The Destruction of Black Wealth

Some youngsters want to grow up to become artists or athletes or firefighters. Some want to be doctors or dancers. Charles Walker wanted to own a supermarket.

“Ever since I can remember, I wanted my own grocery store,” he said over lunch on a quiet afternoon in snowbound Detroit last year. To Walker, “grocery store” meant a gleaming, well-run supermarket, not necessarily huge but well stocked and scrupulously clean, with fresh meats and produce and first-class customer service.

“I had retail in my blood,” he told me. “I grew up here in Detroit, but I had a grandmother we used to visit in Alabama, and she had a store that sold cookies and candies, and she had a pop machine. That all seemed pretty cool to a little kid. And the people my mother worked for owned a meat market. That was their life. As I got older, going to high school and college, I worked there in the summers. That appealed to me, too, and they seemed to be making a good living. I thought that I could do something on a larger scale, and I really wanted to.”

The upside of this story is that Charles Walker, a black kid from a rough-and-tumble neighborhood in Detroit, realized his dream. It took a long time, but after years of working and prudent money management, after stints as a manager for CVS stores and a market called Metro Foodland, he was able to put together a deal, with help from relatives and a handful of outside investors, for a market that was part of the discount Sav-A-Lot chain. At age 47, the happily married father of three grown children had his supermarket.

That was in 2004. Detroit was in the midst of yet another comeback scenario, but decent food stores were rare, and black-owned markets, even rarer. Walker’s store was one of only two black-owned supermarkets in the entire city.

He did well for a while, bringing in $100,000 a week and employing a staff of 20. The store was a gleaming marvel in a neighborhood that was struggling but seemed to be improving. Then, as Walker put it, “the economy changed.”

Not nearly enough attention has been paid to the damage that the continuing Great Recession has done to black Americans. It’s true that jobs and homes were lost across a wide expanse of ethnic and income groups. It’s true that white businesses as well as black-owned firms have failed. But African American communities were particularly vulnerable, and the downturn swept through them like an invading army, destroying wealth that had been painstakingly accumulated over decades and, in some cases, generations.

Cornerstone institutions like minority-owned banks and black churches are being hammered, according to Deborah Wright, president of Carver Bancorp in New York, the largest black-run bank in the country. Some banks have already gone under, and others are in bad shape. Carver handles financing for a large number of black churches, and Wright says, “For the first time since I’ve been in this field, I’m seeing churches fail. That is very, very unusual. It speaks to the distress that their parishioners are under.”

The Pew Research Center reported last summer that the median wealth of white households in the wake of the recession was an astonishing 20 times that of black households. The black unemployment rate at the end of last year was close to 16 percent, comparable to the average national unemployment rate during some years of the Great Depression. But even 16 percent does not begin to capture the horror of unemployment in black America. The hardest of the hard-core unemployed are not even included in the official government statistics. I’ve been to neighborhoods in Boston; Chicago; Detroit; Camden, New Jersey; and other cities in which the majority, sometimes the vast majority, of the working-age population is jobless. Forget the smiling faces on television citing the latest hopeful economic statistics. Forget the assurances of self-styled black intellectuals that we are in some sort of marvelous post-racial era in which anybody can realize his or her dreams. The black community is shouldering its way through an economic calamity. More than a quarter of all black Americans are poor, as are more than a third of all black children. Doors of economic opportunity—in the workforce, in access to higher education, and elsewhere—are slamming shut at a breathtaking rate.

For many small African American businesses, and for countless entrepreneurs like Charles Walker, the downturn has been ruinous. The inevitable reduction in demand from a customer base struggling disproportionately with joblessness and the home-foreclosure crisis came at the same time as a drastic curtailment in access to capital for most small businesses. For black businesses, already chronically undercapitalized, the one-two punch was often fatal.

