Pitfalls of Buy Black/Black Capitalism

Buy Black (via Twin Cities Daily Planet)

During recent Kwanzaa celebrations there was a call for collective economics. “Ujamaa (Cooperative Economics): To build and maintain our own stores, shops, and other businesses and to profit from them together.” This was explained by many as a call to “Buy Black” with others accepting that it was a call for supporting “Black Capitalism.” I want to offer a critique of this understanding from the standpoint of what would be progressive and beneficial in a transformative way to the black community.

Marginal businesses tend to be small, hence more democratic, since the individual owners of the business are closer to and likely to have relationships with both the employees and the customers. As a business’s size and profits increase (often by increases in the number of employees and customers) the likelihood for greater wage disparity (loss of wage solidarity) and a more contemptuous relationship with the customer base (where customers are only seen as instruments to be utilized for increasing profits) increases.

Most black businesses are marginal and small (pdf). Therefore they are organically connected “of, by and for” the community — democratic. It is even likely that the small profits from marginal black businesses remain in the community. As they become larger and more successful this changes. More successful business people can afford to move to more affluent neighborhoods. They can purchase expensive items that are unlikely to profit other black businesses. They can take their surplus money and invest, looking for the highest returns for their money. They can easily seek new investors for their business in the capital markets and the identity of the business as “black” may change with a more diffuse set of owners.

Even in the case of those where the founders of the business are able to stay true to their initial community orientation after becoming more successful, there would be a strong attraction for the next generation, their children who would inherit the business to “cash out” and live a life much more comfortable than those who preceded them and had to struggle to build up the business.

So, Black Capitalism is progressive when it is small and struggling, but not so progressive when it succeeds. Given the racism connected with access to capital, black businesses that are not structured for community ownership tend to remain marginal and hence progressive, but clearly a dead-end road for those looking for transformative change.

One alternative would be black community businesses that are democratically owned by the community itself and serving community needs — a cooperative. Cooperatives have no incentive to buy or invest luxuriously outside of the community. Nor would there be an incentive to cash out. They can be structured so that any outside investment has a subordinated voice and is not allowed to subvert the mission of the business to serve community needs.

And importantly, the profit from the business stays in the community, either increasing the purchasing power of community members or better yet, forming the basis of additional new business development.

This is transformative. Let’s do it.

One thought on “Pitfalls of Buy Black/Black Capitalism

  1. That’s an interesting take but I have a different perspective.

    What the research clearly shows is that Black businesses tend to hire Blacks at a much more frequent rate.

    If we apply this same generalized principle to the supply chain, then it would suggest that as a Black business scales it’s multiplier effect continues to improve the overall Black economy regardless of whether the owner physically moves out of the community or not. That is recycling the dollars.

    You recycle the dollars you increase Black collective wealth, you increase Black collective wealth, which is a major proxy for power, you increase Black power.

    I am not sure the concern should be the democratic nature of a business. I think it should be the ability to aggregate economic power into the hands of Blacks. Power precedes and then is supported by statehood / politics. Therefore the political structure is second order and not first order.

    One thing I am not sure you considered either in your analysis. Not all Black businesses are started, operate or sell to Black communities. While more will be in the community by virtue of what you point out about being small (mostly service based), if we truly foster a stronger Black business culture then market logic says more Black businesses will be formed outside of the Black community.

    But to what seems to be your primary concern, the democratization of the firm I think that are some ways to get to that.

    If the democracy of ownership is really the aim the co-op idea is a good one.

    There is also some interesting research on community based capitalism (in the true sense of collective community ownership of ventures).

    There is also social entrepreneurship which has promise.

    Finally there is what I call the “amoeba” model where businesses are formed as a collective of individual contractors or small businesses of two to three employees that form around specific market based opportunities. I think that is much more doable in today’s gig economy.

    Again though, interesting article and something I never thought about in regard to the idea of size and the democratic nature of the business.

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