Separate and unequal paths to business for people of color

When a bank turned down George Johnson for a business loan, he got creative. He returned and told the bank he needed $250 to take his wife on vacation and was approved. He then invested the money in his business, which was… the first black company to trade on the American Stock Exchange.

Why it matters: The highways to success in the US market economy in entrepreneurship, business leadership, and wealth creation are often interrupted by roadblocks and twisty detours for people of color.

When a bank turned down George Johnson for a business loan, he got creative. He returned and told the bank he needed $250 to take his wife on vacation and was approved. He then invested the money in his business, which was… the first black company to trade on the American Stock Exchange.

Why it matters: The highways to success in the US market economy in entrepreneurship, business leadership, and wealth creation are often interrupted by roadblocks and twisty detours for people of color.

The story of how Johnson created his eponymous company illustrates the barriers black Americans face in building a business decades after slavery and Jim Crow laws.

• Born in a three-room tenant shack in Mississippi, Johnson dropped out of high school and worked as a door-to-door cosmetics salesperson.
• Johnson and his wife Joan used their “vacation loan” and another $250 loan from a friend to make a men’s hair relaxer in the 1950s, after which they promoted their products in Black-0wned magazines and newspapers.
• Eventually, the personal care products company expanded enormously after advertising on “Soul Train,” the American music-dance television program created by Don Cornelius, another black risk-taker.

But the rise of the Johnson company trusted that the pair outsmarted a banker and found other black companies to promote their products, highlighting the discrimination in banking and the systemic barriers they had to overcome to access capital and markets.

Despite a shocking racial wealth gap, there are many examples of successful black, latino, asian and indian in business. Less well known are the systemic blocks these communities and businesses face.

McDonald’s became one of the largest generators of black wealth in America, historian Marcia Chatelain wrote in “Franchise: The Golden Arches in Black America.”

• After 1968, the chain sought Black franchise owners, provided jobs in impoverished areas, and sponsored Black Little League teams and gospel choir events.
• But the proliferation of fast food restaurants in communities of color led to obesity and diabetes and increased health care costs.
• A group of black franchisees last year accused McDonalds of racial discrimination for sending them to underperforming stores. Last Tuesday, a federal judge laid off a lawsuit filed by the owners.

In cities in the US, local black businesses have been demolished in the name of urban renewal.

• In the Jackson Ward . neighborhood of Richmond, Virginia, gave rise to “the birthplace of black capitalism” in the early 20th century. But laws creating the Jim Crow South and the construction of Interstate-95 through the area destroyed those flourishing businesses.
• Chicago’s Maxwell Street was primarily a thriving Mexican-American business community and a hub for the area’s diverse immigrant culture: demolished decades to make way for the expansion of the University of Illinois at Chicago.
• In New Orleans and Kansas City, a cohort of mostly white bureaucrats saw non-white areas, with cheaper land and less strong political opposition, as fit for demolition after a national script that ran “urban renewal” construction.

It comes down to: The US offers economic opportunities to all Americans through entrepreneurship, professional achievement, and investment. But for non-white Americans, systemic barriers remain an obstacle to wealth creation.

• People of color make up 40% of the total population of the country, yet the typical white family has eight times the wealth of the typical black family and five times the wealth of the typical Hispanic family, according to the Federal Reserve.