How Monopolies Stymie Political Activism: The Case of Black-Owned Businesses

I’m giving a brief overview of an important, well written article at Washington Monthly, The Decline of Black Business. It traces the precipitous decline in the number of black-owned businesses, and links it to a diminished ability to engage in political activism. The piece, by Brian Feldman, describes in detail how black-owned enterprises played a key role in the civil rights struggle, both by virtue of allowing owners and employees to participate visibly in the struggle (blacks working for whites risked being fired) and via black businessmen contributing important resources, such as office space, to organizers.

The data and anecdotes on both of his major threads, the collapse in black entrepreneurship, and the role they played in the Civil Rights movement, are striking. For instance:

The last thirty years also have brought the wholesale collapse of black-owned independent businesses and financial institutions that once anchored black communities across the country. In 1985, sixty black-owned banks were providing financial services to their communities; today, just twenty-three remain. In eleven states that headquartered black-owned banks in 1994, not a single one is still in business. Of the fifty black-owned insurance companies that operated during the 1980s, today just two remain.

Over the same period, tens of thousands of black-owned retail establishments and local service companies also have disappeared, having gone out of business or been acquired by larger companies. Reflecting these developments, working-age black Americans have become far less likely to be their own boss than in the 1990s. The per capita number of black employers, for example, declined by some 12 percent just between 1997 and 2014.

We’ve discussed some of the drivers of the fall in startups, which has become an economy-wide phenomenon: banks withdrawing almost entirely from character-based small business lending; weak demand in the economy post-crisis making it unattractively risky in many sectors of the economy; shortened job tenures making it harder for employees to identify the sort of unfilled niche opportunities which have proven to be the most successful startup formula; and as Feldstein stresses, the rise of monopolies making it much harder for small business to survive and thrive. As he writes:

The decline of black-owned independent businesses traces to many causes, but a major one that has been little noted was the decline in the enforcement of anti-monopoly and fair trade laws beginning in the late 1970s. Under both Democratic and Republican administrations, a few firms that in previous decades would never have been allowed to merge or grow so large came to dominate almost every sector of the economy.

This change has hurt all independent businesses, but the effects have disproportionately hit black business owners. Marcellus Andrews, Bucknell University professor of economics, says that pulling back on anti-monopoly enforcement was a “catastrophic intellectual and political policy mistake,” and that for the black community, the “presumed price advantages of concentration often do not translate into better economic opportunities.”…

In 1969, J. Bruce Llewellyn grew ten Bronx supermarkets into the nation’s largest minority-owned retail business. By the 1990s, however, a retreat from antitrust enforcement and other fair trade laws permitted a few giant corporations like Walmart to engage in anticompetitive behaviors that in previous decades would have resulted in civil and criminal prosecution. These included undermining the pricing power of suppliers and loss leading, or the practice of selling below cost in order to drive competitors out of business. In 1999, Llewellyn sold his last remaining stores to the Dayton-Hudson Corporation, now known as the Target Corporation.

In 1986, a top executive at Revlon made a prediction about the future of the beauty and hair care industry. “In the next couple of years,” he told Newsweek, “the black-owned businesses will disappear. They’ll all be sold to white companies.” The prediction proved accurate. In 1993, IVAX Corp. purchased Johnson Products Co., the thirty-nine-year-old maker of Ultra Sheen, beginning a decade-long series of acquisitions that wiped out remaining black ownership in the hair care industry. One consequence was fewer new hair care products for black customers. Funds once channeled into research and development, University at Buffalo professor Robert Mark Silverman explains, now were accrued as profits by the larger firms.

And lack of economic independence constrains political expression:

The role of market concentration in depressing black-owned businesses is also troubling because of the critical role that such enterprises have played in organizing and financing the struggle for civil rights in America. In the 1950s and ’60s, black Americans employed by whites, including professionals like teachers, often faced dismissal if they joined the civil rights movement, whereas those who owned their own independent business had much greater freedom to resist….

In 1928, W. E. B. Du Bois validated the black community’s embrace of anti-monopolism when he wrote, “To ask the individual colored man . . . to sell meat, shoes, candy, books, cigars, clothes or fruit in competition with the chain store, is to ask him to commit slow but almost inevitable economic suicide.” In 1932, the Associated Negro Press and the National Negro Business League, with the cooperation of the U.S. Department of Commerce, printed a newspaper column called “Business and Industry.” One article in the series noted that “an embarrassing problem confronts the 70,000 or more Negro-owned individual enterprises in the U.S. today[:] . . . Big Business, which so perceptibly handicaps the small industrial business units in which category Negro enterprise unquestionably belongs.”…

Independent business owners also played a key role in financing civil rights protests, especially during their peak in the 1950s and ’60s. In Tallahassee, black grocery store owner Daniel Speed bankrolled a bus boycott similar to that in Montgomery, and his shop served as a meeting ground for black leaders. In Biloxi, Gilbert R. Mason, owner of Modern Drug Store, led a “wade-in” against the whites-only section of a federally funded Gulf Coast beach. In his autobiography, Mason wrote, “Pharmacists represented an economically independent class of black businessmen who might have been thought difficult for the white establishment to control. In many cases, the black-owned pharmacy was itself a nexus in black communities.”

