BLM & the Economics of Racial Injustice
By Zahra Ali Imran and Purav Mohanty, 7/18/2020
Blacks in Traditionally Large Coperations
The Black Lives Matter Movement has gained traction following the May 25th murder of George Floyd in Minneapolis by a police officer. Protests, both peaceful and otherwise, have occurred in major metropolitan cities across the country. The demonstrations have gone beyond demanding justice for George Floyd and have morphed into protests across the world calling out police brutality, discrimination, colorism, and more. Black Lives Matter seems to reenter the spotlight every time an incident of police brutality occurs in America, but it has been around since 2013. It is inspired by the 1960s civil rights/black power movement, the 1980s black feminist/womanist movement, the 1980s anti-apartheid/Pan African movement, the late-1980s political hip-hop movement, the 2000s LGBT movement, and the 2011 Occupy Wall Street movement. Some of the goals of the movement include fixing police brutality, changing mentalities, solving systematic discrimination, and making black communities safe. A movement like this appears to be fueled by pure passion for social causes, so it also appears to be independent of corporate culture in America. However, this is far from the truth.
The truth is that black people in America have faced economic injustices for decades. The key to solving issues that black communities are plagued by (high crime rates and consequential mass incarceration, low postsecondary education rates, mental health issues and more) is to resolve these injustices. First, one must analyze these inequalities. In 2011, the median white household wealth was $110,000, while the median black household wealth was $6,314. It can be said that a similar inequality exists as of today as well. One key indicator of economic success is access to housing and the housing market is one in which black people in America have suffered greatly for many years. The rate of homeownership is 28% higher for whites than for blacks. For decades, blacks suffered from blatant discrimination in the housing market such that they found it difficult to purchase real estate, and if they did, they were pushed into crippling deals. In 1968, the Fair Housing Act tried to level the playing field for blacks in the housing market, but it was too little, too late. Blacks were thrown into a housing market that had already appreciated so it was difficult for them to invest in real estate. If they had invested, they couldn’t take advantage of the huge returns that whites had already been able to take advantage of. Phenomenons like these are indicative of a system of generational wealth that has negatively affected blacks while positively affecting their white counterparts. In a more modern sense, blacks still suffer from injustices in the real estate market. While big banks have been compelled to pay fines for pushing minorities into bad mortgage deals and charging them higher rates and fees, their practices still continue.
Other incidents of economic injustice also occur. Between 2004-2010, blacks lost 25% of their wealth while whites lost just 1%. This indicates that during periods of recessions, blacks are more likely to lose their jobs, have investments fail, default on loans, and have their homes foreclosed. Additionally, many tax programs, including the estate tax and capital gains tax, favor wealthier Americans. This negatively impacts blacks. Despite accounting for 13.4% of the U.S. population, black people only occupy 3.2% of senior leadership roles in large corporations which further exacerbates economic injustices at multiple levels of the socio-economic scale. Only 4 Fortune 500 companies have black CEOs which is only 0.8% of the total number. Moreover, only 37 CEOs are women which is also indicative of a greater struggle with diversity amongst top executives in America. Another startling statistic is that black unemployment was at least twice as high as white unemployment as of April 2019.
If one takes into consideration that the majority of Americans work for large companies, then it becomes clear that at least the unemployment rate could be fixed by some of these large corporations. By implementing effective diversity programs, top companies can hire more black talent. By prioritizing incorporating this talent into the culture of their company, they can promote this talent to higher positions in the company. This process will take a long time, but as a country, society needs to start somewhere. After all, these high-paying, secure jobs are linked to high homeownership rates, low crime rates, high marriage rates, and low divorce rates. All of these things will help blacks increase their political power, decrease their mass incarceration rates, improve their communities, make their lives safer, and ultimately change mentalities and cultures. It’s necessary for large corporations to take it upon themselves to change. Simply throwing money at relevant foundations or a social media post will only apply a bandage, not help fix the problem. Only after corporations take it upon themselves to make a change in their companies will a cycle of economic prosperity start for blacks in America.
