“Black Buying Power”: A Term of Deception

How many times have you heard the call to action to support Black businesses? All throughout the Black community, regardless of class, there is a powerful myth about the buying power of our community. Through all spheres of the Black political spectrum and Black business class, it is commonly misrepresented that we have over a trillion dollars in buying power that we throw away each year instead of pooling together to build the collective wealth we need to improve our community. This myth presupposes multiple realities that simply do not reflect the lived experiences of Black people in this country. The propaganda also ignores how other communities have built wealth in America and offers no solutions that would organize us politically to create policies that more equitably distribute the wealth we create. This position is also willfully ignorant of the systems of oppression that disproportionately effect communities of color and hinder the creation and sustainability of lucrative enterprises needed to build wealth. Racial inequity in business ownership and performance is similar to racial differences in the US economy as a whole.

The report on Black entrepreneurship’s lethal pre-existing condition via The National Community Reinvestment Coalition examines the racial wealth gap before, during, and after the COVID-19 crisis and is a great resource to further research this topic and is a primary source in this work. Dr. Jared Ball’s book, The Myth and Propaganda of Black Buying Power, is the premiere work critically analyzing and denouncing the mythology of Black Americans buying power as a solution to achieving socioeconomic equality and closing the racial wealth gap.

He defines buying power as ‘a marketing phrase that refers only to the “power” of consumers to purchase strictly available goods and is used as a measurement for corporations to better market their products.” (Ball). He goes on to say that “a commercial Black press whose own interests (attracting advertising dollars from the largest white corporations) supersede any journalistic mission to properly inform” is responsible for the majority of contemporary and popular understanding of the myth of buying power. (Ball). He says that “for the segment of the Black bourgeoisie involved in media, journalism, or advertising to “capture,” it meant delivering a newly created Black market packaged in a mythic economic strength, labeled buying power, to white corporate ad buyers. Buying power would become a primary mechanism by which Black media and business could attract white investment. If Black people had billions to spend, the myth began, then white ad buyers would find great value in spending their ad-buying dollars on Black-owned and Black-targeted media.” The Black commercial press seeks to direct the spending power of Black Americans to the largest corporations via the intense, never-ending stream of advertising we see today. Millions of dollars in revenue are redirected to marketing departments seeking to capture the Black dollar. Consider the amount of ads that you see targeted towards Black people, as well as American corporations “efforts” at attempting to increase diversity, equity, and inclusion amongst their workforce. Corporations and the Black bourgeoisie have a shared economic interest in pushing this myth on the Black working majority to enrich themselves and maintain the systems of exploitation affecting our lives. Dr. Ball says that “the myth of buying power functions as propaganda working to deny the reality of structural, intentional, and necessary economic inequality required to maintain society as it is, one that benefits an increasingly decreasing number of people. To do this, the myth functions to falsely blame the poor for being poor, having little to no “financial literacy”, or as resulting from their bad spending habits, when in reality poverty is an intended result of this economic and social system.”  (Ball).

The fact that Black people don’t make as much money or hold as much wealth as white people, that Black businesses don’t make much money, and that Black businesses have a hard time getting money from banks all show that owning a Black business doesn’t really pay off in terms of generating income and wealth. The most current survey of both employer and non-employer business owners, the 2012 Census Survey of Small Business Owners, showed that there were 2.58 million Black-owned businesses in the US. These businesses brought in $150 billion a year and created 3.56 million jobs. Some media and journalists make these companies and the money they make look amazing, but the truth is that they only make up 0.5% of all US firm sales, and the millions of firms and jobs they create only make up 9.5% of all US firm ownership. 

