Wall St. And Business Wednesdays: Black Entrepreneurship, the Sequel by John Sibley Butler

Recent economic data recall a time when blacks were judged not by their political affiliation but by performance in the business world. My memories of my youthful years in southern Louisiana are filled with strong entrepreneurs. My father, who graduated from Southern University in Baton Rouge in 1932, was among the generation of blacks that exemplified the entrepreneurial spirit. Over the years, he ran a movie business, owned malt shops, bought and sold thousands of acres of land, and helped many other black Americans start their own businesses.

So it was no surprise to me when the U.S. Department of Commerce's Public Information Office released census data that showed that the number of businesses owned by black Americans increased 37% from 1982 to 1987, compared with a 28% increase in the number of all U.S. companies. The rise in entrepreneurship among black Americans suggests a return to tradition.

In the late 1700s, for example, James Forten, whose major manufacturing concern made sails for seagoing ships and employed more than 40 black and white workers, was one of the most successful businessmen in Philadelphia. Forten represents a tradition of black entrepreneurship and business ownership that began before the Civil War and could be found in both northern and southern cities. Because of that zeal for starting and maintaining business enterprises, the total wealth of free Negroes on the eve of the Civil War may be placed conservatively at $50 million.

The entrepreneurial spirit intensified following the Civil War. It was black business owners who helped build hundreds of private schools in the South and the North and started the strong tradition of college matriculation among black Americans. Research by Margaret Levenstein at the University of Michigan informs us that in 1910 black Americans were more likely to be self-employed than any other racial or ethnic group in America; the data also show that black women were more likely to be entrepreneurs than white women were.

Those data remind us of a time when blacks were judged not by their allegiance to a political party or how eloquently they spoke to the nation about black problems but by how they operated in the business world. From the inception of the country until about 1960, entrepreneurship was associated with what was called "racial uplift." Both black men and women were judged by their business activity, a process that was the only way for them to develop and maintain communities. Thus in Philadelphia in 1838, black women controlled the dressmaking, hatmaking, and wig-making trades. Black men dominated industries such as tailoring, cabinetmaking, and blacksmithing.

Although free blacks were engaged in manufacturing and retailing, their bread and butter was in the service area. Having no competition in the South and little from immigrants in the North, they dominated ownership of boardinghouses and restaurants, river shipping, barbering, tailoring, and boot making. In 1840 free blacks in New York City operated two first-class restaurants in the financial district, six boardinghouses, a clothes-cleaning establishment, a hairdressing salon, and three tailoring shops, in addition to two coal yards, two dry-goods stores, a confectionery, and a fruit store. That pattern was found in many cities during that time.

After the Civil War, skills that were once bound by the institution of slavery were commercialized in a free society. At the time, the most skilled workers in the South were former slaves. They built highways, houses, and cities and, of course, were responsible for making cotton and other crops blossom.

Southern states responded to the growth of black enterprise by creating Jim Crow or segregation laws, which restricted where black-owned businesses could be located. Thus in southern cities, free blacks who had owned successful enterprises on Main Street before the Civil War were forced, along with the newly freed blacks, to operate only in black communities. Black entrepreneurs were unable to compete in an open marketplace.

Black entrepreneurship is as old as America, and it has had to endure the traditional problems of inadequate capital, federal restrictions, and failure of policymakers to understand its importance in the community. The recent census estimates the receipts of black companies to be 2% of the U.S. total. Recent research by Thomas Boston of Georgia Tech shows that this figure significantly underestimates the performance of black companies, because the census looks only at small companies. What is most important, however, is not the type or size of enterprise but the fact that business activity is again moving to the center of black America.


This article first appeared in the October 1, 1996 issue of of Inc. magazine

Wednesday, May 21, 2003

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