Black business faces test: will Reaganomics spawn growth?
A growing number of black businessmen and civil rights leaders are seeking ideas and private sector models that can generate greater economic independence among black Americans.
The search is engendered as much by desperation as by altruism. The Reagan administration's budget cuts include reduced funds for a number of federal programs that were designed to aid the nation's minorities in their quest for economic advancement.
When he addressed the NAACP national convention last month, President Reagan told a skeptical audience that "free enterprise is a powerful workhorse that, when harnessed, can solve many problems of the black community -- that government alone can no longer solve." Also leading the parade of advocates for more black involvement with the private sector were black businessmen.
The challenge is formidable. Black Americans make up 16 percent of the nation's population, but own less than 3 percent of the nation's businesses and control less than 0.5 percent of the nation's capital assets. Black unemployment is twice that of the general population, and youth unemployment among blacks runs as high as 40 percent in some cities. Nearly half their households are headed by single parents, most of whom are women whose income level is buried below the poverty level. Black people have a gross annual income of $140 billion, but only a very small percentage recirculates within the black community.
Although federal agencies under past administrations have provided basic aid to black firms -- set aside contracts, direct loans, loan guarantees, and technical assistance -- a growing consensus among blacks that in fact this help is inadequate to upgrade distressed inner-city communities.
"These programs designed to help black firms often handicap them with too much red tape, too little capital, and too little understanding of black needs," said Richard E. Barber, back in private business in New Brunswick, N.J., after serving as Region III director of the Small Business Administration (SBA) under the Carter administration.
A founder of the black New World National Bank in downtown Pittsburgh, Pa., in 1975, Mr. Barber says an "economic game plan" is needed for the black economy. "Our solution must start with us," he said. "We must set our own agenda, yet look at the larger community for support." Final plans for the Reagan administration's prize package, urban enterprise zones, have not been completed, says Robert Wright, SBA associate administrator for minority business. He says these zones will be designed to attract minority firms, to create job opportunities for blacks, and to offer job training programs.
F. James McDonald, president of General Motors, notes that his corporation has participated in "every program developed" by the Minority Business Development Agency (MBDA). Through its Motor Enterprises Inc., GM has approved loans of $4.4 million to 135 minority firms, funds that have leveraged to $29 million from other sources, he said.
Mr. McDonald praised "our most successful effort," a minority supplier program that started out with a $1 million goal in 1968, spent $224 million with minority firms in 1980, and has is expected to contract for $300 million worth of business with minority firms during 1981.
In the long run black enterprise are likely to get backing from three sources:
* Federal government: The administration will act through SBA, MBDA, and the US Department of Housing and Urban Development (HUD) to help black firms acquire capital, technical training, and access to contracts from both the public and private sectors.
* Private enterprise: Major corporations will offer new or continue current programs, or improve their efforts to support black firms with contracts, joint ventures, and technical assistance. They will also utilize special programs to provide fiscal help and investment capital to minority businesses.
* Civil rights organizations: They plan to monitor both public and private sectors and encourage them to help black firms enter the economic mainstream.