CHAPTER FIVE

BLACK CAPITALISM: ENTREPRENEURS, CONSUMERS, AND THE HISTORICAL EVOLUTION OF THE BLACK MARKET

Having attained success in business

possessing three cars

one wife and two mistresses

a home and furniture

talked of by the town

and thrice ruler of the local Elks

Robert Whitmore

died of apoplexy

when a stranger from Georgia

mistook him

for a former Macon waiter.

—Frank Marshall Davis, “Robert Whitmore” in Dudley Randall, ed., The Black Poets (New York: Bantam, 1971), p. 121

I

Capital accumulation in the nonwhite periphery creates a number of social and political dislocations within the indigenous society. Businesses can operate at a profit only when there are adequate transportation systems—railroads, canals, highways, airports. Modern communication systems are required to link branch offices with the metropole, to facilitate the completion of orders. A steadily growing number of women and men from the indigenous population are needed to serve in clerical and lower-level administrative posts. Thus schools are a concomitant part of the developmental process, so long as both the content of its education and its pedagogy are oriented toward reinforcing the legitimacy of capitalism and Western civil society. The incessant drive for economic growth and expansion also sparks an inevitable transition within the religious ethos of the workers, since the Puritan work ethic promotes the proper ideological outlook for a hard-working, non-disruptive labor force. It is impossible, therefore, to talk about underdevelopment as a purely economic process, because the human content of that dynamic is profoundly social, cultural and political.

A decisive component of this underdevelopment process within the periphery is the nonwhite elite. This small social stratum is gathered from the masses, reeducated in colonial schools, and converted to the masters’ faith. In political society, it serves as a necessary yet dependent buffer between those who wield power and those who have none. Within popular culture, it is the nonwhite mouthpiece of the new order, articulating in the media and in various aesthetic forums the ideals of the masters. In the context of modern Africa, for example, one can discern a direct correlation between increased agricultural and industrial production for overseas markets and the growth of the Black elite. In the Gold Coast (Ghana), for example, between 1891 and 1911 exports and the level of production of commercial enterprises increased 400 percent; the amount of currency or monetary resources increased by 1,000 percent; the amount of investments in cocoa production soared from £3,000 to £1,573,000. Gold exports to the West increased over 5,000 percent in a ten-year period, 1901-1911. Although the lion’s share of wealth was controlled by British colonialists and businessmen, underdevelopment did result in the creation of a marginal Black petty bourgeoisie. By 1945, several thousand African small farmers produced 20 percent of the Gold Coast cocoa crop from their own land. As the capital city, Accra, expanded from a colonial village into an international port, the British were forced to hire Africans in a variety of petty managerial capacities—clerks, civil servants, teachers, skilled blue-collar workers. Hundreds of Africans became lawyers, doctors, dentists, newspaper editors and held other more influential posts. At the end of World War II, about 400,000 African small entrepreneurs owned residential stores selling clothing, food and household items to the growing rural and urban proletariat. This social strata was simultaneously “nationalist” and “integrationist,” to use terms perhaps more suitable to Afro-American politics. It opposed British racism, and provided critical support for the radical elitists’ demands for decolonialization. Yet it had also integrated the economic and social worldview of the British into its own raison d’être. The elite was a product of capitalism, colonialism and imperial­ism: its activities reinforced the process of Western capital accumulation and the underdevelopment of the African masses.1

Across the nonwhite world, colonized elites have exhibited certain political and cultural tendencies which are, to repeat, a necessary part of the underdevelopmental dynamic. In The West and the Rest of Us: White Predators, Black Slavers and the African Elite, Chinweizu observes that this stratum is primarily the product of Western capitalist “liberalism”:

African liberals, as agents of an international liberal imperialism, have a special job: to spread the liberal ideology in Africa, to maintain a black front there for a neocolonial world order run by the West, to administer the neocolonial African territories for the West, and to restore the imperialized status quo if any genuinely African nationalist regime should storm its way into power anywhere in Africa. To call them neocolonial administrators is not to say that they, like the former white colonial administrators, receive direct orders or mandatory guidelines from their masters overseas . . . But it is rather to say that, though they advertise themselves as serving Africa, they operate in an environment, with a mentality, and under conditioned attitudes and direct advice that all tend to yield policies that primarily serve the neocolonial powers, policies that often are in direct opposition to the genuine interests of the African peoples. Conditioned by a pro-western miseducation, they see their class interests as tied to those of their imperialist masters, and they readily abandon the interest of their people to protect those of their class.2

Although the race/class dialectic of the United States cannot be adequately or accurately described as neocolonial, it is undeniable that the process that gave birth to a Black elite here is virtually identical to that of modern Africa. When Chinweizu writes bitterly, “those whom Africa expected to liberate her from the yoke of Europe have instead chained her to that yoke, perhaps even more tightly, in exchange for crumbs of wealth and privilege,” a similar verdict must be levied against their American counterparts.3 When he dismisses neocolonial politicos as “British O.B.E.—Obedient Boys of the Empire,” Black activists in the United States might include the names of Thomas Sowell, Benjamin Hooks and Vernon Jordan.4 The Afro-American majority has been systematically betrayed by its petty bourgeois stratum.

In Reconstruction, the masses demanded universal education and “forty acres and a mule”; they received instead political leadership of an uneven quality, sharecropping and convict-leasing. In the Civil Rights Movement, they demanded an end to racial discrimination, jobs, decent housing and education; they received instead temporary employment, an end to only the most blatant forms of legal segregation, and affirmative-action programs which directly benefited the Black elite. This is not to say that the Black elite has always consciously served the interests of the exploiters and racists. The key here is not one of intentions but of historical mission—a failure of the elite to comprehend its role as a necessary social force for basic change. As Frantz Fanon noted, “each generation must, out of relative obscurity, discover its mission, fulfil it, or betray it.”5 It is here, on the scales of history, that our elites must be judged as inadequate.

Historically, within Black America, the Black elite has occupied four principal vocations—politicians, clergymen, educators, and entrepreneurs. By “politician,” I mean a person who is directly involved in making, carrying out, or influencing state policies. A man/woman need not be an elected or appointed official to be described accurately as a politician. Booker T. Washington, A. Philip Randolph, Frederick Douglass and Martin Luther King, Jr., were all influential politicians, although none of these men were ever elected to public office. Even Adam Clayton Powell’s profound impact within Black civil and political societies between 1945 and 1965 was perhaps only indirectly due to his position as a senior Black Congressional leader. Indeed, at the moment of the great 1963 March on Washington, there were fewer than 100 Black elected officials in the entire country. The acceptable role of a Black “politician” within a capitalist and racist society is to maximize the level of goods and services reaching the Black community. By definition, Black socialists or revolutionary nationalists are not “politicians” in this narrow bourgeois sense, because they are attempting through their practice to uproot racial hegemony and exploitative economic relations. The Negro politician is neither anticapitalist nor antiracist, except in his/her rhetoric.

The Black clergy comprise the bedrock of Black petty bourgeois politics, due to several historical and sociological reasons. The process of enslavement effectively eliminated the bonds of leadership which were part of indigenous African societies. The slaves who adopted the forms of the master’s religion and who were granted the right to preach to their brothers and sisters became the ministers. These pastors were viewed by their white authorities as an ideological buffer between themselves and the often-dangerous Black masses. The Black messengers taught the Gospel of Christ to the weary, promising sweet visions of freedom in the afterlife. As in Africa, Black American preachers served a variety of roles—part-time politicians, social workers, indigenous intellectuals, spiritual comforters. Some were simply egotistical charlatans; others were reluctant revolutionaries. Because segregation eliminated any route of upward mobility for young Black men within the electoral arena between 1890 and 1960, the majority of Black would-be “politicians” ended up in the church. The church itself was, in many Black communities, the only institution in which a significant number of people regularly invested their time, energies and meager savings. The minister was particularly vulnerable to pressure from local white business and civic leaders, however, because they also recognized his central role in the daily life of his community. Through covert payments or through intimidation, the demands of white authorities were often incorporated into the political and even religious practices of many Black ministers.

