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.