The Reluctant Entrepreneurs

Are American blacks still stuck on the bottom rung of the economic ladder because so few start businesses of their own?

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THERE IS NO MORE VEXING PROBlem for the American economy, or American democracy, than the worsening economic plight of American blacks. Blame white racism or the lack of black self-reliance. Point the finger at government programs that offer too much or too little. There is at least a germ of truth in each of these. But none of these highly charged explanations gets beyond the point of political rhetoric to the more fundamental dilemma: why is it that other minority groups have recently found their way into the great middle class while so many blacks still find themselves at or near the bottom rung of the economic ladder?

The accompanying charts begin to define the problem. In 1980, the Census Bureau found that median black family income was only 61% of white median family income -- where it has been, roughly, since the mid-1960s. And since 1980, things have only gotten worse. Compare that with Hispanics, the next largest American ethnic group, whose income has been climbing steadily over the past decade and is now about 70% that of whites; or Asian-Americans, who have long since stepped ahead of whites. Statistics on unemployment, poverty, or welfare dependency all support the same general conclusion: that black America is falling even further behind.

It would be more comfortable to ignore these statistics and focus more positively on the growing black middle class. But even among these success stories there is something distinctive and revealing about the black experience -- namely, the relative lack of black entrepreneurship. For Asian- and Hispanic-Americans, as with the Jews and Greeks and Italians before them, the favored path to upward mobility has lain in the starting of small, independent businesses. For blacks, by contrast, mobility has been defined quite differently -- in terms of education at universities and professional schools, employment in large corporations or government bureaucracies, or celebrity in sports and entertainment. And perhaps more than any other factor, this absence of a black entrepreneurial tradition explains why the advances of some have not led to the advancement of many.

"You can talk about the other problems of our community, but the real cause is that we have failed to get into business," says Tony Brown, who hosts a popular series for public television. "We have to do something to shore up our economic institutions, to generate jobs within the community. When we take care of that, the other stuff -- the family problems, crime, our political needs -- will start taking care of itself."

The Census Bureau surveys minority business ownership only once every five years, so the most recent data available are a bit stale. But they show that while black entrepreneurship has been on the rise, it has been at a pace slower than other minorities. From 1972 to 1977, for example, the number of black-owned businesses rose 23%, but during the same period, Hispanics and Asians doubled their number of enterprises. A private study based on 1977 data reported that blacks owned about nine enterprises per 1,000 population -- a rate about half that of Hispanics and a third that of Asians. Rates of self-employment, as reported in the 1980 Census, also reflected the same relative position.

Even in such fields as franchising, which has been the target of heavy lobbying and exhortation by such groups as Jesse Jackson's Operation PUSH, blacks are now falling behind other minorities. In 1973, blacks owned more restaurant franchises than either Hispanics or Asians, but by 1984 it was just the reverse. In fact, the number of Asian-owned franchises grew at a rate of about four times that of blacks.

In Los Angeles, where I live, you get a sense of these trends simply walking through the city's ethnic neighborhoods. Hispanic East Los Angeles, Chinese Monterey Park, and Koreatown, on the edge of downtown, are all bustling with new and growing businesses, both retail and manufacturing. There is noise and congestion; signs in a potpourri of languages compete for your attention. By comparison, black sections of Watts and South-Central L.A. convey an attitude of abandonment. Many of the storefronts are vacant. The manufacturing firms that survive employ Asians and Hispanics. The commercial life consists of little more than liquor stores, franchise restaurants, and bars -- and, increasingly, even these are falling under ownership by Asians and other outsiders.

"Blacks have not had the mentality to do what the Koreans and Hispanics are doing," says Bondie Gambrell, a black real estate investor and developer in Los Angeles. "They haven't wanted to venture out on their own. They have relied on others to make opportunities. They don't realize it doesn't kill your soul to be a capitalist."

Robert A. Hill is a black historian at the University of California at Los Angeles and, like many who have studied the black experience in America, he traces the lack of an entrepreneurial tradition to African origins and the brutality of the American system of slavery. Africa, Hill points out, is a more communitarian society, where notions of private property have never been so entrenched as in Europe or North America. "The culture of capitalism is just not part of our African heritage," he maintains.

Certainly slavery and its progeny, the sharecropper system, did nothing to foster confidence, independence, or a capitalist inclination among Afro-Americans. Before slavery and after, white landowners considered that the proper way to treat the black was, in the words of one slave owner, to "create in him a habit of perfect dependence. . . ." And it was a system that proved to be enormously successful and enduring. Here is a race of people who for generations, both before and after Emancipation, were denied freedom of movement, education, and even a rudimentary familiarity with the free market -- to say nothing of credit, legal status, or safety from lynch mobs. That their descendants have not taken naturally to entrepreneurship should hardly come as a big surprise.

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