Funeral home owners emerged as another powerful bloc of civil rights activists. In 1956, funeral home owner William Shortridge cofounded the Alabama Christian Movement for Human Rights, a group that sought to end employment discrimination and abolish segregation in public accommodations. A. G. Gaston, who built his business empire as the owner of the Smith and Gaston Funeral Home, threatened to transfer his accounts from a white-owned bank unless it removed a “Whites Only” sign from a water fountain. In 1963, he lent Martin Luther King Jr. a room at his Gaston Motel. Soon known as the “War Room,” it was there that King decided to submit himself to arrest in Birmingham, a galvanizing moment in the civil rights movement.

These excerpts only scratch the surface of this meaty, well-reasearched article. Go read it now.

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  1. Kalen

    Great post. Finally somebody speaks of everyday reality we are witnessing, behind the fake front companies with different cute names, pretending to be mom and pap, all belonging to concentrated capital, while true minority businesses are dying.

    Here is a raw essay that addresses fallacy of suppose policies of promoting small business by forcing it to become big business or die:

  2. Moneta

    So… is identity politics good or bad?

    It seems to me that the left can’t make up its mind. It can be used to win rights but not when used to take these away.

    1. JCC

      This change has hurt all independent businesses, but the effects have disproportionately hit black business owners.

      Is this really “identity politics”? Or is it a short piece about monopolies destroying local Main Streets, disproportionately affecting black-owned businesses?

      I vote for the latter.

        1. bob k

          ^that. I think you’re confusing the terms “left” with “liberal.” A genuine left puts class – I know we’re not used to that term – interests above the silos cut out by gender and age and culture, etc. The vast majority of blacks have always benefitted when their struggle for equality was part of a larger struggle against monopoly and the predations of capital. You can look at the historical struggle of the Free Soil Party – free soil, free labor, free men – and the Populists to see the power that comes from a true united front that takes up many struggles. You can also see that the powers that be wasted no small effort to disrupt and destroy there struggles.

          When was the last time you saw a concerted effort to disrupt “identity politics?”

          1. bob k

            I should add that since the Great Migration the majority of black people in the northern cities were working class, having entered the factories in great numbers. The struggle against discrimination would seem to be part of the trade union movement. That it wasn’t by and large can probably be attributed to the fact that as blacks moved into the cities, the whites moved out to the suburbs (aided by the Interstate highway system that also physicallydivided the black communities off), and, as the WA Monthly article notes, their neighborhoods were redlined, they couldn’t get FHA loans and couldn’t move to the suburbs. Divide and conquer is a tried and true tactic used by capitalists to keep workers fighting each other. And of course it was aided by the fact the white workers had material benefits that they sought to keep, rather than expand to POC. Again, the lack of a real left wing party to some degree led to this.T

      1. Katharine

        Yes. It’s important to go beyond isolated words and consider what an article (or book) is actually about.

        1. Moneta

          When I read a book, I consider what it’s about but I also try to see the link between that book and all the other books I have read so I can better understand the world around me.

          Here at NC, there is a lot focus on avoiding discrimination (avoid identity politics such as segregating using words such as boomers, millenials, etc.). But over the last 40-50 years a lot of rights have been won using identity politics. So wouldn’t it be logical to see these rights also lost using identity politics?

          Reading this post, it dawned on me that rights won using identity politics might be more at risk than those won based on plain fairness/justice for everyone. But maybe I’m wrong. I need to ponder this…

    2. PKMKII

      Put dry and academically, the left has a problem with identity politics sans intersectionality. Put more casually, the left has a problem with identity politics that consists of outrage and bougie minority tokenism (“It’s okay if these black-owned business have gone under due to corporate monopolies, as long as the board of the corporations in question have at least one black person on them”), that treats discrimination as wholly separate from class. Addressing bigotry and its root causes is good, it’s putting on the veneer of social justice without addressing the substance that is a problem.

      1. Arizona Slim

        This sentence deserves to go viral:

        Addressing bigotry and its root causes is good, it’s putting on the veneer of social justice without addressing the substance that is a problem.