The educators are still the largest single social group within the Black elite, but in many respects, they have been the least influential. During the nineteeth and early twentieth century, school for most Blacks consisted primarily of elementary level instruction. Within a patriarchal and agrarian society, public school teaching was often viewed as “women’s work.” The majority of Black male intellectuals were not found in the classroom; they tended to be businessmen, lawyers, newspaper editors and clergy.6 Even with the expansion of state-supported and private Black universities in the decades after the Civil War, the number of Black male teachers was surprisingly small. The economic demands of family life pressured Black men into vocations where the greatest possible financial compensation could be achieved. It was only in the 1940s, when the relative social status of the Black clergy had declined somewhat and the prospects for accumulating wealth through agricultural production had all but disappeared, that large number of Black males came to view teaching as a viable vocation. The status of intellectual work within the contemporary Black community still remains relatively low. This is particularly true for dissident voices among the Black intelligentsia. Revolutionary nationalists and Marxists are often persona non grata both at white and Black-operated universities and at white publishing houses. Main­stream Black intellectuals are usually politically integrationist and therefore more acceptable. Their Blackness is generally not part of their own intellectual praxis. The Black elite generally does not support Black institutions of higher learning as generously as other ethnic groups bankrole their own universities. Therefore, the economic terrain for Black intellectuals is always tenuous at best; Black academic institutions—particularly since desegregation—rock against the omnipresent shoals of bankruptcy; and Black education has become a marginal factor in influencing major public policy decisions that touch the lives of the Black majority.

Easily the most decisive element of the Black elite, both in the United States and in the Third World periphery, is the entrepreneur. The Black businessperson is the linchpin of underdevelopment and capital accumulation within the Black community. The goal of the Black entrepreneur is to make profits, period. How he/she accomplishes this task is secondary to the goal. The nonwhite businessperson is the personification of the legitimizing and rational character of capitalism. For white corporations, he/she serves to perpetuate the illusion that anyone can “make it” within the existing socioeconomic order, if only he/she works sufficiently at it. For the state, the Black enterpreneur represents the role model of proper civic behavior that the unruly and “nonproductive” Black masses should follow. The Black businessperson (which by definition here also includes persons involved in finance or banking, or who work as executives in a white­-owned corporation) accepts and lives by the rules of the game. By nature and self-interest, the petty capitalist is profoundly individualistic. Profits can be made by exhorting Black consumers via Black nationalist appeals to “buy Black,” or through NAACP-style pressures on the white private sector to subcontract goods, services or advertising through Black-owned firms: but profits must be made. My treatment of the elite will consist of all four major sectors described above. But it seems appropriate, writing this monograph during the period of “Reaganomics,” to begin with the historical evolution of the entrepreneurs, and the theory of Black Capitalism.

Capitalism has always had proponents within the Black community. In fact, the historical evolution of the concept “Black Capitalism” provides one of the rare instances of ideological concensus among the fractious elements of the Black Movement, from the period of antebellum slavery to the present. Abolitionist leader Frederick Douglass, a strong integrationist, for example, encouraged newly emancipated Blacks to accumulate capital and to invest in their own enterprises. In 1874 Douglass even served briefly as president of the country’s largest “Black” bank, Freedman’s Savings and Trust Company. Racial accommodationist Booker T. Washington and Black nationalist leader Marcus Garvey developed detailed programs separately to coordinate small Black entrepreneurs. Conservative integrationists in the Urban League and nationalist-oriented members of the Nation of Islam advanced similar strategies for Black economic development within the U.S. capitalist system. At the 1968 Congress of Racial Equality (CORE) convention, leader Roy Innis, a militant Black nationalist, announced that his organization would build “a nation within a nation,” attempting to develop Black community corporations and “Black ownership of capital instruments” to operate factories and to create job opportunities for thousands of unemployed Blacks.7

For these leaders and the majority of Black political organizations of the last 100 years Black Capitalism connotes several key concepts: the accumulation of capital by individual Black entrepreneurs; strategies designed to maintain Black control over the Black consumer market in the U.S.; collective programs to improve the economic condition of all Blacks within the overall framework of U.S. capitalism. Beneath all of this is a theory of development, rooted in the often unchallenged assumption that U.S. capitalism is not structurally racist, and that the devastated condition of most Blacks throughout history could be alleviated through the acceleration of capital accumu­lation in the hands of a small number of Blacks.

This chapter begins with an alternate view of Black development, a thesis articulated by sociologist E. Franklin Frazier in his 1957 book Black Bourgeoisie. Black Capitalism was a “social myth,” in Frazier’s judgment, perpetuated by individual Black entrepreneurial “success stories” and by the economic barriers established by the system of segregation.8 The contemporary renaissance of Black Capitalist pro­ grams and ideology is fostered partially by the Reagan Administration and the emergence of a politically conservative sector of the Black elite. Beginning with Black economic history, this chapter documents some of the central components of the theory and practice of Black Capitalism, the evolution of the now highly profitable Black consumer market, and the current prospects for Black entrepreneurial activity in late capitalism. It will also reestablish that Frazier’s initial critique is even more valid today than ever before in our history.

II

The origins of Black Capitalism are found in the development of a small but affluent propertied Black elite which emerged before the Civil War. In Northern cities, some Blacks owned surprisingly large amounts of real estate. Properties owned by Blacks in Philadelphia were valued at $400,000 in 1847 and $800,000 in 1856. In 1840, Blacks in Cincinnati had accumulated real property, excluding church and personal property, valued at $209,000. Real estate owned by Blacks in New York City and Brooklyn in 1853 was valued at $755,000 and $79,200 respectively. Black entrepreneurs were involved in a wide variety of antebellum commercial activities. In Manhattan, by 1840, Blacks owned one cleaning firm, two dry goods stores, two “first-class restaurants in the downtown financial district,” four “pleasure gardens,” six boarding houses, one confectionery and two coal yards. In the 1840s, one Black clothing and tailoring firm in Detroit, owned by James Garrett and Abner H. Frances, boasted annual gross profits of $60,000. Black entrepreneurs in Cincinnati were particularly successful. Samuel T. Wilcox, a Black boat steward on the Ohio River, initiated a wholesale grocery store in the downtown business district in 1850. Quickly he became “the largest dealer of provisions in the city,” establishing commercial links with New Orleans and New York. By the mid-1850s Wilcox’s annual gross profits were estimated at $140,000. In 1851 two Black businessmen acquired a contract with Hamilton County, Ohio, worth $10,000 to plaster all its public build­ings. Henry Boyd, a former slave artisan, established a furniture store in the late 1830s in Cincinnati. By the 1850s he regularly employed 20 to 50 Black and white cabinet makers and workers, and was worth $26,000.9

Under the slavery regime Black entrepreneurial activities were difficult, but not impossible in the South. In 1860, there were 348 free Blacks in Baltimore whose total property was worth $449,000. Eight hundred and fifty-five free Blacks in New Orleans owned 620 slaves and real estate worth $2,462,470 in 1836. By the outbreak of the Civil War, conservative estimates of property and business owned by the New Orleans free Black community exceeded $9 million. The vast majority of Blacks engaged in activities which provided goods and services to white patrons—tailoring establishments, saloons, eating houses, barbering and stables. The total value of all free Black-owned establishments and personal wealth in the U.S. in 1860 was at least $50 million dollars—half of which was based in the slave South.10

Of course Black business was not without certain risks in a racist society. Northern and Southern whites found it difficult to tolerate the economic success of any individual Black person, fearing that even isolated instances of Black financial ability would threaten the racist order. In 1844, Virginia authorities revoked the license of mulatto innkeeper Jacob Sampson without explanation. In 1852 Maryland prohibited Black membership in building and homestead associations. Blacks who saved their money to purchase farms discovered that many white homesteaders did not want them in their states or regions. White insurance companies usually refused to do business with Blacks, and white bankers drew the color line against Blacks desiring credit. Black businessmen usually could not sue white creditors in Northern courts, and often were legally restricted from engaging in certain commercial activities. The political attitudes of wealthy Blacks were also subject to careful scrutiny. When a copy of Uncle Tom’s Cabin was found in the possession of one Black merchant in Salisbury, Maryland, for instance, “the public hostility that resulted led to his financial ruin.” In Cincinnati, white mobs periodically burned down Henry Boyd’s furniture factory. “Three times he rebuilt, but the fourth blaze compelled him to yield since insurance companies refused to underwrite his risk.”11

Despite these risks, the relatively successful record of some early Black business efforts prompted many Blacks to conclude after the Civil War that private enterprise was the only means to achieve Black economic advancement. Booker T. Washington reflected upon these isolated instances and proceeded to postulate a general theory of group upward mobility via capitalism. Writing in 1906, the Black educator insisted that Black artisans “had a monopoly of the common and skilled labor throughout the South” in 1865. “By reason of contact (between) whites and blacks during slavery,” Washington stated, “the Negro found business and commercial careers open to him at the beginning of his freedom.”

In slavery, when the master wanted a pair of shoes made, he went to the Negro shoemaker for those shoes; when he wanted a suit of clothes, he went to the Negro tailor for those clothes; and when he wanted a house built, he consulted the Negro carpenter and mason about the plans and cost—thus the two races learned to do business with each other. It was an easy step from this to a higher plane of business; hence immediately after the war the Negro found that he could become a dry goods merchant, a grocery merchant, start a bank, go into real estate dealing, and secure the trade not only of his own people, but also of the white man, who was glad to do business with him and thought nothing of it.

