by Devin Cornish
You drive an Escalade but you can’t afford gas. You have on a pair of Jordan’s but you can’t pay your rent. You don’t have health insurance, you are two months behind on your electric bill, and you manipulate the food stamp system, Section 8 housing, and layaway to show off to all your friends all of the things that none of you can afford. You are hood rich.
The label “hood rich” may be unfamiliar to most Americans but the concept is well understood. If you visit the slums of any major city you will find minorities wearing Coogi jeans, Jordan’s, and Seiko watches. The women have long wavy hair that costs about $115 for eighteen inches, and they carry Prada, Louis Vuitton, Michael Kors, Gucci, and Chanel purses in their freshly manicured hands.
So, how do low income people accrue the lump sums necessary to make expensive purchases? Well, I sit next to these people on the bus. On the first of the month while I am on my way to school, they are on their way to any local check-cashing place. They have their “Independence Card” to which the government allocates funds at the beginning of the month. Whenever they see me walk into a convenience store, they ask me if I want to buy some food stamps. Allow me to explain this process: Food stamps, as the name suggests are only supposed to be used to purchase food products. For the recipient of these food stamps, this is a complete hassle. Things such as cigarettes, clothing, or haircare products (in order of importance) cannot be purchased via food stamps, so to circumvent this problem food stamps are “sold.”
The Independence Card is loaned to someone who has legal tender, and this person uses the card to buy groceries, and in exchange gives the card owner half the value of the groceries in cash. I am a huge fan of this process because it allows me to basically buy my groceries at half-price. I plan my monthly trip to the Stop Shop and Save around the first of the month, and I reap the benefits of the “everything half-off” sale. My friends are these people’s kids. They are wearing $300 “dope-dealer shoes” (properly named because the dope-dealers are the only ones who can legitimately afford them), $180 Gucci belts, and $130 “fronts” (ornate plating, usually gold or other precious metal, which conforms to the contours of an individual’s teeth). I know how much these things cost not because I buy them, but because it is not enough to wear expensive clothing and jewelry, you have to let everyone know the retail value. That is the most malignant aspect of this phenomenon because it compels people to compete with each other, and this propagates a cycle of low-income people spending their savings and bill money to out-dress each other.
The house next to mine is a Section 8 house. The people who live there rent out the rooms as an extra source of income. Apparently, this extra money is not enough for them to invest in their education so that they can possibly survive without government-subsidized housing. But why would they? They have a ’94 Lexus with 18-inch rims and an amazing stereo system. I always see them with nice clothes, and the women who live there manage to keep their biweekly salon appointments. (I do not know how they have time to break from unemployment to achieve this.)
It could be possible that my neighbors would save their money if they came into an appreciable amount, but I doubt it. During tax season, most low-income people get a large lump sum of money in back-taxes. One of the biggest sources of back-tax money is tax credits for dependents. Often, people who have not worked or did not pay a large amount of money in taxes, will “sell” their children to people who have fewer dependents. As a result, the working person pays less in taxes and the true proprietor of the child earns a portion of the money saved. I am pretty familiar with both sides of this system, because my family owns a tax firm, and I have friends who “buy” and “sell” dependants. More interesting than how the tax system is cheated, however, is what happens with the spoils. Tax season becomes a Christmas for the lower-class. Back bills are paid, and more important, luxuries are bought (usually luxuries similar to the ones that caused the delinquent bill payments). Although I have seen this process of squandering money and acquiescing to poverty my entire life, I have never understood it.
I have always found myself looking in and judging these people who appear to be hood rich, and I wonder why they choose to be this way. I look at the eight-year-old child wearing an $85 Polo shirt who is going to repeat the second grade because his mom cannot afford a math tutor and refuses to pay for summer school. It seems that minorities live beyond their means so that they are not judged as poor. Apparently, poverty is bearable if you do not look poor (although expensive clothes further poverty). But I think that this is a delusion. Wearing expensive clothing or putting rims on a car are not symbols of wealth to anyone who is wealthy. But if there is a group of people without health insurance, who do not own land, whose only retirement option may be social security, and who will never have the credit or collateral to purchase a home or a new car, then expensive clothing is the only way to distinguish the have-nots from the have-less-than-the-have-nots. In the song “All Falls Down” the rapper Kanye West says:
We buy our way out of jail, but we can’t buy freedom; We’ll buy a lot of clothes when we don’t really need em; Things we buy to cover up what’s inside; Cause they make us hate ourself and love they wealth.
Kanye suggests that wearing labels, expensive designer clothes, is some form of catharsis for the Black indigent. And that there is some form of self-loathing that the less fortunate derive from the well-off. But I do not think that this is a personal self-loathing. It seems to be a cultural loathing. To be more specific, it seems that poor blacks are taught to look down on other poor blacks, and to avoid being judged as poor you cannot look poor. An article from Ebony magazine entitled “Tired of Being ‘Hood Rich” concurs, saying, “The problem lies in the fact that while we can see the car, see the clothes, see the jewelry, the crib and the cash of the ‘hood-rich’ Brother, we can’t see the bonds, the Brother who really has it going on. We can’t see his 401k, his IRA, his MBA” (28). Because of this stigma of not appearing wealthy, Black people overspend at the expense of the opportunity of becoming wealthy. For example, I think about one of my friends who lost his father and began to collect money from his father’s life insurance. Instead of saving that money to help pay bills or put it towards his education, he bought a new car, some clothes, and a flat-screen television. It seems almost ridiculous that there are people who would go to such extremes to squander money.
