The story of Black business in America is the story of an unimaginable struggle. It is the story of Black people making that term—Black business—become something denoting the actual trade and commerce conducted by that group, and not, as Black business in America had meant for so long, the trade and commerce of Black people conducted by the nation.
The story is ultimately a tragedy. Black business has always operated amid the highly discriminatory conditions of American free-market enterprise. And despite Black entrepreneurs possessing all the talents, creativity, ingenuity, and perseverance needed to develop and grow business, anti-Black public policy and repeated violence sharply limited the possibilities for these attributes to be applied. Full, fair, and genuine participation in American capitalism—the very system whose exploitation of slave labor turned, as Matthew Desmond notes, a “poor, fledgling nation into a financial colossus”—was never a reality for the descendants of those enslaved individuals.1
As Juliet Walker writes in Racism, Slavery and Free Enterprise, “The legal constraints of slavery emphatically denied the economic freedom requisite for any business activity among the bondsmen.”2 Worse still is when a slave owner would rob a slave of ownership of his or her articles of manufacture and pursue business opportunities with the slave’s invention. When a slave known in record only as ‘Ned’ developed the cotton scraper—an agricultural tool that the Mississippi Governor at the time lauded for its improvement upon the existing tool—he reaped no reward for his invention. Ned was held in bondage by Oscar Stuart, a man who began manufacturing Ned’s cotton scraper and eventually securing a patent for the tool. Stuart marketed the product by including this testimonial from another plantation owner: “I am glad to know that your implement is the invention of a Negro slave,” the man says, “thus giving lie to the abolition cry that slavery dwarfs the mind of the Negro. When did a free Negro ever invent anything?” he asks.3 In this way, Stuart not only enriched himself off the ingenuity of a slave but used the opportunity to promote anti-abolition propaganda.
Stories like that of Ned and the cotton scraper are commonplace owing to federal law that denied patents for slaves’ inventions. The system of ownership for products of one’s intellectual labor, established by the Patent Act of 1790, and which helped drive the United States economy to its top, premiere global position, was not accessible to enslaved people. The Patent Act required applicants to undertake the ‘Patent Oath,’ which included swearing allegiance to one’s country. Unrecognized as citizens, enslaved people could not then apply for federal protection for their inventions and were precluded from realizing the financial gains. Absent the guarantee of exclusive rights to inventions, slaves were compelled to relinquish their invention rights to their owner who then obtained all benefits of manufacture and sale. The consequences of this exclusion are evident in Jack Daniel’s whiskey, a world-renowned bourbon whose recipe was developed by a slave, Nathan “Nearest” Green. Last year, Jack Daniel’s sold more than 14 million cases of liquor, making it the highest-selling brand in the world. Stefanie Benjamin, an assistant professor of tourism management at the University of Tennessee, Knoxville, points to how business arrangements—even when Black people like Nearest Green were brought into the company’s production process—have always sought to reserve an exclusive space of ownership for white stakeholders, and thus, have always ensured far greater outcomes for that particular group: “Although they [the Green family] were very well off in terms of finances [in the 1800s] in that time, they were not the owners or co-owners of the Jack Daniel distillery,” Benjamin says. “And so, those millions of dollars have been passed down through generations of the Jack Daniel family, and not necessarily the Green family.”4
After emancipation lifted the formal impediments to acquiring the rights and protections associated with original inventions, segregation brought with it a unique set of barriers that preserved the inability of Blacks to obtain patents. In her article, Violence and economic activity: evidence from African American patents, 1870-1940, Lisa Cook, an economics professor from the University of Michigan, writes: “The offices of patent attorneys (all white at the time) were in ‘white-only’ commercial districts, hindering African American inventors from applying for patents.”5 And to the extent that there was progress in the wake of emancipation with regard to Black people gaining the sole right to manufacture, sell, or deal in products and commodities (and indeed there