Washington concluded, “for these reasons . . . the Negro in the South has not only found a practically free field in the commercial world, but in the world of skilled labor.”12

But emancipation and Reconstruction did not usher in a new period of Black economic expansion. Washington’s interpretation of Black economic history is sharply contradicted by the evidence of the destruction of most Black artisans after the war. Several factors limiting Black economic opportunity were present. First, the vast majority of Black millers, blacksmiths, carpenters and other potential entrepreneurs were illiterate. According to figures from the Census of 1870, probably fewer than one-third of all urban Blacks in the South who were artisans or employed in commerce were literate. Any skilled Black artisan who lacked the ability to maintain correspondence with customers, to check accounts and to supervise payments to creditors was severely crippled.13 A second factor is suggested in DuBois’ The Negro Artisan. Slavery permitted Blacks to develop skills as master craftsmen, but seldom permitted Black artisans to acquire training as entrepreneurs—placing advertisements in local newspapers, hiring and firing employees, purchasing supplies, and maintaining profit and loss records. The business of the Black artisan in slavery, DuBois observed, “had been to do work but not to get work.”14 A third and decisive factor was white racism. In late 1865 many Southern states passed “Black Code” regulations declaring that any Black man who did not have an employer was subject to arrest as a “vagrant.” Working independently got themselves, some Black artisans were fired, jailed and even sentenced to work as convict laborers. South Carolina’s legislature declared in December, 1865, that “no person of color shall pursue or practice the art, trade, or business of an artisan, mechanic or shopkeeper, or any other trade, employment or business . . . on his own account and for his own benefit until he shall have obtained a license which shall be good for one year only.” Black peddlers and merchants had to produce $100 annually to pay for the license, while whites paid nothing.15

Historians Roger L. Ransom and Richard Sutch document that both before and immediately after slavery the number of Black artisans was extremely small. The percentage of slaves working as field hands in the Black Belt South in 1860 was between 80 and 92 percent in various states; rates for slave employment as blacksmiths ranged from under 1 to 3 percent; for all Black artisans, the percentages for states varied between 3 and 11 percent of the total slave workforce. These figures did not improve significantly by the 1890s. According to 1890 Census figures, in the five major cotton-producing states (Georgia, Alabama, South Carolina, Mississippi and Louisiana), the overwhelming majority of Black workers were employed as agricultural laborers, porters, laundresses, teamsters and personal servants. Over 90 percent of all male agricultural workers and almost 70 percent of all female agricultural laborers were Black, out of a total workforce of 594,700. The approximate number of Blacks gainfully employed in 1890 as painters in these five states was 2,272; butchers, 978; manufacturers, 256; printers, 234; bank employees, 108. More· importantly, the approximate number of Black lawyers and government officials in these states was 110 and 160, respectively. Aspiring Black businessmen had few allies in postbellum state and local governments to represent their interests, and had few if any friends in the banking industry to provide venture capital.16 The total number of Black businesses in the United States was approximately 2,000 in 1863, 4,000 in 1873, and only 10,000 in 1883. Growth rates in Black businesses declined abruptly between 1883 and 1903.17

The older Black business elite—barbers, butlers, caterers, tailors, blacksmiths, carpenters, furniture makers and other skilled artisans—had been dependent upon white patrons for much if not all of its business. With the expansion of racial segregation after 1890, many of these artisans disappeared. The new generation of Black entrepreneurs was a byproduct of racial segregation, developing goods and services for Black consumers, embracing Washington’s rhetoric of “self help” and racial upliftment. A conservative Black nationalist ideology was promoted aggressively by Black bankers, insurance agents and small merchants precisely because they “depended upon the Negro community for their support,” observed historian August Meier. “The difficulties involved in obtaining credit from white banks, the discrimination practiced by white insurance companies and real estate firms, exclusion from white restaurants, hotels, and places of amusement, (and) the gradual elimination of skilled workers from employment” all combined to force Blacks to accept the Tuskegee economic theory. “Many (Blacks) were led to believe that only racially developed and supported business would solve their economic and other problems.”18

The number of Black Capitalist success stories multiplied with the proliferation of Jim Crow restrictions. In 1899 DuBois predicted that most Black barbers in Philadelphia would be eliminated, because they served whites. Eight years later he discovered that Black “barbers (were) more numerous than ever, but catering to Negroes.” Between 1900 and 1914, the number of Black-owned banks increased from 4 to 51; Black retail merchants, 10,000 to 25,000; Black undertakers, 450 to 1,000. The total number of Black businesses in the U.S. doubled in a little more than a decade, reaching 40,000 in 1914.

Two of the most influential Black entrepreneurs of the period were John Merrick of North Carolina and Isaiah T. Montgomery of Mississippi. A former slave and brickmason, Merrick established the North Carolina Mutual Insurance Company. By 1915, the company was insuring Black customers in twelve states and the District of Columbia. Merrick and his Black partners also created Mechanics and Farmers Bank in 1908, and the Merrick-Moore-Spaulding Real Estate Company in Durham in 1910. They also briefly owned a textile mill, and managed two drug stores servicing Durham’s Black population. In 1887, Montgomery, the former slave of Jefferson Davis’ brother, established an all-Black town, Mound Bayou. In less than ten years the city possessed several banks and real estate firms, a trades and technical education school modeled after Tuskegee Institute, a newspaper, a power and light company and a sawmill.19

But if the ideology and practice of Black Capitalism was to become a national force, it required political organizations. The leading advocate of this effort was Booker T. Washington. His influence in the Afro-American Council in the late 1890s was the beginning of the infrastructure which later became the Tuskegee Machine. The chief organization of Washington’s power from 1900 to 1915 was the National Negro Business League. The original concept for the League came from the sociological studies of DuBois, who was at that time a professor at Atlanta University. In an 1899 conference, DuBois proposed “the organization in every town and hamlet where the colored people dwell, of Negro Business Men’s Leagues.” He also called upon Negroes to spend consumer dollars solely with Black entrepreneurs. Washington opportunistically expropriated the concept from DuBois, and within a year had created the organization. At its first annual conference in Boston, over 300 Black merchants, artisans, lawyers, doctors and newspaper editors gathered to promote the Tuskegee philosophy of self-help and Black private enterprise. For Washington, the development of the League would provide the basis for a gradual end to racial oppression and segregation. “Suppose there was a black man who had business for the railroads to the amount of $10,000 a year,” he wrote. “Do you suppose that, when that black man takes his family aboard the train, they are going to put him in a Jim Crow car and run the risk of losing that $10,000 a year? No, they will put on a Pullman palace car for him.” The road to eventual civil rights, in Washington’s estimation, was clearly one of private capital accumulation.20

Much of this sudden growth of Black businesses could not have occurred without the critical assistance of the Black press. Between 1865 and 1900 over 1,200 Black-owned newspapers were established, about 70 percent of them in the South. Without adequate advertising support, most of these papers disappeared within ten years. But in the age of Black business growth after 1900, a series of Black entrepreneurs succeeded in creating a number of politically influential news­ papers. Robert S. Abbott initiated the Chicago Defender in May, 1905, and within 15 years was printing 200,000 copies nationally. Virginia journalist P. Bernard Young started the upper South’s most widely read Black newspaper, the Norfolk Journal and Guide, in 1909. Black lawyer Robert Lee Vann created the Pittsburgh Courier in 1910, which in three decades achieved a national circulation of 300,000 and became the largest Black publication in the U.S. In the Deep South, William A. Scott established a Black Republican newspaper, the Atlanta World, in 1928.

