus on some of the barriers that Black Americans face when it comes to financial inclusion and owning assets, especially property and homeownership, which are both fundamental in creating wealth.
Shelley Stewart III, who leads McKinsey's research on Black economic mobility in the United States has published numerous articles on racial inequity. He’ll speak with me about the roots of the pervasive inequities that have shaped the Black financial experience. But first, we'll hear from Eddie Slaughter about his fight to keep property that had been in his family for generations.
Carla Harris: Eddie Slaughter, now 70 years old, was born in Georgia but grew up in Miami, Florida. From an early age, he knew that city life was not for him.
Eddie Slaughter: Well, let me tell you, I'm so country that if you go out there and stir that earth up - it's just something about the smell of the, oh my God, it's country. I don't think I can tell you. It's just country.
Because I was such a country boy every year when summer came out, I would spend those two and a half, three months back here in Georgia, because I always knew I was coming back to the land and back to the farm.
Carla Harris: True to his word, Eddie eventually moved back to Buena Vista and inherited the family’s farm.
Eddie Slaughter: I like being out here. I like, plying. I like, putting the crop in. I like harvesting the crop. It's just a better quality of life, all the way around.
Carla Harris: Today, Black farmers like Eddie make up less than 2% of the farming population in the United States, but there’s a proud history of Black farm ownership, beginning in the Reconstruction era.
Eddie Slaughter: Well, you have to go back into the ending of the Civil War, it was three great things that had happened to the South. First of all, the Confederate money was no good. They no longer had free labor. And they had all this vast land and didn't know how to till the soil. So that gave opportunity to those large black families because now not only were they able to farm that kind of land, but able to get paid for their wealth. So they was able to buy it back. And so 45 years out of slavery, that was in 1910, we had amassed 16 million acres of land in America, mostly the historical South.
Carla Harris: Eddie is the latest in a long line of Slaughter family farmers - they bought their plot in Georgia about a hundred years ago, and have been passing it down for generations.
Eddie Slaughter: My granddaddy Tim Slaughter owned it, and then it was passed down. Then, my uncle and my dad owned it. Now, I am owning it and hopefully that if the Lord's will we'll be able to pass it down to my sons and grandsons. So that'll be four and five generations respectfully.
Carla Harris: When Eddie’s aunt and uncle passed away, Eddie inherited the second farm that he loved as a kid. There was just one snag: the farm was in debt.
Eddie Slaughter: So I ended up taking up the loan and that's pretty much how I began to understand all of the injustices and racism that was going on with blacks owning land in this country.
Carla Harris: The trouble Eddie ran into as a Black farmer wasn’t unique to him, he faced discriminatory systems that have been in place for decades within the United States Department of Agriculture, or USDA.
Eddie Slaughter: Well, they say that it supposed to be the people's department in government, but we found out it to be “The Last Plantation”, because some of the same problems you had in sharecropping, and all the Jim Crow laws that you deal with is innately put into USDA.
Carla Harris: The USDA gives loans to farmers to help cover normal operating expenses. But the department often treated Black farmers differently from white ones, and generations since his family began farming, Eddie was still experiencing the same discriminatory practices.
Eddie Slaughter: Most of the time, if you put in an application for a loan, two things always, always happened: you never got it on time and you never got the money you requested. That's why there are so many of them out there that tried to get away from the USDA because of discriminatory practices, but all of them, most of them couldn't. You’d have to sell off like 1800 acres of land so that you can get out from under USDA.
Carla Harris: Even when Eddie was able to get loans, he found they had strings attached, like how his loans were issued in what's called a supervised account, meaning he had to ask for permission each time he wanted to use the money that was loaned to him.
Eddie Slaughter: If I got to pay this money back, why every time that I get ready to write a check, I got to come to your office for you to sign for it. I say, I come here, sometimes you ain't here. Then if you’re on vacation, it takes some sometime a week or longer for me to get this here. And I was wondering, why do I have to have a supervised account if I'm accountable for paying this money back? I understand that 99% of all blacks, their accounts were supervised, but that wasn't the case with whites. So, you know, those kinds of things was like, why do this have to be? And, uh, most of that is to make sure that you are not as profitable as you should be on your farm.
