Entrepreneurship should be the goal, not white-collar jobs


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Black entrepreneurship in the United States has a remarkable history. Even during the inhospitable climate of Southern slavery, both enslaved and free blacks managed to establish lucrative businesses. Research on black entrepreneurship found that in the Antebellum South, the activities of black entrepreneurs spanned the full spectrum of industry, from merchandising to transportation.

Indeed, the success of some black entrepreneurs was so astonishing that the demand for their services transcended race and class boundaries. The case of Archy Carey, a black slave who gained his freedom, deserves attention. Carey owned a successful hack-drive business, owned several investment properties, and was even revered by prominent white people (pdf). “He is a person of good character, honest conduct and without exception in his behavior,” they noted in a petition.

Despite the illustrious pedigree of black entrepreneurship, researchers have observed that black businesses are not achieving parity with their white counterparts. Experts cite many factors to illuminate black business underperformance, but the relevance of human capital is insufficiently explored. In their research on disparities in corporate performance, Robert Fairlie and Alicia Robb posit (pdf) that large variations in corporate legacies are unable to explain the poorer performance of black firms relative to white firms.

Instead, they argue that “the lack of prior work experience in a family business among black business owners, perhaps limiting their acquisition of general and specific human capital, negatively affects black business outcomes” . Working in a family business gives young people the work ethic and human capital to launch scalable businesses, and black people invariably miss opportunities to hone human capital by not getting involved in family businesses.

Although black people are entrepreneurs, black businesses are constrained by cultural dynamics. Black social theorist Elizabeth Wright once noted that black Americans express strong preferences for white-collar employment over entrepreneurship. Wright argues that in black intellectual circles of W. E. B. Du Bois’s era, there was a tendency to downplay commerce and what some would characterize as menial labor:

“A nerd snob, Du Bois considered the labor of craftsmen, farmers, and business owners undignified. In his zeal to train all blacks into his beloved halls of ivy, he spoke of “turning carpenters into men.” Because, in this particular world to which he had assimilated, someone who worked or was deprived of a university degree could hardly be considered a man. It was this pretentious spirit that would become the hallmark of the black elite, whose overriding influence would shape the thinking and behavior of future generations of https://doc.epochbase.com/Products/Files/DocEditor .aspx?fileid=6577blacks.”

As a result, black people might start trades, but rather than encouraging their children to embrace the mantle of entrepreneurship, they implore them to become professionals. Because of the contempt given to small trades, these companies are never transformed into power players by the second generation. Such ventures are started to generate income for the family so that funds are available to finance the higher education of the children. In short, the goal is for children to enroll in the professional class rather than become entrepreneurs.

Cultural economists would characterize black people as having an “aristocratic mindset”, emphasizing status signaling instead of accumulating wealth through entrepreneurship. For example, in his investigation of the black elite in America, Lawrence Otis Graham reveals a group obsessed with status and producing the next generation of doctors and lawyers. Unfortunately, the intellectual elites fail to realize that while doctors and lawyers can get rich, the most sustainable path to wealth is to own a business.

Additionally, another barrier to success for black businesses is financial illiteracy. Finding capital and investment partners requires an understanding of company finances and performance metrics. Business people who are unaware of the criteria used by financial institutions to assess business prospects will be unlikely to secure loans or receive equity financing.

According to a study published by the Congressional Black Caucus Foundation, 82% of respondents in the 18-30 age category lacked financial literacy. Lead researcher Dr. Tiffany Howard observed that respondents “did not demonstrate…knowledge of their own credit score, basic knowledge of the Minority Business Development Agency or the administration of small businesses, and knowledge of the minimum years of operation generally required for a business owner to apply for a small business loan from a traditional bank.

More serious still, the Financial literacy and well-being among African Americans report shows that blacks trail whites on the personal finance index by double digits. Financial literacy makes black Americans better entrepreneurs, and entrepreneurship can close the wealth gap. Therefore, closing the financial literacy gap is a laudable goal, however, it is quite surprising that racial gaps in financial literacy are observed in the information age.

A possible explanation could be that the thirst for financial information is not embedded in black culture. In fact, many argue that black culture is tainted by conspicuous consumption. Therefore, to address the problem, policymakers should not only create institutions to sell financial literacy and entrepreneurship in Black communities, but also incorporate the star power of influencers to promote positive messages to Black people. Artists are the opinion leaders of the black community, so using them to advertise financial literacy is likely to gain success.

Linking the misfortunes of black Americans to racism is fashionable, but a more sober argument is that the problems plaguing black people in entrepreneurship and other fields can be solved by a positive transformation of black culture.

The opinions expressed in this article are the opinions of the author and do not necessarily reflect the opinions of The Epoch Times.

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The Mises Institute, founded in 1982, promotes teaching and research in the Austrian school of economics, individual freedom, honest history and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard . We seek a radical change in the intellectual climate, away from statism and towards a private property order.

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