None of these newspapers could have survived without the continued support of Black business, since circulation revenues alone could not cover their normal expenses. As journalist-historian Henry G. LaBrie noted, “big business (in the 1920s) ignored the black press” because it was “unaware of the buying power of the black consumer.”21 Thus, it was up to Black business to support the Black press. Accordingly, the National Afro-American Press Association usually selected officials who espoused the Tuskegee philosophy. At the peak of Washington’s political power, the Tuskegee Machine even subsidized a number of Black newspapers, including the New York Age, the Boston Colored Citizen, the Colored American Magazine and the Washington, D.C. Colored American. Some Black newspaper owners and editors, particularly Fred R. Moore of the New York Age, not only became strong polemical advocates of racial accommodation but also became affluent business leaders in their own right. With these ties to Black business, the Black press became the chief vehicle to control and to exploit the Black consumer market, as well as to promote the ideology of Black Capitalism to the masses.22

The “Golden Years” of Black business occurred in the decade 1919-1929, which not coincidentally was also the period of the most extensive racial segregation.23 By 1929 the number of Black-owned firms exceeded 70,000. Virtually every Black neighborhood or town in the United States could claim a number of independent Black entrepreneurs providing goods and services to an exclusively Black consumer market: barbers and beauty parlors, laundries, restaurants, grocery stores, newspapers, shoeshine and shoe repair shops, automotive service and repair, funeral parlors, insurance companies and small banks. It was this rapid petty capitalist development within a strictly segregated society that impressed and inspired the Black nationalist leader, Marcus Garvey. After only eight months in the United States, Garvey was convinced that Washington’s strategy could be combined with race nationalism and political militancy to create a self-sustaining, Pan-Africanist economic order. Writing in 1916, Garvey declared:

The acme of American Negro enterprise is not yet reached. You still have a far way to go. You want more stores, more banks, and bigger enterprises. We (West Indians) have no banks of our own, no big stores and commercial undertakings; we depend on others as dealers while we remain customers. The file is there open and ready for anyone who has the training and ability to become a pioneer.24

Garvey’s Universal Negro Improvement Association (UNIA), which included commercial establishments, the Negro Factories Corporation and Black Star Line, was successful in part because it reflected the economic and political realities of the Jim Crow age. Even Garvey’s harshest critics within the NAACP did not dissent from the general economic direction of the UNIA. In the Crisis, DuBois admitted that “the main lines of the Garvey plan are perfectly feasible. What he is trying to say and do is this: American Negroes can, by accumulating and ministering their own capital, organize industry, join the black centers of the south Atlantic by commercial enterprise and in this way ultimately redeem Africa . . . for black men. This is true. It is feasible.”25

Although DuBois considered himself an avowed socialist after 1904, his militancy was compromised with the optimistic spirit of the age. The Black entrepreneurial elite was basically a progressive, potentially powerful force in the battle against Jim Crow, in DuBois’ view. He praised the rapid development of the Black business class in Durham, North Carolina, in 1912.26 In October, 1913, he commented on a conference of Black business leaders in Philadelphia, concluding that despite evidence of “a spirit of aggrandizement, lying, stealing and grafting” the general outlook for this stratum was “excellent.”27 In articles written in 1922 and 1928, he applauded the development of Black-owned and directed banks.28 When two major Black businesses went bankrupt, Brown and Stevens Bank of Philadelphia and Standard Life Insurance in Atlanta, he urged readers of the Crisis not to lose confidence in Black enterprise.29 It was not until the Great Depression and its aftermath that DuBois grew pessimistic about the long-term possibility of a “Black Capitalist Solution” to the Negro’s plight. In an October, 1942 newspaper column, DuBois lamented that Black entrepreneurs as a group had absolutely no ethics or morality regarding their own people. “What American Negro businessmen have got to remember,” he urged, “is that a new economic morality is facing the world, and that emancipation from unfair private profit is going to be as great a crusade in the future as emancipation from Negro slavery was in the past.”30 Again in May, 1943, he encouraged Black businesses to seek the general economic improvement of all Blacks, rather than simply the accumulation of capital at grossly high profit margins.31

Few if any Black intellectuals and political leaders recognized the extreme economic instability of these expanding Black firms. A National Business League Survey of 1,534 Black enterprises in 33 large cities in 1928 found that 666—43.4 percent—recorded annual gross profits below $5,000, and only 137, or 8.9 percent, had annual gross receipts above $25,000.32

For the Black banking industry, the Depression was disastrous. The Douglass National Bank of Chicago, which in 1929 had a capital investment of $293,212.70 and deposits totalling $1,507,336.70, failed in May, 1932, despite a $200,000 loan from the Reconstruction Finance Corporation. The Chicago African Methodist Episcopal Church lost $18,000 with Douglass’ collapse; a Black fraternal order lost $20,500. Of the 134 Black banks founded between 1888 and 1934, not more than 12 were operating in 1938.33

Thousands of other Black businesses also went bankrupt during the Great Depression. For the survivors, many managed by illegal means. In Chicago, for example, about one-fourth of all Black firms by the late 1930s were owned or controlled by “policy syndicates”—the “numbers” daily lotteries.

In World War II the number of Black enterprises resumed their pre-Depression growth, but at very low levels of capitalization. One 1944 survey of 3,866 Black businesses in 12 cities noted that the initial amount of capital for 64.4 percent of these firms was less than $1,000. The median value for Black business initial capitalization was $549. Some 86.3 percent of all enterprises were started solely with personal savings, and only 3.3 percent were initiated with bank loans. Almost 70 percent of all Black firms comprised only six types of businesses: restaurants (627); groceries (491); funeral parlors (126); shoe repair (130); laundries (288); barber shops and beauty parlors (1,004). Not until the late 1940s did Black businesses completely recover from the trauma of economic disaster.34

III

As the Black sharecropper in the South became a blue collar or service worker in the East Coast and Middle West, the bulk of Black business activity moved with the massive migration North. Gradually, majority Black populations appeared where only two decades before emigrants from Eastern and Central Europe had settled. Georgia and Carolina Blacks moved into the traditional Italian neighborhood of East Harlem. In New York’s lower East Side, Blacks and Puerto Ricans replaced Eastern European Jews. From the 1870s until World War I Harlem was primarily Jewish. The “ghetto,” the term used in Europe to delineate the restricted residential boundaries for Jews, became attached to the Negro for all practical purposes by the 1930s. Black entrepreneurs who travelled north discovered that small Jewish, Irish, Italian and Slavic business owners did not often sell their establishments after their old ethnic neighborhoods had been racially transformed. Most of these firms were engaged in retail trade, had stable lines of credit with small banks established by their own ethnic groups, and they had absolutely no intention of surrendering the growing ghetto consumer market to upstart Black petty capitalists. Adding insult to injury, many of these Northern stores had an informal Jim Crow hiring policy well into the 1950s.35

The Black response to white ethnic economic hegemony within the ghetto’s retail market took distinct political form in the “Don’t Buy Where You Can’t Work Movement.” Local Black leaders picketed white establishments first in Chicago in late 1931, demanding jobs for Blacks. The movement swept rapidly to Pittsburgh, Atlanta, Boston, Baltimore and Richmond. Blacks initiated the “Citizens’ League for Fair Play of New York” and initiated selective boycotts of major white Harlem establishments. Black progressives were divided on the effectiveness of the “Don’t Buy Where You Can’t Work” boycotts. Adam Clayton Powell, Jr., rose to political prominence as Harlem’s leading business boycott leader, and was elected to Congress in 1944. Black radical political economist Abram L. Harris thought that this Black nationalist-oriented strategy “would serve further to widen the breach between white and black labor.” The boycotts “would merely meet the unemployment of Negroes with the displacement of whites. But in the final analysis it would be the hundreds of thousands of black workers in industry who would have to bear the cost of the movement’s success in obtaining a few thousand jobs for Negro clerks, salesmen and managers. What would be more natural than a retaliatory movement of whites demanding that Negroes be employed only by those white capitalists whose income is mainly derived from Negro [sales]?”36

The aspiring Black petty capitalists profited from this racial discontent. The closing of a single Jewish grocery store in a small Black neighborhood potentially meant thousands of dollars in added gross receipts to struggling Black entrepreneurs. To many Blacks in the middle strata within Jim Crow society, the existence of white businesses in a primarily Black community seemed essentially unfair. “Denied equal competition with whites in higher positions of the capitalist set-up and thwarted in its ambition to develop a miniature capitalism within its own segregated racial domain, the Negro middle class is being driven into a position of extreme racial chauvinism toward other minorities,” Harris wrote in 1936. Black peddlers, loan sharks, retail store owners and real estate dealers not infrequently blamed Jews for Blacks’ higher rents and exploitative consumer prices. The picture of the “money-grubbing, cheating Jew,” to quote Paul Jacobs, soon became an integral part of Black urban folklore. In Los Angeles’ Black ghetto, Watts, the vulgarism employed by unemployed Black teenagers for teasing Jewish shopkeepers was “pushing peanuts up Goldberg’s nose.” Jews, and after 1945, Lebanese, Palestinians, Latin Americans and Chinese were often the symbolic targets of Black economic animosity, primarily because they were the most visible non-Black entrepreneurs in ghetto life. But as Harris argued, racial chauvinism was no substitute for the development of an effective program to eliminate Black urban poverty, unemployment and hunger. “If there is exploitation of the black masses in Harlem, the Negro businessman participates in it as well as the Jew, while both the Jewish businessman and the Negro are governed by higher forces that are beyond their control.”37

