THE BIRTH PANGS OF BLACK CAPITALISM

FOR all the divisions that rend the U.S., there is at least one point of agreement between blacks and whites, Democrats and Republicans, young and old. It is that Negroes are not really part of the mainstream of American enterprise, and that they should be brought into it through the classic means: ownership of business. Richard Nixon has called for a mixture of Government loans, tax incentives, private business aid and Negro self-help to create "black capitalism." Hubert Humphrey, urging all of that but with greater emphasis on Government aid, has stumped for "black entrepreneurship." He declares that the Negro has a basic right to be an employer as well as an employee.

Businessmen, bankers and bureaucrats of both races are allied in a major drive to help more Negroes achieve that status. They are working to equip aspiring Negro entrepreneurs with capital, business training and markets. Behind all such efforts lies the conviction that Negroes should have "a piece of the action" in U.S. business, and that broad-based ownership of business by blacks is essential to help defuse racial enmity. If the Negro is to escape from poverty and discrimination, more and more businessmen are recognizing, the U.S. must develop a Negro managerial class to lead, hire and inspire.

Barriers to Bigness. Doing that will not be easy. Beyond doubt, black capitalism today is meager. Though Negroes constitute 12% of the U.S. population, they own scarcely 1% of the country's 5,000,000 private business firms. One out of every 40 white Americans is a proprietor, but only one Negro in 1,000 is.

Almost all black businesses are mom-and-pop operations, catering to a ghetto clientele and providing a slim income for their owners and a few jobs for others. Some surveys show that a quarter of Negro firms are barbershops or beauty salons. Negroes also run mortuaries, restaurants, bars, small grocery stores and cleaning establishments. But they own few manufacturing or distribution firms. Only six of the 28,000 U.S. auto dealerships are Negro-owned; until recently, there was only one. Even the biggest Negro enterprises, such as life insurance companies and banks, are relatively small. The nation's largest Negro-owned concern, North Carolina Mutual Life Insurance Co., has assets of $94 million, compared with $25 billion for front-running Prudential.

Such disparity rises partly out of the obstacles that confront Negroes everywhere: inferior education, lack of capital, the despair of ghetto life, the fear of failure. Negroes lack a heritage of business experience. Successful blacks have gone into law, medicine, religion. Without much exposure to business, a young Negro is often inadequately trained in the fundamentals that whites take for granted, including bookkeeping. When he ventures into enterprise, he runs into a financial community that often rejects him for reasons that strike him as strange: a shortage of collateral, a dim credit history, a lack of precise records.

Money and Management. Like many other small business enterprises, a number of new Negro-owned businesses have foundered. In Pittsburgh, a Negro druggist failed after he converted his pharmacy into a pinball parlor, whose dime machines produced a much lower return, than high-markup drugs. Hard times have hit Fairmico, a boxmaking company formed last April in Washington, D.C. Owned by Fairchild Hiller and a local Negro community group, it is Negro-managed and hires only the hard-core jobless. Absenteeism has run high, and some drug addicts have taken injections right on the factory floor. But, despite such .problems, many other new enterprises are doing surprisingly well.

Amid the bewildering variety of efforts to help Negroes become entrepreneurs, four types predominate.

o WHITE HELP. Some of the most promising new businesses have been initiated by white businessmen, drawn to the ghetto by mixed motives of social activism, self-protection and profit.

Warner & Swasey Co., the Cleveland machine-tool firm that has a reputation for conservatism, decided to help rebuild the city's riot-seared Hough section. This year, its executives persuaded Robert L. Coles, a Negro machinist and aviation-mechanics teacher, to ally his limping little C & B Machine Co. with Warner & Swasey in a joint venture. Together they created the Hough Manufacturing Co., whose ten Negro workers labor over turret lathes and milling machines. Warner & Swasey invested $250,000 to buy a three-story plant and provide operating capital. Coles got 200 shares (out of 2,000) in the new firm and became its president. Warner & Swasey has agreed to sell its majority interest gradually to Hough employees. Meantime, the big company helps Coles line up customers and has subcontracted some of its work to him.

Similar joint ventures have been set up in dozens of other cities. E.G. & G., the company that triggers atom-bomb blasts for the Atomic Energy Commission, has a Negro-managed subsidiary that is building a metal-fabricating plant in Boston's Roxbury Negro district. In San Francisco, Safeway Stores has rescued a ghetto cooperative supermarket from the brink of bankruptcy, even though the store competes with a Safeway outlet ten blocks away.

