Beginnings to 1900 Black entrepreneurship has been traced back to Africa itself.
University of Texas economic historian Juliet E. K. Walker has argued that the African elites who collaborated in the supply side of slavery lived in kingdoms where agriculture, construction, fishing, craft and merchant guilds were well established, and that the marketability of kidnapped Africans was also linked to their background and competences in areas like mining, cattle-raising, and
rice cultivation. Between 1837 and 1841, writing for the
Coloured American newspaper under the pseudonym
Augustine,
Lewis Woodson had set forth an early comprehensive and systematic plan for achieving the economic uplift of his fellow African Americans. Woodson was an early teacher and mentor of
Martin Delany, who became his protégé. Historically even prior to the
Civil War, a significant number of blacks in northern states engaged in all manner of skilled trades. On the eve of the war, free Afro-Americans numbered 88,070, with an estimated collective wealth of around $50 million, accumulated evenly between
their respective populations in the
northern and
southern states. Even in the slave states of the South, wherever dense concentrations of Afro-Americans existed, such as in cities like
Savannah,
Charleston,
New Orleans and
Richmond, blacks keen to escape from selling their
labour for wages, managed to run a number of profitable enterprises. Free blacks like Martin Delany openly stated that social elevation by blacks would be related to their acquisition of business acumen, very much as was the case with whites.
In the era of reconstruction following the civil war,
black code legislation passed in 8 southern states struck at the heart of freemen's access to trades and Afro-American artisan enterprises by placing strict limits to black property rights and skilled craftsmanship.
The Freedman's Saving and Trust Company (FSTC), which grew out of the military banks where the wages of black soldiers had been deposited, and was created by Congress on March 3, 1865, was designed specifically to serve as a substitute for land grants, which had been foreclosed by violence and to counter the effects of post-war retrenchment of blacks in the South. It was considered the preferred vehicle for enabling blacks to save up and purchase land. One of its institutional aims was to tutor poor blacks and inculcate them with the virtues of thrift and planning for the future. Within a decade it garnered deposits totalling $75 million from 75,000 otherwise generally impoverished freedmen. A later amendment to its charter, which originally stipulated that the bank was to secure and safeguard deposits, and invest 2 thirds of the capital in government-backed securities, enabled white managers to effectively loot the bank by engaging in real estate speculations. The
First National Bank shifted its own liabilities onto the FSTC's books while drawing on its deposits to buy worthless paper. A 2019 study of 107,197 accounts in the FSTC archives found that access to the Freedman Saving's Bank significantly increased the schooling, literacy, employment, income, and real estate wealth of its depositors. The authors inferred that these accounts, spread over 27 Freedman's Bank branches, represented some 483,082 individuals in toto, that is roughly 12% of the Black population in the South in 1870. In the wake of the
1873 financial crisis,
Frederick Douglass was appointed by the bank's trustees as its president, and, after investing $10,000 of his own money, discovered that the institution was crammed with "dead men's bones, rottenness and corruption". Congress on receiving his report had the bank's operations closed down on June 20, 1874, with the result that 61,113 depositors were denied access to their savings of $3 million. Speculative mismanagement burned half of the accumulated wealth accumulated by its black clients.
W. E. B. Du Bois was to observe that, aside from ruining thousands of blacks, the experience drummed into many more a deep sense of institutional distrust of banks and the federal government among the Afro-American community.
1900-1960s A core aim of the
National Negro Business League under its president
Booker T. Washington from its foundation in 1900 was to alleviate the plights of discrimination against blacks by encouraging economic self-sufficiency. It was thought that by embracing thrift, industry, and Christian values, rather than exercising political pressure to ameliorate their situation through legislative changes, that the social inferiority suffered by blacks could be gradually reduced. The choice of this priority would soon stir opposition from the ranks of the
National Association for the Advancement of Colored People (1909) and among many upwardly mobile Afro-Americans. Leaders such as
W. E. B. Du Bois represented their view that what this precedence effectively entailed was a tacit acquiescence in Afro-American inferiority.} Du Bois eventually came round, however, to recognizing by the 1920s that black capitalism was both feasible as a project and a desirable goal. The three decades from 1900 to 1930 have been called "the golden age of Black Business". A black entrepreneur like
Annie Turnbo Malone succeeded in establishing a cosmetics industry that gave employment to some 75,000 Afro-Americans. One of the companies founded by the former slave
John Merrick, the
North Carolina Mutual Life Insurance Company became under the management of
Charles Clinton Spaulding became the largest black-owned business in the United States. The life of the first female Afro-American banker
Maggie Lena Walker tells a similar success story. These exemplary figures emphasized in their writings and activities the necessity for business to face its social responsibilities. The
G.I. Bill, which took up 15% of the entire federal budget by 1948 and which enabled, via low-cost mortgages and educational benefits, large numbers of
lower class white Americans to rise into the middle class, was so structured or interpreted that its benefits were not widely distributed to Afro-American veterans of World War 2.