In the 1950s and 1960s, the political prospects for Black Capitalism began to improve. White corporate leaders and politicians, anxious to improve their standing within the burgeoning Black urban communities of the North and West, began serious efforts to cultivate a stable and class-conscious Black elite. The general pattern that emerged was corporate and philanthropic support for local development corporations and “economic resource centers” which provided fiscal and technical assistance to Black businesses. In Los Angeles, for example, the Economic Resource Corporation was created with white corporate assistance. It guaranteed loans made by Black enterpreneurs at local banks, extended generous grants, and purchased property and machinery for Blacks. Chicago’s Economic Development Corporation assisted Black businesspersons in their financial loan negotiations. The Interracial Council for Business Opportunity, a group of Black and white businesspersons in St. Louis, New Orleans, New York, Los Angeles, Chicago and other cities, gave technical symposiums to Black would-be corporatists, created the National New Enterprise Program—which helped Black businesses needing capitalization of over $100,000—and guaranteed “up to 50 percent loans made by banks to minority entrepreneurs.” The Inner-City Business Improvement Forum of Detroit helped to arrange the finances of Black firms. Rochester, New York’s Business Opportunities Corporation gave technical aid to Blacks just starting in business, and also guaranteed their bank loans. San Francisco’s Program for Action in Changing Times provided most of the services available in other urban corporations of the type listed above, but it also acted “as a broker between minority job-seekers and large white corporations” and gave “counseling and technical assistance on a one-to-one basis for existing and potential businessmen.” New York City’s International Council of Shopping Centers encouraged Blacks who aspired to initiate their own shopping malls. New York’s Association to Assist Negro Businesses (AANB) provided credit to Blacks “under a mechanism whereby pledges of $10,000 were solicited from each of twenty-nine white businessmen and used this as a basis for a $290,000 line of credit for ten years to be used against loan guarantees made by AANB to black enterprises.”38

This “benevolent” corporate strategy was actually a return to the policy of Andrew Carnegie and other business leaders vis-à-vis Washington and other Black accommodationists. It was Carnegie who financed the National Negro Business League’s chapters; in 1904 the steel industrialist created a pseudo-civil rights organization, the Committee of Twelve for the Advancement of the Interests of the Negro Race, led by the politically pliable Washington.39 Similarly, years later, Richard Nixon appointed Black millionaire real estate developer and lawyer Gloria A. Toote to serve as Assistant Secretary for Equal Opportunity in the Department of Housing and Urban Development. Nixon also selected Black Capitalist proponent Jewel Lafontant to the post as Deputy Solicitor General in the Department of Justice. As women and as Blacks, both represented the newest version of the kind of personal success stories that perpetuate the myth of Black Capitalism. After Watergate and Nixon’s political downfall, both women made the transition to symbolic posts in the upper sanctum of white corporate power. Lafontant became a member of the boards of Trans­World Airlines, Continental Illinois National Bank and Trust Corporation of Chicago, Equitable Life Assurance Society of the U.S. (New York City), Harte Hanks Communications, Foote, Cone and Belding, Jewel Companies, Inc., and the Bendix Corporation. Toote has emerged as the major Black female ideologue for Ronald Reagan and enjoys seemingly limitless access to the media to propagate her views.40

Despite these and other paternalistic efforts, the general pattern of U.S. Black business today still reveals a systematic underdevelopment, a paucity of capital and employees, that extends across geographical and regional boundaries. A random selection of nine moderately sized cities where at least 100 Black businesses exist—three each in the South, North, and West—provides an illustration. The towns selected ranked between 70th to 90th in their size of Black population for U.S. metropolitan areas in 1977: Chattanooga, Tennessee (48,079 Blacks), Pensacola, Florida (43,458 Blacks), and Greenville, Mississippi (37,889 Blacks), in the South; Akron, Ohio (59,441 Blacks), Bridgeport, Connecticut (35,639 Blacks), and Harrisburg, Pennsylvania (33,605 Blacks), in the North; Sacramento, California (51,953 Blacks), Phoenix, Arizona (38,561 Blacks), and Austin, Texas (36,905 Blacks), in the West.41 Each town and region of the country exhibits different economic characteristics. Blacks comprise a higher percentage of a town’s total population in middle-sized cities in the South than in the North and West. Akron, Harrisburg and Bridgeport have strong, industrial working class communities, with substantial Black member­ship in local trade unions. Sacramento, Harrisburg and Austin are state capitals, which traditionally have a higher percentage of Blacks employed in state government as white collar workers. Phoenix’s Black community developed substantially later than in the other cities, with the sudden economic growth in the Southwest after 1950. (See Tables XX, XXI and XXII)

The data reveals some obvious divergences. The city recording the highest gross receipts in 1977 was Greenville, Mississippi, with $12,765,000. Greenville’s gross receipts total is followed by Phoenix ($11,132,000) and Austin ($10,047,000). Cities with much larger Black populations, such as Sacramento ($6,920,000) and Akron ($7,666,000) actually recorded significantly lower gross profits. Greenville’s Black economic development may be explained by history and geography. It is the largest town between Memphis and Baton Rouge on the Mississippi River. Situated between Arkansas and Louisiana to the Southwest, Greenville’s Blacks are a high percentage of the town’s population. Greenville is one of the largest commercial centers for what remains of the western Black Belt. It also retains a strong legacy of racial segregation. These points set Greenville apart from the two other Southern towns of similar size on the list. Chattanooga has some light industry, but is politically and socially more Appalachian white than Black Belt in character. Pensacola is part of the wiregrass region of western Florida and southeastern Alabama. George Wallace and his supporters still dominate the politics of the rural region, which is conservative, populist and technically outside the Black Belt. Blacks immigrating to Western cities like Phoenix and Austin after 1950 were generally better educated and more affluent than earlier Blacks who arrived between Reconstruction and World War II. Both cities, however, have recent histories of legal segregation ending only a generation ago. All three Black populations in the North have relatively small numbers of Black firms possessing paid employees, and rank fifth, seventh, and ninth in the group in 1977 amounts for gross receipts. Tentatively these figures suggest that cities with relatively high percentages of Blacks, having strong histories of legal segregation, and/or experiencing a rapid growth of middle class Blacks since 1950 will have a somewhat more developed Black petty capitalist infrastructure than towns of similar size without such characteristics. Black business communities are weakest in cities where no legal Jim Crow barriers have existed for a century or more, and/or where Blacks comprise a relatively small segment of the total metropolitan population.42

There are far more similarities within these Black business profiles, however, than differences. The largest number of firms in all nine cities is in the area of “selected or human services,” a broad category including housekeeping, repair shops, laundries, health services, amusement and recreational concerns, automotive repair and garages, hotels and educational services. Greenville has the lowest percentage of selected services within its entire number of firms, 35.2 percent. The other towns’ percentages of selected services within the total number of Black firms range from 41 to 60 percent, roughly paralleling the Black national human services figure of 44 percent. In all cities selected, the number of human service firms without a single paid employee was much larger than those with workers. In Bridge­ port, only 14 out of 87 such firms have paid employees. The amount of gross receipts for firms without employees averages only $8,630 per year. Bridgeport’s other 14 Black human services firms have staffs totalling 32 persons, pay annual payrolls averaging $10,214 per firm, and have average annual gross receipts of $55,714. The second leading number of Black firms in all nine cities is retail trade establishments: grocery stores, apparel and accessory shops, garden and building supply centers, general merchandise stores, restaurants, bars and furniture stores. Chattanooga and Austin have the largest number (both 108) of stores in the retail sector. The number of retail stores in both cities with paid workers is very low. Chattanooga’s 79 Black retail stores without paid employees average annual gross receipts of $15,962. The city’s 29 Black-owned retail establishments with employees (84 total) pay average annual payrolls of $12,689, and have average annual gross receipts of $139,931. Austin possesses 80 Black retail stores without paid workers, with average annual gross receipts of $14,925. The other 28 firms have a total of 46 employees, have average payrolls of $6,036, and average annual gross receipts of $63,679. Akron, the third ranking city (94) for Black retail firms, has similar totals: for the 77 Black retail firms without employees, average gross receipts were $10,597; the 17 other Black retail firms (43 employees) have average annual gross receipts of $130,058.

The lowest number of Black business enterprise in all of these cities is in the areas of manufacturing (food products, tobacco, lumber and wood products, electronic and electrical equipment, machinery, fabricated metal products, leather products, stone, glass and clay products, etc.) and wholesale trade (suppliers to food stores, general merchandise centers, furniture stores, etc.). Phoenix has only one Black manufacturer with paid employees, and 23 Black entrepreneurs who are wholesale merchants, most of whom (20) having no paid workers. Sacramento claims all of two Black manufacturers, neither of whom have employees, and only one out of a grand total of five Blacks involved in the wholesale business have any employees. Taken together, all nine cities listed here have a total of 2,933 Black-owned firms of various kinds. In this group, there are only 525 that have paid employees, 17.9 percent of the total number of enterprises. One thousand three hundred and seventy-one firms (46.7 percent of total) engage in human services. Some 687 businesses are in retail trade (23.4 percent). Over 70 percent of all modern Black enterprises, in summary, are in the same vulnerable sector of the segregated economy that was developed 80 years ago by Washington and the early proponents of Black Capitalism. Relatively few have made it into the big leagues of white corporate finance, manufacturing and wholesale commercial trading.

