Prosperity a New Challenge for Black Entrepreneur

Henry T. Baines Sr. envisions opportunity in the inner city where others see failure.

Over the last 20 years, Baines has built a $100-million chain of Stop Shop Save grocery stores in neighborhoods where the area’s other major food markets feared to tread. Now, with the national economy booming and unemployment near record lows, Baines should be positioned to cash in.

He’s not. His best customers are riding the 1990s wave of prosperity clear out of the inner city to more affluent neighborhoods. Left behind amid abandoned row houses, thriving drug markets and weedy lots are those who missed the boom: the most unemployable, the most immobile, the most hopeless--in short, those least likely to be good Stop Shop Save customers.

Capitalism is working as never before on a national scale. If only inner-city businesses were sharing in the blessings of the national boom, Baines could be more than a rags-to-riches story. He might be hailed as an inner-city Bill Gates.

But, perversely, today’s good times are bad news for inner-city entrepreneurs. By offering passports out to all who can take advantage, the boom is plucking out of central Baltimore the very people Baines and other business owners need if they are to prosper.

Baines’ story, which encapsulates the spectacular rise and potential fall of an inner-city merchant, is a cautionary tale for those trying to spread capitalism’s promise across the most resistant slices of American poverty. His saga provides insights, if not answers, into the travails of a capable and determined businessman straining against the odds to enrich both himself and the long-neglected communities of his city.

Inner Cities Losing Population

There are, of course, oases of urban progress scattered around the country. In Los Angeles, former basketball player Magic Johnson has revived a South-Central neighborhood with his multiplex cinemas. In Harlem, plans are underway to transform rundown businesses with such high-end retailers as the Gap and the Disney Store.

But such cases appear to be exceptions. The Brookings Institution, a nonpartisan think tank, has been compiling data on population trends in the 25 largest U.S. cities. It found that only in New York did the inner city fare better in the 1990s than close-in suburbs.

Ten of the inner cities--nine Northeastern and Midwestern cities plus New Orleans--actually have bled population this decade. Baltimore, whose central city has lost about 1% of its population a year during the 1990s, is second only to Washington (minus 1.5% a year) in this category.

It is a phenomenon known to sociologists as “undercrowding,” and it has sent Baines’ firm into a downward spiral. Black Enterprise magazine said that the company’s sales fell to $70 million in 1999 from $86.5 million in 1998. The magazine dropped the grocery chain to the 36th-largest black-owned firm, from 22nd in 1998.

President Clinton recently visited half a dozen of the nation’s most distressed areas as a way to urge business leaders to redouble their commitment to such communities. Some firms responded immediately. Bank of America, for example, offered $500 million for investments.

Michael E. Porter, a professor at Harvard Business School and a leading national authority on inner-city business, said that free enterprise remains the answer to urban blight. He argued that investors who capitalize on the low-cost land and willing employees of the inner city stand to reap great rewards in the long run--as long as their goal is to generate wealth, not to solve social problems.

“Jobs, investment and businesses in our inner cities will materialize only as they have elsewhere--as the result of private, for-profit initiatives and investment based on economic self-interest and true competitive advantage . . . “ he wrote in a recent issue of Inc. magazine. “The only growth social programs promote is their own.”

Georgia Institute of Technology economist Danny Boston, an expert on black business development, suggested that Porter has it backward. Investors will risk their capital in the inner city, he said, only when social conditions improve.

“You can’t just say, ‘Build a business on the profit motive,’ and all the other problems will take care of themselves,” Boston said. “You have to focus on the whole social destabilization of the [inner-city] community before you can deal with the economics.”

Baines Moved North to Prosper

So far, at least, Baltimore’s inner city has attracted little investment since Baines staked his claim 20 years ago. He arrived in Baltimore in 1962, two days after graduating from high school in North Carolina, where he had grown up in rural poverty.

Always optimistic, he knew that an ambitious black man could expect a better chance in the North, away from the backbreaking tobacco farms and dead-end factories.

“Ever since I was 8 years old, I always knew that there was something for me, that I was going to change my life, that I was going to be someone,” Baines told the Baltimore Sun in 1996. “I didn’t know how or what, but, inside of me, I never had a doubt.”

