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Black Business in the United States Is Little More Than a Promise Failed

Earl Ofari is the editor of "Ofari's Bi-Monthly," a national newsletter on economic and political issues and the author of "The Myth of Black Capitalism," published in 1971 by Monthly Review Press

This month’s issue of Black Enterprise magazine called it “a good year” for the top 100 black businesses in America. Each June, the magazine devotes an edition to a prideful look at the state of the nation’s major black businesses.

For 1984, the top 100 firms registered total sales of $2.6 billion. Black Enterprise boasts that the companies’ total rate of growth from 1983 surpassed both the gross national product expansion of 6.8% and the inflation rate of 3.7%.

Impressive--maybe. But this depends on the standards by which black companies are measured. Taken on their own, black businesses have indeed grown. However, when compared to the major American corporations, the economic worth of black enterprise remains negligible.

The bottom corporation on the Fortune 500 list for 1984 is Coatesville, Pa.-based Lukens Inc., a machinery firm. Lukens’ sales ($416 million) far exceeded the combined sales of the top three black companies ($380 million).

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Battle Creek, Mich.-based Kellogg Co., ranked number 143 on the Fortune survey, matched in sales and dwarfed in number of employees the total for the top 100 black businesses. Overall, the $2.6 billion in sales of the top black 100 paled beside the $1.8 trillion in sales of the Fortune 500.

Black businesses in general, are largely “mom and pop” operations with little capital or credit. The Commerce Department’s profile of a typical black business lists it as a sole proprietorship, with no full-time paid employees and with an average of $37,000 in gross receipts.

The sad fact is that black business is still nothing more than a promise failed. And much of the blame must go to recent Republican administrations.

In 1968, Richard M. Nixon told blacks that one of his missions as President was to bring blacks into “the economic mainstream.” With much fanfare, Nixon announced a program of “black capitalism.” The object would be to create a self-sufficient, economically strong core of black entrepreneurs.

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Campaigning in 1980, Ronald Reagan repeated the pledge. Addressing a group of black delegates to that year’s GOP convention, Reagan said that his Administration would help blacks “turn that dollar over at least four times before it leaves your community.”

Reagan’s idea was to build a growth segment of black enterprise capable of providing jobs and income for the ghetto poor at minimal cost to the federal government. Seed capital for this growth would come largely from grants and loans from the overall business community.

Blacks, for the most part, were suspicious. Many black business people, and some black leaders, who had earlier placed their faith in the Nixon plan had seen their hopes dashed. They complained that the Nixon Administration failed to provide adequate funds for minority business programs and did not put enough pressure on corporations to provide loans, technical assistance and training for black business people.

Worse, blacks have watched as their share of federal procurement dollars has shrunk under the Reagan Administration. Rep. Parren J. Mitchell (D-Maryland), chairman of the House Small Business subcommittee, says black vendors received only 4% of government contract money in 1984.

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In 1982, minorities received 9.5% of the loan money disbursed by the Small Business Administration. This year, there was serious talk among Reagan budget planners of eliminating the SBA entirely.

Without an SBA, direct financial resources for 150 Minority Enterprise Small Business Investment Companies would be in dire jeopardy. These MESBICs, as they are called, have been credited with the initiation of more than 6,500 new minority businesses since 1971.

The SBA has been under pressure from outside forces as well. The Assn. of General Contractors, a predominantly white trade group that represents small contractors, has forced the SBA to modify its “set aside” program, under which minority contractors were assured a certain percentage of government contract awards.

The association charged that the program was “reverse discrimination.” The SBA reacted by clamping a five-year ceiling on the period in which companies could participate in the program. The result: 180 minority firms have been removed.

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Black business leaders argue that the cold shoulder they receive from government and many corporations is, at best, shortsighted. Minority business, they say, does not just create wealth for a few individuals, but has economic and social plusses for the entire nation--providing jobs, expanding opportunities and promoting economic independence and community pride.

Few blacks are under any illusion that “black capitalism” can offer a permanent solution to the deep-seated problems of poverty and powerlessness for the ghetto poor. Black business cannot be a substitute for corporate and government action to fund and expand programs for jobs, education and social services.

Black business wants only the chance to compete. When that day comes, Black Enterprise magazine will truly be able to say that not only is it a good year for black business, but also for the nation.


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