by jordan blum
Advocate Washington bureau
September 24, 2012
WASHINGTON — The median net worth — not income — of black families in the U.S. is less than $5,000 compared with more than $110,000 for comparable white families, said small business officials.
Democratic congressional members are emphasizing the economy cannot be rectified without helping the nation’s growing minority demographics lift themselves.
Sen. Mary Landrieu, D-La., who chairs the Senate Committee on Small Business and Entrepreneurship, said she has begun focusing on growing minority entrepreneurship for three years now, but that the problems are heightening despite expanded efforts of the U.S. Small Business Administration to reach out and educate more.
As such, Landrieu moderated last week the “Closing the Wealth Gap through the African-American Entrepreneurial Ecosystem” roundtable featuring black government, education and business leaders nationwide. It also included several with Louisiana ties, such as Southern University Chancellor James Llorens and former New Orleans Mayor Marc Morial, who now leads the National Urban League.
White, black, Hispanic and Asian families are all losing family net worth, according to the U.S. Census Bureau, but the gap is greatest between whites and blacks. In 2010, the net worth for black families was $4,995, compared with $12,100 in 2005. The median white family net worth in 2005 was $135,000.
“Wealth is created and maintained generation to generation,” Landrieu said, while noting but not getting into the details of past decades and centuries of racial discrimination against blacks.
The reality, she said, is that starting a new small business is incredibly challenging without access to startup funds and the ability to qualify for decent back loans.
“The $4,995 is not enough,” Landrieu said. “It’s simply not enough to fall back on.”
Morial and Atlanta Mayor Kasim Reed both emphasized the need to focus the need to rebuild the nation’s economy by helping minorities thrive with financial independence. As the population growth rate of minorities continues to outpace whites, the nation will not be able to succeed with such gaps in wealth.
“We’ve got to move this conversation, so the opposition we face is not so withering and fierce,” Reed said. He did not use the hot-button “affirmative action” phrase.
“Prosperity for the nation in the post-Great Recession will not and cannot be solved without a focus on racial equality,” Morial said.
Rep. Chaka Fattah, D-Pa., said the American government has given advantages to Iraqi-owned businesses during the Iraq reconstruction bidding process but will not do enough of the same for minority-owned businesses domestically.
“We need to stop having selective amnesia,” Fattah said.
Among the ideas mentioned were: Creating and better funding more mentoring programs, friends or family pooling funds for business ideas, adding more business incubators, and changing the criteria in some instances for determining loan eligibility.
Chancellor Llorens said Southern University plans to start renovations next year on a new small business incubator on campus that would house five to seven startup businesses.
Southern’s existing Small Business Development Center helps small businesses and aspiring entrepreneurs with business advice and technical assistance on acquiring loans, capital and more, Llorens said.
“I think we have a young population that is more entrepreneurially minded,” Llorens said.
Major goals of historically black colleges include nurturing young people’s visions and talent in order to help “address the wealth gap and entrepreneurship,” Llorens said.
“All the training is great, but you need (startup) capital,” said Bill Bynum, CEO of the HOPE Enterprise Corporation/Credit Union.
Landrieu said the nation has more than 900 community development financial institutions, or CDFIs, through the U.S. Treasury but that only a few dozen are successful in regularly helping minority entrepreneurship.
Ron Busby, president of the U.S. Black Chamber, Inc., said a major problem is that the majority of black-owned businesses are self-employed people without any additional employees.
“I say mom and pop (businesses), but it’s really mom’s or pop’s,” Busby said.
If these businesses all just hired one additional employee, he said, then a sizable chunk of the nation’s unemployment problems would disappear.
Kevin Hicks, partner of Blackman and Associates Franchise Consulting Firm, said the problem goes beyond raising capital, because there is a financial “information gap” as well. Hicks said he has consulted millionaire NBA players after they have gone broke.
“It’s really important we focus not just on wealth creation, but also transference and preservation,” Hicks said.
Reed bragged on Atlanta by noting the longstanding public policy of requiring 25 percent of all government contracting to go to minority or female-owned businesses if they are qualified. That mindset transferred to the private sector with diversity programs and the city now has multiple Fortune 500 companies with minority leadership or ownership, he said.
Morial agreed the most successful cities have specific policies boosting minority-owned businesses and large companies with pro-diversity practices.
“We cannot dance around or avoid those types of critical interventions,” Morial said.