Finance’s Black Bourgeoisie Must Not Define the Terms of Social Justice
Finance’s Black Bourgeoisie Must Not Define the Terms of Social Justice
by Taji Amani
June 20, 2022 / 6322 AFK
According to research produced by Stanford University and a black-led asset management firm in 2019, high-performing, black-led asset management firms are perceived less favorably than are their high-performing, white-led peers. Oh, the shock.
“We find evidence of racial bias in the investment decisions of asset allocators, who manage money for governments, universities, charities, foundations, and companies. This bias could contribute to stark racial disparities in institutional investing. In general, asset allocators have trouble gauging the competence of racially diverse teams. At stronger performance levels, asset allocators rate White-led funds more favorably than they do Black-led funds. At weaker performance levels, asset allocators actually prefer Black-led teams to White-led teams. However, asset allocators are unlikely to invest in weaker funds, diverse or otherwise. These results suggest that beyond racial disparities in the pipeline, there are additional systemic racial disparities in how investors evaluate funds and allocate money.”
In press articles discussing this research, this inequality of opportunity between prosperous, black asset managers and more-prosperous, white asset managers is presented as a financial problem and a social injustice that should be addressed. Media publications like Institutional Investor explain that this is a financial problem because investors’ own implicit bias against black-led management firms causes investors to miss out on lucrative investments, effectively “leaving money on the table”. Black Enterprise makes the same case and adds the point that this problem creates missed opportunities for impact investing that could finance black-owned companies, otherwise-diverse companies and environmentally-minded companies. Thirdly, the study and its discussion in media point out that the black finance professionals at these top-performing asset management firms are being discriminated against.
As real as these problems are, black entrepreneurs and activists who are interested in a world that empowers black people and creates social justice should be wary of how urgently they prioritize these problems relative to more fundamental causes of black disenfranchisement and social injustice. One such fundamental driver of social injustice may very well be an economic system that is dominated by private, anti-democratic control of capital assets. Black liberationists and social justice advocates need to consider the track record and functions of capitalism itself and determine if it is even capable of producing and reproducing social justice.
The concern that racist bias against high performing, black-led asset management firms may cause institutional clients to miss out on greater returns is most likely not a concern to social justice advocates. Whether or not the wealthiest institutions and people miss out on growing their accounts by an additional 0.5% or 1.5% per year is not a major concern of most social justice advocates.
On the other hand, the study raises another concern that is of some significance (if only to the corporate wing of the movement for diversity, equity and inclusion). The study demonstrates that black professionals in asset management are missing out on opportunities because of racist discrimination. This is wrong. And yet, this is only a problem for the tiny fraction of black people who belong to the petite bourgeoisie of black finance professionals who manage the assets of wealthy institutions and ultra-high net worth individuals. Their priorities often are not aligned with the priorities of most black people nor with those of most working class people of all colors.
As an example of those misaligned priorities, during the 2020 US presidential campaign, the hosts of the podcast, Real Sankara Hours discussed the conflicting interests between black executives in the financial sector and progressive activists, both angling for influence in a future Biden Administration. The podcast referenced a Politico article explaining that progressive activists wanted the Joe Biden to refrain from appointing former finance executives or lobbyists to his administration. Arguably, excluding such executives and lobbyists would have been in the best interests of the global climate, poor people and the working class, including most black people. However, this demand would ultimately go unheard in large part because of claims that such a measure would exclude black financial executives and lobbyists from being appointed to important roles. This was an instance of the black misleadership class, including members of the Congressional Black Caucus, ironically using the race card to undermine the interests of working class people and therefore most black people, which are frequently not aligned with the interests of Wall Street. Skin color alone does not unify the interests of black people. As much as the dominant society prefers to skirt issues of class, black peoples’ interests are divided by class, among other things. Our collective liberation requires a strong bias in favor of black poor and working class interests.
The most credible concern regarding the results of this study of how black asset managers are perceived is that the bias against black-led asset managers may be contributing to underinvestment into social impact businesses. (In simplified terms, impact investing can be thought of as the financing of or investment into businesses that are owned by women and/or people of color, that employ a significant number of women and/or people of color or that have a positive environmental or societal impact.) If top-performing, black asset managers have a greater tendency to engage in impact investing, then when their clients’ – likely unconscious – racist bias causes them to allocate fewer (or no) dollars to those black asset managers, it is plausible that those managers would have less capital to allocate to impact investing.
The shortcoming with this line of thinking is that, ultimately, the top-performing, black asset managers and the top-performing, white asset managers allocate investments in very similar ways. They extend equity financing or debt financing to investment funds and to individual companies whose ownership structures reproduce capitalism. Even if one assumes that black asset managers are allocating a slightly greater proportion of their capital to businesses engaged in positive “social impact” – black capitalism, green capitalism, feminist capitalism or crypto capitalism, then they are still maintaining capitalism and the social injustices that flow from such an oligarchic economic system.
Asking for equity, or even just equal opportunity, within a capitalist system - an economic system that is designed to reproduce inequity and competitive barriers to entry - is an old, failed strategy. Some of these black finance professionals know that this is a failed strategy for improving material conditions for most black people. Nevertheless, to protect their privileged positions, they are willing to encourage working within the existing system to achieve justice. A greater number of black finance professionals who sound the alarm against racism in the finance industry are genuine in their desire to see all black people and all working class people meet their basic human needs. However, they have misplaced their faith in capitalism’s ability to make that happen.
Decrying racism against black financial professionals who are mainly in the business of replicating capitalism is almost exclusively in the interest of that tiny fraction of black people in those roles. It does not advance the movement for our collective, black liberation and it can even have the effect of rallying black people to the futile task of making capitalism work for everybody. Furthermore, when considering their interests as a class of black professionals, despite the racism they face, capitalism affords black finance professionals the privilege of livable-to-luxurious incomes and the uniquely important power of being financial capital allocators. They are skilled at framing their struggles against racism as central to advancing social justice while avoiding meaningful criticism of capitalism itself. The terms of black liberation must be defined by the interests of poor and working class black people alone.