        Thank you, PKMKII!

  3. Musicismath

    I would share this excellent piece with the usual crowd of liberals who think they’re leftists, but I imagine that the immediate comeback would be: “But why doesn’t he mention #BLM? Surely the existence of this movement undercuts the article!!!”

    I guess I could then link the Adolph Reed nonsite essay on why #BLM doesn’t constitute a “political movement” on the same order as civil rights, but I’m sure sharing *that* would elicit the internet equivalent of blank stares and suggestions that Reed doesn’t count as a critic because Freddie Deboer and Nathan Robinson like him.

  4. TheCatSaid

    Great post. I bet the stats for minority-owned/run franchises is poor both for franchise ownership and for individual stores. Does anyone know if there are any chains that are especially welcoming to minority franchisee owners?

    1. PKMKII

      I know Golden Krust was founded by a black Caribbean immigrant, and have put an emphasis on giving economic opportunities to said community. So I would think that would extend to franchisees.

  5. Tim

    One cannot have this discussion without addressing the role of COINTELPRO at disrupting person to person trust in the Black community. The FBI systematically targeted all efforts at Black business self-empowerment. When the Black Panthers ran breakfast programs, the FBI would make fake extortion threats (in the style of the Panthers) to business owners who were already donating to the cause.

    In San Francisco during the early 1980s, the big cooperative food system warehouse suffered massive internal battles (erupting into a gunfight and then a suspicious fire) that many old-timers believe were driven by the FBI. Those cooperative businesses often had programs to bring in Black former prisoners as worker-owners.

    It’s not just about monopoly (market) power it’s about state violence and the power of the security services.

  6. Sluggeaux

    My father was a wholesale grocer supplying black-owned businesses in the Oakland area during the 1960’s-1980’s. Many of those business owners had been educated in the Historically Black Colleges and were an amazing group of civic-minded people.

    During the 1980’s, most of those black-owned businesses went under due to competition from big-box stores, who had abandoned minority communities during the “Burn baby, burn” 1960’s but came back with a vengeance when the civil rights struggle cooled. The community lost an important source of socially-conscious funding when black-owned businesses went under.

    It was an inspiration to have known that generation and I’m glad to see them finally as the topic of serious discussion.

  7. blert

    Black financing for Dr. King et. al. largely came from Black LANDLORDS… not businesses.

    By accident of history, I ran into the grandson of one of Dr. King’s biggest chronic supporters.

    He was not so much “a talented tenth” as a talented .01% of the Black community of Atlanta. He could afford to kick Dr. King $5,000 at a crack, at will, half-a-century ago.

    The typical Black owned and operated business never had the cash flow to support Dr. King… or anyone else.

    Politics is largely supported by the rentier class… and always has been.

    Note how LATE to the political game even Bill Gates was… and his pattern of contributions is typical.

    The famous robber barrons of the 19th Century didn’t start to buy politicians until after they’d become titans. It was then that they slipped them into their back pockets.

    ( J.D. Rockefeller famously ‘owned’ Ohio, well, at least its officials.)

  8. c1ue

    Sorry, but I don’t agree the article is either well researched or groundbreaking.
    For one thing, it would be a far stronger argument if the author had taken the time to contrast black owned business data with overall business data.
    For example: is the reduction in numbers of black-owned businesses really dramatically different than the decline of small business in general? So many of the stories of black owned businesses ending in the article were said businesses getting bought out – hardly an outcome that is guaranteed bad.
    The decline of black owned bookstores, video rental shops, or other once common small businesses isn’t a racially discriminatory phenomenon, for example, but it is emblematic of economic disruption due to Amazon and Netflix.

    1. HotFlash

      Hi c1ue, just wondering here…

      it would be a far stronger argument if the author had taken the time to contrast black owned business data with overall business data.

      If the thesis is that reduction in black-owned business reduces black activism by denying it independent funding and other resources (meeting space, time off without repercussion, etc.), which it seems to be, then what does overall biz data have to do with that? If anything, one would like to look more broadly, to see if the similar pattern of small businesses being consumed into the Giant Corporate Amoebae is reducing (or influencing/controlling?) activism in other areas.

    2. lb

      Think less of discrimination than outcomes. Consolidation in financial institutions beyond some point affects the populace adversely, sure. If black-owned financial institutions helped the black community in some way, and an effect of overall consolidation is the disappearance of black ownership, the black community is left at a significant loss.

      Some folks respond to “black lives matter” by trying to reframe and dilute with “all lives matter”. They miss the point, sometimes wantonly. Your argument sounds somewhat parallel. This article is about harm done to the black community, not harm done to the black community in contrast to the overall community.

