Is black business declining in America? Judging from the sober warning issued by Black Enterprise magazine publisher Earl Graves, the answer is a troubling yes.
Graves was upset that the top 100 black businesses in the annual Black Enterprise survey had virtually no growth in 1989. He blamed a sluggish economy, attacks on affirmative action and cuts in minority business development for the mounting problems of black businesses.
Ironically, Graves’ gloomy assessment comes at a time when more blacks than ever are trying to start businesses. This was evident at a recent Black Business Expo in Los Angeles that attracted dozens of vendors and thousands of spectators. Across the country, similar expos also drew record crowds.
But if Graves is right, most will be disappointed. And it won’t be anything new. The road for black business has been a rocky one since Richard M. Nixon vowed to give blacks a “piece of the capitalist action” 22 years ago.
The Nixon prescription for turning minorities into capitalists has been embraced by Presidents Ford, Carter, Reagan and Bush with little change. They all dutifully promised to bolster aid to minority business development.
For a brief moment in the early 1980s, black business did show signs of overcoming the roadblocks of racism and poverty that for decades locked blacks into marginal enterprises such as catering, mom-and-pop grocery stores, beauty and barber shops.
For the first time, nearly as many blacks were involved in petroleum, chemicals, manufacturing, automotive sales, investments and communications as in the service industries. A Commerce Department study reported that black businesses’ revenue grew 46% between 1977 and 1982.
Minority vendors also found more corporate doors open. The National Minority Business Council, a New York-based vendor trade association, reported that majority firms purchased more than $8 billion in goods and services from minority vendors in 1987. By the end of 1989, more than 500 associations represented various black industry groups. Black Enterprise hailed each new blip on the black economic chart as the long-awaited breakthrough by blacks into corporate America.
But it wasn’t. Let’s return to this year’s Black Enterprise top 100 survey. While the $6.8 billion in total sales of the top black firms at first seems impressive, it pales compared to the revenue of major corporations. Overall, the total sales of all black businesses were a microscopic 3% of the more than $2 trillion in sales of the Fortune 500 companies’ sales in 1989.
Only one top 100 black corporation, Johnson Products, had stock traded on Wall Street. When the market crashed in October, 1987, Johnson wasn’t spared. The company’s stock plunged too. Only recently has it rebounded to $3 per share.
The S&L; shakeout also took its toll on the 33 black-owned savings and loans. Twelve out of 33 could not meet the minimum tangible capital requirement established by government regulators. Seven were declared insolvent and placed under direct government supervision.
The picture was no brighter in communications. Of the nation’s estimated 1,000 TV stations, only 13 were black-owned. The dismal pattern was the same in radio. Only 170 of the nation’s estimated 9,000 commercial radio station were black-owned.
Worse, private investors give no indication that they are any more willing to provide seed money for black firms.
Black leaders have picked their targets. They accuse the Reagan and Bush administrations of cutting Small Business Administration minority business programs. They point to adverse U.S. Supreme Court rulings curtailing government set-asides for minority contractors. And they accuse banks of failing to increase credit and capital to minority firms.
But black leaders are not totally blameless. They failed to see that the promise made by government and corporations to aid black business came during the years of plenty. Black leaders continued to depend on them to keep those promises even as the economy turned sour.
They forgot an important fact. When governments and corporations scramble to find dollars to reduce deficits, avert layoffs or stave off leveraged buyouts, they are hardly willing to increase funding for programs they regard as marginal--and black business was always considered that.
Also, no matter how generous the support minority firms receive from government agencies, to grow they still must compete in the general marketplace. Like other businesses, their fortunes will rise or fall on the strength of the economy. If inflation-conscious consumers buy fewer cars or new clothes, auto dealers and clothing manufacturers are hurt--no matter what color the owners are.
For black businesses to escape its current malaise and be competitive in the 1990s, they will have to adopt these strategies:
* Develop more self-help programs. Minority firms with the resources could pool money into a development fund to provide loans, credit, resources, training and a contact network for new businesses.
* Become more efficient and continue to diversify. Black firms must concentrate more capital in research and development to upgrade products and services. Mergers, joint ventures, stock trading and expansion into international markets have become essential tools for growth.
* Teach black consumers how important it is to patronize black businesses. Black Enterprise reports that blacks spend an estimated $30 billion annually on goods and services.
But to get a bigger share of those dollars, black businesses cannot expect black consumers to support them merely because they are black. They must give efficient service and sell quality goods at competitive prices. They can also help their cause by contributing to scholarship funds, and promoting job and skills training programs aimed at the black poor.
A self-help approach does not mean that black trade associations and business groups should stop lobbying Congress, the Bush Administration and major corporations to provide more direct assistance to minority business. It just can no longer be the only strategy.
Those black firms that can adapt to meet the new challenges will succeed. Those that don’t will continue to fail. It’s a painful lesson that black business must learn--just as white-owned corporations have.