America's 'zero-sum world view' is a 'lie': Heather McGhee on racism

Lifting people out of poverty will help everyone economically, said Heather McGhee, former president of think tank Demos.

“Poverty is a policy choice. The more families we have with enough economic security, and by that I mean simply cash in the bank to be able to meet their needs and invest in their dreams, the better off we'll all be,” McGhee, author of “The Sum of Us: What Racism Costs Everyone and How We Can Prosper Together,” told Yahoo Finance Live.

McGhee called the zero-sum game theory in economics a “lie.” The idea that "there's sort of only so much good to go around, that progress for one group has to come at the expense of the other. One dollar more in my pocket must mean $1 less than yours,” is simply not true, she said.

“As economists, we know that's absolutely not the way it works.” she explained. “What I discovered in my research is that that mindset, that is the biggest impediment to our progress in America is this zero-sum world view.”

It’s an idea held by the majority of white Americans and less so by people of color, according to McGhee,.

A study from Citi (C) estimated that racism has cost our economy $16 trillion over the last two decades. It’s a combined cost of disparities in wages, education, investment in Black-owned businesses, and the housing market.

“Our economy would be larger… if we had closed the racial economic divides,” McGhee said, citing a separate study from the Federal Reserve Bank of San Francisco that found that race and gender disparities cut U.S. GDP by nearly $3 trillion.

“We know that our economy needs every single player on the field, off the sidelines, scoring points for our whole team. And yet, so often when we talk about racism, it comes through this filter of winners and losers, the us and the them.”

“And I think that has been the detriment. And frankly, it's been something that we have heard from people who want to keep us divided, right, the sort of scapegoating and demonizing and stereotypes about the other,” she added.

McGhee discussed the historical event of "drained pools," likening it to America today. In Montgomery, Alabama, officials chose to drain the public pool instead of integrating — preventing not just Black people, but also white ones from using it.

“Oftentimes, when racial justice advocates (like I consider myself one) talk about racism, we actually end up sort of marketing it to white people, saying how great racism has been for white folks. And of course, that's true,” she said.“But it's also true that the drained pool has left everybody poor.”

The "drained pool" is evident today, where in the midst of the pandemic many Americans are reaping the financial benefits as the stock market hits record highs. Meanwhile, millions of Americans continue to be out of work and struggling.

McGhee said the current racial wealth gap is harming everyone.

“We simply can't keep letting compound interest on bad racist decisions hamstring some of our best players going into the future. And that's what these persistent and recurring racial inequalities all have in common,” she said. “They're hamstringing so many members of the American team. And it's costing us all.”

Kristin Myers is a reporter and anchor for Yahoo Finance. Follow her on Twitter.

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