Martin Luther King Jr. mostly is noted for his work in racial justice. Nearly every student from grade school up is familiar with his famous “I Have a Dream” speech. This speech set much of the tone on civil rights and racial justice in the United States after King’s death. Most Americans, however, are not as familiar with his thoughts on the economy and on how to address poverty. While the term “inclusive economy” is commonplace in economic development now, it was, in fact, another of Dr. King’s dreams.
“People must be made consumers by one method or the other.”
In his 1967 book, Where Do We Go from Here: Chaos or Community? King pushed for the federal government to provide a guaranteed middle-class income. He wrote:
We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available...We are likely to find that the problem of housing and education, instead of preceding the elimination of poverty, will themselves be affected if poverty is first abolished.
From King’s point of view, poverty and social conditions were intertwined. By addressing poverty in innovative ways and improving the capacity of individuals to participate fully in the economy, you also address other social challenges. This required looking at work in different and new ways.
“There is nothing new about poverty.”
In 1968, King prepared for the Poor People’s Campaign march on Washington. The march was a multiracial effort to urge the federal government to enact an Economic Bill of Rights. In one of his last speeches, “Remaining Awake through a Great Revolution,” King said:
This is America’s opportunity to help bridge the gulf between the haves and the have-nots. The question is whether America will do it. There is nothing new about poverty. What is new is that we now have the techniques and the resources to get rid of poverty. The real question is whether we have the will.
King saw that the rate of American innovation and shifts in the economy provided opportunities to address the challenges of poverty. But to King, it was not just an issue of technology, ability or even capacity but one of American will.
King was assassinated April 4, 1968, two months before the march. The march, on June 19, 1968, drew an estimated 50,000 demonstrators.
Both wealth and income inequality are growing King included the goals of addressing poverty and economic classism in his racial justice platform. Now, more than 50 years later, we still face many of the same questions, opportunities and challenges around poverty.
Both wealth and income inequality are growing, according to the Federal Reserve Bank of St. Louis. In 1989, the top 10% of income earners received 42% of the nation’s income. By 2016, that share had increased to 50%. Middle-income workers lost the most from 1989 to 2016, declining from 42% of national income to 37%. The lowest-income workers also saw a decline, as their percentage of national income dropped 2%, shrinking from 15% to 13%.1
Over the same period, there was an even greater shift in wealth inequality. Wealth is measured by how much you own minus how much you owe. In 1989, the bottom 90% of wage earners held 33% of the nation’s wealth. By 2016, that share decreased to 23%, with the bottom 50% of wage earners owning only 1% of the nation’s total wealth.
Wealth gap between black and white hasn’t budged
At the intersection of race and wealth, there still is pervasive disparity. According to the Federal Reserve Bank of Cleveland, the wealth gap between blacks and whites has changed little since 1962, near the middle of the civil rights movement, with whites, on average, holding seven times more household wealth than black households.2
Two words bring hope
The reality of King’s vision for an inclusive economy has stalled. In part, this is because the nature of the economy has changed. Our economy is global and automation continues to displace jobs. In addition, we still struggle with entrepreneurship dynamism, which is the rate of new business starts minus the number of business failures. According to a 2014 report by the Brookings Institution, small business dynamism declined steadily in the U.S. from 1978 to 2011, when the data were compiled.3
However, if we boil down the quotes from King mentioned above, we find two words that can summarize his views on addressing poverty then, and the challenges to addressing poverty now. Those words are innovation and will. What I see in the community and the economic development landscape gives me cause for optimism. I am heartened by the emergence of national and local leaders focusing on entrepreneurship-led economic development, with a heavy focus on inclusivity. National entities like the Federal Reserve System and the Ewing Marion Kauffman Foundation, among others, have been working with other leaders and economic developers to advance this more inclusive and innovative form of economic development.
Increasing diversity and inclusion can reduce wealth gap Over the nine years that I have worked at the Federal Reserve Bank of Kansas City, I have seen a remarkable increase in the rise of conversations and strategies that address some form of economic inclusion. Two in particular strike me as important.
Most of the readers are familiar with the shift in human resources focus at corporate and large organizations toward diversity and inclusion. It now almost is a given that to maximize the potential of your organization, you need to maximize the potential of your workforce through diversity and inclusion strategies. Research has shown one of the most effective ways of doing this is ensuring that your employees are both diverse and included in all aspects of the organization. This has the indirect long-run potential to decrease the wealth and income gap, as employees historically left out of growth opportunities would then have better upward mobility.
Building environments that support entrepreneurship can increase wealth The second shift is the increased focus on inclusive economic development. A leading strategy is called entrepreneurship ecosystem building. Building an ecosystem means creating a local community that is rich in resources and relationships. These relationships support innovation and entrepreneurship that can create and grow the economy. As more businesses start and grow to scale, they create more wealth and jobs. Over the past decade, the effort toward building entrepreneurship ecosystems has grown fast. What is unique about that is that early on, leaders like the Kansas City Fed and the Kauffman Foundation of Kansas City, Missouri, pushed the field to make inclusion a priority. How do we increase entrepreneurship in demographic groups, such as women and racial/ethnic groups that traditionally have been underserved? That is the topic of many national, regional and local conversations. In addition, entrepreneurship ecosystem building has focused on rural communities and other areas facing economic distress or high poverty rates. The focus on inclusion also has extended into broader conversations around creating high-quality jobs that pay better wages. We have seen a push toward pivoting education back toward skilled labor, which, in many cases, provides stable, living-wage jobs. We have all the tools at our disposal The United States has not yet fulfilled King’s dream of an inclusive economy, but we are seeing an increase in the innovation and will needed to do so. I personally believe that, throughout this new decade, we can take large steps to turn that dream into reality. It requires us to continue to push forward, to keep in mind the elimination of poverty and the growth of an inclusive economy. We have all the tools at our disposal. We just have to continue to pursue the dream boldly, collaboratively, and most important, inclusively. If we do that, we can get there sooner rather than later.
Links for further reading
• Inclusive Ecosystem Building
• Investing in America’s Workforce
• Living Cities Radical Collaboration for Black Wealth Creation [1]https://www.stlouisfed.org/open-vault/2019/august/wealth-inequality-in-america-facts-figures Source: Wealth Inequality in America Facts Figures -
[2] Source: What is Behind the Persistence of the Racial Wealth Gap. https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2019-economic-commentaries/ec-201903-what-is-behind-the-persistence-of-the-racial-wealth-gap.aspx
[3] Source: Declining Small Business Dynamism in the United States: A Look at States and Metros. External Linkhttps://www.brookings.edu/wp-content/uploads/2016/06/declining_business_dynamism_hathaway_litan.pdf