Editor’s Note: Black Entrepreneurship

Recently, a friend wrote a post on Facebook about the lack of African-American entrepreneurs in Atlanta. Even in the black community, most of the stores are owned by whites and Asians, she lamented. The post ended with a heart-felt plea: “Time for a change!”

I’m not familiar enough with Atlanta to gauge the accuracy of this post but it fits patterns in cities with which I am familiar so it rang true. I remember driving around the blackest of black neighborhoods in Detroit, when I lived in that city, and seeing nothing but white faces behind the counters of small businesses. Where, I wondered, were the black entrepreneurs?

February is Black History Month, a time when we celebrate the proud history of African Americans in this country.  My friend’s post got me to thinking: Do African Americans have as little to celebrate, when it comes to entrepreneurship, as a drive around black communities in Atlanta and Detroit (and other major cities) might suggest? I decided to do some digging and found that, if you dig deep, the history of African-American entrepreneurship is not what many think it is.

First of all, let’s establish that I’m not saying there’s something wrong with white or Asian entrepreneurs serving the black community. Indeed, that’s commendable that they are filling a need. But business is opportunity – economic opportunity – and there definitely is too little of that in black neighborhoods.

Some of the reasons for the paucity of black businesses in black neighborhoods are good – or, at least, the negative side of a positive coin. Opportunities for African Americans in the corporate world have meant that talented individuals have other avenues for success besides self-employment. But we cannot fail to take advantage of the economic opportunities in our own neighborhoods. For many without academic credentials, this is the only step up the economic ladder.

Let’s be clear; the perception that African Americans are underrepresented among the entrepreneurial class is more than a perception. It’s a reality. According to the U.S. Census Bureau, in 2007, blacks owned 1.9 million nonfarm businesses operating in the United States. (Note that data of this type tends to be dated; the Census Bureau does the survey only every five years and the 2012 survey is not due out until next year.)

Blacks own a smaller percentage of the nation’s 27.1 million business than do Hispanics. While African Americans do own a slightly larger share than do Asians (7.1 percent vs. 5.7 percent), the black population is considerably larger than the Asian population – more than double, in fact (13.1 percent vs. 5.1 percent). Comparatively, Asians are entrepreneurs at a much higher rate than African Americans.

It has long been this way. According to a 2007 study by Vicki Bogan and William Darity, then of Cornell and Duke universities, respectively, the rate of black entrepreneurship was consistently about one-third the rate for whites from 1910 to 1990.

The state of black-owned businesses has long been a concern. Put the question “Where are the black entrepreneurs?” into a Google search and you will get a lot of hits. Many have gone so far as to speculate that the problem is due to some flaw ingrained in African-American culture or character.

But, as I said, you have to dig deep. A good place to start is with the scholarly work of Dr. Juliet E.K. Walker, author of (among her many works) The History of Black Business in America. Walker’s research shows that entrepreneurship has always run strong among black Americans even since slavery days.

Black businessmen and businesswomen thrived before the Civil War, creating a class of “entrepreneurs within the tradition of creative capitalists,” Walker’s research shows.

Among the successful black entrepreneurs she points to are:

  • James Forten of Philadelphia, who invented a sail-making device and, by the 1830s was worth $100,000
  • William Leidesdorff of New Orleans and San Francisco, a businessman who owned a ship, built a hotel, and established a lumber businees and a shipyard in the first half of the 19th Century. He was, Walker said, “America’s first black millionaire.”
  • Pierre Cazenave of New Orleans, an undertaker who invented an embalming process and, by 1860, was worth more than $100,000.
  • Former slave CeCee McCarty of Louisiana, who was in the dry goods business, purchasing merchandise from importers and retailing then through slaves; she was worth $150,000 by 1848.

There are many others I could mention from that era: clothier John Coburn and real estate investor Chloe Spear of Boston; cattle and horse farm owner Alfred Greenbriar and barber John Brown of Cleveland; lumber merchant and coal dealer Stephen Smith of Pennsylvania; and, of course, Madam C.J. Walker, who in the early 20th Century had a business manufacturing and selling hair products and cosmetics in Indianapolis. Her business provided jobs for about 3,000 people.

By 1890, around 5,000 black Americans operated businesses, according to the Bogan-Darity study. But the rate of black entrepreneurship declined steadily throughout the 20th Century. Bogan and Darity point to several reasons for the decline, including competition from immigrant groups, difficulties encountered by black business owners originating from the lack of public policies and “racial hostility.” In other words, African Americans have always had the entrepreneurial spirit within us, but it has been (figuratively and probably literally, in many cases) beaten out of us.

It did not help that housing segregation has vastly declined, draining most black communities of the middle class and leaving them with an overabundance of low-income residents.

But there is good news. Black entrepreneurship is on the rise, partly due to the recession of the past several years. Black business ownership tripled from the Census Bureau’s 2002 to its 2007 surveys, and other surveys have shown that it has continued to grow since then.

In the 19th Century, African Americans went into business because they had no other way to support themselves. The recent recession may have reminded us that self-employment is a viable option, and we are starting businesses today with more resources; witness the serious efforts in the technology sector to foster black innovators.

So, yes, as my Facebook friend stated, it is time for a change. But the good news is that the times already are changing. Not all new black-owned businesses are in the ‘hood, so the change may not be evident from the ground level, but things are moving in the right direction.

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