1968–1980 Following on recommendations by the
National Advisory Commission on Civil Disorders in 1968 for major programmes to ameliorate the quality of ghetto life, and in response to
Black radicalism, Nixon often spoke of black capitalism as a remedy for the ills besetting Afro-American communities during his
1968 presidential campaign. The idea had long enjoyed grassroots Afro-American support before Nixon put it on his agenda. He established an
Office of Minority Business Enterprise (OMBE). Despite initial scepticism, it did improve the prospects of some minority firms, but given the small number of black entrepreneurs the overall effect was small, though it did generate widespread interest in the idea. The measures taken by the
Carter administration from 1977 to 1979 to improve technical training and facilitate loans for Afro-Americans, and in particular its
SBA 8A set-aside program, led to black business's biggest period of growth. A fixed percentage of government contracts allocated to minority firms was mandated at all levels from federal to local agencies and the measure almost tripled government business with black firms ($1 to 2.7 billion by 1980).
1980s The impact of Carter's policies declined rapidly under the succeeding
Reagan administration. which was opposed to
affirmative action quotas and goals, and trimmed SBA funding. Though first passed by Congress during the final year of Carter's administration (1980), the
enterprise zones developed from the 1980s onwards had a marginal impact.
Eleanor Holmes Norton, for one, dismissed them as evasive schemes by government to avoid spending on the poor and developing areas suffering from
urban decay. The politically activist NAACP's reaction to this sea-change in government policy was to re-embrace the recipé outlined by Booker Washington and others in the early 1900s, namely self-help. The return to first principles was bolstered by the impressive growth of a
black middle class, with a sharp rise in its purchasing power, and lessons it thought it might learn from the successes experienced by other groups, in particular the recent immigrant communities of
Koreans,
Vietnamese and
Cubans, together with the example set by
American Jews. The common factor discerned in these groups was that they all provided access to credit and capital, as well as technical know-how, for members of their communities. The utility of such models has been questioned: despite appearances, many of these newcomers were professionals, with high education and had access to credit systems and, as refugees from communism, were amply funded as such via
federal resettlement programs.
Critical overviews Ralph Bunche discerned in the fragility of black capitalism its dependence on a credit system monopolized by the white class, which, in his view, tolerated this enclave in its larger structure only on sufferance.
Earl Ofari Hutchinson argues that historically, a core problem in the economics of Afro-American communities has been that they are not structured to
retain capital, a fact exacerbated by the powerful grip major corporations exercise over domestic markets. The chronic outflow of wealth, he concluded, made black areas subject to a kind of
'domestic colonialism'. One further drawback noted by
Andrew Brimmer, speaking as a member of the
Federal Reserve Board of Governors is that black entrepreneurial activities were concentrated in industries that are subject to slow growth. In a keynote address before the
National Black Economic Development Conference in 1969, the economist
Robert S. Browne argued that the lack of empowerment of black communities was grounded in their exclusion from what he identified as the six core bases of the American economy (a)
huge personal wealth, (b)
the top 22 major corporations, (c) the
military-industrial complex, (d) the federal and state governmental apparatus, (e) the federal legislative apparatus, and (f) the
crime syndicate. Marxists, on the premise that race loyalties subvert class loyalties and interracial solidarity, have argued against the view that benefits can accrue to a black community through individual black entrepreneurial activities, and that "buy black" endorsements only favour members of the Afro-American bourgeoisie. The only result of such a stance would be to replace white with black exploitation of blacks. One compelling non-ideological argument, advanced by Sar Levitan and others advanced against the advantages attributed to black capitalism development holds that "an increase in wages and salaries of 2 percent could have more effect on the total income of the average Negro than a 100 percent increase in the profits he presently receives".
Economic disparity Blacks on average have a lower net worth than whites in America. This is especially pertinent in the creation of new businesses. One of the most common forms of collateral for loans to open businesses is home equity. With the historical and current differences in lending patterns toward blacks and whites, the option of using home equity to borrow against in order to open a business is diminished. Writing for the
Huffington Post on "America's Financial Divide", Anthony Moore states ...nearly 96.1 percent of the 1.2 million households in the top one percent by income were white, a total of about 1,150,000 households. In addition, these families were found to have a median net asset worth of $8.3 million dollars. In stark contrast, in the same piece black households were shown as a mere 1.4 percent of the top one percent by income, that's only 16,800 homes. In addition, their median net asset worth was just $1.2 million dollars. Using this data as an indicator only about 8,400 of the over 14 million African American households have more than $1.2 million dollars in net assets...Relying on data from Credit Suisse and Brandeis University's Institute on Assets and Social Policy, the Harvard Business Review in the article "How America's Wealthiest Black Families Invest Money" recently took the analysis above a step further. In the piece the author stated "If you're white and have a net worth of about $356,000, that's good enough to put you in the 72nd percentile of white families. If you're black, it's good enough to catapult you into the 95th percentile." This means 28 percent of the total 83 million white homes, or over 23 million white households, have more than $356,000 in net assets. While only 700,000 of the 14 million black homes have more than $356,000 in total net worth. ==See also==