The Beginnings of Black Capitalism

In the ghettos, as in the suburbs, live many men whose dreams of independence and achievement cannot be satisfied by working for someone else. They are not inspired by the Nixon Administration's slogan of "black capitalism," which they dismiss as smooth honky talk. To them, the words stand for a plethora of unimaginative federal programs that have been long on promises and red tape, short on loans and management-training programs that would help to create real wealth in the hands of Negroes.

Some blacks have built big enterprises, mostly in banking, insurance and cosmetics. Still, Negroes own only about 2.5% of the 5,300,000 U.S. businesses. That 2.5% accounts for only 1% of U.S. business receipts. The aspiring black entrepreneur has even more trouble than the white in getting loans, insurance or contracts from large firms, and he is particularly handicapped by a lack of familiarity with modern business techniques. Unlike the white man, he can rarely draw on the experience of relatives and friends. Two-thirds of all small businesses fail in their first five years: the failure rate for black businesses is higher, though impossible to pin down.

Blacks, nevertheless, continue to view going into business as a way to prosperity and pride--and an escape from having to work for the white man. They keep trying, with varying results. Three examples:

The Builder. Winston A. Burnett has illustrated what a Negro manager can do when he finds enough capital to expand. Harlem's Burnett, now plump and 45, learned about construction from the bottom up by working as a painter, plasterer and carpenter in his youth. Later he built one of Harlem's larger contracting firms, Winston A. Burnett Construction Co.; it had a yearly volume of $1,000,000. Despite his experience and his sound business practices--he continually reinvested all profits in the company--Burnett could not get the bank loans, and especially the performance bonds, needed to take on major construction projects. White officers of bonding companies, explains Burnett, "simply do not know many Negroes."

Beginning in 1967, however, Burnett began getting help from Boise Cascade Corp., a white-owned firm whose officers believe that fostering black capitalism is part of their social responsibility. Boise Cascade has bought 49% of Burnett's stock and all told invested about $5 million. The white company also arranged bank credit for Burnett and helped to secure performance bonds. Charles Butler, a black Boise Cascade executive, joined Burnett Construction as president last October; Burnett is chairman. Helped not only by Boise Cascade's capital but also by the advantages that a black-run firm has in negotiating for construction work in ghetto areas, he has now built a contract backlog of $25 million. The company has progressed from rehabilitating old buildings to erecting large projects from the ground up. Some 2,500 black craftsmen are employed on Burnett's jobs; he insists that building unions supply him with black laborers, and if they cannot, he sometimes hires nonunion blacks.

The Shopkeepers. William Willis and Earl Dural, both 39, typify the many Negroes for whom the dream of starting their own business has soured. They had talked of opening a clothing store when they were university students and kept discussing it while Willis worked as a beer salesman and Dural as a mailman. Last year they took an eight-week course in retailing run by New Orleans department stores, pooled $3,000 of savings with a $20,000 loan from the Small Business Administration and set up shop on Dryades Street, the main drag of the New Orleans ghetto. Blacks had boycotted white merchants on Dryades Street some years earlier (because they employed few Negroes), and Willis and Dural thought they only had to advertise the presence of a black-owned shop to attract buyers.

They were wrong. Since the boycott, blacks have lost the habit of shopping on Dryades Street, partly because a white-owned bank, a Woolworth's and a McCrory's store have moved elsewhere--and the whole area has gone downhill. Though Willis and Dural offer brand-name clothes at reasonable prices, middle-class blacks prefer to shop at more prestigious downtown stores--a habit that in other cities is yielding to a "buy black" movement. Willis and Dural do not have the resources to provide credit, and they have refused to send customers to white loan sharks who volunteered their services. The store owners have rung up sales of only $800 to $900 a month, instead of the $2,500 they expected, and they have piled up $60,000 of debts to suppliers. Still, Dural says: "We haven't the slightest idea of failure, even if we have to sell this merchandise door to door."

The Franchise Holder. Charles E. Johnson, 43, got into the franchised fast-food business through a combination of belated Government aid and militant pressure. The Small Business Administration rejected his first application for a loan to buy a McDonald's hamburger franchise near a Negro area of affluent Shaker Heights, a Cleveland suburb, because officers thought the location he wanted would not produce enough income to repay the loan. They did not realize, says a Cleveland Negro leader, that to blacks "the hamburger stand is breakfast, lunch and dinner--they don't just buy hamburgers as a snack as many whites do."

Meanwhile, a neighborhood organization had started a boycott to back demands for more black control of local businesses; it cut sales of the area's only existing McDonald's stand by 90%. The owner agreed to sell for about $200,000, and Johnson got his SBA loan, on terms he sardonically summarizes: "Thou shall not buy a Cadillac. Thou shalt not take a trip to Bermuda."

Since opening up in January, Johnson has had some unexpected problems. Two black workers quit as soon as he took over, because they did not want to work for a black boss. Such attitudes, though they are diminishing, are still found among older black workers; some doubt that a black manager will make a success of the business. Johnson, a graying man with an animated and emphatic manner, has not been easy on his 30 black employees. "When I walk around and see some cat leaning instead of working," he says, "my inclination is to tell him 'If you can lean, then clean.' I have tried to project an image of business for them to follow."

He has had to drop his original intention to "do the black-on-black bit"--that is, give all his business to black lawyers, accountants and so on. Now he looks for quality regardless of color when seeking assistance. He feels keenly the lack of a Negro business tradition; although he was a business major at Atlanta's Morehouse College, the concepts of record keeping and inventory control that he has been learning from the McDonald chain were "all Greek to me." Johnson has been putting in 14-hour days at his stand. He has won back about 80% of the customers who had begun patronizing other stands during the boycott, and he is determined to attract all of them back.

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