Census research on Black-owned businesses also indicates a profound pattern of concentrated wealth and power in the hands of a relatively small number of Black capitalists. Only 164,177 workers (mostly Blacks) found employment in the 39,968 Black firms which hired personnel in 1977. Within this figure, however, 32,581 businesses (81.5 percent of firms hiring workers) employed between one to four persons during the year. These firms hired an average workforce of 1.45 employees, paid average annual gross payrolls of $9,695, and recorded average gross receipts totaling $68,831. Moving up the employment scale, a different picture emerges. Only 230 Black firms in the U.S. in 1977 hired between 50 and 99 employees. This group retained an average workforce of 67.6 employees, had average annual gross payrolls of $540,035, and average yearly gross receipts of $2,357,909. At the pinnacle of Black Capitalism were the 113 Black U.S. firms which employed 100 or more workers in 1977. This tiny elite is marginally part of the dominant U.S. capitalist class. With an average workforce of 247.5 employees, these firms met average annual payrolls of $1,960,221. Average annual gross receipts for the elite in 1977 were $8,952,469. Throughout the U.S., there were 1,060 Black-owned corporations and partnerships that hired 20 or more employees. This small fraction of all Black entrepreneurs was only one half of one percent (00.46) of all Blacks engaged in private enterprise. These 1,060 affluent Black firms had gross receipts which totaled $2,467,958,000, 38.6 percent of all gross receipts acquired by Black firms with employees, and 28.5 percent of the gross receipts received by all Black-owned businesses. Only a few enterprises earn the vast majority of profits. One hundred and three manufacturing firms out of a total of 4,243 received 67.3 percent of all gross receipts in that sector, and employed 52.8 percent of all employees. In wholesale trade, 5 percent of the firms had 75.3 percent of all receipts and 58.3 percent of all paid workers. In finance, real estate and insurance, 90 firms (0.9 percent of the total number) earned 69.2 percent of all gross receipts and had 77.1 percent of all employees. Even within the Black commercial and industrial elite, the old patterns of the segregation era were stamped clearly on these profit patterns. Three hundred and forty three of the top 1,060 firms (32.4 percent) were involved in selected services, and another 277 businesses (26.1 percent) were large retail stores. Only two Black firms in the U.S. employing 100 or more workers were in wholesale trade. Only 5 construction firms and 3 transportation companies owned by Blacks hired 100 or more employees.43 (See Tables XXIII and XXIV)

Black Capitalism in the 1980s, whether considered as an economic force competing for a substantial share of Black consumer dollars or as a political force which advances a pro-corporate and “neo-Horatio Alger” ideology within Black society, must be subdivided into three distinct constituencies—the “proletarian periphery;” the intermediate Black petty entrepreneurs; and the Black corporate core. Over four­fifths of all Black-owned U.S. firms, 82.7 percent of the total number, belong to the proletarian periphery. These 191,235 enterprises have several common characteristics: (1) Almost all are sole proprietorships, unincorporated firms owned by a single Black individual; (2) most are started by Black blue-collar or marginally white-collar employees; (3) the firms are undercapitalized from the outset, and owners are forced to subsidize business activities by drawing upon personal savings, loans from friends and relatives, and by allocating a portion of their salaries at their other place of employment; (4) all of these firms have no paid employees; (5) the vast majority are concentrated in two traditional sectors of the segregated Black economy, human services and retail trade; (6) at least 75 percent become bankrupt within three years; and (7) their average annual gross receipts vary between $3,000 and $15,000. Economically and politically, these Blacks are essentially workers who are attempting to become small businesspersons, struggling against massive odds to leave the ranks of the proletariat.

These marginal worker-entrepreneurs must be viewed as part of the Black proletariat from which capitalism extracts surplus value. These small entrepreneurs uniformly pay higher rates for insurance, since majority-Black communities are defined as “high-risk” areas. They are exploited by banks which “redline” Black districts, making entire communities ineligible to receive loans at reasonable interest rates. The proletarian periphery falls victim to the economies of scale, wherein smaller retailers with low sales volume and a small number of commodities must charge Black consumers higher retail prices for goods or services than larger white companies. McDonald’s and Kentucky Fried Chicken, for example, can sell their fast foods at nominally lower prices than the Black “mom-and-pop” chicken establishment, because of infinitely higher sales volume. Human service-oriented establishments initiated by Black workers who possess personal skills (hairdressers, cooks, barbers, caterers, etc.) can be established with little capital, but they are also extraordinarily vulnerable to capitalist recessions. Black workers and the unemployed have precious little discretionary income even during brief periods of high employment. At every periodic downturn in the capitalist economy, Black lower-to-­middle income consumers cut back on their spending for services. As a result, in both 1973-75 and 1980-82 tens of thousands of small Black businesses failed.

Those fortunate enough to survive, by legal or even illegal means, became part of the Black petty bourgeoisie, the intermediate level of Black entrepreneurship. These Black businesses constitute about 38,900 firms, 16.8 percent of all Black enterprises. The common traits they share are the following: (1) All retain paid personnel, with an annual workforce between 1 and 19 employees; (2) average gross receipts are between $30,000 and $300,000; (3) almost all employers work full-time in their enterprises; (4) almost all firms receive loans from banks and savings and loan establishments to continue business expansion; and (5) a substantial minority of these firms are involved in real estate, finance, manufacturing, and other traditionally all-white sectors of private enterprise. In Black Capitalism, Timothy Bates outlines the financial characteristics of 285 Black “high-caliber” firms in Chicago, Boston and New York that received loans through the Small Business Administration in the early 1970s. Mean value for the group’s total sales was $74,101; mean total assets, $30,029; the mean number of years of the Black owner’s management experience, 8.45 years; mean total liabilities, $19,528; mean amount of Small Business Administration loan, $27,740.44

The corporate core of Black Capitalism is the 1,060 Black businesses with a workforce of 20 or more employees, led by Black Enterprise magazine’s top 100 firms. Number one is Motown Industries of Hollywood, producers of soul records, films and tapes, with 1979 gross receipts of $64.8 million. Numbers two through five are Johnson Publishers ($61 million), Fedco Foods supermarkets ($45 million), H.J. Russell Construction of Atlanta ($41 million), and Johnson Cosmetics of Chicago ($35.4 million). This select group also includes Independence Bank of Chicago ($98.3 million in 1979 assets); Seaway National Bank of Chicago ($80.9 million in assets); Industrial Bank of Washington, D.C. ($59.9 million in assets); Freedom National Bank of New York City ($57.9 million in assets); United National Bank of Washington, D.C. ($56.2 million in assets); North Carolina Mutual Life Insurance Company ($5.1 billion insurance policies in force); and Golden State Mutual Life of Los Angeles ($2.7 billion insurance policies in force). Although these figures seem impressive, all of these major Black corporations combined could be purchased, for instance, by Mobil Oil Corporation with its liquid assets. White corporations allow these Black companies to exist for symbolic value alone. John H. Johnson of Johnson Publishers, for instance, is a member of the Boards of Directors of Twentieth Century Fox, Greyhound Corporation, Zenith Radio Corporation and Marina City Bank. H.G. Parks, Jr., Black millionaire owner of Parks’ Sausage Company of Baltimore, sits on the boards of First Pennsylvania Banking and Trust Company and W.R. Grace and Company. Former Tuskegee Institute President Luther H. Foster, the modern representative of Washington’s conservative philosophy, was elected to the Boards of Directors of Sears, Roebuck and Company and Norton Simon, Inc. The modern equivalent of Fred R. Moore, Black Enterprise publisher Earl Graves, was rewarded with posts on the boards of International Telephone and Telegraph Corporation and the Liggett Group. Black millionaire and Atlanta Chamber of Commerce President Jesse Hill Jr. serves on the boards of Delta Airlines and Sperry and Hutchinson Company. The number of executives who truly dominate the Black corporate core within the Afro-American political economy amount to less than 200 individuals. They have earned the confidence of the white corporate hierarchy and the capitalist state by keeping alive the bogus illusion of Black Capitalism.45

