Small Black Owned Businesses Get the Shaft

During the pandemic, big, connected businesses got to stay open and got funds from the government while small businesses, particularly small Black-owned businesses, got the shaft. 

February is Black History Month and one positive note has been the growth of Black owned businesses. Starting with E.E. Ward Moving and Storage in 1881, Black owned businesses in the United States have continued to increase, including 34.5% growth between 2007 and 2012. There are now 2.6 million Black owned businesses.  More than 95% of these are sole proprietorships or partnerships with no paid employees, i.e., very small. Thirty six percent of Black owned businesses are headed by women. A 2021 survey found that 36% opened their own business because they were ready to be their own boss and another 17’% were fed up with corporate life.

However, according to a report by the House Committee on Small Business Committee,between February and April of 2020, Black business ownership declined more than 40%, the largest drop across any ethnic group,  

One major reason for what has happened to small Black-owned businesses, which was happening long before the pandemic, is big government cronyism. Power and money will always be attracted to one another and the more power the government has, the more money from big business will join it in an unholy alliance. The losers will always be small businesses (as well as consumers). 

During the pandemic, big, connected businesses got to stay open and got funds from the government while small businesses, particularly small black-owned businesses, got the shaft. Big businesses thrived, as indicated by stock market growth, because of the federal government's “extraordinary measures.” Those measures included financial relief, that went mainly to medium and large businesses and that reassured corporate investors that major corporations wouldn’t fail. Because of that reassurance, it led to a 45% stock market increase in the two years during the pandemic. 

The term “crony capitalism” is, at best, misleading. Cronyism leeches off of capitalism as it does in any system of government. In fact, government cronyism was responsible for bringing down the Soviet Union and today it afflicts socialist Venezuela, China, and Cuba (Sociolismo). 

As Carol Roth notes in The War on Small Business, instead of pandemic relief going to the smallest businesses, 75% went to the largest 13.5% of the applicants. In fact, in a survey of black small business owners on the government’s response to COVID, 41% of black small business owners answered that they “strongly disliked” the response.

But COVID didn’t bring us any new crony behavior, it’s been around for a long time. Unlike large firms who use the government to put their smaller firms at a disadvantage, small businesses don‘t have the time or money to match them. Regulations that require large one-time fixed costs are easy for large firms to handle but can be a company killer for small firms. Access to capital has been made much harder for small firms by The Dodd Franklaw, making it even harder to comply with regulations.

In 2017, Small Business Trends ran an article that said that the top two concerns for small businesses were health care, made more expensive by the government, and government regulations. There are two laws that require regulatory agencies to provide relief for small businesses, the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act, but there is no penalty for regulatory agencies that choose not to provide relief. 

Black owned small business owners are, like many other small business owners, some of the hardest working and most respected people in this country. They deserve better.