Small businesses generally get started and survive their early stages with capital drawn from the personal assets—mainly savings and real estate—of the business owners, their relatives, and friends. Home equity is a common source of collateral for small-business loans. With substantially lower levels of wealth and homeownership to begin with, blacks have a much harder time putting together start-up capital, and they find it more difficult to hang on during rough patches in the economy. The Great Recession was much worse than anyone’s idea of a rough patch.

David Beck of Self-Help, a nonprofit lender that has concentrated on minority businesses, told me: “With this financial crisis, the amount of equity wiped out in minority communities is just jaw-dropping, and that is devastating to small businesses. Once that home-equity collateral is wiped away, it’s really hard to find anything to replace it with.”

The ferocity of the recession has made it difficult in some cases for sympathetic lenders—black or white—to stay in business. The most dramatic example was the fall of ShoreBank in Chicago, which pioneered the concept of a community--oriented bank that would provide capital to establish and help sustain minority--owned firms. ShoreBank made more than $4 billion in investments and was responsible for the rehabilitation of tens of thousands of units of affordable housing. One of ShoreBank’s clients was Charles Walker. “I was actually one of their bigger projects in Detroit,” he said. But the Great Recession destroyed the dreams of both. ShoreBank closed its doors on August 20, 2010.

It was inevitable, as the recession and its dismal aftermath persisted, that black businesses would fold at a higher rate than normal, and at a higher rate than white-owned businesses. Official statistics are difficult to come by, but the hard evidence of shuttered shops, restaurants, and offices can be viewed in neighborhoods across the country. Black-owned auto dealerships have taken a terrible hit. By mid-2011, according to Automotive News, there were just 261 black-owned dealerships in the U.S., half as many as three years earlier. White-owned dealerships suffered a decline of 18 percent over the same period.

At the same time that this carnage in existing businesses was occurring, African Americans who lost jobs in the recession and were desperate for work began trying to start businesses of their own. Their goal was to create a job for themselves. Few winners are expected to emerge from that effort. The newcomers have tended to lack business experience as well as capital, and few mainstream lenders have been willing to help.

When the recession struck, Charles Walker had already poured all of his modest personal wealth into his Sav-A-Lot market. “It was difficult even before the recession,” he said. “But I’ve always been a hard worker, and I was doing OK for a while—I’d say for about three years. When I first opened up, they were building houses in the neighborhood. As the economy changed, they stopped building houses. People started to leave the neighborhood. Those were my customers. A Chrysler plant that was nearby shut down one of its shifts. It was rough. I thought the economy would start to turn around at some point in time, but it never did.”

“As everything started closing down all around me,” he continued, “I started to feel like I was on this island all by myself. I was struggling, taking from Peter to pay Paul, and that was the start of the downward spiral. I went to my investors and asked them to put up additional funds—you know, ante up some more to try and keep us going. And they did. I did get some more money from the bank. And I went to Sav-A-Lot and asked them to give me different terms. They worked with me. But you can’t keep borrowing money. I couldn’t see my way out, so I had to make the tough decision.”

I rode with Walker from the restaurant where we’d had lunch to the large parking lot outside his supermarket, which had already been shut down. We walked through the snow to the front of the store, and he unlocked the doors to what had once been his dream. With the flick of a switch, the store filled with light. It was still scrupulously clean, but the shelves were empty and the registers were gone. The heat had been turned way down, so it was cold. Walker gave me a tour, telling me in detail of the way things once had been.

It’s a mistake to think there was much of a flourishing black business sector even before the recession. Walker’s supermarket, which probably would have survived and might have thrived if the economy had held, was unusual. More than 90 percent of black-owned businesses are one-person affairs—the owner is the only employee.

Small businesses in general tend to be undercapitalized and lack such fundamental resources as finance and marketing experts. Black firms are even less likely to have that kind of expertise within reach. According to the Association for Enterprise Opportunity, which specializes in the development of microenterprises, less than 5 percent of all firms in the U.S. generate annual sales of a million dollars or more. For black firms, it’s less than 1 percent.