The COVID-19 pandemic worsened the already precarious economic position of Black Americans. But reviewing the data, it’s easier to see how unstable the finances of African American business owners before COVID were. According to the 2012 Census Survey of Business Owners, “white people owned 70.9% of all US businesses and 88% of US firm sales.” Black-owned businesses made only $150 billion a year, while white-owned businesses made an amazing $11 trillion a year. In the same way, Asian-owned businesses made $700 billion a year, and Hispanic-owned businesses made almost $473 billion a year. Despite making up 13% of the US population, Black people only own 9.5% of all American businesses, and only 2% of those businesses employ people. 2012 data showed that Black firms owned by Black men paid an average of $32,061 in salaries, and firms owned by Black women paid an average of $24,303, which is much less than the national average of $44,321. These numbers are very different from those of white Americans, who own 78% of all private companies, even though they only make up 62.8% of the population. White people run 82% of all businesses in the US. Also, businesses that don’t hire people are much more likely to never reach profitability. You cannot expand an enterprise without hiring employees to assist in production. 

The types of firms held by Black people must also be studied, as industry distribution is one significant indicator of the wealth disparity confronting Black entrepreneurs. Primary care and mental health services, plumbing, heating, and air conditioning contractors, law firms, and full-service restaurants not only make more money but also have a lower likelihood of having Black Americans as owners. Black-owned businesses, on the other hand, are concentrated in lower-income industries such as beauty salons, childcare services, assisted living services, cleaning services, barbershops, and clothing boutiques. White-owned enterprises in the same industry earn more money than their Black counterparts, producing a bigger hole in the racial wealth disparity.

The racial discrepancies in entrepreneurship parallel the broader racial economic disparity in the United States. African Americans exist in a state of financial insecurity in comparison to the overall population and other racial groupings. The median income for African Americans is around $41,361, while the national median income is roughly $62,000. In contrast, the median income for white individuals exceeds $71,000. The median wealth of white families is 41 times greater than that of Black families. Prior to the onset of COVID-19, the rate of unemployment among Black individuals had reached its lowest point in several years. However, there were significant disparities in unemployment rates based on race. The rate of unemployment among Black individuals stood at 6.5%, although the overall national unemployment rate was 3.9%. Prior to the onset of the COVID-19 pandemic, the unemployment rate among white individuals was 3.5%. In January 2021, the unemployment rate among Black individuals stood at 9.1%, while the unemployment rate among white individuals was 5.7%.

The vulnerable economic position from which African Americans began the epidemic is brought into focus by this economic fact, which also sheds light on the ways in which it directly effects the achievements and struggles that African Americans experience as entrepreneurs. Low starting wealth has a negative impact on access to credit, which in turn has an impact on the capacity to earn specific certifications and licenses, as well as the ability to enter industries that need big initial investments in businesses that often have better economic returns. This cycle has been going on for centuries or more. Because of this, Black entrepreneurs are relegated to low-revenue businesses, which, as a consequence, are less lucrative and are not a feasible avenue for addressing the widening of the racial wealth gap between different races.

In addition to the racial disparities in wealth and income, Black business owners experience immense difficulty acquiring affordable funding and investment.

The historic credit gap was worsened more recently during the 2008 Great Recession, when federal deposits were justified as vital to keep banks lending but have yet to be redistributed as loans, mainly to small firms. The drop in overall SBA loans to Black firms from 8% to 3% between 2008 and 2016 is quite troubling. The Biden-Harris administration’s efforts to increase funding for Black-owned businesses are notable, yet still insufficient. In Fiscal Year 2023, the SBA’s 7(a) and 504 loan programs helped Black-owned businesses get 4,781 loans. This is more than twice as many as in Fiscal Year 2020 (2.78x). The loan’s accumulated total was $1.45 billion, which is more than twice as much as it was at the start of the Biden-Harris Administration (2.45 times). The overall percentage of Black-owned enterprise’s that got loans from the SBA increased from 3.5% to 7.6%. In contrast, Spanish-owned small businesses received double the total amount of loans given to Black owned businesses, at $3 billion. Asian and Pacific Islanders received a staggering $6.4 billion in small business funding, and $5 billion was allocated for women owned businesses in 2023.

