Residential segregation can be the outcome of racial animus or racial prejudice, for example when whites decide that they don’t want to live near blacks for no other reason than race. In that case, segregation is a symptom of racism and is evidently wrong. What to do about it is less clear: forcing people to live somewhere is also wrong.
But residential segregation can also result from less prejudiced motives, sometimes even from rational ones: whites may be relatively wealthy and therefore decide that they prefer to live in a nice suburb. Automatically, they end up together with other whites. (Perhaps the wealth disparity has something to do with racism, but not the segregation itself). Yet, even in that case, segregation has harmful consequences and we will have to do something about it.
Residential segregation is harmful in several ways. When relatively wealthy whites move en masse to the suburbs, the relatively poor blacks who stay in the inner cities find themselves in an increasingly impoverished area. Shops will disappear; house prices will fall and will put pressure on people’s assets, etc. The reduced tax base will make it harder for the local government to fund high quality public goods. As a result, the quality of education and other public services will drop, which will start a vicious circle of poverty.
Physical segregation of races will reduce self-esteem and self-confidence among the members of the group that is worse off after segregation. It may also foster racial animus against those who are better off. And, finally, so-called membership poverty will kick in. People will see a reduction in the number of role models, and the remaining role models will by definition be relatively poor and hence not always the ones providing the most beneficial inspiration. Criminal role models also become more prominent, as the simple arithmetical result of the disappearance of the middle class. Furthermore, when people witness high rates of failure among group members, this will also negatively affect their aspirations and effort, which in turn will make a negative economic logic take root: for example, when few group members start businesses, few other members will have the opportunity to work for them or trade with them.
However, residential segregation is not entirely negative for the poor minorities remaining in the inner cities. As house prices in the cities fall, relatively poor blacks are more likely to become homeowners. However, that’s a small silver lining to an enormous black cloud.