IV

Undoubtedly the greatest obstacle to a present-day Black Capitalist strategy is the newly found interest of white corporations in controlling and capturing the Black consumer market. Between 1960 and 1973 the estimated amount of goods and services purchased by Black Americans increased from $30 billion to almost $70 billion annually. By 1978 the Black consumer market was the ninth largest in the world. Twenty years ago, however, at the peak of the Civil Rights Movement, few corporations seemed interested or willing to make special efforts to appeal to Black consumers. Initial advertising strategies were poorly staged and more appropriate to the racial ideologies of the 1890s. In 1960, for example, Readers Digest decided to reprint Up from Slavery, and invited the United Negro College Fund to help it sponsor a creative writing contest to promote the ideals of Washington. In 1962 Greyhound Lines, Inc., the world’s most profitable transportation company, hired baseball relief pitcher Joe Black as a special markets representative in New York City, to “recognize, identify and invite black passengers” to ride its buses. With much fanfare in press released to Black-oriented radio stations and to the Black press, Black was promoted in 1967 to vice president of special markets for Greyhound, becoming the first Black vice president in the U.S. transportation industry.46

The white corporate strategy of gaining control of the Black consumer market occurred first with Pepsi-Cola Company. In the early 1950s the vast majority of Black soft-drink consumers purchased Pepsi, approximately three times more frequently than they selected Coca-Cola, Pepsi’s chief competitor. Overall profits for Pepsi sagged from the Black market throughout the 1950s. In early 1961, Pepsi’s management commissioned Elmo Roper and Associates to complete a detailed “breakout of black consumer preferences and attitudes, (giving) Pepsi its first overall picture of black consumer trends.” The Roper study revealed a number of surprising facts:

1) Blacks comprised only 11 percent of the U.S. population, but made up 17 percent of the soft-drink market. Blacks purchased 300 million cases of soft drinks annually. White per capita consumption of soft drinks was 120 bottles, vs. 163 bottles for Blacks.

2) Blacks were far more “flavor-conscious” than whites. Forty-nine percent of all grape soda and over 33 percent of all orange soda sold in the U.S. was bought by Blacks.

3) Between 1951 and 1961, Blacks’ consumption of Pepsi had remained constant, while Pepsi consumption among whites had increased 300 percent. “This lack of sales growth among blacks meant a loss of 60 million cases per year to Pepsi-Cola.”

Reacting quickly, Pepsi elevated Harvey C. Russell as vice president of special markets. Russell’s appointment, well publicized in both white and Black media, made him “the highest-ranking black executive of an international business firm.” In January, 1962, Pepsi bought twelve four-color pages in Ebony, and ran advertisements in virtually every Black newspaper in the country. Pepsi donated money to over 30 annual Black conventions, cosponsored a tournament for Black golfers, and subsidized the casting of a special medallion for the president of the Black National Medical Association. The company urged its local bottlers to develop or expand programs for Black market development. In 1963 Pepsi hired Black historian John Hope Franklin and other prominent Black social scientists to develop an elaborate series of films and records entitled “Adventures in Negro History.” By 1964, after spending several million dollars solely in Black-oriented advertising, the “bottom line” results were in. Pepsi-Cola’s annual profits rose from $157.6 million to $250 million between 1960 and 1964. Market research indicated subsequently that after five purchases, six out of ten Black “heavy-user households” favored Pepsi, compared to only four out of ten white households.47

The Pepsi-Cola campaign not only reaped almost $100 million, but illustrated to the entire white corporate and advertising world the enormous profits at stake in the Black consumer market. By the mid-to-­late 1960s, advertisers produced exhaustive studies of Black consumer habits, finding key differences between Blacks and whites. Researchers discovered that Black women purchased over 50 percent more home cleaning products, particularly air fresheners, garbage bags, insecticides and oven cleaners, than white women on a per capita basis. In 1966, nonwhite consumers (11.5 percent of the U.S. population) purchased 15 percent of all cereal; 18.5 percent of the flour; 39 percent of the rice; 38 percent of the cornmeal; 17.5 percent of the poultry; 26 percent of the smoked sausage; 22 percent of the canned milk; 29 percent of the green beans; 32.5 percent of the lard; 14.5 percent of the molasses and syrup; 17 percent of the salt; 22.5 percent of the wool blankets; 15.5 percent of the cooking utensils; 14.5 percent of the overcoats; and 28.5 percent of the hats sold in the United States. The list of Black consumer preferences is, of course, almost endless. The data collected by market analysts can be interpreted in a number of ways, to promote greater profits from Black sales. For example, Procter and Gambel learned from its advertising agency that 22.4 percent of Black householders used Tide to wash dishes as well as the family laundry, compared to only 3.4 percent of white householders. The company developed two different marketing strategies: in white­-oriented media, “the message referred only to Tide as a laundry detergent;” in majority Black areas, Tide is advertised as “an all-pur­pose detergent for dishes, in the bath, for washing fine fabrics, and in the laundry.”48

In the 1970s the level of corporate sophistication increased. Market analysts informed Pillsbury corporation that the purchasers of its “profit leader,” Hungry Jack biscuits, were 46 percent Black and 54 percent white. Relatively few white householders outside the rural South regularly ate biscuits, whereas Black consumption was increasing. However, Pillsbury was dismayed to learn that only 11 percent of all Black consumers purchased Hungry Jack biscuits, which were then packaged in a ten-ounce, ten-biscuit can. Allocating $1.5 million for a new marketing strategy, Pillsbury decided to simply maintain its white consumer market while attempting to boost its sales to Blacks. A six-biscuit can was produced to appeal to smaller Black households. Black-oriented radio commercials were developed for Black stations with a “hearty endorsement of a black mother.” Hungry Jack advertisements appeared in Essence and Ebony. By 1975, gross profits surged 56 percent. Brown and Williamson Tobacco Corporation of Louisville, Kentucky, hired a Black advertising firm for assistance in marketing its Kool cigarettes in the Black community. Research figures revealed that while Kool accounted for a meager 7 percent of the total U.S. cigarette market, Black smokers comprised about one-third of all Kool consumers. In the mid-1970s Brown and Williamson initiated the “Kool Jazz Festivals,” featuring noted Black musicians and singers, playing only in cities where a significant number of Blacks resided. In its first year, the concerts reached 480,000 people, mostly Blacks. Much of the music presented in the Festivals by the late 1970s, ironically, was not jazz at all, but “disco.” Kool producer George Wein admitted that this “has upset” some jazz artists, but “we will continue to present soul artists as long as the public wants to hear them.” Authentic Black jazz or blues, in short, did not produce sufficient patrons or profits.49

The impact of corporate America’s massive exploitation of the Black consumer market has created a profoundly negative effect within Black culture and consciousness. When Schieffelin and Company, manufacturers of Teacher’s Scotch, learned that Blacks consumed a 50 percent higher per capita rate of scotch than whites, it created a film narrated by Jesse Owens, The Black Athlete, in 1971. The film “premiered” in every U.S. city with a large Black consumer market. “Teacher’s Scotch Sports Nights” were arranged by Black liquor salesmen, and the film was displayed in bars and nightspots in Detroit, New York, Baltimore, Chicago, Washington, D.C., Cleveland and Los Angeles. Prints of The Black Athlete were forwarded to Schieffelin distributors for showings in bars in smaller Black communities and in Black public libraries. The same ideological techniques devised by corporations are now used with greater effect by the U.S. military and other law-and-order agencies. In the aftermath of the urban rebellions of the late 1960s, for example, the National Guard recognized that it had a major “credibility problem” within the national Black com­munity. In 1970 only 5,000 Black Americans were members of the National Guard. The military agency hired W.B. Doner and Company to devise a media strategy to help it “to overcome negative attitudes” among Blacks. With Doner’s assistance, Black Guard membership exceeded 50,000 by 1976.50

In addition to these specific marketing strategies, there has also been a general white corporate strategy to increase profitability at the expense of the Black consumer. The first aspect of this strategy concentrates on 50 percent of the total Black U.S. population, whose annual incomes fall below $13,000. White businessmen now recognize that the urban poor and lower-income consumers can be made to pay much higher prices than affluent white suburbanites for commodities, so long as adequate lines of credit are made available to them. In the 1960s, studies illustrated that personal debt-to-income ratios were quite high for all poor people, Blacks and whites alike. However, unlike low-income whites, Blacks’ debts “tend to increase with income.”51 Blacks with incomes of $5,000 actually had greater personal debt-to-­income ratios than whites with virtually no income. Black low-income consumers also suffered because of low savings rates. For Black families with incomes below $2,500 in the early 1960s, only 25 percent had savings of $100 or more. Merchants designed their Black marketing strategy to make profits not only from the sale of the commodity, but primarily from the terms of the credit agreements. Almost two-thirds of all poor Blacks buy their household appliances either exclusively or primarily on credit, often on terms that exceed market credit rates by over 100 percent. David Caplovitz’s observation of 1963, “the poor pay more,” remains true today.52