We clearly receive the least funding for our businesses, but we are constantly told to improve our financial situation through business creation. It is lazy, disingenuous, and keeps us from organizing politically to redistribute the wealth that we all create. Aside from discrepancies in financial institution service, racial disparities in banking connections and credit ratings have an influence on entrepreneurs’ capacity to obtain finance. According to the data, 56% of white-owned businesses used a loan or line of credit to support business operations, compared to 44% of Black-owned businesses. Thirty-nine percent of nonemployer enterprises with sales greater than $100,000 utilized loans or lines of credit on a regular basis, whereas only 24% of nonemployer firms with revenue less than $100,000 used loans. The fact that just 4% of Black enterprises have workers, as well as insufficient funding set aside for low-income, non-employer organizations, is a major barrier for the majority of Black businesses. The disparate reliance on personal assets recreates imbalances in wealth by eroding minority company owners’ personal wealth while broadening white owners’, since they are more financially capable of saving their own personal cash and using their greater income to sustain their firms.

At the current rate of government investment and political organization, we are generations away from seeing Black entrepreneurship as a viable path to improving the material conditions of the Black working majority. The persistent economic crisis in the Black community highlights the necessity for a strong partnership between the public and private sectors to encourage entrepreneurship and consumption. Manufacturing, technology, and finance are the sectors of the economy that are most in recovery (or expansion), have high rates of concentrated white ownership, and are less likely to be Black-owned. Similarly, most Black businesses are tiny, employ few people, pay those few people less than the national average, and rely on a Black consumer base that is less financially secure than others. The pre-existing situation of Black entrepreneurship stems from the severe asset poverty that afflicts both Black entrepreneurs and Black communities as an entire group. Initiatives aimed at boosting Black entrepreneurship can help improve income and wealth generation. Likewise, actions and interventions aimed at addressing Black asset poverty and the racial wealth gap will help to enhance the landscape of Black entrepreneurship. Comprehensive asset injection into the Black community, as well as targeted asset investments for Black entrepreneurs, are required.

In Black America, purchasing power is utilized as a bludgeon on a regular and persistent basis, drawing media attention and serving as a means of “political organization” like nowhere else. For us to engage in actual solutions, places where Black politics are frequently debated and where Black people’s futures are given serious consideration must eradicate these and other myths surrounding the American economy and Black people’s place in it.  

Supporting Black businesses is the easy thing to do. It requires little to no effort, as it has little to no return. It has no return because of many of the earlier points detailing how Black people simply do not have enough money. To see a true transformation of our lives, we must politically educate, organize, and agitate to more equitably redistribute the wealth that we create. This is not the path of least resistance, but it is necessary to build the better world that we deserve.

References

Administration, B.-H. (2023, October 24). Biden-Harris Administration Announces Significant Increase in Lending to Black-Owned Small Businesses | U.S. Small Business Administration. Www.sba.gov. https://www.sba.gov/article/2023/10/24/biden-harris-administration-announces-significant-increase-lending-Black-owned-small-businesses #:~:text=The%20SBA%20backed%204%2C781%20loans

Asante-Muhammad, D., Ball, D. J., Buell, J., & Devine, J. (2021, April 6). Black Entrepreneurship’s Lethal Pre-Existing Condition: The Racial Wealth Divide During the COVID Crisis» NCRC. Ncrc.org. https://ncrc.org/Black-entrepreneurships-lethal-pre-existing-condition-the-racial-wealth-divide-during-the-covid-crisis/

Ball, J. A. (2020). The Myth and Propaganda of Black Buying Power. Springer Nature.

Mitchell, J. (2023, January 17). New study explores Black millennial spending power. Www.cbsnews.com. https://www.cbsnews.com/newyork/news/Black-millennial-spending-power/

SBA. (2023, November 21). SBA Announces Biden-Harris Administration’s Progress in Small Business Lending with End-of-Year Capital Program Numbers | U.S. Small Business Administration. Www.sba.gov. https://www.sba.gov/article/2023/11/21/sba-announces-biden-harris-administrations-progress-small-business-lending-end-year-capital-program#:~:text=%2427.5%20billion%20in%207(a