Carla Harris: The widespread mistreatment was often carried out by the USDA's local branches, which were largely run by all-white county committees.
Eddie Slaughter: They have all of these millions of dollars flowing into the county committee and these people here will decide whether or not you're going to get the loan. It's nothing more than a tool to decide who can and who can't own land, who can and who can't farm.
Carla Harris: Eddie also found that the USDA would even use loans as leverage to control what Black farmers could and could not do with their land. Here is Eddie, during a 1997 Congressional hearing on discrimination in the USDA’s loan processing...
Eddie Slaughter: If you can lend me from $50,000 to $200,000 to plant softwood timber, and can’t lend me $14,000 to operate my farm, that is a shock to the American sense of fairness. It is wrong. It is wrong.
Carla Harris: A report released by the USDA in 1998 finally admitted that there was systemic discrimination in the department, resulting in Black farmers losing more than 90% of land over the last century.
In the late nineties, thousands of Black farmers collectively took action against the USDA in a landmark class action lawsuit, and they won. The US government gave $2 billion to Black farmers, but the damage had already been done.
Eddie Slaughter: You can't find me one Black farmer in the continental United States that received justice out of the lawsuit. They splayed out over two or 3 million, a billion dollars to lawyers. But the black farmers, most of them, by the most part, are worse off now than they was before the lawsuit. So that's just a harsh reality that we have to live with every day.
Carla Harris: There are more attempts to right the mistreatment of Black farmers: the American Rescue Plan passed into law in 2021 includes $5 billion of relief for farmers of color. But it's unlikely any bill can reverse the effects of more than a century of the USDA's discriminatory practices.
After years of fighting the USDA over loans, Eddie is out of debt, and he is ready to move on.
Eddie Slaughter: The Bible say that a good man will leave an inheritance for his children's children's children. So I’m hoping that I can leave an inheritance that, you know, they won't be saddled with the debt that I had to fight with. But, uh, this place going to come alive again. Like I had it before. And so, it's what it said, a dream deferred? Yeah. Well, mine has been deferred, but I'm right back on schedule.
Carla Harris: Eddie's experience with the USDA is just one of countless examples of how systemic forces have limited Black access to ownership, be that land or a home, and contributed to the racial wealth gap that exists today.
Carla Harris: It's people like my next guest, Shelley Stewart III, who research and analyze these forces in order to help provide some solutions for populations historically excluded from traditional avenues of building and passing down generational wealth.
I sat down with Shelley to talk about his work on Black Economic Mobility in America, systemic policies and practices that exacerbate racial inequities, and how those affected can prosper in spite of it.
Carla Harris: Shelley, thank you so much for being here with me today. And it's a pleasure to have you on the show.
Shelley Stewart III: Carla, thank you so much for having me. Really appreciate it.
Carla Harris: So let's start with you telling us about your work at McKinsey, where you lead the new McKinsey Institute for Black Economic Mobility. Give us a little background on that. How did that come to be? Why were you uniquely qualified to take on this challenge and just tell us a little more about it?
Shelley Stewart III: To be honest, Carla, it started very much as a passion project for myself and some colleagues. So we had been discussing issues as part of our McKinsey Black Network and we said, “Let's get some executives together and let's use the network and power of McKinsey to just facilitate a dialogue.” And leading up to those events. We said, well, "When we get there, what are we going to talk about?" And so we said, "Let's put some content together." We're consultants. That's what we do. We know how to kind of go do some analysis and put some pages together. And so we did that. And we had an event that we partnered with the Executive Leadership Council and the Boulé called the Black Economic Forum, and as we reflected on the event and we looked at some of the research, we said, "Well, wait a minute, we should we should publish this. We should crystallize this into an article that can be disseminated far beyond the group of folks that we gather." And so we did that. We published this piece, The Impact of the Racial Wealth Gap, and that was really kind of the first thing that set us up to really scale. If you fast forward to the early summer of last year with what happened with the murder of George Floyd, as we reflected as a firm and a group of of Black colleagues and partners on what we would want to commit to, which ultimately became Mckinsey’s 10 actions for racial justice, we thought it was a great time to institutionalize the research we've been doing, and so that's how we got to where we are. We announced that in June of 2020 and we formally launched the institute in December of last year.
