The 1954 Supreme Court’s ruling in Brown v. Board of Education of Topeka has become one of the most significant legal decisions in this nation’s history. In declaring that “separate but equal has no place in the field of public education,” the Court paved the way for the desegregation’s beginning in American life. The decision was strengthened by the 1964 Civil Rights Act with its special emphasis on providing equal access to places of public accommodation, while expanding employment opportunities for African Americans.

Yet, the 1964 Civil Rights Act also marked the beginning of government support to encourage the expansion of black business, reflected, initially, in Federal government affirmative action mandates in contracts and procurement policies and set-asides that required large corporations to give subcontracts to minorities was especially important.

The purpose of this conference, then, is to explore the impact of the federal government on black business activity since the 1954 Brown Decision.

The Conference Participants include three categories: scholars who have studied the role of the federal government and black business; employees in the various federal agencies created to promote black business; and, black business owners who have participated in various government programs to promote black business.

EACH YEAR, THE CENTER WILL SPONSER A CONFERENCE ON BLACK BUSINESS

Fall 2003 “The Federal Government and Black Business”
Fall 2004 “Blacks and Minorities Entrepreneurs and Business Enterprises”
Fall 2005 “The New Entrepreneurs: Hip Hop, High Tech, Superstar Athletes
Fall 2006 “Blacks in White Corporate America”
Fall 2007 “Black Business in the African Diaspora: The USA, WI, LA, and Africa”
Fall 2008 Black Business and the Black Church”

OVERVIEW: THE FEDERAL GOVERNMENT AND BLACK BUSINESS

After the 1954 Brown decision, in the initial years of the Federal government’s affirmative action economic programs, providing equal employment opportunities for blacks was foremost. At that time, assistance to black business was peripheral and indirect. The one specific agency in existence before the Civil Rights era that could provide monetary assistance to black businesspeople was the Small Business Administration (SBA). While established in 1953 the SBA did not become a permanent federal agency until 1958. Moreover, at the time of its founding and in the early 1960s, there was no specific attempt to reach out to black businesses.

That took place in 1964, with President Lyndon Johnson's Economic Opportunity Act that established the Office of Economic Opportunity (OEO). Its specific charge was to provide loans through its Economic Opportunity Loan (EOL) Program as well as technical assistance to inner city poverty area residents who applied to establish businesses. Unlike SBA loans to non-minority small business, EOL loans were targeted for blacks, but priority was given to those blacks with no business experience and no savings who wanted to establish small, marginal, high risk "mom-and-pop" enterprises. The EOL program went into effect in 1965.

Within a year, with so many loan defaults, Congress gave full control of EOL to the SBA. Still, it would not be until the 1970s that the SBA was restructured to provide support specifically to minorities with experience in business. In the interim, however, by 1968, with America’s escalating war in Vietnam, concomitant with increasing black dissidence and civil disorders in American cities, including the catastrophic Detroit Riot in 1967.

In the last year of his administration, doubtless President Johnson took the position that the demands for black economic empowerment could not just be limited to new employment opportunities. Perhaps, too, in response to Black Power demands that White Corporate America become actively involved in contributing to black business development, President Johnson established the National Alliance of Businessmen. One of the most recognized symbols of White Corporate American at that time, Henry Ford, II, was appointed chairman. At that time, too, several major American corporations, including IBM, established factories in the urban ghetto although by 1987, “of the 15 inner city factories built by major corporations in the mid-1960s, 9 had either been sold or closed."

Whether it was either national or international factors, or a combination of both, even before the end of the 1960s, strident Black Power demands for black business expansion with the support of White Corporate America did begin to have an impact on black business.

The federal government’s Black Capitalism initiatives began with Nixon’s 1969 Executive Order 11458 that established the Office of Minority Business Enterprise (OMBE) subsequently renamed the Minority Business Development Agency (MBDA). Also in 1971, President Nixon issued Executive Order 11625 which required that all federal agencies were directed to develop comprehensive plans and specific program goals for a national Minority Business Enterprise (MBE) contracting program.

From that point on, a number of alphabet-named agencies were established to promote minority business, with the SBA specifically strengthened to provide federal support to encourage black business development. With the SBA 7(a) program, the federal government provided guarantees against defaults on bank loans made to minority businesses and the Certified Development Company (504) Loan Program to finance fixed assets, such as facilities or machinery.

Doubtless, the most important provision in 1969 was the Minority Small Business/Capital Ownership Development Program, known generally as the SBA 8(a) federal government set-aside program. The legislation, drafted by black congressman, Parren Mitchell, became the cornerstone of the federal government minority business policy initiatives. The SBA 8(a) set-aside program guarantees that a percentage of government contracts will go to minority businesses.

Also, each federal agency was to establish an Office of Small and Disadvantaged Business Utilization with the mandate, found in Title IV of the 1964 Civil Rights Act, that all government agencies seek the fullest possible use of minority businesses in the agency's purchase of goods and services. Then, in 1983, President Ronald Reagan issued Executive Order 12432 with its mandate that all federal agencies with substantial procurement or grant making authority were required to develop a Minority Business Enterprise (MBE) development plan. As a result minority-owned businesses were positioned to secure a larger share of federal procurement contracts and subcontracts.

Consequently, federal government affirmative action mandates in contracts and procurement policies and set-asides that required large corporations to give subcontracts to minorities were especially important.. To assist these emerging growth companies, the Small Business Administration (SBA) launched a variety of lending programs, such as the 7(A) Loan Guaranty Program for small businesses and the Certified Development Company (504) Loan Program to finance fixed assets, such as facilities or machinery.

Certainly, black businesses after 1964 benefited from federal government affirmative action policies in force to encourage greater black business participation. Indeed, much of the expansion of black business in certain sectors of the economy was a result of federal government Black Capitalism policies and initiatives put in place in the 1970s, especially the such as the 8(a) program.

While much of the expansion of black business in certain sectors of the economy has been a result of federal government Black Capitalism policies and initiatives put in place in the 1970s. By the 1990s, these policies were losing ground, with negative results for black firms. In 1997 black firms generated only 0.4 percent of the nation’s total ($18.6 trillion) business receipts, whereas a decade earlier they had earned 1 percent of total American business receipts.

Also, despite substantial increases in the number of black businesses, the increase in numbers of employees and business receipts, those gains have not matched those of other minority owned firms in the New Economy.

Specifically, by the 1990s these policies, challenged in state and federal courts, were losing ground, with negative results for black firms. Specifically, the 1989 Croson Supreme Court decision and subsequent 1995 Adarand decision challenged African Americans businesspeople in their efforts to successfully secure contracts from state and local governments.

Whether Congress in the Twenty-First Century will act to strengthen various federal government Black Capitalism initiative programs, such as the SBA 8(a) program, one thing is clear: the federal government can no longer ignore the reality of the abysmal place of Black business in America.

Sources:

• Juliet E. K. Walker, The History of Black Business in America: Capitalism, Race,,Entrepreneurship (New York/London: Macmillan/Prentice Hall International, 1998)
  
• Juliet E. K. Walker “White Corporate America: The New Arbiter of Race?” in Kenneth Lipartito and David Scilica, Constructing Corporate America: History, Politics, Culture (New York: Oxford University Press, 2003), 238-285. [forthcoming September])