By Natalie Hopkinson, professor
Andre Perry, fellow, Brookings
Institution Metropolitan Policy Program
Social distancing is not new to black communities. “Social distancing” in the form of anti-black segregation and discrimination was U.S. law throughout the 19th and 20th centuries. This created racial wealth disparities that have lingered, negatively impacting black people’s capacity to start and maintain businesses. The remnants of federally backed redlining practices, which financially isolated black people throughout the 20th century, throttled the amount of wealth black people could create from homeownership. Most entrepreneurs start businesses with the equity they’ve accrued in their homes. Consequently, black people, who’ve been over-burdened by American economic policies, require a different kind of stimulus in this coronavirus scourge era.
The Coronavirus Aid, Relief, and Economic Security Act (Cares) package is an attempt to offset an impending recession caused by mandated and voluntary social distancing, which will last until at least April 30. Congress should also pass a relief package for people who’ve suffered from the de jure and de facto social distancing of racial segregation, which still sets African Americans apart from white people today on both a spatial and economic basis.
Current financial assistance bills at the federal, state, and local levels don’t account for real wealth differences created by past anti-black policies. The bounce back from the recession will be uneven and partial, as past recoveries have been, in terms of continuing to bail out white families while ignoring the financial and social hole that “colorblind” policies have created for black families.
The Coronavirus relief package includes a $25 million earmark for the Kennedy Center for Performing Arts, which also receives regular funding from taxpayers and private donations. While we love the Kennedy Center — we hear the recent Alvin Ailey American Dance Theater performance there was divine — in D.C., where we both live, indigenous black art and cultural institutions are collapsing.
Go-Go was recently branded the official music of D.C., but that honor hasn’t come with financial support for the constellation of black businesses that support Go-Go culture. Meanwhile, there is a cohort of arts nonprofits in D.C. that receive funding from the District despite the fact they already bring in more than $1 million in income annually. Black barbershops and beauty salons — institutions that allowed black communities to survive segregation and legal exclusion for decades — are struggling. Where’s their bailout?
We support arts funding, especially in challenging times. But in an emergency, we need to make public dollars stretch as much as possible. If well-endowed institutions such as the Kennedy Center can get a bailout, then we believe that it is more than appropriate to create set-aside programs specifically for black institutions and businesses that have survived a legacy of legal discrimination.
Privilege may blind some to the reality that we are all indeed connected, but government leaders should no longer bury their heads in the sand to the unique vulnerability of black-owned businesses and neighborhoods created by past economic crisis responses.
Through the Cares Act, Congress allocated $350 billion to the Small Business Administration to issue loans of up to $10 million per business. In addition, the Cares Act provides $10 billion for emergency grants of up to $10,000 for small businesses to cover operating expenses. These loans become grants if the businesses keep employees on the payroll through June.
But we need to consider the structural issues that often prevent black businesses from participating in these stimulus efforts. Black people represented 12.7% of the U.S. population, but only 4.3% of the nation’s 22.2 million business owners in 2012, according to analysis derived from the latest Census Survey of Business Owners. Asian Americans accounted for 6.9% of business owners and 4.8% of the population, while Latino or Hispanic Americans accounted for 12% of business owners and 16.4% of the population. Meanwhile, only 1% of black business owners were able to obtain loans in their founding year, compared with 7% of white entrepreneurs, according to Brookings and Gallup research.
Despite the need, Congress allocated just $10 million to the Minority Business Development Agency (MBDA) out of the $2.2 trillion coronavirus relief bill. The MBDA connects “minority-owned businesses with the capital, contracts, and markets they need to grow, but yet it received not even 1% of coronavirus relief assistance.
Our research on business devaluation found that minority-owned businesses (i.e. black people, Asian Americans, Latinos or Hispanics, and American Indians) in majority-black neighborhoods earn significantly higher ratings on the consumer rating app Yelp than white-owned peers in white neighborhoods yet they receive less revenue because of the negative perception of the black neighborhoods they are in.
That research is consistent with other findings around housing prices in majority-black neighborhoods. In 2017, houses in black neighborhoods were priced 23% lower than the same kind of houses in white neighborhoods, amounting to $156 billion in accumulative lost equity in black neighborhoods throughout the United States. These losses are heirlooms of past recovery policies, including much of the New Deal, that didn’t consider race or discrimination in their stimulus packages. “Colorblind” approaches have proven to hurt black people and restrict national growth.
The “black tax” – the financial penalty that people pay for living and running businesses in majority-black neighborhoods — must be accounted for in any future spending packages for the novel coronavirus recovery. We need to inject emergency funds into the people and institutions that policymakers have historically excluded from financial assistance the most, but yet are essential to the survival of black communities.
The Covid-19 pandemic has shown that we have a moral imperative to distribute resources based on racial equity. When the most vulnerable communities are healthy, then all communities are better off. The novel coronavirus is showing how interconnected we all are, as the contagion is infecting people across race, class, sex, gender, and age. Privilege may blind some to the reality that we are all indeed connected, but government leaders should no longer bury their heads in the sand to the unique vulnerability of black-owned businesses and neighborhoods created by past economic crisis responses.
Any legislator that really wants to see the country recover from this current pandemic, must approach recovery using a racial equity framework. Political leaders must address the failures of the past that still extract wealth from black people and their assets, making them more vulnerable to inevitable shocks to the market, such as hurricanes, housing bubbles, and pandemics like the one we’re in now. If we really want a solid recovery in the short and long term, spending bills must address the needs that still exist. If we are all in this together, then we must all address the anti-black legislation that kept black people in a state of emergency before the emergence of Covid-19.