Free-market enterprise is supposedly the cornerstone of American industry. Advocates argue that businesses and industry work best with limited governmental interference. Yet, giant corporations have been rescued from near economic demise twice in the last decade, first during the Great Recession and now during the COVID pandemic. Each time the government spent hundreds of billions of public dollars helping private corporations. The rationale is that the assistance is fundamental to preserving jobs and the American lifestyle. And so, the nation’s largest corporations have received loans, grants, guaranteed government contracts, and restructuring support. In contrast, Black business owners have endured a history of unequal treatment. It is time for them to have the same type of Marshall Plan assistance repeatedly provided to large corporations.
In contrast to the support lavished on Wall Street corporations, the Paycheck Protection Program (PPP), designed to assist small businesses during the COVID pandemic, was woefully inadequate in reaching businesses in Black communities. In August 2020, a Federal Reserve Bank of New York study found that funds were disbursed disproportionally to businesses in neighborhoods other than where the COVID pandemic impacts were most significant and Black-owned firms most heavily concentrated.
While Washington policymakers continue to debate whether certain corporations are “too big to fail,” the pandemic has highlighted how dependent the nation is on first responders -the majority of whom are minority workers and others who live in communities hardest hit by the pandemic. Ironically, those same communities received a disproportionally smaller share of the benefits of past COVID relief programs.
Mainstream media focuses on wealth and income inequality. But Black-white disparities in business ownership and business capacity are more extensive than all other forms of the racial divide. Business ownership is fundamental to human development and economic prosperity. Therefore, it is past time that we give serious attention to this persistent inequity. Furthermore, we must recognize the solution is more deeply-rooted than simple policies like greater access to capital.
The Federal Reserve Survey of Consumer Finances found the median wealth in Black households is just 10% of white families, i.e., $17,200 compared to $171,000 respectively. Further, Black workers earn just $0.59 for every dollar earned by whites. It is hard to imagine racial disparities can be worse than Black-white inequalities in wealth and income. However, in the business sector, the problem is more dire.
The Department of Commerce’s recently released January 2021 Annual Business Survey examined 5.7 million U.S. employer-based businesses; specifically, those having one or more workers and excluding public corporations. The survey results cover 2018 – a full year before the COVID pandemic. Even so, the results indicated extreme racial inequality in business ownership and performance. In 2018, a booming economy period, Black-owned employee-based companies’ revenue was just .9% of all business revenue. The revenue share decreased from the previous year (2017) when it was 1.1% of all companies’ receipts. Further, the number of Black-owned employer firms (124,551) comprised only 2.3% of all such firms. The conclusion is that the racial disparity in business is more extensive than are the racial gaps in wealth and income.
There will inevitably be those who argue that white-owned firms’ superior performance is a function of their owners’ Horatio Alger spirit, their more exceptional work ethos, perseverance, and capabilities. Yet, in recent times U.S. taxpayers have twice bailed out major U.S. corporations from the threshold of bankruptcy. The 2009 bailout resulted from reckless corporate behavior, which precipitated the housing crisis and Great Recession. Therefore, we should not debate whether deficiencies in business management caused the lag in Black entrepreneurship. Had Black businesses received the same government support injected continually into Wall Street corporations, I doubt that a lag would currently exist.
President Biden’s $1.9 trillion American Rescue Plan seeks to address the unequal treatment between “Wall Street corporations” and “Main Street small businesses.” The Program allocates resources to assist Black and minority business owners’ access to benefits by doing the following: deploying community navigators to increase awareness of and participation in the program; allocating flexible grants to the hardest hit small restaurant establishments; targeting the Paycheck Protection Program to benefit businesses that have the greatest need; investing billions of dollars in state, local, and tribal small business financing programs; and helping small companies rehire and retain workers by extending the employee retention credit through the end of 2021.
The current Administration’s approach is more equitable than that of past administrations. Yet, even if successful, it is impossible to imagine it having more than a marginal impact on reducing the Black-white business inequality.
Today there is a growing concern about the widening racial wealth and income divide. Yet, we have seen that the business disparity is even more extensive. As we reimagine the post-pandemic world, we should not forget that Black income, wealth, and businesses are part of a broader social mosaic trampled by racism. All of it needs fixing, which cannot happen with policy initiatives that are too small to succeed. What Black businesses need is a Marshall Plan.