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Is Black Capitalism Still a Myth?

The Myth of Black Capitalism, New Edition
This article is the introduction to the new edition of Earl Ofari Hutchinson, The Myth of Black Capitalism (Monthly Review Press, 2023).

The year was 1968. Then Republican presidential candidate Richard Nixon was in the midst of an intense dogfight with Democratic presidential nominee and the vice president Hubert Humphrey for the White House. Nixon needed an edge.

The edge was the race card. He covered two of his political flanks playing it. One was his so-called Southern Strategy. Put simply that meant saying little and doing even less on the fight for racial equity that would rile the white conservative South.

The second was to come up with something, anything that would dent the ironclad lock the Democrats had on the Black vote. This meant he had to appear that he was not the polarizing racist that many Blacks regarded him and the GOP as. His idea was crass and cynical, but in one sense it was brilliant.

He combined two words that appeared on the surface to be an oxymoron. They were “Black” and “Capitalism.” This was not just a con man’s eye-catching sloganeering. Nixon sought to put body behind it. In his acceptance speech at the 1968 GOP presidential convention, he thundered, “Let government use its tax and credit policies to enlist in this battle the greatest engine of progress ever developed in the history of man—American private enterprise.”

In the immediate months after, Nixon trotted out a parade of prominent African American sports, entertainment, and business entrepreneurs to gush over his Black Capitalism call and, of course, endorse his candidacy.

This touched off a fierce debate among African Americans that essentially boiled down to two questions: Could Blacks really be capitalists? How could Blacks attain some measure of economic independence, wealth building, and, most important, business, and financial ownership?

In 1968, I was a graduate student, president of the campus Black Student Union, and, as were many young Blacks, a radical, the label in vogue before “activist” and “progressive” supplanted it. I, and others, were deeply enthralled by Karl Marx and Marxism. The Nixon call stirred a mix of fascination, awe, and anger. It also stirred a burning desire to dig deep into the history of Black economic development and in the process debunk it.

The result was The Myth of Black Capitalism. In the introduction, I laid down the gauntlet: “Future programs for black liberation definitely should not include capitalism in any form.” I fleshed out a hard-nosed radical critique of Black Capitalism and lambasted those I termed the “Black Elite” for trying to foster what I considered this fraud on Blacks.

But there are two often daunting facts of life. One is that things change, while at the same time they stay the same. That holds true for politics, people, and often one’s point of view. That is, in one’s thinking about events and issues over time.

In the half-century since the initial publication of my book, successive presidents up to and including Joe Biden and even Donald Trump all borrowed a page from Nixon’s Black Capitalism playbook in their pitches to Blacks. They pledged to provide more funding, support, programs, and technical assistance to minority businesses.

In the same period, some Blacks have often, with much media fanfare, become major sports team owners, corporate, bank, and Wall Street firm CEOs, and major investors in and owners of an array of varied business enterprises.

To many, this seemed irrefutable proof that Blacks not only can be capitalists but are capitalists. There is also the side-by-side debate over the new buzzwords—Black financial empowerment, wealth building, financial and business literacy, financial planning and management, and debt avoidance. These phrases have struck a deep chord among many African Americans. They have engendered healthy debate and discussion, striking to the heart of the need for prudent financial solvency and security.

However, a half-century after my book’s release, one thing has not changed, and that is the brutal reality that still firmly bolsters my initial critique. Blacks are still entrenched at or near the bottom of the economic ladder. They consistently in the past fifty years have had the highest rate of joblessness and poverty, and the lowest rate of business ownership. They remain mired at the bottom of America’s economic and financial ladder.

A 2019 NBC study found that Blacks represent less than one percentage point (0.8 percent) of Fortune 500 CEOs. The number is even more damning when one considers that Blacks make up 10 percent of college graduates. Proportionately, Blacks then should make up at least fifty Black CEOs. There were only four at the time.