Proponents of black business development make a persistent effort to cast the best possible light on a bleak environment. ShoreBank, as good a friend as small black enterprises have ever had, found only a few sectors in which such firms could thrive. Most were retail or service start-ups with little hope of succeeding. Few were in bolder enterprises like manufacturing, wholesaling, or distribution. The quality of most businesses that applied for loans was poor.

ShoreBank found some success financing minority-owned franchises of large national organizations like McDonald’s, which offered its franchisees high-level corporate support in such areas as cost control, marketing, and mass advertising. The bank had great success supporting businesses that purchased and rehabilitated rental properties—as long as the housing market held up. Other types of enterprises did not do well.

The cold truth is that the chances for success are extremely slim for aspiring black entrepreneurs in an environment in which unemployment is chronically high, inequality of wealth and income is off the charts, and capital of any sort is hard to come by. There is also the continuing problem of racial discrimination. Studies have consistently shown that black-owned firms experience higher rates of loan denial and pay interest at higher rates than white-owned businesses, even after credit worthiness and other factors are taken into account.

The scale of the problem is huge, and the resources of those trying to deal with it are, by comparison, minuscule. Hundreds of nonprofits, credit unions, and community-development financial institutions are trying to fill the breach. But black businesses will never thrive if they have to rely primarily on a customer base that is depressed economically, isolated socially, and the target of persistent racial discrimination.

Deborah Wright made it clear that even Carver Bancorp, established in the 1940s, is not immune. When I asked about its outlook, she said: “The jury is still out. We’re going to fight to the end, but it’s a hard nut. It really is.”

It is futile to view the desperate struggle of African American businesses outside the context of two overwhelming imperatives: the obligation of the United States to figure out how to put its population to work in jobs that will support families and sustain a world-class economy; and the parallel obligation, perpetually avoided, to bring black Americans and all of their talent and energy fully into the fold of the wider society.

James Baldwin warned of the fire next time. Failure to face up to those two imperatives will lead ultimately to the failure not just of black-owned business enterprises but the failure of American society itself. 

Comments

Mr. Herbert makes some very valid points about the deteriorating economic prospects (and Detroit is an exceptional example of this). And while there should be little disagreement about "a customer base that is depressed economically", I wonder if "isolated socially, and the target of persistent racial discrimination" might be just a bit of an exaggeration for effect. I, for one, would like to see objective substantiation for these charges.

I'd also like to see the disappearance of comments like the one above (15:57) along with the mentality that could even conceive of posting such words in a forum like this.

So what? Herbert has pushed Obama to the hilt. Now, he's crying because blacks have been hurt by his policies? Fact is, blacks still support Obama by over 90%. Don't cry to me! You live by the sword, you die by the sword. Blacks (and whites and anyone else) who support Obama and his big government spending deserve every single bad thing that happens to them. I'll save my concern for anyone who is suffering and has voted against the socialists.

And what's this talk
about the Judas Goat
and pipin' America
aboard a new slave boat?
-Bamashave

"The Gods of the Copybook Headings with terror and slaughter return!"

Sooner or later reality catches up - so until you want to deal with reality, it's not really worth complaining about. I feel for Walker - he sounds like a hard worker. But the largest sources of his economic problems lie in DC and black leadership and the author never gets around to that. After years of working to build themselves up many people lost their savings to a housing bubble that was designed folks in DC who thought they could demand people be given no downpayment loans and there wouldn't be any consequences. Well there are consequences. Do you still support the DC pols who forced the no-downpayment loans? Then I don't want to hear about it. Yes, there are other bad actors in the economic mess, but you have a direct vote about the ones in DC, so if your going to ignore what you have direct control over, I don't want to listen to whining about what you don't have direct control over.

