In light of what most of us know about the economy and where Black people fit, mostly as consumers rather than producers, a discussion of Black capitalism is in order.
The term was promoted by Stokley Carmichael in 1966 as part of the “Black Power” movement, but came into vogue in 1968 when the Nixon administration adopted it from a proposal by Robert Kennedy. Black capitalism originally called for loan assistance, credit guarantees, and technical assistance for Black-owned businesses in an effort to stimulate economic development in the ghettos.
According to “Black Entrepreneurship in America” by Shelly Green and Paul Pryde: [Black capitalism] constituted a movement by Blacks to gain control over the business development of their own communities … Directing business growth in the Black community was considered the first step toward achieving a powerful Black economic presence in the larger American economy. [It] called for a new kind of social contract among racial groups in America — one based on mutual self-interest rather than integration.”
Andrew Brimmer, noted economist and Lyndon B. Johnson appointee to the Federal Reserve Board, had a different perspective on Black capitalism. In the book, “A Different Vision: African American Economic Thought,” Brimmer wrote, “… the strategy of Black capitalism offers a very limited potential for economic advancement for the majority of the Black population.”
In support of his contention, Brimmer posited, “The ghetto economy … does not appear to provide profitable opportunities for large scale business investment.” He noted a large part of the problem was attributable to “a tendency for affluent Blacks to shop in the more diverse national economy.”
Brimmer suggested that Black capitalism fails because it is founded on the premise of self-employment, as opposed to employment in salaried positions where the rewards are greater and the risks are much lower. (That reality gives credence to Thomas Boston’s “20 by 10” strategy of Black businesses hiring Black employees.) Brimmer suggested that Black capitalism “may retard Blacks’ economic advancement by discouraging many from the full participation in the national economy …” His position assumed that corporations would hire Blacks; but his concern about the greatest risk being placed on those who can least afford to take risks is quite valid. We have several examples of that reality in Black businesses today.
Has Black capitalism worked? Is it working? One thing is certain: Korean capitalism is working. They control the Black hair care market via their stores in the ghettos, where Black folks are their only customers; and Koreans hire their own people as well. This is a great example of how “segmented” capitalism can and does work.
Economist Milton Friedman said, “History suggests only that capitalism is a necessary condition for political freedom [since many nations can be identified that have] economic arrangements that are fundamentally capitalist and political arrangements that are not free.”
History Professor, Dr. Juliet E.K. Walker, wrote, “The existence of Black entrepreneurship … provides an example of an economic arrangement in this nation’s antebellum free enterprise system that was fundamentally capitalistic, but within which some of the capitalists, the African Americans, were not fundamentally free.”
The problem with Black capitalism is structural inequity due to a paucity of government support. Just as the government has subsidized large corporations, it should do the same for Black businesses. The International Journal of Humanities and Social Science (November 2012) carried a paper written by Ryan Very, titled, “Black Capitalism: An Economic Program for the Black American Ghetto,” in which Very made a good case for government support of Black capitalism.
Here is the abstract from that paper: “The American federal government supported the creation and expansion of economically depressed urban residential areas where Blacks live in segregation from whites. These ghettos face barriers to economic development including high unemployment, a low wage labor market, capital drain and market dualism.
Three popular ghetto economic development strategies are ghetto dispersal, corporate branch planting, and Black capitalism. Black capitalism breaks the ghetto’s economic barriers better than ghetto dispersal and corporate branch planting, but it will only be possible with significant support from whites and the federal government.” In other words, the government caused the problem, and the government should fix it.
Very continued, “Black access to capital coupled with subsidized entrepreneurial training services would … allow more residents to start their own potentially successful businesses in the ghetto. With a sizable government subsidy, ghetto residents could even build manufacturing plants. If ghetto residents would export enough manufactured goods, both the drain of capital and the [neighborhood] trade deficit would decrease.”
Until Blacks understand our economic and political positions in this country, we will continue to languish in what Ron Daniels calls, the “Dark Ghettos” of either or, and we will never move to the land of both and.
Jim Clingman, founder of the Greater Cincinnati African American Chamber of Commerce, is the nation’s most prolific writer on economic empowerment for Black people. He is an adjunct professor at the University of Cincinnati and can be reached through his website, blackonomics.com.