Carla Harris: Well, first of all, let me applaud you all on having the passion and bringing it forward with the commercial angle, because as I like to say, "You and I may not agree on the nice thing to do, but as business animals, we will agree on the commercial thing to do." What in specific were the things that you think were the “aha’s” in those first couple of pieces that really captured everybody's attention? And what were the things that you think that the institute found or that you found in those earlier days that were previously overlooked and underfunded?
Shelley Stewart III: I think the core, the core idea for founding the institute is to move the discussion about racial equity beyond the four walls of a company, beyond D, E, & I initiatives. In terms of the early days and the findings, I actually think that a lot of folks intuitively understood that there was a racial wealth gap and that there's income disparity. But I was, I was actually surprised that even folks who study it and even folks who spend time thinking about it didn't realize the magnitude of the gap. Right, anywhere from 8 to 10X, if you think about median white family wealth versus median black family wealth. And that stayed remarkably consistent over time, which is the troubling fact. And when we go through things like Covid-19 or the Great Recession or other exogenous events, we tend to see that gap widen temporarily and then normalize back out during the recovery. So I think the magnitude of the gap and how consistent it's been over time and through economic cycles is one of the most eye-opening things for many folks.
Carla Harris: Yes, so let's go there. Let's talk a little bit about this gap you just alluded to the fact that the gap between median Black families and white families could be 8 to 10 times. Let's talk about some of the historical policies and practices that created that and has exacerbated that and actually caused those things to widen, as you say, when we get in crises, whether it's Covid-19 or an economic crisis.
Shelley Stewart III: Yeah, there's no question that there are lots of historical policies that have contributed to where we are today, one that's been widely discussed and one that I think, frankly, anchors the broader discussion is redlining and restrictive covenants with respect to where Black Americans could live at the time that that was put into place. And the downstream implications of that are many fold, right? These are the communities that have suffered continuously from underinvestment. And it's not just public sector investment, but if you actually look at what I'll call ‘deserts’. So ‘consumer deserts’, whether it be health care, banking, whether it be even broadband access today, it's remarkable how closely those desert's map to redlining that was done decades ago.
Carla Harris: Yeah, and I'm not going to assume that our audience understands what redlining is all about because you don't hear those words as much as you heard them two, three decades ago. So can you just define what redlining was? Make it real, make it plain for them?
Shelley Stewart III: Yeah, absolutely. In simple terms, this was all about driving certain families, in this case Black families, into certain neighborhoods and separating them out from white families. And this was done in a variety of different ways with respect to how mortgages and lending occurred and who could get loans in certain areas, and then even explicit restrictive covenants in terms of who could move to certain places and communities. And so it really was about residential segregation and actual policies that supported and accelerated this segregation further. And we're still grappling with that today.
Carla Harris: Yeah. And ladies and gentlemen, I'll take it one step further. There was literally a red line drawn on a map around certain neighborhoods and in certain areas that those who were doing city planning, those who were allocating resources to certain places in the city or the town, those who were, you know, looking at political processes. So it was just that literal, which is why people call it redlining. But it had, as Shelley has said, significant implications to resources and opportunities to those neighborhoods, which ultimately impacted one's ability to build wealth or to have a house. And as we've talked about on this podcast before, being able to have your own home, your own real estate is sort of the foundation of starting to build wealth, which is why he said significant implications from there. Now, Shelley, you said in one of your reports that -- I think it was your 2019 report -- that, you know, the racial wealth gap then could easily drive $1.5 trillion of costs for the US economy from 2019 to 2028. Could you tell us a little bit more about how you got to that number and what, again, what that looks like?
Shelley Stewart III: We did some econometric modeling, which I'll spare the intricate details of. But we essentially forecasted the multiplicative effect of one additional dollar of wealth on the economy and what that would actually do. And so it increased capital investment in both businesses and consumers. And we said, what would that actually mean for GDP and for output? And what we found in kind of shocking this model in bringing Black American wealth up to parity with white Americans, we found that if you could close this gap gradually over the next 10 years, by year 10, you would be adding $1.5 trillion of incremental economic output every year. And that's not just money flowing to Black Americans, as I often explain. That's that's incremental dollars in the pockets of everyone.