Racism is horrible, but I'll tell you why I don't care. I refuse to be distracted by a pimple when someone is bleeding from an artery. If you face the data it tells you the differences between the socioeconomic condition of blacks and whites is 99.9% things like out of wedlock birth and 0.1% racism. It wasn't always like this - in the past racism was the bigger part of the problem - but now is what we need to deal with. If we don't want to face it, there's no use in complaining - and at the moment black leadership doesn't seem to want to face it. Complaining about racism is easier, but that's not what we need leaders for.

I really feel bad about the entrepreneur featured in this piece.
My only complaint is that the story is written by an Obama stooge who has zero idea what it's like to be assaulted on all sides-- state, local and Federal, by waves of regulation, taxation, oppression, ridicule, ambush and guile.
It's not hard for those blessed with memory and impartiality to see the plain disconnect of this jerk writer, running down Bush at every turn while this entrepreneur was prospering, then writing the business's obituary during the TeleprompTer reign of Zerobama and his cabal of czars and plutocrat cronies, including most specifically Little Timmy Tax Cheat Geithner.

Blacks are infamous for voting nearly en bloc for Democrats, who are in turn equally infamous for destroying economies. If black-owned businesses are suffering, they've none to blame but themselves.

This article contains many truths however it provides an incomplete picture. Wealth cannot be created and sustained in any group whose leaders consider wealth the result only of greed and selfishness. We shouldn't be surprised when corporate leadership lacks diversity when the the First Lady tells young people not to go into the corporate world. She certainly wasn't being malicious but such statements can have negative second and third order effects. Corporate America needs good, honest people from all backgrounds to make our nation a better place.

Herbert was the resident "racialist" at the NYT for years. Nearly everything he wrote was seen through a lens of this is good or bad for black-Americans. That is the problem, to people like Herbert America is a hyphenated land, and to most black Americans if a black man is running they will vote for him no matter how pathetic that man is, just look at how many times they voted for Marion Barry in D.C. and now, along with their new white slave-masters, the elitist Chicago liberal politicians, they have given America its first anti-American president, or maybe the first black anti-American, and now they suffer worse? Boo-freaking-hoo!

Here is just one of the famous quotes by their thrice Mayor of D.C. : "If you take out the killings, Washington actually has a very very low crime rate."

"The Pew Research Center reported last summer that the median wealth of white households in the wake of the recession was an astonishing 20 times that of black households."

This is a troubling statement. For two reasons:

i. It clearly states HOUSEHOLD income. But it does not give any context that would help us understand if there is a corresponding gap between blacks and whites in single, non-working parent homes. Certainly, if there is a statistically signifcant difference; using HOUSEHOLD income as means to characterize disproportionate income might be intentionally misleading

ii. The choice of using the median instead of the mean as the 'barometer' for the reported disparity in household income, again, is not contextualized. There are instances where using the median is appropriate...and other times using the mean is appropriate. We have no data to contextualize which would be more appropriate here based on the distributions of income.

All in all, Herbert isn't stating a hypothesis and testing it with facts. He is creating a context to support his beliefs.

And really, that is nothing more than political campaigning.

It certainly isn't journalism or research.

The racial divisions that the left wing goes out of its way to promote is disgusting

fickng white trashi half breed what calls hissilf OBAMA - whos mommas cunit was available to commies reds 'en fagigots is THE MAIN HOMomOFUK that zombie nigigahs ALL vote faw!!!!!!!!!

The implication in this article is that the higher black unemployment is due to race. When you look at unemployment numbers relative to education levels independent to race, the correlation is undeniable. It is not racism that keep blacks from completing a HS education.

The implication in this article is that the lack of wealth in the black community is due to racism. When you look at wealth number relative to single parent homes, the correlation is undeniable. It is not racism that 72% of all black children are born to single mothers. There is no man in a white sheet forcing you to have unprotected sex.