    3. JCC

      My initial reaction was that this was interesting and probably accurate, but I’m not sure if all of it is well researched either… or groundbreaking.

      But not having a great deal of time to research this sort of thing myself, but enough time to be curious, I plugged a few searches into Google (too easy, I know, and probably not overly accurate results) and finding both detailed and accurate info was not easy.

      Specifically I searched on things like “percentage of minority owned franchises” (mentioned above) and similar searches. Most of the results were too vague and/or generalized to draw any immediate conclusions, after all, minorities are everyone but whites, about as vague as you can get.

      But I did stumble across this at wikipedia African American Businesses and the section called 21st century bothered me a little relative to the article.

      It would appear that the author, Brian Feldman, is talking about a totally different level/class of business in general compared to this wikipedia statement (that was not backed up with an accurate link, by the way):

      In 2015 The US Census Reported that there were 2.6 million black or African American-owned firms nationally in 2012, up from 1.9 million or 34.5 percent from 2007.

      After reading the original article, though, I do think it’s a very good piece on the history of small to medium sized businesses owned by blacks during the 20th Century but I would really like to read, all in one place or two, some accurate and detailed research backing up (or not) both Feldman’s and wikipedia’s claims.

      There are so many things I would love to research and think about, but I have so little time. I guess I’ll just have to depend on the research of others.

      1. Yves Smith Post author

        We’ve found major errors in Wikipedia data, in fact just yesterday I had to have Don Quijones correct a post because Wikipedia claimed that the retirement age in Italy was a full 7 years lower than it really is.

        The idea that the number of small business of any type save in countercyclical niches like tailors increased from 2007, the peak of the pre-crisis era, to 2012, is implausible on its face, let alone by 34%. Private equity, in better position to back businesses than anyone, was struggling to raise new funds. And the data clearly showed by 2012 that all of the post-crisis income gains went to the 1%; everyone else was a net loser.

        If the Census reported anything like this, I would hazard it has to do with aggressive reclassification under the Obama Administration to liberalize what was considered to be a minority owned business. The very fact that this factoid has not been touted widely suggests it would not hold up to scrutiny.

      2. Yves Smith Post author

        I found the Census Bureau quote, and the factoid is really dodgy. It also includes this priceless statement:

        All except for 109,137 or 4.2 percent, of black or African American-owned firms were nonemployers.

        The overwhelming majority of these “businesses” are not businesses in any meaningful sense.

        The IRS limits how much you can take out in profit v. salary. A business with no employees where the owner is taking all the income out as profit as opposed to attributing some to salary is asking for an audit.

        After the crisis, blacks were hit harder by foreclosures than whites and also suffered higher rates of unemployment. The most likely explanation of a spike in a near depression is that these were people who were unemployed saying they were self-employed because it looked better while they were job hunting. So the big rise for blacks is a sign of desperation, not success.

    4. Yves Smith Post author

      Straw man. I never said it was groundbreaking.

      You are seriously saying an article that has this much detail on the history of black owned businesses, the role of black businessmen and politicians in anti-monopoly efforts, and how black owned businesses were important to black struggles for greater political rights isn’t well researched? What planet are you from? Have you ever done any actual research of this sort yourself? It appears not.

      The fact that it does not provide data you’d like to see does not mean it is not well researched.

      And if you know anything about banking or insurance, you don’t need the comparisons. The fall in black owned banks and insurers is obviously far greater than the aggregate.

  9. EyeRound

    Well, the Stiglitz Center at the University of Chicago’s Booth School of Business is currently hosting a 3 day conference on “Is There a Concentration Problem in America?” Meaning monopoly problem. I came across it in David Dayen’s twitter posts. Aside from what you would expect from this institution (“regulation is bad, bad, bad, doesn’t help the economy, etc.”), apparently, at least according to Dayen, there is some talk of something called “political antitrust” by one of the U of C hosts, Luigi Zingales. Maybe it means a new era of “trust-busting” but it’s hard to see how re-regulation would be possible among today’s global supercorporations.

    The demise of the FTC, begun with de-funding in the 1970’s as the article indicates, has turned it into yet another supine regulatory agency. In its earlier days the FTC had a dual purpose: to control business/concentration and to enforce consumer protection. As an example of the latter, the FTC of bygone days oversaw “truth in advertising,” presumably to ensure that ads didn’t outright lie to consumers. In other words, recognition that business and public welfare were more or less antithetical to one another.

  10. EyeRound

    Hi. Sad to say, this is the second time NC has bricked a comment from me. Is there some problem?

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