Carla Harris: And what do you think of the role of entrepreneurs and institutional investors and even VC in combating the wealth gap?
Shelley Stewart III: The institutional investors and VCs, I'll take them first and then we'll talk about entrepreneurs. As allocators of capital, you play a tremendous role in combating the racial wealth gap in a number of different ways. There's the obvious one, which is: hire folks, create jobs, income wages. This is how you build wealth, right, you earn money that translates into wealth over time. The other way is through your investment decisions and dollars. Investing in businesses owned by people of color generates wealth for the owners. And we also know empirically that it generates jobs in these communities because these owners of color tend to also hire and employ people of color. So there's just a huge opportunity to spend more time there. In terms of entrepreneurs, we need more entrepreneurs in the black community and we need to make sure we fund those entrepreneurs because they also, as I said, create jobs. The economic engine of the U.S. is our small and medium business community.
Carla Harris: Yeah, there's an overwhelming amount of data that talks about the fact that small businesses are the primary generator of jobs in this country and being able to have access to capital to create the business and more importantly, to scale it can have a powerful multiplier effect with respect to closing the wealth gap. What do you think policymakers can do? Because that's something we have been pretty articulate about. And I'd love to hear your perspective.
Shelley Stewart III: The government at all levels plays a big role in driving equitable outcomes, state and local as well as federal. The government is sometimes a funder and investor. So just direct dollars, whether it be through SBA loan programs or other direct injections of capital to individuals or businesses. Government also plays a huge role in what the private sector does. Indirectly or directly, the government helps to guide and steer where the private sector makes investments. The government influences this through the regulatory authority and through things like tax incentives. And the third one I'll highlight is their role as watchdog and enforcer. Even if you have good policies in place and you have good intent, broadly speaking, in the private sector, whether it's something like mortgage lending or we've seen some of this bias in the real estate market recently where certain brokers won't show certain houses to certain certain families. The government has a role to play as the watchdog and enforcer to ensure that where bad behavior is occurring, it's called out and addressed as quickly as possible.
Carla Harris: Very well said. And let's talk, let's take a right down to the personal for our listeners. What are some of the biggest barriers to entry in this financial system, to financial inclusion for young people?
Shelley Stewart III: I think particularly for young young people of color, it's all the stuff that we talk about in the context of the wealth and income gap. There's a lower starting endowment, right? You're less likely to have inheritance. And if you have it, it's much smaller. Over time, incomes tend to be lower, which is something we have to address, 78 to 80 percent when compared to white Americans, depending on whether you're male or female. To the extent you've gone to college, higher student loan debt on average, right, which means you have to service that debt and pay it down over time, which reduces your ability to invest. And in some instances you just have less exposure to investing, whether it be because your family didn't invest or people in your circle don't invest.
Carla Harris: Yeah, I could not agree more that exposure issue is a big deal, you know, if I had had this information when I was 19 and 20, I would have thought differently about how to use that money, how to engage it, but you’ve said that financial literacy is not the silver bullet, but how can we talk to this audience about finding out about the information, networking with the people that are in your lives -- whether it's people who are on this podcast -- but finding out and arming yourself, what else can they do?
Shelley Stewart III: Absolutely. I think there's a couple of things that financial institutions can do, and then I think there's an individual side of it. So first, we have to continue to create more accessible pathways to start investing and saving with lower levels of starting capital. That is just incumbent upon the folks who have these products and resources. The second thing, as employers in general, is providing education at the key inflection point in a person's income and wealth trajectory. So early days of college would be one example or another one might be at the end of college or when you start your first job. In terms of individuals, I think there's some tactical things. One, make savings a practice, even if it's small and incremental, just start. Building wealth is a lifelong process and needs to be just, be a core activity to what we do. So forget the money, just invest it, save it, whatever level it is, even if it's only one percent of your income or even less: put it somewhere, pretend it doesn't exist, go back and, and watch it grow over time and that will help to create a nest egg. And don't worry if it's only a small amount. Just start.