Often, white executives pool their assistance. One successful instance is Rochester Business Opportunities Corp., which grew out of a proposal made by Eastman Kodak. R.B O.C. provides technical expertise in everything from plant layout to accounting, has set up a free night class in business management at a local college. So far the organization has helped 24 Negroes to start businesses. Xerox teamed up with R.B.O.C. and a militant Negro organization named FIGHT to establish a Negro-owned company to manufacture transformers and metal stampings. Xerox will buy $500,000 worth of them yearly.

o GOVERNMENT HELP. Next to business training, what Negro entrepreneurs need most is credit. The easiest source for it is the Small Business Administration. Since 1965, the S.B.A. has made or guaranteed more than 8,000 soft loans, totaling $82 million, to would-be businessmen--about a third of them Negroes--with incomes below the poverty line. Unfortunately, the effort to make instant entrepreneurs of the poor proved disastrous. Default rates soared, and the S.B.A. concedes that a majority of the firms are in trouble.

This year, under new Administrator Howard Samuels, the S.B.A. has switched to looking for middleclass, college-trained Negroes with enough business experience to give them real potential for success. Searching for more of them, Samuels has opened storefront offices in ghettos. He is also stretching the S.B.A.'s $1.1 billion loan kitty by guaranteeing loans made by private lenders, has lined up support from dozens of major banks. Last week five of Manhattan's largest banks agreed to provide up to $50 million to help minority businessmen. A consortium of 23 Houston banks has pledged $7,000,000 for the same purpose, a nine-bank group in Philadelphia, $6,000,000, a group in Boston, $3,000,000.

o SELF-HELP. Negro groups have also initiated a number of businesses. A few months ago, Charles Bussey, a Negro operator of a furniture-restoring firm, rounded up 25 other Negro investors to form San Francisco Container Corp, They put up $20,000, then raised another $180,000 from the Bank of America and the Fireman's Fund Insurance Co. Next month, in San Francisco's Hunters Point ghetto, they will open a plant that will make chipboard and cardboard cases.

Pittsburgh's four-year-old Business & Job Development Corp., owned and run by Negroes, has won enough financial support from civic leaders to start an ambitious industrial park in the Home-wood-Brushton ghetto. Last month the nonprofit group broke ground for a $1,100,000 plant that Westinghouse Electric will lease. Westinghouse will install Negro managers, hire about 75 ghetto residents. The development corporation plans a second industrial park, two shopping centers and a ghetto bank.

Negro athletes, who have easy entree with blacks and whites alike, have formed combines to assist fellow Negroes. Three years ago, a group of pro football players, including the Cleveland Browns' ex-Fullback Jimmy Brown and the Washington Redskins' Guard John Wooten, started the nonprofit Negro Industrial and Economic Union. With a $520,000 grant from the Ford Foundation and $251,000 from the Commerce Department, the union has helped finance firms in half a dozen cities. Using such aid, former Barber Dennis Taylor, 29, has built his year-and-a-half-old Magnificent Natural Products Inc., a Los Angeles cosmetics manufacturer, into a thriving concern that expects to gross at least $500,000 this year.

One of the most successful efforts is Los Angeles' Green Power Foundation, largely bankrolled by Negro businessmen. Led by Engineer Norman Hodges, 32, the foundation started by making souvenir baseball bats, called "Watts Wallopers," and has since spread out. It now runs a trucking company, plans to start manufacturing plastics products and printed electronics circuits.

o CIVIL RIGHTS GROUP HELP. Boycott threats by the late Martin Luther King's Operation Breadbasket have forced major Chicago food chains to stock such products of Negro concerns as Mumbo barbecue sauce and Diamond Sparkle wax. As a result, Mumbo-maker Argia B. Collins, 42, tripled his sales in 1967. This year, after a seven-year struggle, he expects to earn a profit.

In Los Angeles, two Negro civil rights workers, Robert Hall and Lou Smith, borrowed $1,000 to launch a job-training project. To provide the facilities, they started a service station, a clothing shop, and a firm that sells African-style garments to The May Co. and Bullock's department stores. "We want to create economic black power," says Hall, describing his plans to share profits with his 82 employees. "We want the people of the community to own everything we start."

It should be axiomatic that the ultimate success or failure of black capitalism will depend on the blacks themselves. Negroes, so long denied opportunities, have a strong argument for special help. At some point, other businessmen are bound to complain that such aid gives Negroes an unfair competitive advantage. But for now, black capitalism has proved to be a beneficent form of black power, moving gradually toward the kind of green power that has led every other group upward in American society.

This file is automatically generated by a robot program, so reader's discretion is required.