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Banker tells Concord Chamber that inequality, climate change are biggest economic threats

  • Jeffrey Fuhrer—Federal Reserve Bank of Boston

Monitor staff
Published: 1/11/2020 7:16:22 PM
Modified: 1/11/2020 7:15:40 PM

When a Federal Reserve Bank official gave an economic talk to the Greater Concord Chamber of Commerce last week, he included a startling graphic.

The graphic didn’t show interest rates or unemployment trends or capital goods shipments, although those were also part of the hour-long talk from Jeffrey Fuhrer, senior policy advisor and a vice president at the Federal Reserve Bank of Boston.

The graphic was a map of the city of Concord, with sections known as census tracts carrying different colors. It was startling because the colors reflected the enormous, lifelong effect of being born in one part of the city instead of another, regardless of where you lived 30 years later.

Specifically, white males who were born to lower-income families in west Concord had a median household income of $27,000 three decades later, while those born to lower-income families in east Concord were making twice as much: $54,000.

“Why is that?” asked Fuhrer. “It’s not like all the engineers grew up in one neighborhood, all the doctors in one neighborhood.”

Fuhrer argued that such a huge discrepancy between people born just a few miles apart – a discrepancy that can be found in cities, suburbs and rural areas throughout the country – reflected one of the major problems facing the country: continuing economic inequality that casts doubt on the American dream.

“We call ourselves the land of opportunity, and in many ways we are. But in reality, it’s not opportunity, it’s luck,” he told more than 100 people attending the Chamber’s annual Economic Forecast Luncheon forum in a talk he called “The Two Economies.”

“While the overall economy is doing well there are a bunch of folks in the economy, and by a bunch I mean tens of millions, who are not doing well at all,” he said.

Fuhrer’s talk also touched on topics like institutional racism and the imbalance in economic fortune spurred by a business culture in which “it’s okay if you send some workers home on government assistance … if it drives shareholder value.”

Fuhrer asked the crowd what they thought the other major threat to the economy was. After hearing guesses of debt, trade wars and demographics, he said he believed it was climate change, which would make all economic activity more difficult and more expensive.

These may not be typical topics for a business forum, but Chamber President Tim Sink said they were well-received, partly because Fuhrer has talked to the Chamber several times in the past.

“The members’ reaction was extremely positive – spoken with lots of people at the event, they thought Jeff hit it out of the park. … I saw a lot of heads nodding,” said Sink. “Jeff is an extremely thoughtful guy, a senior economist, who has the respect of the people in that room. … I think he’s thinking about these social issues more than he has in the past.”

Fuhrer, who made it clear that his comments were his own, said these topics have been the subject of study at the Federal Reserve for some time in projects such as the Working Cities Challenge, although he has only recently begun to speak about them publicly. Fuhrer is retiring from the Federal Reserve soon and will be working on development issues.

“This is not a zero-sum game. We’re not just talking about redistributing income. This is about changing the economic system so the overall size of the pie grows for everybody, about bringing more people into the economy,” he said.

Fuhrer, who has degrees from Princeton and Harvard, pointed to himself as an example of what he called a common but a misleading “narrative” about success. He argued that while he had worked hard in life, this was far from the explanation for his position.

“To a large extent it’s down to the location of where I was born, what my parents were, their expectations and support,” he said.

Fuhrer said that attributing success to hard work, as is often done, indirectly blames low-income people for lack of economic success, ignoring underlying social causes that people cannot control.

“There’s a narrative that people wouldn’t be poor if only they worked hard. But my experience is that laziness is uniformly distributed across income levels,” said Fuhrer. “It isn’t laziness that explains economic outcome – working hard is not sufficient to succeed in our economy.”

As a particular example of that, Fuhrer – who, like virtually everybody at the luncheon, is white – singled out what he said was a history of government policy deliberately designed to hold back blacks and racial minorities.

“Government policy has explicitly tilted way from people of color – unemployment income, GI Bill, housing insurance, all of them,” Fuhrer said. “You can see it in the comments of the (lawmakers) at the time.”

He gave an example of unemployment benefits that when created deliberately did not include agriculture or domestic workers, both of which were dominated by non-whites. This history is a large part of the reason, he said, that on average black families in America have virtually no wealth saved up, regardless of their current income.

“Over generations we’ve denied those families the ability to build wealth in a way that can be passed on to future generations,” he said.

(David Brooks can be reached at 369-3313, dbrooks@cmonitor.com or on Twitter @GraniteGeek.)



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