The Economic Cost of Racism – IMF F&D

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Addressing systemic racism is framed as both a moral imperative and an economic opportunity.
Continuing to deny or refuse to confront racism leads to a less vibrant, less cohesive, less prosperous world.
The article emphasizes that commitment to human rights and racial equity requires active measures to acknowledge, understand, measure, and eradicate systemic racism.

Historical policies: post–World War II GI Bill benefits were largely denied to Black people; “Redlining” shut Black Americans out of mortgage insurance and home ownership.
Policing: Black Americans are twice as likely as whites to be killed by police while unarmed (analysis by the Washington Post and the Guardian).
Medicine and health outcomes:
- In 2016, the US National Academy of Sciences found that 29 percent of white first-year American medical students thought that Black people’s blood coagulates more quickly than white people’s, and 21 percent believed that Black people have stronger immune systems.
- One study published by the American Heart Association found that racist medical notions contributed to Black women in America being a third more likely to die of heart disease than white women.
Wealth gap:
- According to a 2019 McKinsey report, median Black families have 10 times less wealth than median white families.

Official stance: the government refuses to compile statistics on faith, ethnicity, or skin color in its census; national universalist outlook masks modern-day racism.
Policing and discrimination:
- Young men perceived as Black or Arab are 20 times more likely to face identity checks.
- 20 percent of young Black or Arab French people reported being the victim of brutality in their most recent police interaction—well above the 8 percent of their white counterparts.
Labor market bias:
- Men perceived to be Muslim by employers are up to four times less likely to get a job interview than candidates seen as Christian (Institut Montaigne).
- A 2018 study by the University of Paris-Est Créteil found that job applicants with Arab-sounding names got 25 percent fewer responses than those with French-sounding names.
Projected economic gain:
- GDP could jump 1.5 percent over the next 20 years—an economic bonus of $3.6 billion—by reducing racial gaps in access to employment, work hours, and education (Bon-Maury and others 2016).

Educational attainment:
- In 2012 fewer than 13 percent of Afro-Brazilians over the age of 16 had received postsecondary education, 15 points lower than whites (Pereira 2016).
- Twin study evidence: among sets of Brazilian twins in the same household where one was labeled white and the other nonwhite, the nonwhite twin was at a distinct disadvantage in educational attainment (Marteleto and Dondero 2016).
Policing violence:
- In 2018, the police killed 6,220 people in Brazil, and despite representing about half of the national population, 75 percent of those killed were Black (Sakamoto 2019).
Income disparities:
- The average income for white workers was 74 percent higher than for Black and brown workers (Brazilian Institute of Geography and Statistics, 2019).
- With the same level of education, Afro-Brazilian men made only 70 percent of comparable white men’s income, and Afro-Brazilian women only 41 percent.

United States:
- The wealth gap between American whites and Blacks is projected to cost the US economy between $1 trillion and $1.5 trillion in lost consumption and investment between 2019 and 2028.
- This translates to a projected GDP penalty of 4 to 6 percent in 2028 (Noel and others 2019).
France:
- GDP could jump 1.5 percent over the next 20 years—an economic bonus of $3.6 billion—by reducing racial gaps (Bon-Maury and others 2016).
Australia:
- A$44.9 billion is estimated by the Alfred Deakin Institute as the cost of racism to Australia between 2001 and 2011.
- Public perceptions in an Australian poll: 78 percent of respondents said that US authorities have been unwilling to address racism; only 30 percent believed there was institutional racism in Australian police forces.

Racism affects economic relationships and social cohesion beyond the three country cases:
- Reported racist incidents in China against African immigrants are noted to jeopardize Sino-African trade and investment relationships.
- Denial of discrimination by authorities is highlighted as a recurring feature that undermines remedies and economic confidence.

The article argues that countries owe action to their citizens; addressing racism should not be done solely for economic gains.
Recommended approach:
- Acknowledge the existence of systemic racism.
- Understand and measure racial disparities.
- Implement active measures to eradicate systemic racism.
- Treat commitment to human rights and racial equity as a call to action backed by policy measures.
Stakes:
- The world is at an inflection point; policymakers must act or racism will continue to carry economic and social costs.

IMF Finance & Development page: "The Economic Cost of Racism – IMF F&D" (September 2020), Joseph Losavio.

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The Economic Cost of Racism – IMF F&D
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- The Economic Cost of Racism – IMF F&D (PDF)