The truth is that black people in America have faced economic injustices for decades. The key to solving issues that black communities are plagued by (high crime rates and consequential mass incarceration, low postsecondary education rates, mental health issues and more) is to resolve these injustices. First, one must analyze these inequalities. In 2011, the median white household wealth was $110,000, while the median black household wealth was $6,314. It can be said that a similar inequality exists as of today as well. One key indicator of economic success is access to housing and the housing market is one in which black people in America have suffered greatly for many years. The rate of homeownership is 28% higher for whites than for blacks. For decades, blacks suffered from blatant discrimination in the housing market such that they found it difficult to purchase real estate, and if they did, they were pushed into crippling deals. In 1968, the Fair Housing Act tried to level the playing field for blacks in the housing market, but it was too little, too late. Blacks were thrown into a housing market that had already appreciated so it was difficult for them to invest in real estate. If they had invested, they couldn’t take advantage of the huge returns that whites had already been able to take advantage of. Phenomenons like these are indicative of a system of generational wealth that has negatively affected blacks while positively affecting their white counterparts. In a more modern sense, blacks still suffer from injustices in the real estate market. While big banks have been compelled to pay fines for pushing minorities into bad mortgage deals and charging them higher rates and fees, their practices still continue.
Other incidents of economic injustice also occur. Between 2004-2010, blacks lost 25% of their wealth while whites lost just 1%. This indicates that during periods of recessions, blacks are more likely to lose their jobs, have investments fail, default on loans, and have their homes foreclosed. Additionally, many tax programs, including the estate tax and capital gains tax, favor wealthier Americans. This negatively impacts blacks. Despite accounting for 13.4% of the U.S. population, black people only occupy 3.2% of senior leadership roles in large corporations which further exacerbates economic injustices at multiple levels of the socio-economic scale. Only 4 Fortune 500 companies have black CEOs which is only 0.8% of the total number. Moreover, only 37 CEOs are women which is also indicative of a greater struggle with diversity amongst top executives in America. Another startling statistic is that black unemployment was at least twice as high as white unemployment as of April 2019.
If one takes into consideration that the majority of Americans work for large companies, then it becomes clear that at least the unemployment rate could be fixed by some of these large corporations. By implementing effective diversity programs, top companies can hire more black talent. By prioritizing incorporating this talent into the culture of their company, they can promote this talent to higher positions in the company. This process will take a long time, but as a country, society needs to start somewhere. After all, these high-paying, secure jobs are linked to high homeownership rates, low crime rates, high marriage rates, and low divorce rates. All of these things will help blacks increase their political power, decrease their mass incarceration rates, improve their communities, make their lives safer, and ultimately change mentalities and cultures. It’s necessary for large corporations to take it upon themselves to change. Simply throwing money at relevant foundations or a social media post will only apply a bandage, not help fix the problem. Only after corporations take it upon themselves to make a change in their companies will a cycle of economic prosperity start for blacks in America.
BLM, Small Businesses and Racial Injustice
“As long as poverty, injustice and gross inequality persist in our world, none of us can truly rest.” – Nelson Mandela
Day after day and night after night, uncountable numbers overwhelm the streets of dozens of cities, braving a deadly virus and brutal retaliation, demanding racial justice and sweeping changes since the killing of George Floyd by a police officer in Minneapolis in May 2020. The globe reels from those eight minutes and forty six seconds that have spurred movement of tens of thousands of protestors to not only call attention to the unchecked power of the police and its capricious use, but the systemic racism and brutality the black community all over the world has continued to grapple with.