Wealth is neither black or white, male or female. Wealth does not possess a face or a body. Wealth sometimes is not even real. Sometimes it is perceived, wrongly, to be something people possess when they do not. Wealth also is defined according to a person's values. You can lack monetary wealth but have abundant health which to some perceive as they possess wealth. Ted Kennedy might agree as he was very monetarily wealthy but not healthy, and so he expired at a relatively young age.

Others feel wealthy from the enjoyment of many friends which are not to be confused over acquaintances or business associates. Some feel wealthy due to monetary worth but find themselves alone, without anybody to confide their inner fears, secrets, or gain acceptance without condition. On occasion those that have possessed monetary wealth, only to lose it, discover they are truly destitute. Some, as time passes, discover they can't depend on people, especially in their old age where they must depend on others to maintain basic functions of their daily lives.
Sadly, for those like Mr. Herbert, who no doubt is an intelligent, learned, and articulate individual, this basic concept of wealth is lost on them. They struggle in vain to assign physical meaning to wealth only to sooner or later discover, like God, it is something that is rooted in spirituality and not some earthly being.

Society has already lost its way in these regards:

Detroit, as most American cities are the new reservations for minorities, poverty, crime, UNWED Mothers, school dropouts(76%), 50 percent illiteracy rate, corrupt unions, abortions, drugs, gangs, gangsters, guns, abyss of crime, debauchery, gun play, school truancy, car-jacking, human depravity, cronyism, incompetence, arrogance, 7 out of 10 murders remain unsolved, unemployment rate is 32.9%, and general entitlement living. They have become this way (AS WE ALL KNOW) from the liberal progressive mindset of spread the wealth. With Aid to Dependent Children, (73% Out of Wedlock) minority women birthed eight to 10, and in one case, one woman birthed 24 children and all on American taxpayer dollars.

As America looks to a future concerning cities, we best totally eliminate all unions and move to a privatization of all services through bidding contracts. Then after putting all criminals in prison with the use of the National Guard can ANY city have a chance of recovery.

Very interesting points.....This is why we have decided to live the rest of our lives helping others achieve freedom from Mental Slavery and Self-Oppression. If you want to see real change in the African American Communities across Black America please show your support by spreading the word about our Black African American Owned Business, Contractor, and Organization National Online Listing Directory. http://www.FirstBlackAmerica.com

Nice blog to read on.Allow me to share something,Reverse mortgages are a bit of a niche financial product, as they are only accessible to senior citizens. The loans can provide some funding for retirement, but the CFPB is looking to the goods to see if any additional legislation could be warranted. Article source: visit right now on this site.

African Americans have failed each other. "Crab in the barrel" mentality has left us fighter each other, not supporting each other and in a constant state of reaction to Caucasian racism. If we could ever come together economically, we would have a major control over how our country engages us.

If you conservatives are so down on Big Government why in the Sam Hell did your icon examples of the Capitalist myth line up under a conservative name George Bush Jr. to get handouts/Welfare Checks from this same incompetent too intrusive, Socialistic, Big Government??? How come they did not go to Donald (The Trump) or the Koch Brothers to bail their Socialism for the rich/capitalism for the poor Asses out??? Why is it that these icons of the capitalist myth did not offer any assistance on their own??? Look, here's the Deal (listen up liberal Obama and others who never have the smarts to remind the public of what I just stated or what I am about to say) If Regan's Trickle down Con job/ Hustle really worked most of us would be living on easy street by now! However, since the 80's and that last crash of 2007-08 bought to the world by conservative business deregulation (let big business do their thing) that is not the case! So now that you have control of both houses go back and F the economy up even more than you did with you own homeboy Bush Jr. so this time you can cause a worldwide economic collapse worst than the one we had in 1929. Those who decided to put in office even more of the type of knucklehead corporate anarchist minded thugs who F up the economy before Obama got in (and whimped out on throwing their butt' in jail) will have no one but your backward thinking reactionary selves to blame, not the Too Big Government!!!

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