briefly was, with Black patenting rates after emancipation growing equal to that of the broader inventor community), Cook notes that white violence and segregation drove down patent activity among the newly freed. Brenda Reddix-Smalls, in her article, Intellectual Property, Income Inequality, and Social Interconnectivity in the United States: Social Calculus and the Historical Distribution of Wealth, summarizes Cook’s findings nicely: “In other words,” she writes, “as racial violence and discriminatory practices increased in a given area, black patent numbers fell. White patents, meanwhile, rose in proportion.”6 This disparity has no doubt contributed to the present lopsidedness we see when observing group wealth levels. As Nina Archie, a diversity and tech policy advisor at The Commercializer notes, “There’s a direct correlation between the racial wealth gap and IP ownership.”7 And today, Black people, at 13% of the population, comprise less than 1% of U.S.-born inventors.8
The specific example of federal patents is but one aspect of a broader economic regime in America that has maintained the racialized inequalities upon which it was founded, often through lethal-minded white mobs. The absence of the rule of law when it came to protecting the property and personal safety of Black business owners directly violated every conceivable American ideal: individualism, freedom, equality, and the ability to start something of your own and pursue one’s passion. These menacing campaigns, so common throughout the American South, were textbook examples of terrorism. The core intent was not just to destroy capital or damage physical property; rather, the aim was to completely paralyze the sense of basic aspiration held by a specific group of people. From the era of Reconstruction to the Civil Rights era, white backlash to the Black struggle for economic advancement can be summed up in the statement, “The war is over, negroes. Stay in your place. If you don’t, we’ll put you there.” In Pittsburgh PA, this notice was posted by the Ku Klux Klan throughout Black neighborhoods, and its vile sentiment was seen throughout the nationwide acts of anti-Black terrorism such as the Red Summer of 1919 and Tulsa OK.
And while the Greenwood Massacre in Tulsa, OK is frequently invoked when discussing the terrorism carried out against Black communities, the Greenwood neighborhood was far from the sole heinous manifestation of white resentment toward Black attempts at economic uplift. When Black people created their own media—such as the Black-owned Daily Record in Wilmington, NC—white mobs burned down that institution as part of a larger terror campaign known as the Wilmington Coup of 1898. Twenty years later, the Springfield Massacre in Illinois saw Black businesses laid to waste by fire. That particular massacre became a model for numerous others that would follow until at least the 1940s. The ominous shout of “Give ‘em Springfield!” was often heard at these copycat massacres. In sum, whatever ambition that burned among the recently freed to engage in their own enterprise—whatever spirit of entrepreneurship finally had the possibility to be actualized—white mobs set out to create a sense of such immense and ever-present vulnerability that the simple notion of that group doing business for themselves would be banished from their minds. To use the language of business, “risk,” for Black entrepreneurs, took on an entirely different and frequently lethal valence.
Particularly as descendants of U.S. chattel slavery endeavored to achieve greater political autonomy in the mid-to-late-20th century, the business sphere naturally became a principal site of contestation and violence. The growth of the Black middle class, fueled by Black entrepreneurship, helped fund the fight for racial equality. And so white America, through means both covert and overt, suppressed the avenue of upward mobility and social progress offered by business and coerced the Black community into permanent second-class citizenship.
Supply chains, for example, which have always reflected the country’s white power structure, were weaponized against Black-owned, independent businesses. After Mississippi grocery store owner Reverend George Lee—who organized the NAACP Belzoni branch—was shot and killed after receiving numerous death threats, wholesale distributors began refusing to deliver to the grocery store owned by his friend and fellow organizer, Gus Courts.9 Local oil suppliers—enraged at the refusal of some small business owners to cease supporting the Civil Rights movement—would remove their pumps at Black-owned gas stations like that of Mississippi resident George Washington. Washington’s property was later firebombed in retaliation for his continued involvement in the Civil Rights struggle.