The Black Lives Matter Movement is one that has been embraced by unmatched scope and intensity, a movement that aims to highlight the depth of brutality, injustice and unaccountability that American society harbors toward black people. While the BLM Movement especially targets law enforcement, the aspect of injustice under the economic sector is one that cannot be ignored. According to a 2017 report by the Kauffman Foundation, additional financing, although needed, was avoided by the majority of black entrepreneurs, in fear of the rejection of a business loan by a lender. As expected, in 2018 large banks approved of only 29% of loans sought by black small-business owners, in comparison to 60% of white small-business owners. Additionally, minority-owned small businesses were far more likely to classify as “at-risk” or ‘distressed” as stated by a 2019 Small Business Credit Survey; Black and Latinx owned businesses were three times more likely to close down after a two-month revenue loss, with greater willingness to invest their personal funds to stay afloat. Black-owned businesses on a smaller scale were at greater risk of bankruptcy by even a slight decrease in the demand of their goods or services. Shelton and Minniti (2018) noted that many Black-owned small businesses lack capital and strategies to survive longer than 5 years. While more than 65% of white small business owners were successful in obtaining SB loans and sustaining their business beyond 5 years, black small business owners stood at less than 30%. Minority owned and operated businesses obtained 35% less SB loans than non-minority business owners, despite similarities in their businesses.
In an economy marred by the coronavirus pandemic, black-owned small businesses are on the verge of “extinction”, with mounting bills and social-distancing restrictions. They tend to comprise of fewer employees, mostly encompassing the retail or restaurant industries, which have been hit hard by lockdowns. Many black-owned small businesses lacked easy access to loans, were unable to smoothly shift to and operate online, and generally entered lockdown in a less secure state in comparison to other companies. African Americans also struggled to get loans from the $669 billion Paycheck Protection Program, the centerpiece federal rescue program for small businesses. “Most lack the capacity, scale and technical assistance needed to survive a pandemic,” said Kent Harris, president of the National Business League. According to an analysis of government data by Robert Fairlie of the University of California, Santa Cruz, more than 40% of black business owners reported that they were not working in April 2020, accounting for 440,000 businesses, while only 17% of white small business owners were in a similar position as shown in Figure 1.
Day after day and night after night, uncountable numbers overwhelm the streets of dozens of cities, braving a deadly virus and brutal retaliation, demanding racial justice and sweeping changes since the killing of George Floyd by a police officer in Minneapolis in May 2020. The globe reels from those eight minutes and forty six seconds that have spurred movement of tens of thousands of protestors to not only call attention to the unchecked power of the police and its capricious use, but the systemic racism and brutality the black community all over the world has continued to grapple with.
The Black Lives Matter Movement is one that has been embraced by unmatched scope and intensity, a movement that aims to highlight the depth of brutality, injustice and unaccountability that American society harbors toward black people. While the BLM Movement especially targets law enforcement, the aspect of injustice under the economic sector is one that cannot be ignored. According to a 2017 report by the Kauffman Foundation, additional financing, although needed, was avoided by the majority of black entrepreneurs, in fear of the rejection of a business loan by a lender. As expected, in 2018 large banks approved of only 29% of loans sought by black small-business owners, in comparison to 60% of white small-business owners. Additionally, minority-owned small businesses were far more likely to classify as “at-risk” or ‘distressed” as stated by a 2019 Small Business Credit Survey; Black and Latinx owned businesses were three times more likely to close down after a two-month revenue loss, with greater willingness to invest their personal funds to stay afloat. Black-owned businesses on a smaller scale were at greater risk of bankruptcy by even a slight decrease in the demand of their goods or services. Shelton and Minniti (2018) noted that many Black-owned small businesses lack capital and strategies to survive longer than 5 years. While more than 65% of white small business owners were successful in obtaining SB loans and sustaining their business beyond 5 years, black small business owners stood at less than 30%. Minority owned and operated businesses obtained 35% less SB loans than non-minority business owners, despite similarities in their businesses.
