A Pause for Reflection: Juneteenth and Economic Development

Today is Juneteenth. Juneteenth is a holiday commemorating the end of slavery in the United States. On June 19, 1865, enslaved residents Galveston, Texas were told they were free by Union troops, more than two and a half years after the Emancipation Proclamation was put into effect. Over 150 years later, Juneteenth is celebrated in cities across the country to commemorate the end of slavery. 46 states and DC have passed legislation recognizing Juneteenth as a holiday. 

Over the past several weeks, in response to killings of George Floyd, Ahmaud Arbery, Breonna Taylor and others, many businesses, organizations, and government leaders have issued statements in support of racial justice and against the racism that pervades the United States.  This year, as so many have continued to express their outrage, many businesses have moved to make June 19 a paid holiday. Twitter, the NFL and Target are among some of the companies taking the day off for Juneteenth.

The holiday has received more attention than in prior years, with many celebrating Juneteenth for the first time. Though slavery was abolished decades ago,Black Americans today still experience modern forms of economic disenfranchisement from being overrepresented in the nation’s prison populations to continued wealth disparities that effectively impede Black Americans from building generational wealth. Economic developers can take time this holiday to better understand, and take action steps to solve, the racially-based economic inequalities in this country and in their region.

COVID-19 

Black populations are bearing the brunt of the economic and public health effects of COVID-19, compared to their White counterparts. In addition to being overrepresented in COVID-19 deaths in the U.S., more Black individuals report higher rates of unemployment or reduced hours than other racial groups due to the pandemic. Furthermore, minority small business owners are disenfranchised from federal government COVID-19 assistance due to historically weak ties with financial institutions stemming from discriminatory lending practices, such as redlining.

A recent survey by the Bipartisan Policy Center and the Rockerfeller foundation revealed that 54 percent of individuals in Black households are unemployed versus 36 percent of White households as a result of the pandemic. Black households are twice as much likely to have dipped into emergency funds compared to their White counterparts, and over half of Black households had to use their COVID-19 relief checks for basic necessities such as groceries, compared to 31 percent for White households.

In an analysis done by the University of California, Santa Cruz, 40 percent of Black small business owners were not working in April (the peak time of when businesses were feeling the pinch from the pandemic economic shutdown) compared to 17 percent of White small business owners. According to the National Bureau of Economic Research, 41 percent of Black businesses have closed since February, compared to the overall national figure of 35 percent. In addition, only 12 percent of Black businesses reported receiving federal assistance from the Paycheck Protection Program and the Small Business Administration.

Wealth Disparities 

Black Americans have been disproportionately hit by the economic effects of COVID-19, but they were facing economic setbacks long before COVID-19 disrupted the global economy. In 2016, according to the Brookings Institute, the median net worth of a Black family in the United States was $17,150, which is just one-tenth of what the average White family’s net worth was at $171,000. Stated another way, Black Americans are 13 percent of the US population, but only possess 2.6 percent of our country's wealth. 

The wealth gap has its origins in failed post-Civil War policies to redistribute property to former slaves. As history scholar Henry Louis Gates explains, Union General William T. Sherman’s Special Field Order No. 15 specified that formerly enslaved people would have access to 40 acres of land, a policy that was crafted specifically with Black leaders in the south, who recognized the need for economic self-determination. Lincoln’s successor, Andrew Johnson, a Southern sympathizer, overturned this revolutionary policy. 

Since then, impediments to property ownership have become a key factor in the wealth gap between Black and White American. Post slavery, farming via sharecropping, or renting farmland, became the defacto job of freed slaves. The low wages did not allow for purchasing farmland of their own. Lack of access to the legal system prevented Black Americans who had purchased land from protecting it through legal wills; between 1910 and 1997, black Americans lost about 90 percent of the farmland they owned. 

One of the most detrimental policies to Black wealth has been redlining, which denied banking and other services to majority Black neighborhoods, along with other racist policies surrounding homeownership for Black Americans. Homeownership can be a critical purchase that leads to intergenerational wealth, which was denied to many Black Americans through targeted denial of access to mortgages, and other financial resources.

Black Owned Businesses 

The opportunity to become an entrepreneur and business owner is not as accessible to Black Americans as it is to White Americans. While Black Americans are 12.6 percent of the population, they represent 9.5 percent of all U.S. businesses. There is a large disparity in revenue and employment shares, with Black-owned businesses accounting for only 1.3 percent of sales and 1.7 percent of employment. 

Why is this? Capital is a critical starting point for many entrepreneurs. Black-owned businesses start with only one-third of the capital, at $35,205, compared to new White-owned businesses, $106,720. A common expectation for many entrepreneurs is to raise funds from family and friends.  This expectation is more typically more difficult for Black entrepreneurs, because of the large wealth inequality that exists in this country. This lack of access to funds can be detrimental to an entrepreneur successfully opening up business. 

Economic Development Role

Events such as COVID-19 and the recent protests related to police brutality towards Black Americans have brought systemic racism into focus, but the foundations of racially-based inequality have been entrenched for generations. These patterns are often seen when the status quo is disrupted; natural disasters such as Hurricane Katrina and flooding in Houston showed that historically Black communities are more impacted and less likely to recover. 

To quote a recent Brookings article, “Public policy has created the Black–White gulf in wealth, and it will require public policy to eliminate it.” Economic developers shape public policy; it is our responsibility to understand the history that has lead to pronounced inequality, and work to create programs, policies, and incentives to address it. This time can be a pivot point; as our economy recovers from COVID-19, economic development and community leaders can follow the lead of national business leaders in reconsidering strategies and resources to promote the economic health of Black Americans.