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We Should Support Black Businesses, But Full Racial Equity Will Require Much More

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We Should Support Black Businesses, But Full Racial Equity Will Require Much More

  1. 1. FALL 2020 WE SHOULD SUPPORT BLACK BUSINESSES, BUT FULL RACIAL EQUITY WILL REQUIRE MUCH MORE by Brian Reyes, Berkeley ‘21 Edited by Eva Magyar, Davenport ‘22 1THE YALE HISTORICAL REVIEW 1701 Project institutions and organizations in support of Black com- munities.1 At the simplest level, supporting a Black small bu- siness means supporting a Black household.Most Black businesses are not operating at the level of a major cor- poration; most do not hire paid employees or bring in particularly high levels of revenue.2 There has been a steady stream of excitement around supporting these 1 Matthey J Belvedere and Michelle Gao, “Netflix Makes $100 Million Commitment to Support Black Communities in the U.S.,” CNBC, June 30, 2020, https://www.cnbc.com/2020/06/30/netflix-makes-100-million-commitment-to-support-black-communities.html. 2 “U.S. Business Fact Sheets,” Minority Business Development Agency, accessed September 6, 2020, https://www.mbda.gov/page/us-busi- ness-fact-sheets. entrepreneurs because there is a justified understanding that helping keep them in business is a good and al- truistic thing to do. Beyond this,many Black businesses contain not only monetary but cultural meaning.For example,one of the most famed Black millionaires, Madam C.J. Walker, built her company by selling hair products that catered to Black women. During the early to mid-20th century, long with the renewed mainstream focus on racial ine- quality this summer came a resurgence of interest in Black-owned businesses. Lists proliferated on social media showcasing businesses to support in various cities, inclu- ding New Haven.Even Netflix pledged $100 million to financial A
  2. 2. 3THE YALE HISTORICAL REVIEW Black women suffered hair loss as a result of malnutri- tion and constant labor. White business leaders had no interest in providing a product that would solve this, so Walker stepped in and filled the void.3 Decades later, current Yale senior Alyse Robinson is doing something similar with her digital skincare business, SkinBloom Kits. For Robinson, owning a Black business is about much more than just monetary gain.It’s also about pro- viding experiences that help “Black women to reclaim pleasures that have been historically denied to them”so that they can, in turn, feel free enough to pursue social activism for their communities as a whole.4 For reasons like these, we should continue to give our support to Black businesses. That being said, we should be wary about the way that we do so. The rhe- toric around Black business can be misused to divert claims for transformative change: the success of Black entrepreneurs can be heralded as a sign that structural change is not needed, and people who view themselves as allies can easily spend money on Black businesses without confronting the tougher questions that acti- vists are raising. This would be a mistake. A close look reveals that Black businesses are plagued by the same underlying conditions that produce inequality in other realms of Black life, and that the best way to help them is to help Black Americans as a whole—and this, in turn, requires us to go beyond individualistic notions of achievement that might otherwise accompany support for small businesses. First, I’ll start by painting a numerical picture: Black Americans are about 13.4 percent of the U.S. population, and whites are about 76.3 percent5 ; Black Americans own 2.6 percent of all U.S. businesses as op- posed to whites’ 70.9 percent; Black businesses employ 1.7 percent of U.S.employees as opposed to white firms’ 86.5 percent; and Black businesses bring in about 1.3 percent of all U.S. sales, as opposed to the 88 percent of white companies.6 These disparities are the direct result 3 Mehrsa Baradaran, The Color of Money: Black Banks and The Racial Wealth Gap (Cambridge, Massachusetts: The Belknap Press of Harvard University Press, 2017), 54. 4 “SkinBloom Kits’s (@skinbloom_kits) Instagram Profile • 4 Photos and Videos,” accessed September 6, 2020, https://www.instagram.com/ skinbloom_kits/. Quotations are from a text conversation with Alyse Robinson. 5 “U.S. Census Bureau QuickFacts: United States,” accessed September 6, 2020, https://www.census.gov/quickfacts/fact/table/US/ PST045219. 6 “Are We There Yet? - The State of Black Business and The Path to Wealth,” BLNDED Media (blog), February 13, 2019, http://blndedmedia. com/are-we-there-yet/. 7 For statistics on Black business, see Mels de Zeeuw, “Report on Minority-Owned Firms” (Federal Reserve Bank of Atlanta, December 2019), https://www.fedsmallbusiness.org/survey/2019/report-on-minority-owned-firms. For statistics on the racial wealth gap, see “Examining the Black- White Wealth Gap,” accessed September 6, 2020, https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/. 8 Baradaran, The Color of Money, 182-183. 9 ibid., 183. of a long history of racism that have created abhorrent inequalities in social, human, and financial capital. For example, Black business owners tend to rely more on personal savings and their credit scores to acquire ca- pital, despite facing an immense 10:1 wealth gap and struggling with credit histories weakened by the effects of lasting discrimination.7 The federal government’s attempts to address this problem have been paltry at best and harmful at worst. When the federal government finally got involved in financing Black business, its efforts originated as an an- ti-Black political tactic rather than a real attempt to help the community. In 1969, President Nixon established the Office of Minority Business Enterprise (OMBE), fulfilling campaign promises that he would use his ad- ministration to further an agenda of “Black capitalism”. Officials at the newly created agency initially took their role seriously, putting together an ambitious $8.6 bil- lion plan to create 400,000 new minority-led businesses in ten years. This