Tactically, white America eventually realized it no longer needed to lay waste to Black businesses with torches and bombs. The marginalization of Black businesses could be achieved via the structural violence of the American capitalist system itself; that is, in the anti-competitive monopolies and duopolies that created barriers to entry and public policies that promoted market concentration of economic might such as, for example, Bill Clinton’s Telecom Act of 1996, which was responsible for a tremendous decline in Black independent radio stations.10 In the post-Civil Rights era, a wave of mergers and acquisitions—abetted by deregulation efforts that were overseen by Republican and Democratic administrations alike—helped dramatically suppress opportunity for Black-owned enterprises in every sector of the economy. Critically, these increasingly consolidated industries in which larger corporations would either incorporate or drive competitors out of business were industries that small, independent Black business owners relied on to expand and develop their own businesses. Black-owned financial institutions such as banks and insurance companies were decimated as anti-monopoly and antitrust enforcement was relaxed. By 2017—of the 50 Black-owned insurance companies that were in operation in the 1980s—only 2 remained.11Black-owned firms in other industries faced similar imperilment during the decades-long series of acquisitions. Robert Johnson—the founder of Black Entertainment Television—perhaps summed up the essential consequences for Black business owing to the intense market concentration activity in the late 20th century: “You cannot get big anymore by being 100 percent Black-owned anything.”12 By the turn of the millennium, Johnson’s BET Holdings Inc. would itself fall victim to monopoly power when it was purchased by the media conglomerate Viacom. Suffering a similar fate were the small, independent Black-owned businesses that were vulnerable to the large retail chain expansion. And because of the sustained assault on Black business throughout the 20th century—which sought to crimp the opportunity for growth at every turn—the words of W.E.B. Du Bois ring just as true now as when he first spoke them in 1928: “To ask the individual colored man . . . to sell meat, shoes, candy, books, cigars, clothes or fruit in competition with the chain store, is to ask him to commit slow but almost inevitable economic suicide.”13
From the permission to form, to the ability to operate and be protected, when it comes to business in America, the government has always had an essential role to play. And so, is it any wonder that the group whose needs the government has so long and so specifically neglected would fail to make appreciable progress in the business sphere? The present disparities in private business assets—with whites holding $12.68T compared to the $310B held by Blacks14—attests to the history of atrocities and governmental disregard that have plagued Black people in the so-called land of opportunity. In what follows, the ADOS Advocacy Foundation offers specific policy recommendations that will form the foundation of a new paradigm for developing Black business in America:
We require the following:
- The Biden-Harris administration must issue an executive order recognizing the need for the specific economic uplift of Black Americans, like those issued for Hispanics and AAPIs. This order must create a permanent White House Initiative on Black Americans’ Economic Uplift and Full Economic Inclusion.
- The Biden-Harris administration must create a National Program for Black American Business Enterprise. In addition, the administration must audit the banks annually to measure fairness in lending practices and hold banks accountable for discriminating against Black American borrowers in denials, interest rates, fees, and penalties.
- The Biden-Harris administration must commit to providing grants and zero to low-interest loans specifically targeted to Black-owned businesses of all types (including, but not limited to, sole proprietorships, single-member LLCs, and 1099s) to keep existing businesses open and to help reopen businesses that are now closed due to the disproportionate economic fallout from COVID-19.
- 15% of SBA loans must go to Black-owned businesses. These loans must be sufficient for Black-owned businesses to scale and employ workers. Such loans should not be secured by collateral, as the government—through policies such as redlining—has intentionally devalued Black-owned property. These loans must be federally backed and forgivable.
- 15% of government contracts must go to Black-owned businesses.
- 15% of the government’s media expenditures must go to Black-owned media companies.
- The Biden-Harris administration must create an Office within the Consumer Financial Protection Bureau specifically for Black Americans. It must be equipped with the enforcement tools to deal with the specific history of and the present-day relationship between predatory capital and the Black American community. Offices such as the Equal Employment Opportunity Commission and others that enforce anti-discriminatory practices in hiring and contracting must be reoriented with new language recognizing Black American workers and Black-owned businesses as protected categories.