Within three months, Baines parlayed his job as a stock clerk at the Food-A-Rama grocery chain in 1963 into a position as the store’s grocery manager. He stayed with the company 18 years, rising to the position of store manager.

During the 1970s and 1980s, as Baltimore began to revitalize its decaying downtown business district and harbor front, Baines realized that black families in surrounding neighborhoods were being left out. Whites who could leave these areas for the suburbs did so, and Pantry Pride, Grand Union, A&P; and other food stores went with them.

To Baines, the departure of the big chains was an opportunity to provide top-quality grocery service to the remaining black community. He secured a bank loan to purchase his first store, which he called Baines SuperPride. Baines attracted business by handing out dollar bills to neighborhood kids for every A they could show him on their report cards. In 1981 he joined forces with black entrepreneur Edward Hunt to create Stop Shop Save Food Markets. Today, Baines is owner, president and CEO.

“Fifteen to 20 years ago, that was the time when you saw your most successful businesses being concentrated in retail services in the inner city,” Boston said. “African Americans have a strong affinity to buying from other blacks. So if you served a quality product in that community at that time, you had the market to yourself.”

At the outset, Shop Stop Save prospered beyond Baines’ expectations. By 1996, Black Enterprise magazine ranked Stop Shop Save Food Markets as the nation’s ninth-largest black-owned business, with 16 stores, 800 employees and $108 million in sales.

Then, as the national economy glowed white hot, Baltimore’s urban core--like those of Detroit, Philadelphia, St. Louis, Washington and many other cities--imploded. Many of the working poor and the lower middle class finally could afford better than the despair and danger of the inner city.

Now children’s voices and blue-collar laborers’ greetings seldom ring out from Baltimore’s tidy homes and marble stoops. The city leveled more than 4,000 row houses and storefronts in the last three years, and officials have plans to tear down 20% of those that remain. Baltimore has lost 90,421 residents since 1990, according to the Census Bureau, a 12.3% decline that is second in the nation only to Washington.

“They were my customers,” Baines said. “They were where everything was happening. It happened all of a sudden. I didn’t foresee it.”

Few people did. Major inner-city employers in Baltimore either closed or scaled back. The work forces at Bethlehem Steel and General Motors are mostly memories. Many of the hometown banks and investment firms are owned now by international conglomerates with no particular commitment to solving problems here.

“In the last 30 years, we’ve gone from an economy in Baltimore where you could drop out of school, find a job at a decent wage, buy a house, raise a family and send your kids to good schools,” said Baltimore Housing Commissioner Daniel P. Henson III. “Now, jobs at Johns Hopkins University, our largest employer, require a bachelor’s degree or, at least, some college to make a living wage.”

Drug Abuse Erodes Inner City Economy

Jobs that offer less than what Henson would regard as a living wage--such as 3,000 entry-level jobs likely to accompany hotel construction at HarborPlace--are still available downtown. What Malcolm X said several decades ago is still true, Henson said: “If you can read and walk at the same time, you can get a job in Baltimore.”

But for many who linger in Baltimore’s inner city, crack cocaine has put even these jobs out of reach. He estimated that 55,000 drug abusers live in Baltimore--junkies who cannot even read and walk at the same time.

David Callahan, editor of Food World, a regional grocery magazine based in Columbia, Md., regards the inner city as the industry’s next growth area. “Giant and Metro are looking at the city because there are too many stores in the suburbs and not enough in the city,” he said.

But that is the future, not the present. Giant Foods is still expanding mostly in the suburbs, for example, although Giant spokesman Barry Scher said that the company is poised to seize inner-city business opportunities as they come along.

Two years ago, Giant tried to buy one of Baines’ most profitable stores in one of Baltimore’s least-distressed neighborhoods. When Baines refused to sell, Giant built its own store nearby.

“We are taking a fresh look at underserved markets,” Scher said, “and we know we’re going to have to build there more and more in the future.”

For Baines, this is just one more challenge to his business.

“I don’t want to talk about what’s happened. I don’t want to be a crybaby, a whiner. I do what I have to do to compete.”