The second part of the profit-making corporate strategy concentrates on the 36.1 percent of the U.S. Black population with annual incomes above $15,000 in 1978. Segmented, this sector of the Black consumer market includes: the majority of Black two-parent households with both parents in the labor force, 1977 median income of $17,008; Black family heads with 4 or more years of college education, 1976 median income of $20,733; Black two-parent households under the age of 35 with both parents in the labor force, residing in the North and West, 1974 median income of $15,031. In 1974, the highest 20 percent of all Black families received 44.2 percent of the aggregate income earned by all Blacks, and the top 5 percent received 15.9 percent of all Blacks’ aggregate income.53 Corporate market analysts learned that these “middle-class” Black families spent a larger share of disposable income on travel, certain foods, entertainment and luxury furnishings than whites at identical income levels. Mediamark Research, Inc., completed a detailed study of the purchasing patterns of Black families who earned over $15,000 in 1980. The research completed indicated that Black middle-class families not only were heavy consumers, but had spending patterns that were different from lower-­income Blacks. Corporations and advertisers in the 1980s began to devise class-conscious propaganda, based on this type of information, to capture this new Black elite market. (See Table XXV)

v

The modern paradox confronting the prospective Black Capitalist is the process of desegregation. No Black nation in history has acquired the economic growth potential of the total Black consumer market in the U.S. Total Black income had grown from $98.6 billion in 1978 to $125.8 billion in 1980. Almost half of the aggregate Black income, roughly $56 billion in 1980, was earned by less than one-fifth of all Black families.54 Theoretically, Black enterprise activities should have entered an unprecedented period of capital growth in the 1970s and 1980s. But in real terms, the opposite occurred. Between 1900-1930, the number of Black firms increased 700 percent; between 1930-1969, the number of Black firms grew by 233 percent; between 1969-1977, growth was 70.5 percent. The number of Black businesses with paid employees in 1969—38,304—amounted to 23.4 percent of all Black firms in operation; by 1977, Black firms with employees totaled 39,968, only 17.3 percent of all Black businesses. Gross Black business receipts climbed from $4.5 billion in 1969 to $8.6 billion in 1977, but inflation and other factors actually reveal an overall stasis in real net profits.55 Historically, rapid Black business growth occurred only during the period of rigid racial segregation, when relatively few white corporations made any attempts to attract Black consumers. The Civil Rights Movement and desegregation permitted the white private sector to develop a variety of advertising strategies to extract billions in profits from Black consumers, all in the name of “equality.” The net result was the increased marginalization of the Black entrepreneur, the manipulation of Black culture and social habits by white corporations, and a new kind of economic underdevelopment for all Blacks at all income levels.

Recognizing the crucial paradox, a number of Black advocates for capitalism have stepped forward with new approaches to this dilemma. In 1968, Andrew Brimmer, a member of the Board of Governors of the Federal Reserve System (and subsequently, a member of the Boards of Directors of Bank of America, American Security Bank, E.I. DuPont, United Air Lines, and International Harvester) admitted that “the wall of segregation which cut Negroes off from many public services” provided a “wall of protection (for) the Negro businessman.” Washing­ton’s ambitious strategy was doomed to failure, however, because “in those areas in which Negro customers have relatively free access to retail establishments (such as department stores, hardware, furnishings and similar outlets), Negro businessmen have not found fertile ground.” Complete desegregation would destroy the entire foundation of Black Capitalism. Therefore, Brimmer concluded, would-be Black entrepreneurs should leave the ghetto and become managers and consultants to multi-billion dollar U.S. corporations. As a conservative integrationist, Brimmer views all forms of racial separatism with utter contempt. As an integral spokesperson for corporate interests, he advances the necessity to develop a stable Black stratum within the upper-to-middle ranks of the managerial elite.56

Other proponents of Black Capitalism are reluctant to yield to the modern realities of America’s corporate system, yet they recognize that the old Washingtonian approach can no longer yield dividends. “It is obvious that black economic development, on the scale necessary, is impossible if it must rely solely on accumulated wealth possibilities in the black community,” Black economist Flournoy A. Coles, Jr., wrote in 1975. “The black stock must be augmented with wealth from outside the black community—and this means wealth transfers.”57 A combination of corporate property and Federal tax revenue, or perhaps “reparations payments” from white civil society, would be used to form the basis of a Black capitalism within the overall system of “white capitalism.” The most ambitious and controversial scheme outlined to date that implements this strategy was written by economist Richard America. Since Blacks comprise over 10 percent of the total U.S. population, America observed, then in a truly “democratic capitalist” society, Blacks also should own 10 percent of all U.S. corporations. The Federal government should buy 125 of the largest industrial firms and corporations over a period of 15 years at fair market rates, and subsequently resell them to Black businesspersons at below market rates. The difference in purchase and resell price, literally hundreds of billions of dollars, would be absorbed by the Federal government. Coles favors the “America plan . . . because it addresses itself to the root cause of black powerlessness and black alienation from the economic mainstream of our society.” Other Black theorists have extended the proposal to include 10 percent of all corporations and firms currently owned by whites.58

Even when examined seriously, the America proposal is absurd. The total gross income received by all U.S. Blacks in 1980 was $125.8 billion, and the total gross receipts of all U.S. Black firms that same year was $8.6 billion. Let us assume, for the moment, that the Federal government agreed to such an arrangement—a deal that would significantly increase income tax rates and stimulate inflation tremendously. Let us assume further that every single Black income earner in the U.S. in 1980 set aside 3 percent of his/her gross income computed at $3.77 billion. Black firms with 20 or more employees would reserve 5 percent of all annual gross income ($123.4 million in 1977), and less affluent businesses with fewer than 20 workers would donate 3 percent of gross receipts ($117.9 million in 1977). The total amount of capital, excluding any costs for paperwork, etc., comes to $4 billion. The total number of all businesses in the U.S. in 1972, excluding corporations, was 7,053,000, of which Blacks owned 2. 7 percent. Gross 1972 receipts for all businesses, again excluding corporations, amounted to $289.3 billion. Even if the Federal government reallocated these small-to-medium sized sole proprietorships and partnerships at fantastic budget prices, it would take probably more than one hundred years to complete the payments. But one special problem emerges. In certain very profitable economic sectors, Blacks are not currently trained in adequate numbers to assume “leadership” for their 10 percent share of that particular area. Only 2.3 percent of all construction-firm owners are Black; only 0.4 percent of all wholesale trade owners are Black; Blacks comprise only 0.8 percent of all real estate, insurance and finance company owners. Should the Federal government pay the reeducational costs of Black factory workers, for example, to become chief executive officers of metropolitan banks and public utility companies? And will the transfer of these companies mean that more Blacks from the working class will have a greater possibility of jobs, eliminating the high Black unemployment rate? What America, Coles, et al., ignore is that the U.S. is not simply a capitalist state, but a racist state. Everything in U.S. history indicates that not a single major corporation would agree to liquidate its current directors and owners, rendering itself unto the desperate Black petty bourgeoisie.59

There is yet another political reservation that must be registered about Black Capitalism. Historically within advanced capitalist societies it is the sector of petty capital that is often more inclined toward authoritarianism than large capital. Reactionary political movements within parliamentary democracies tend to develop their strongest support (although, I should add here, not their decisive support) among elements of the most economically insecure and marginal stratum within the capitalist class. Hitler’s astonishingly rapid growth in Weimar Germany came not merely from the anti-Semitism of many German unemployed workers but also from the small shopkeepers and merchants of that country. In both 1976 and 1980, finance capital was extremely reserved about Ronald Reagan’s candidacy for the Republican nomination. Reagan’s delegates tended to be less well-educated and less wealthy than Ford’s or Bush’s delegates, respectively. Small business is usually less supportive of state intervention into the capitalist economy (e.g., its strong opposition to the Federal government’s loan guarantees to Chrysler Corporation in 1980), and is far more hostile to unions than multinationals are. Large corporations agree to modest minimum wage laws and substantial wage and fringe benefits to workers because they desire long-term labor peace. Small corporations, sole preprietorships, and business partnerships, working with smaller profit margins, paying higher interest rates for borrowed capital for business expansion than the multinationals, cannot afford to take the “long view.” The gross receipts of every single business day are much more crucial to them. Sole proprietors, Black or white, are much more likely to advocate strict laws to restrict the development of unions in their own workplace, and in their own states. The economic demands of day-to-day entrepreneurial struggle tend, in every capitalist society, to push the politics of small businesspersons to the right. This remains particularly the case for entrepreneurs engaged in human services and retail trade—the economic areas which have continued to be the decisive part of Black Capitalist development. In short, the crisis of modern capitalism may push the advocates of Black Capitalism squarely into the political camp of the most racist and conservative forces of white America. The logic of Black Capitalism could reinforce the politics of authoritarianism. The Black entrepreneurs’ quest for profits could become part of the political drive to discipline the entire Black working class.60