Carla Harris: And Shelley, what about people who feel a little bit discouraged because they believe that you need 2500 dollars to open a mutual fund, you need five hundred dollars in order to get a good savings account? Can you just blow that myth out of the water that today is different?
Shelley Stewart III: Today is absolutely different. There are many innovative financial services companies that are offering the ability to go small, to just get a start. And they're able to do that because their cost structures are just dramatically different than it was for institutions, you know, 10, 15, 20 years ago. So you should not be worried about needing to go big. If you can't go big, put something in the account, buy one share of a stock and just get started.
Carla Harris: Absolutely. Or a fractional share, as my friend Beatriz Acevedo said, get a fractional share, but get it rolling.
Carla Harris: Alright, before we get out of here, though, what’s next for the Institute for Black Economic Mobility?
Shelley Stewart III: We’re early. We are still crafting our more comprehensive research agenda. I believe that McKinsey is uniquely positioned because we sit across private, public and social sector and the institute, we want to be more than just a research body. We want to enable our colleagues, our clients, folks that are in the broader ecosystem to understand how to embed racial equity in everything that they do, if you're a private company. That means embedding it in your operations, embedding it in your business strategy, embedding it in your corporate social responsibility strategy, as well. And so that's our goal. And we hope to continue to accelerate and and and be having more discussions like this.
Carla Harris: Well, Shelly Stewart III, I will be watching and applauding honey, make no mistake. Well, we have a tradition on Access and Opportunity called the Lightning Round, and that's where I ask you a series of rapid fire questions and you answer the first thing that comes to your mind. And it's an opportunity for our listeners to get to know the man a little bit more than the conversation that we've had. So are you ready, Shelley?
Shelley Stewart III: I'm ready.
Carla Harris: Here we go. City or countryside?
Shelley Stewart III: City.
Carla Harris: Winter or summer?
Shelley Stewart III: Summer.
Carla Harris: Coffee or tea?
Shelley Stewart III: Coffee, black.
Carla Harris: I hear that. Book or TV?
Shelley Stewart III: TV.
Carla Harris: Personal mantra?
Shelley Stewart III: Find inspiration in everything.
Carla Harris: If you had a talk show, who would you want to be your first guest?
Shelley Stewart III: You.
Carla Harris: Oh, thank you. I will take that all day long. And one word to describe your legacy.
Shelley Stewart III: Empathy.
Carla Harris: Well, Shelley Stewart III, thank you very much for the privilege and the honor of having this conversation with you.
Shelley Stewart III: The privilege and honor was all mine. Thank you so much, Carla.
Carla Harris: It was truly an honor to hear from these two gentlemen today! You know, in hearing Eddie's story, I couldn't help but feel inspired by his tenacity. Thirty plus years into his fight, and he’s still just as fired up as ever. But his story is also a sobering reminder that Black Americans who aspire to own tangible assets, like land or a home, are up against decades of systematic discrimination, such as redlining policies, and we still see its effect to this day with a nearly 30-percentage-point gap between White and Black homeownership. By being denied the opportunity to acquire wealth, we’ve been left with very little to pass down to our sons and daughters. So, they’re already behind from the start. And that is why the cycle continues. Inequity is woven into the very fabric of our American institutions, so to see real, lasting change, the whole system needs to shift.
That’s why I was so glad I had the opportunity to speak with Shelley more broadly about not only these various mechanisms that ultimately impact one's ability to build wealth, but also the potential solutions to combat them. I applaud the work that the McKinsey Institute for Black Economic Mobility is doing to educate folks and ensure that racial equity is at the root of everything.
I want to thank Eddie Slaughter and Shelley Stewart III for sharing their experiences and insights with us today.
Thank you all for joining us on this episode of Access & Opportunity highlighting the racial wealth gap and examining how policies of the past will still affect the people of today.
What did you learn today from Eddie and Shelley? Send us your thoughts at firstname.lastname@example.org. We would love to hear from you. Subscribe to Access & Opportunity on Apple Podcasts or wherever you listen. Thanks for coming along!