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Systemic racism is a drag on the US economy

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The United States is in the midst of two crises — a pandemic-induced recession with consequent unemployment, and a struggle to overcome a prolonged history of systemic racism. These twin crises are linked.

Systemic racism is a persistent drag on our economic vitality. Any success in overcoming it will be a boon to the U.S. economy. Modern economies run on two related things, knowledge and talent. Knowledge is developed by talent, and it takes talent to effectively make use of knowledge. It is the knowledge and talent engine that secures economic growth and prosperity. Unfortunately, systemic racism restricts the supply of talent, which in turn undermines both our growth prospects and our social cohesion.

In the United States, talent development is significantly curtailed by economic deprivation, the lack of access to basic goods and services, overly formalized talent development processes and stereotypical expectations. This was recognized by a prominent talent development researcher who stated that:

“Deprivation, segregation and stigmatization of lower-class groups in various nations produce consistent patterns of anxiety, fatalism and resignation in children. Combined with inequality of educational opportunity, these patterns undermine motivation, academic achievement and standardized test scores.” 

Knowledge and talent form what economists have called the intangible economy, a kind of capital that we cannot see or touch. In high-income countries, intangible capital is now more important than the tangible sort, and it is increasingly related to growth prospects, which are now quite dim.

The World Bank suggests that the current recession is the worst since World War II. It is more pronounced than the recessions of 1975, 1982 and 1991. It has outdone even the global financial crisis of 2009. What is more, because the pandemic has undermined several important growth factors, the recession is likely to be prolonged.

All evidence suggests that addressing systemic racism is critical for economic recovery and long-term vitality. A recent study published in one of the most prestigious economics research journals suggests that between 20 percent and 40 percent of the growth that took place in the United States between 1960 and 2010 can be explained by the removal of racial and gender discrimination in talent development. This startling result reminds us of the immense economic, as well as human, cost of thwarted talent development. 

Reinventing educational policy and practice is key to dismantling systemic racism and transforming the U.S. economy. This reinvention must be based on a paradigm shift away from the notion of talent as the purview of elite White and Asian children to a recognition of the inherent potential in all human beings. This paradigm shift will involve the transformation of schools and workplaces into containers for nurturing and cultivating human talent. This must be complemented with an increased focus on meeting basic human needs, particularly in health, housing and education. Children born with elevated lead levels, for example, must be a thing of the past.

Studies have shown that returns to schooling do not vary by race and ethnicity. Policies that support high-quality education among the disadvantaged have positive effects. Policies that embrace the idea that talent lies in all people and not just the elite can significantly expand intangible assets within the U.S. economy.

By opening the gates of knowledge and talent, we can advance social justice, combat prolonged recession and build much-needed social cohesion. It is time for all Americans to meet their potential. There is no better time than now to address systemic racism.

Gelaye Debebe is an associate professor of organizational sciences at the George Washington University. Kenneth A. Reinert is a professor of public policy at the Schar School of Policy and Government of George Mason University.

Tags coronavirus Economic growth Institutional racism Racism Recession systemic racism World Bank

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