By: Bob Herbert
March 10, 2012
The destruction of black wealth
Some youngsters want to grow up to become artists or athletes or firefighters. Some want to be doctors or dancers. Charles Walker wanted to own a supermarket.
"Ever since I can remember, I wanted my own grocery store," he said over lunch on a quiet afternoon in snowbound Detroit last year. To Walker, "grocery store" meant a gleaming, well-run supermarket, not necessarily huge but well stocked and scrupulously clean, with fresh meats and produce and first-class customer service.
"I had retail in my blood," he told me. "I grew up here in Detroit, but I had a grandmother we used to visit in Alabama, and she had a store that sold cookies and candies, and she had a pop machine. That all seemed pretty cool to a little kid. And the people my mother worked for owned a meat market. That was their life. As I got older, going to high school and college, I worked there in the summers. That appealed to me, too, and they seemed to be making a good living. I thought that I could do something on a larger scale, and I really wanted to."
The upside of this story is that Charles Walker, a black kid from a rough-and-tumble neighborhood in Detroit, realized his dream. It took a long time, but after years of working and prudent money management, after stints as a manager for CVS stores and a market called Metro Foodland, he was able to put together a deal, with help from relatives and a handful of outside investors, for a market that was part of the discount Sav-A-Lot chain. At age 47, the happily married father of three grown children had his supermarket.
That was in 2004. Detroit was in the midst of yet another comeback scenario, but decent food stores were rare, and black-owned markets, even rarer. Walker's store was one of only two black-owned supermarkets in the entire city.
He did well for a while, bringing in $100,000 a week and employing a staff of 20. The store was a gleaming marvel in a neighborhood that was struggling but seemed to be improving. Then, as Walker put it, "the economy changed."
Not nearly enough attention has been paid to the damage that the continuing Great Recession has done to black Americans. It's true that jobs and homes were lost across a wide expanse of ethnic and income groups. It's true that white businesses as well as black-owned firms have failed. But African American communities were particularly vulnerable, and the downturn swept through them like an invading army, destroying wealth that had been painstakingly accumulated over decades and, in some cases, generations.
Cornerstone institutions like minority-owned banks and black churches are being hammered, according to Deborah Wright, president of Carver Bancorp in New York, the largest black-run bank in the country. Some banks have already gone under, and others are in bad shape. Carver handles financing for a large number of black churches, and Wright says, "For the first time since I've been in this field, I'm seeing churches fail. That is very, very unusual. It speaks to the distress that their parishioners are under."
The Pew Research Center reported last summer that the median wealth of white households in the wake of the recession was an astonishing 20 times that of black households. The black unemployment rate at the end of last year was close to 16 percent, comparable to the average national unemployment rate during some years of the Great Depression. But even 16 percent does not begin to capture the horror of unemployment in black America. The hardest of the hard-core unemployed are not even included in the official government statistics. I've been to neighborhoods in Boston; Chicago; Detroit; Camden, New Jersey; and other cities in which the majority, sometimes the vast majority, of the working-age population is jobless. Forget the smiling faces on television citing the latest hopeful economic statistics. Forget the assurances of self-styled black intellectuals that we are in some sort of marvelous post-racial era in which anybody can realize his or her dreams. The black community is shouldering its way through an economic calamity. More than a quarter of all black Americans are poor, as are more than a third of all black children. Doors of economic opportunity--in the workforce, in access to higher education, and elsewhere--are slamming shut at a breathtaking rate.
For many small African American businesses, and for countless entrepreneurs like Charles Walker, the downturn has been ruinous. The inevitable reduction in demand from a customer base struggling disproportionately with joblessness and the home-foreclosure crisis came at the same time as a drastic curtailment in access to capital for most small businesses. For black businesses, already chronically undercapitalized, the one-two punch was often fatal.
Small businesses generally get started and survive their early stages with capital drawn from the personal assets--mainly savings and real estate--of the business owners, their relatives, and friends. Home equity is a common source of collateral for small-business loans. With substantially lower levels of wealth and homeownership to begin with, blacks have a much harder time putting together start-up capital, and they find it more difficult to hang on during rough patches in the economy. The Great Recession was much worse than anyone's idea of a rough patch.
David Beck of Self-Help, a nonprofit lender that has concentrated on minority businesses, told me: "With this financial crisis, the amount of equity wiped out in minority communities is just jaw-dropping, and that is devastating to small businesses. Once that home-equity collateral is wiped away, it's really hard to find anything to replace it with."