The pandemic-fueled economic recession is steeper than anything American businesses have ever experienced. In response, Congress passed an unprecedented series of economic relief packages to help struggling families and businesses. However, because of how the government has doled out those funds, it’s possible that this could be the latest economic downturn to deepen historic inequities, not address them.
This week on the Reckon Interview, we’re examining the Southern economy and how it will weather the storm. Dr. Stephanie M. Yates is a professor of finance at the University of Alabama at Birmingham and Diane Standaert is a senior vice president of the Hope Policy Institute in Mississippi, which aims to help people in underserved areas grow wealth.
Dr. Yates explains how today’s wealth gap can be explained by a history of policies that deliberately cut Black and Brown people out of the opportunity to accumulate wealth — and how some policies aimed to address that disparity have backfired due to a lack of oversight.
And Diane Standaert describes how the largest stimulus package in American history could exacerbate those disparities, if we aren’t careful.
Here are a few excerpts from our conversation with Diane Standaert, but you can listen to the whole episode here.
Diane Standaert on the Southern economy pre-Covid
We’ve been tracking the kind of the economic impacts of Covid-19 to the Deep South since, since the beginning and, even one month into the crisis, we could see that the job losses here in the Deep South were already far eclipsing those that happened following the 2008 Great Recession. And that’s important for understanding not only the depths of the harm, but also thinking about what the road to recovery looks like for our region.
Just a little bit more context, compared to the Great Recession is that many of the Deep South states were just returning to pre-recession job levels by the time Covid hit. So more than 10 years later, we were still, in many ways recovering from the previous crisis, not to mention the other disasters that happened between them. Just as one example, Mississippi had not returned to its pre-recession job levels until October of 2019.
That recovery for the Deep South was significantly longer than the recovery for the country as a whole. And so that is just one example of the importance of giving these relief dollars to the communities that need them most right now—the more effective the relief efforts are now, the shorter the road to recovery for so many people and our region as a whole.
Of course, within that are the vast existing racial and economic disparities that are rooted in this very long history of extraction and exclusion and discrimination that’s happened in the South, and elsewhere across the country, particularly for communities of color. We’ve seen those disparities play out, not only in the health consequences of Covid-19, but of course, in the economic consequences as well. In terms of just one example of the disparities in the economic consequences of Covid is, of course, in whose jobs are being lost and who is experiencing reductions in income.
Here in the Deep South, in each of the five Deep South states of Tennessee, Alabama, Louisiana, Arkansas, and Mississippi, over half of all Black households, in those five states have experienced some loss of income since March 23. By comparison for white households, in the same five Deep South states, they hover more around 40% of people experiencing losses in employment related income. So still high, but not as high as we’re seeing for Black and Latino households.
I think the context of the trillion-dollar relief package that’s coming from Congress and coming from the federal government and being deployed to states and others throughout these ways, that’s being deployed into an existing environment that’s already experiencing vast inequalities. What we’re concerned about is that the money is being deployed in a way that follows these existing fault lines and perpetuates these existing patterns, rather than being thought about as a way to help plug these holes or to really get to the communities that are experiencing the harm the most, during this time.
That’s been our question, as we look at what this money is being used for: where is it going? Who’s benefiting? Who’s being left behind? To what extent is it perpetuating these existing racial and economic disparities? Versus, you know, can it be used to actually fill some of these gaps and make sure that those who need the relief the most actually receive it?
Diane Standaert on how the pandemic recession could exacerbate inequities
In so many ways, we’re seeing that those already with resources and access are going to be the same people or entities that are able to access the relief and those that don’t have resources are going to struggle the most in getting access to the relief. And I think we saw that a little bit with the stimulus checks. Those that have access to a bank account were able to get their money more quickly.
We saw that within the federal Paycheck Protection Program, businesses with an established relationship with a bank were able to get access to those funds more quickly. And others were largely shut out.
And I think we’re seeing that in some of the state level relief efforts, as well. Those who have the ability to access the internet or access information about the programs are the ones who are able to get the relief dollars. But those who are historically left behind, even before this crisis are the same ones who really struggle the most to get these dollars now.
Through the trillion-dollar CARES Act package passed by Congress, one of those programs was the Paycheck Protection Program which, in the end, deployed over $500 billion of relief to businesses across the country. Through structural barriers within that program, particularly within the first two weeks of that program, hundreds of billions of dollars primarily flowed to white-owned businesses and left smaller businesses and businesses owned by people of color shut out of that money.
One of the structural challenges was that the money was dependent on being deployed primarily through banks, which have their own long history of not serving communities of color very well.
Another structural barrier included the fact that for the first seven days of the program, sole proprietors were literally not able to apply for those funds. And that’s really important for understanding the racial inequities that perpetuated because over 90% of all Black and Latino owned businesses are sole proprietors. And literally, by the time they were even able to get in the door to access the funds, hundreds of billions of dollars had already flowed out.
Finally, another structural barrier creating these racial inequities, is that for nearly the entirety of the program, people with criminal backgrounds had really severe restrictions to access the funds. And those did not get loosened until nearly the final week of the program. So those were just a few examples of some of the structural barriers embedded within the Paycheck Protection Program, which will lead to hundreds of billions of dollars flowing to white-owned businesses, that businesses owned by people of color simply were not able to access during that time.
One way in which these barriers were overcome is through the participation of Community Development Financial Institutions and minority-led financial institutions who were able to advocate for changes within the Paycheck Protection Program. And were able to help businesses they are already serving in their own communities get access to these monies, and through CDFIs and minority-led financial institutions, they were able to deploy about $17 billion of those Paycheck Protection Programs to businesses that highly likely would have otherwise been left out.
If you want to hear what gives Diane Standaert reasons for hope, listen to the full episode here.
If you’ve still got questions about finances, check out our new video series Money Talks. Each episode, Reckon’s Anna Beahm walks through some of the biggest questions about wealth and the economy. Find it on Facebook, Twitter and YouTube.
Reckon Interview Season Three
- Episode One: The fight for the vote and how to ensure your vote counts
- Episode Two: How the South created modern politics and what’s at stake in 2020
- Episode Three: How the South nearly blocked women’s suffrage
- Episode Four: To live here, you have to fight: Coalition building in the South
- Episode Five: A system broken by design: The politics of health care
- Episode Six: The death of ‘stick to sports’: The politics of football