In 2020, Blacks owned less than 3 percent of American businesses. Even this was misleading. The bulk of them were still mom-and-pop sole proprietorships, with one or two employees.

The COVID pandemic revealed another deflating fact about Black business ownership. That is how tenuous and fragile it is.

This figure was oft cited after Trump and Congress passed the COVID stimulus relief packages in 2020. Ninety percent of minority businesses did not get a nickel of money from the Small Business Association’s (SBA) Payroll Protection Program. For Black-owned businesses, the number was even worse. Ninety percent got no funding.

In several informal polls on my Facebook pages during the pandemic, I asked the same question: “Do you know of any Black-owned business that got a COVID stimulus SBA Payroll Protection Program Loan?” There were a handful of “yeses.” There was an avalanche of “nos.” Some expressed optimism that the grim shutoff of the money spigot to Black businesses might change with the House passage of an added $3 trillion stimulus package. However, the hope was guarded and cautious.

At first glance, the abysmally low numbers seemed ridiculous. Trump, congressional leaders, and Treasury officials loudly pledged that small businesses were a prime target of the aid program. There was a litany of much publicized online workshops and town halls on where and how to apply for funding. Many banks announced that they had funds and encouraged businesses to apply. House Democrats sweetened the pot by prying $60 billion out of the loan package for minority banks. Yet, the low number of Black businesspersons who got money never budged.

There was much justified finger-pointing at the SBA, Treasury officials, corporate and bank lobbyists for lax to nonexistent oversight, lax rules on who could get the money, and earmarking far too much of the half trillion in business loans to major corporations.

There was equally justified finger-pointing at the banks for tossing up a mountain of paperwork, tax and business filing documents, and account requirements that small business owners had little chance of hurdling. Then there was the muddle, confusion, and constant changing edicts about what and how the money could be used and what if any of it had to be paid back.

Little had changed except the desperation of countless numbers of near penniless, distressed Black small business owners. The clock ticked on the future survival of Black businesses. There was no guarantee that the businesses would reopen their doors, and when they did, that their customers would be back. Many closed their doors permanently.

Making government funds immediately available for Black-owned businesses was then and always vital to counter the inherent ideological and structural tilt toward the big corporations that is built into all government contracting, taxing, and endless subsidies that is the virtual sole province of corporate America. For instance, during the pandemic, Wells Fargo flatly said in a memo that it “prioritized” loans to its biggest and supposedly best customers, namely the major firms. It took much heat for its candor and in quick damage control said it would donate the hefty lending fees it raked in to nonprofits. At least that is what it said.

Black businesses have long been a specially endangered breed when it came to getting a dime out of banks and the government. The reasons are well documented: the lack of credit, a proven business track record, resources, expertise, and a longstanding cozy business connection and relationship with the banks. Then there is the dizzying gauntlet of wage and tax forms, documents, and filings needed to qualify for a loan. Much of the work is done online and that means having a computer, computer access, and computer skills to go through the cyber paperwork required.

Countless surveys by business groups, federal regulators, and watchdog groups have produced reams of figures to show that despite the PR lip service lenders pay to wanting to loan to small businesses, the paltry number of loans they make annually to small, and especially minority, businesses has remained frozen over past decades.

On the plus side, Black businesses, I will concede, have been a needed engine for employment, wealth building, financial security, and, importantly, hope for many Blacks. They have served as showpieces for Black financial and economic achievement and independence. They have spurred generations to pursue the oft-touted American dream of entrepreneurship and the means to be your own boss.

Yet a half-century plus after the publication of The Myth of Black Capitalism the state of Black business remains exactly as I wrote in 1970—small, and marginalized. Today, as then, it cannot be said that they are the embodiment of the capitalism that Nixon proclaimed as his goal for Blacks in 1968. In short, as I wrote in 1970, Black Capitalism is still a myth.

2024, Volume 76, Number 02 (June 2024)
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