idea, however, was short-lived. Upon hearing of the plan, Secretary of Commerce Maurice Stans immediately shut it down: Stans informed his employees that they had misjudged their new positions, explaining to them that they were not there to create widespread material uplift, but success stories: “What the black people, the minority people, need more than anything else today is a modern Horatio Alger.”8 As Baradaran writes, the agenda of Black capitalism was a “public relations strategy”meant to appease the calls for economic empowerment coming from the Black Power movement.9 The OMBE has since become the Minority Bu- siness Development Agency (MBDA), a less symbolic entity than its predecessor and the only federal agency that exists to foster the economic well-being of Black Americans and other people of color. However, the MBDA has incredibly weak support from within the federal government: in fiscal year 2020, it was allocated
  3. 3. 4 $42 million, just 0.0003 percent of total discretionary spending.10 Entrepreneurs can also acquire finance ca- pital from the Small Business Administration (SBA), though Black Americans only receive three percent of SBA loans despite being thirteen percent of the popu- lation. But the issue with the MBDA and the SBA is not only one of magnitude; they also have their eyes on the wrong target. In trying to revitalize communities simply through loans, and leaving Black communities’ other systemic problems unaddressed, these agencies were already drastically limited in the impact they could have.This problem is best highlighted by the history of a particular kind of institution: Black banks. For decades, Black banks have been trying to solve these problems by funneling capital into Black com- munities. In her book The Color of Money: Black Banks and the Racial Wealth Gap, Mehrsa Baradaran documents the history of these financial institutions and comes to a grim conclusion: despite more than a century of trying to support their communities, Black banks have struggled to achieve long-lasting success, a result that stems directly from how deeply this nation has entrenched the problem of Black poverty. Because many of their consumers, on average, have little to no wealth and lower incomes, Black banks’ deposits are smaller and more volatile (i.e., there’s less predictabi- lity as to when they’ll be withdrawn and/or deposited again).They also face higher losses on their investments for similar reasons. As a result of this instability, they end up investing a large chunk of their own funds in U.S. government securities, which are more stable; however, the more money invested in securities, the less they are investing in their own communities. Perhaps the most major issue facing Black banks is undercapi- talization. Capital, invested by shareholders or retained from profit, acts as a cushion against losses that finan- cial institutions incur; this makes capital integral to an institution’s ability to maintain and expand their ope- rations. However, a bank attracts more capital by being profitable—and for all the aforementioned reasons, this is something Black banks have trouble doing.11 The in- tricacies of Black banking are important because they 10 Connor Maxwell et al., “A Blueprint for Revamping the Minority Business Development Agency,” Center for American Progress, ac- cessed September 6, 2020, https://www.americanprogress.org/issues/ race/reports/2020/07/31/488423/blueprint-revamping-minority-busi- ness-development-agency/. 11 Baradaran, The Color of Money, 243-245. 12 “Black Socialists in America,” accessed September 6, 2020, https://blacksocialists.us/. reveal that Black business success is constrained by the current economic landscape of the U.S. What Black businesses need, then, is not just goodwill or more consumer dollars; they need a redistribution of wealth not only targeted towards entrepreneurs but the whole of the Black community. In other words, thriving Black entrepreneurship might be best envisioned not as a path towards racial equity, but as a result of it. The question then becomes: how do we get to that kind of economy and society? Broadly speaking, we need bold, new ideas. Policies like universal basic in- come, baby bonds, and reparations for American des- cendants of slavery deserve serious consideration. The emerging conversation on social democracy and socia- lism also holds serious relevance to questions of racial justice.12 Underlying these ideas is a shift from indivi- dualism to political and economic solidarity, as well as an acknowledgement of the lasting impact of history. For those who would decry certain recommendations as being based in harmful identity politics, I would point to the history of the term: identity politics was originally conceived by a group of Black women called the Combahee River Collective, for whom “identity politics”meant recognizing the unique oppressions and privileges that impacted different people, identifying common ground, and productively grappling with any tension that may arise, so that they could ultimately work together towards related goals. Following in the spirit of the Collective, we must be comfortable with supporting policies that uniquely and disproportiona- tely help Black Americans, especially those whose an- cestors were enslaved in the United States. In short, the fundamental reasons why supporting Black business is a good idea still stand—when we do so, we support Black households and the cultural meaning that these businesses bring. But supporting Black businesses should be one piece of a much broader framework. Racial economic justice will not come from well-meaning people pledging their dollars; it will come when we as a nation are able to systemically address our centuries-long problem of anti-Black racism in a radi- cal and unforgiving way. THE YALE HISTORICAL REVIEW Brian Reyes is a senior at Yale University and a Senior Editor of the Yale Historical Review. As a history major and a Mellon Mays Undergraduate Research Fellow, he studies race, capitalism, and social movements from the late 20th century to the present.

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