In an economy marred by the coronavirus pandemic, black-owned small businesses are on the verge of “extinction”, with mounting bills and social-distancing restrictions. They tend to comprise of fewer employees, mostly encompassing the retail or restaurant industries, which have been hit hard by lockdowns. Many black-owned small businesses lacked easy access to loans, were unable to smoothly shift to and operate online, and generally entered lockdown in a less secure state in comparison to other companies. African Americans also struggled to get loans from the $669 billion Paycheck Protection Program, the centerpiece federal rescue program for small businesses. “Most lack the capacity, scale and technical assistance needed to survive a pandemic,” said Kent Harris, president of the National Business League. According to an analysis of government data by Robert Fairlie of the University of California, Santa Cruz, more than 40% of black business owners reported that they were not working in April 2020, accounting for 440,000 businesses, while only 17% of white small business owners were in a similar position as shown in Figure 1.
(Figure 1: Change in active small business owners between February and April 2020)
The Black Lives Matter movement serves as a beacon of hope for black-owned small businesses as fallout from the coronavirus continues. As protests spread across America, citizens are calling on one another to “vote with their dollar” through an outpouring of support for small-scaled black-owned businesses. Social media has caused a seismic shift; posts urging for support towards such businesses have gone viral on Instagram and Twitter on a global scope, receiving hundreds of thousands of likes that eventually translate into notable increases in sales. Manifold digital lists have been compiled and shared across the internet under the hashtag #blackedownedbusiness, in order to help customers locate and support local, black-owned restaurants, bookstores, beauty brands and more. Comerica Bank has recently announced its $1 million commitment to the National Business League over four years as part of a national partnership that will launch the Black Capital Access Program (BCAP), an innovative small business program which is said to become available in all 50 states in 2021. The BCAP aims to ensure benefit through capitalization for African American owned small businesses, and to develop sustainable enterprises that are consistently bankable and investment ready in the digital economy. It includes a $150,000 financial contribution with access to a capital toolkit, various technical services, financial planning information, and webinars, etc. “We believe our partnership with the National Business League will become crucial in helping many Black-owned businesses and entrepreneurs recover and survive this turbulent time," said Curt Farmer, Chairman and CEO of Comerica Incorporated and Comerica Bank.
Major corporate brands have signaled their economic support for the Black Lives Matter movement, such as donations of over $175 million and $200 million to support black-owned businesses by Google and Facebook respectively. Similarly, Ramon Laguarta, chairman and CEO of PepsiCo, pledged $400 million over five years to strengthen local black-owned businesses, and Paypal announced a $530 million commitment to support black and minority-owned businesses and communities in the U.S. Yelp also launched a free searchable attribute in order to help businesses identify themselves as black-owned to aid users in finding and supporting these businesses. Moreover, online payments platform Finli will offer $500 grants for black-owned businesses in education and enrichment, such as those offering classes in art, music, yoga, dance or martial arts.
Acts of raising support and awareness can be catalytic. With the U.S. economy gradually reopening amid protests, redefining the status quo and capitalizing on this movement to support local Black-owned small businesses are our responsibility. We must volunteer our services, learn, listen, donate, and most importantly — vote.
Major corporate brands have signaled their economic support for the Black Lives Matter movement, such as donations of over $175 million and $200 million to support black-owned businesses by Google and Facebook respectively. Similarly, Ramon Laguarta, chairman and CEO of PepsiCo, pledged $400 million over five years to strengthen local black-owned businesses, and Paypal announced a $530 million commitment to support black and minority-owned businesses and communities in the U.S. Yelp also launched a free searchable attribute in order to help businesses identify themselves as black-owned to aid users in finding and supporting these businesses. Moreover, online payments platform Finli will offer $500 grants for black-owned businesses in education and enrichment, such as those offering classes in art, music, yoga, dance or martial arts.
Acts of raising support and awareness can be catalytic. With the U.S. economy gradually reopening amid protests, redefining the status quo and capitalizing on this movement to support local Black-owned small businesses are our responsibility. We must volunteer our services, learn, listen, donate, and most importantly — vote.