But wait. What is more ridiculous is the thought that minorities are the only ones who are hood rich. Consider the mortgage and credit card crisis. Doesn’t that indicate a huge population of Americans live outside of the hood and way beyond their means? Isn’t it true that there are a multitude of families whose lower- or middle-class incomes do not justify their half-million dollar homes, expensive private school tuition, or annual vacation? They are living the American dream. They have careers, live in cul-de-sacs, have retirement plans and country club memberships, buy their 16 year-old children their first car, and have health insurance and credit. This group of people is referred to as the “backbone” of the American economy. But upon closer inspection, we find their spending habits seem just as “hood rich” as any. So, maybe “hood rich” is a minority title that describes an American phenomenon? And certainly this is not a recent phenomenon. A 1965 Time Magazine article titled “The Pleasures and Pitfalls of Being in Debt” explains that personal debt in 1965 was rising faster than government debt, and it talks about the new convention of credit saying:
Much of U.S. business prosperity is due directly to credit-fueled consumer purchasing. The automobile industry this year will sell close to 9,000,000 cars—three-fifths of them on credit. The nation’s fastest-growing new industry, color television, this year will sell 2,300,000 sets—more than one-half on credit. Many an American sends his youngsters to college on a “dollars-for-scholars” loan, is up to his ears in mortgage payments, buys his clothes on the cuff (65% of department-store purchases are charged), and then gets away from it all on a fly-now-pay-later plan.
It would be egregious, then, to discuss being “hood rich” without acknowledging how wide-spread the phenomenon of living beyond one’s means is in America. The conventions by which different groups overspend vary, but the principle is uniform.
The alternative method of overspending, which is usually more legal than “hood rich” methods, is the exploitation of credit and debt. In America, debt is universal, shared on a personal and national level. One of the most vivid examples of hood rich is on the corporate level. Let’s consider a case in the financial sector.
Through the financial process called securitization, banks bundle the debts that are owed to them and sell them as risk potpourri. This process has become an integral part of the American financial sector but if mismanaged it can be catastrophic. In the pursuit of financial gain, large banks began to approve loans with considerable risk, and then sell them as a security. These awry securitizations are thought to be one of the main causes of the current American recession.
An issue of Time magazine illustrates securitization’s role in the economic meltdown saying:
When lax underwriting standards and borrowed money on top of borrowed money finally caught up with the world, the pyramid-style system crashed. Even slight changes in economic conditions sparked fatal domino effects in complex securitizations. The market for new products evaporated; CDO issuance fell 90% last year.
You may be wondering how this very specific case relates to the concept of hood rich. I assure you that just as the struggling low-income individual seeks out government assistance when money is mismanaged, large corporations do the same thing. And these large corporations are not exempt from the temptation of exploiting the government’s funds on frivolous luxuries. Below are some excerpts from a 2009 Bloomberg article which describes what the CEO of Merrill Lynch did after receiving government assistance.
John Thain, the former Merrill Lynch & Co. chief executive officer ousted yesterday, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said.
Thain hired Los Angeles-based decorator Michael Smith, chosen by President Barack Obama and his wife Michelle to redecorate the White House, CNBC reported. Thain paid Smith $837,000 and his purchases included $87,000 for area rugs, $25,000 for a pedestal table and $68,000 for a 19th-Century credenza, CNBC said.
“That’s symbolic of a pattern that has developed on Wall Street over this past decade of more and more extravagant, more and more lavish, more and more one-upmanship in all of these visible symbols,” said Post. “This may be the last vestige of a culture that we’re not going to see for many years to come.”
John Thain, not anyone on welfare, seems to be the poster child for hood rich. Through immoral or irresponsible means, he amassed a large sum of money, and when he received government assistance to reestablish himself he spent it. The “symbolic pattern” of “one-upmanship” is no different from what Kanye West speaks about in his lyrics.
It seems that overspending, or being hood rich is the American way. Everyone does it, but it just so happens that minorities whose motives and methods are slightly different, have coined the title “hood rich.” But who should judge what low-income minorities do with their money? Well, when the impoverished overspend, it cripples their finances, and their only salvation is government assistance which uses tax-payer money. But then again, when “well-off” or “comfortable” Americans default on loans or mortgages, and declare bankruptcy, the financial sector crumbles and the government has to issue bailouts. Both of these are unfortunate consequences, but the point is that they both exist. Regardless of which is more common and which is more detrimental, it is important to acknowledge the existence of both. If we no longer understand this idea of hood rich as some niche problem that only affects a minority of Americans, maybe a change can be made. Maybe the less fortunate will learn the value of saving and investing, and maybe the elite can learn to be responsible with how they accrue and spend their money as well.
“Essay: The Pleasures and Pitfalls of Being in Debt” Time Magazine: July 2, 1965
Chappell, Kevin. “Tired of being `hood rich – For Brothers Only.” Ebony Aug. 2002
Green, Peter S. “Merrill’s Thain Said to Pay $1.2 Million to Decorator (Update1)” Bloomberg Jan. 23, 2009
Karabell, Zachary. “Is there too Much Worry about Debt?” Time Mar 15, 2010.
Kiviat, Barbara. “Can Wall Street Find a Safer Way to Package Assets?” Time Jan. 29, 2009.
West, Kanye. “All Falls Down”. The College Dropout. Sony Music Studios. April 2004.
Devin T. Cornish, class of 2014, is a mechanical engineering major. He is from Baltimore Maryland, and is a Brother of Chocolate City. In his spare time Devin likes to listen to music, hang out with friends and play basketball.