DEFINITION of 'Ghetto'

A ghetto is a run-down urban area primarily inhabited by a single minority group. Ghettos are often characterized by high unemployment, high crime, gang activity, inadequate municipal services, widespread drug use, high rates of dropout from school, broken families and an absence of businesses. As a result, real estate values in ghetto communities are generally much less expensive than in other communities.

BREAKING DOWN 'Ghetto'

Experts may identify ghettos by physical characteristics, such as large numbers of poorly maintained buildings, large amounts of graffiti, trash or debris accumulated in the street or on properties, and weedy vacant lots. Racial zoning laws, mortgage lending discrimination and income disparity contributed to the creation of many ghettos in the United States in the mid-20th century. Those areas still persist into the 2010s.

Inner-City Poverty

In the United States, ghettos referred to inner-city neighborhoods of blacks established after slavery was abolished in the 1860s up until the Civil Rights Movement of the 1960s. Because cities intentionally discriminated against this minority group in America, these areas were often poor, run-down and dilapidated. Even after segregation ended, these neighborhoods struggled to gain prosperity because the low property values kept away businesses, schools, infrastructure improvements and transportation.

The U.S. Census calls ghettos extreme poverty areas, or neighborhoods where 40% or more of the people who live there are poor. These types of neighborhoods doubled from the 1970s to 1990. By 1990, one in every 25 Americans lived in an extreme poverty area. Three-fourths of Americans who lived in ghettos resided in central areas of America's 100 largest cities.

Style

In the 2010s, the word "ghetto" may refer to a style of dress, attitude and manners. Ghetto can also refer to something jury-rigged together that may not perform up to standards. Instead of describing poverty, ghetto became a term to indicate something having lower standards. This new term is a far cry from the original term.

Origins of Ghettos

Ghettos originated in Europe in the 13th century when cities in Spain, Germany, Italy and Portugal sought to segregate Jewish populations into one area upon the suggestion of Pope Pius V. The word itself could come from several sources. Jews settled into an area of an old iron foundry, or ghetto, in Venice, Italy, in the 14th century. This old foundry was far from impoverished; the Jews who settled there were wealthy merchants. The word could also come from the Greek word "ghetonia," which means "neighborhood," or the Italian "borghetto," which means "small neighborhood."

In the 18th and 19th centuries, Jewish communities decided to settle together as a matter of choice throughout Western Europe after Jews fled persecution in Eastern Europe. During World War II, ghettos turned into impoverished slums when Nazi Germany decided to concentrate a labor force into one area of a conquered city.

RELATED TERMS
  1. Slumburbs

    A slang term for the suburbs of once large and prosperous cities ...
  2. Poverty

    A state or condition in which a person or community lacks the ...
  3. Poverty Gap

    The average shortfall of the total population from the poverty ...
  4. Redlining

    The unethical practice whereby financial institutions make it ...
  5. International Poverty Line

    An international monetary threshold under which an individual ...
  6. Consumer Price Index For All Urban ...

    A measure that examines the changes in the price of a basket ...
Related Articles
  1. Investing

    Why You Should Buy In Gentrifying Neighborhoods 

    Living in a gentrifying area has many benefits, not least of which is a property's investment potential.
  2. Investing

    6 Neighborhood Red Flags

    These six items should be considered when choosing a new home.
  3. Investing

    How to Rate a Neighborhood When Buying a Home

    From school quality to crime rates, here are the factors to consider before you purchase a home.
  4. Insurance

    Why Being Poor Is So Expensive

    The less you earn, the more you're likely to spend for the everyday necessities of life.
  5. Investing

    Top 6 Factors For Homebuyers

    As a first time buyer, there is much to consider. Here we have a look at some of the factors that may influence your decision, and suggest which factors are worth taking a second look at.
  6. Investing

    How To Buy A House In Another City

    Finding an agent, doing your research, feeling out neighborhoods etc.
  7. Managing Wealth

    The Most Expensive Neighborhoods in San Francisco

    Learn about the city of San Francisco and why rent has increased so much in the past eight years. Discover more about the top five most expensive neighborhoods.
  8. Investing

    5 Best Neighbourhoods to Live in Denver

    An overview of the top neighborhoods in the best place to live in America: Denver.
  9. Managing Wealth

    The Most Expensive Neighborhoods in London

    Understand what makes London such a desirable place to live and why it is so expensive. Learn about the top five most expensive neighborhoods in London.
RELATED FAQS
  1. What are foundry companies in the electronics sector?

    Explore the role of foundry companies within the electronics industry. Find out how foundries improve their products and ... Read Answer >>
  2. Can the consumer price index (CPI) for individual areas be used to compare living ...

    Understand why the Consumer Price Index, or CPI, cannot appropriately be used for comparing the cost of living across different ... Read Answer >>
  3. What are the different types of price discrimination and how are they used?

    Understand the difference between the three major types of price discrimination and how each is used in practical business ... Read Answer >>
  4. What area of the consumer price index (CPI) should I use if there is no CPI for the ...

    Learn what data is published by the Bureau of Labor Statistics and how to use the various Consumer Price Index data sets ... Read Answer >>
  5. What is the average debt/equity ratio of companies in the electronics sector?

    Learn about the three types of price discrimination, and understand how each can benefit a company in terms of selling its ... Read Answer >>
  6. How did World War II impact European GDP?

    Understand the effect of World War II on the European gross domestic product and what foreign and domestic factors influenced ... Read Answer >>
Hot Definitions
  1. Straddle

    An options strategy in which the investor holds a position in both a call and put with the same strike price and expiration ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  4. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  5. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  6. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
Trading Center