Today's date:
Winter 1987

The Invisible Entrepreneur

One of the more curious questions about black economic advancement concerns the observable lack of black small businesspeople in the black neighborhoods of America's cities.

Los Angeles-based writer Joel Kotkin asked black businessmen and academics why. They told him the major reasons are cultural and historical and the effects are clearly damaging to the black community,

This article was excerpted from a much longer piece, "The Reluctant Entrepreneurs." Reprinted with permission, INC. Magazine, December 1986. Copyright 1986 by INC Publishing Corporation, 38 Commercial Wharf Boston, MA 02110.

There is no more vexing problem for the American economy, or American democracy, than the worsening economic plight of American blacks. Blame white racism or the lack of black self-reliance. Point the finger at government programs that offer too much or too little. There is at least a germ of truth in each of these. But why is it that other minority groups have recently found their way into the great middle class while so many blacks still find themselves at or near the bottom rung of the economic ladder?

For Asian and Hispanic-Americans, as with the Jews and Greeks and Italians before them, the favored path to upward mobility has lain in the starting of small, independent businesses. For blacks, by contrast, mobility has been defined quite differently - in terms of education at universities and professional schools, employment in large corporations or government bureaucracies, or celebrity in sports and entertainment. Perhaps more than any other factor, this absence of a black entrepreneurial tradition explains why the advances of some have not led to the advancement of the many.

Robert A. Hill is a black historian at the University of California at Los Angeles and, like many who have studied the black experience in America, he traces the lack of an entrepreneurial tradition to African origins and the brutality of the American system of slavery. Africa, Hill points out, is a more communitarian society, where notions of private property have never been so entrenched as in Europe or North America. "The culture of capitalism is just not part of our African heritage," he maintains.

Despite that, West Indians have shown a remarkable success in business. By 1901, for example, West Indians owned 20% of Manhattan's black enterprises, twice their percentage in the population. As with the immigrant groups that preceded them to New York City, these blacks were not shy about their connections to the "old country." And as with the Asian and Hispanic immigrants today, entire families pitched in to run these proudly ethnic businesses, keeping labor costs low and ensuring that the instinct for enterprise would be passed on to the next generation. Several families would sometimes get together, pool their capital in networks known as "susu," and launch new enterprises. Such virtues as thrift and hard work were part of the West Indian ethos, and leaders such as Jamaican born Marcus Garvey found willing listeners for their gospel of separatism and self-reliance.

The West Indian experience is the best indication that it is historic and cultural factors, not skin color, that best explain the disinclination toward business among so much of black America - a disinclination that borders on conviction.

The relative lack of prominence for black entrepreneurs also came to be reflected, years later, in the civil rights struggle of the 1950s and '60s. Ministers, lawyers and other professionals dominated the movement, and their emphasis reflected the aspirations of a black middle class that wanted to break down the barriers to the white establishment. Less emphasis was given to building a strong and separate black economy that would create its own wealth, its own jobs, its own prosperity. The goal was status - legal, social and even economic - not money. As Atlanta Mayor Andrew Young, a former aide to Martin Luther King, Jr., remembers it, "We were almost taught that there was something wrong with being rich."

Eventually, the civil rights movement opened the doors of opportunity for thousands of blacks. Many went on to college educations and most responded to the preferences of the prevailing black culture by choosing careers in government, the professions, or the corporate side of American business. In 1980, more than half of all black professionals and managers were working for the government.

The idea was to play it safe. That meant starting careers, not businesses. And what followed was something of a brain drain within the black business community. Where once the top accounting, legal and business talent stayed within the community, now the best and the brightest went on to better things in the white world.

"When I was growing up, we had black laundromats and drugstores," recalls Oakland accountant Herman Morris of his boyhood in Little Rock. "But integration changed all that. All of a sudden - hallelujah - you could work and shop with whites. People turned away from black economic institutions because that was a way of getting away from the past."

This turning away of customers severely undermined the market position of black entrepreneurs. According to New York television personality Tony Brown, from 1969 to 1984 the proportion of black income spent in black-owned businesses dropped from 13.5 % to only 7 %. Black banks and insurance companies, once pillars of the community's economy, were sold or folded. Even such traditional bastions of black business as hair-care products have watched as corporations like Revlon Inc. and Alberto-Culver Co. have increased their share of the black market.

Other ethnic groups tend to be more loyal to merchants of their own kind. Tony Brown refers to a San Francisco study that found that money in the Chinese community circulates there five or six times before leaving the ethnic enclave. The figure is four or five times for Jews. With blacks, money earned in the community usually leaves within minutes. "The Chinese are helping, the Chinese, the Haitians help the Haitians, Cubans help Cubans, but blacks are helping everyone else," complains Brown. "We have been conducting the most successful business boycott in American history - against ourselves."

Judged by its purely political power, of course, black America has enjoyed progress far greater than any major minority group. Since 1970, the number of black congressmen has doubled to 20, and the number of black mayors is approaching 300. Blacks now control the top offices *in Detroit, Newark, Los Angeles, Chicago, Philadelphia and New Orleans. Not since the Irish has an ethnic group shown such political muscle. But the limits of political clout can perhaps best be seen in Atlanta.

Fourteen years of political power have done little to raise the relative position of Atlanta's black underclass. The income differential between the city's black and white families remains much, as it was. And the city's rate of black poverty is no better than the national average.

"You can talk about the other problems of our community, but the real cause is that we have failed to get into business," says Tony Brown. "We have to do something to shore up our economic institutions, to generate jobs within the community. When we take care of that, the other stuff the family problems, crime, our political needs will start taking care of itself

Bondie Gambrell, a black real estate investor and developer in Los Angeles, casts an admiring eye at Los Angeles County's Asian community about half the size of the black community. Today, the Asians control some 30 commercial banks in and around the city. They have used their money collectively to start and expand businesses, educate their youth, and even send some of what's left over to relatives abroad.

Korean-Americans, for example, who represent only 1% of the population, own nearly 5% of all retail businesses in the county. And more recently, Koreans have begun buying up businesses and real estate in such traditionally black areas as Watts and South-Central Los Angeles. The move has spawned new racial tension in the city. Some blacks have even begun to boycott Asian-owned businesses as a sort of silent protest against the aggressive ''foreign'' businesspeople in their midst.

"Blacks just don't do what the Koreans do," says Gambrell as he looks wistfully over the city from his posh hillside home. "They band together and raise capital. They work hard and move into our neighborhoods. But it's not their fault. They've figured out that the real color of freedom is green."

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