- Any public-private partnerships that the Biden-Harris administration engages in must include a commitment by private partners to take affirmative action to reach parity within the next 20 years in the recruiting, mentoring, training, hiring, promotion, and retention of Black American workers at all levels, from entry-level to upper management.
- Companies in the technology and finance sectors must reach a goal of having at least 15% of their workforce composed of Black Americans at all levels, from entry-level to upper management, in 20 years. The government must amend the existing tax law to offer these businesses specific tax incentives, like the Work Opportunity Tax Credit (WOTC), that encourage the hiring of ex-offenders to incentivize the hiring and retention of Black American workers.
- As Black Americans are making their way into investing in the stock market at higher rates than ever before, we require that capital gains taxes for retail investors be eliminated for households with an income of less than $46,000 per year which, according to the census data, was roughly the median income for African American families in 2019. Any losses incurred in the stock market by eligible families must qualify for tax write-offs.
- Desmond, Matthew. “In Order to Understand the Brutality of American Capitalism, You Have to Start on the Plantation.” The New York Times. The New York Times, August 14, 2019. https://www.nytimes.com/interactive/2019/08/14/magazine/slavery-capitalism.html.
- Juliet E. K. Walker. “Racism, Slavery, and Free Enterprise: Black Entrepreneurship in the United States before the Civil War.” The Business History Review 60, no. 3 (1986): 343–82. https://doi.org/10.2307/3115882.
- Richardson, Sarah. “Whose Patent Is It?: American Patent Law Denies Slave Creativity.” HistoryNet, March 27, 2019. https://www.historynet.com/whose-patent-is-it-american-patent-law-denies-slave-creativity/.
- Mekouar, Dora. “Enslaved Black Man Created World’s Most Popular Whiskey.” VOA. Enslaved Black Man Created World’s Most Popular Whiskey, February 24, 2022. https://www.voanews.com/a/enslaved-black-man-created-world-s-most-popular-whiskey/6271051.html.
- Cook, Lisa D. “Violence and Economic Activity: Evidence from African American Patents, 1870-1940.” Journal of Economic Growth 19, no. 2 (2014): 221–57. http://www.jstor.org/stable/44113425.
- Reddix-Smalls, Brenda (2018) “Intellectual Property, Income Inequality, and Societal Interconnectivity in the United States: Social Calculus and the Historical Distribution of Wealth,” North Carolina Central University Science & Intellectual Property Law Review: Vol. 11 : Iss. 1 , Article 1. Available at: https://archives.law.nccu.edu/siplr/vol11/iss1/1
- Bultman, Matthew. “For Black Inventors, Road to Owning Patents Paved with Barriers.” Bloomberg Law, July 14, 2020. https://news.bloomberglaw.com/ip-law/for-black-inventors-road-to-owning-patents-paved-with-barriers
- Salvatore, Susan C., Neil Foley, Peter Iverson, and Steven Lawson. Rep. Civil Rights in America: Racial Voting Rights. National Park Service U.S. Department of the Interior, 2007.
- Tiller, Joseph. “How the Telecom Act of 1996 Impacted Hip-Hop.” A3C Festival News and Updates. Accessed June 7, 2022. http://blog.a3cfestival.com/how-the-telecom-act-of-1996-impacted-hip-hop.
- Campbell, Eryn, Jeffrey Czajkowski, Stacey Mitchell, Eric Nordman, Connie Roland, and Paul Tetrault. Rep. Milestones in Racial Discrimination within the Insurance Sector. The Center for Insurance Policy and Research, 2020.
- Feldman, Brian S. “The Decline of Black Business.” Washington Monthly, January 9, 2022. https://washingtonmonthly.com/2017/03/19/the-decline-of-black-business/
- Bhutta, Neil, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu (2020). “Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances,” FEDS Notes. Washington: Board of Governors of the Federal Reserve System, September 28, 2020, https://doi.org/10.17016/2380-7172.2797.