The Color of Money Read online

  The least controversial and most durable black capitalism program was the 1969 Minority Bank Deposit Program (MBDP). Ever since Washington policymakers had linked ghetto rioting with credit exploitation, multiple programs had been proposed to fix credit inequalities. They ranged from creating new banking institutions to providing loan guarantees, capital infusions, or Marshall Plans for the ghetto. Rejecting all of these proposals, the Nixon administration’s program simply asked government agencies to deposit their accounts in black banks. In 1968, when William Proxmire’s Senate Banking Committee had discussed whether agency deposits might help bolster black banks, a representative black banker remarked that these agency deposits would not provide a good basis for financing banks in the ghetto because they were too unstable.100 No matter. The program cost nothing. The initial goal was to encourage federal agencies to deposit $100 million of their accounts in black banks; the actual yield was about $35 million by 1971.

  The first agency to volunteer was the Post Office, which announced that it would be depositing $75 million in black banks. It would actually deposit only about $150,000. And even this small sum was rotated through several different banks. One businessman quipped, “It was like me saying I’ll lend you $365,000 for the next year and then lending you a dollar every morning and taking it back every night."101 These were not the deposits that black banks needed—they were the same type that had been crippling them for years. The president of Unity Bank in Roxbury, Massachusetts, complained that the Post Office refused even to bring the money to the bank. “They expected us to hire a security service to collect deposits that we couldn’t even make any money on."102 After complaints about the added cost burden of the postal deposits, the program promised the banks that they would send them more valuable deposits from other agencies. While this did happen, all the government deposits ended up costing banks more than they were worth.

  Another piece of the Nixon administration’s black capitalism program was affirmative action, which was initiated by the Equal Employment Opportunity Office (EEOC) with the aim of encouraging companies to hire more black employees.103 The 1969 Philadelphia Plan required construction companies that had federal contracts to set numerical goals for hiring blacks. The word “quotas" brought a quick backlash from employers and blue-collar unions, so Nixon withdrew the demand and asked businesses to set voluntary hiring goals.104 Striking a political compromise, the EEOC began measuring and keeping track of these “voluntary goals." It did this across a variety of businesses that had government contracts, and it encouraged other businesses to prioritize hiring minorities.

  In supporting affirmative action, Nixon claimed that “jobs are more important to the Negroes than anything else." This was obviously not true, but while asking businesses to provide jobs was not politically popular, it was an acceptable compromise in a politically fraught climate. Nobody lobbied for affirmative action, and no one had demanded it. It was a weak compromise position meant to throw a bone to the black middle class and deal with black militants without spending too much politically or financially.105 According to historian John David Skrentny, “Affirmative action was legitimated very quickly, in a matter of a few years, in a very turbulent time, and by a variety of people pursuing very different goals."106 Affirmative action would be fiercely attacked by Nixon’s own Republican Party until it was almost fully dismantled. It was more vulnerable than black capitalism because it cost whites more, and it would become the epicenter of a white backlash that claimed it was “reverse discrimination."

  All the black capitalism programs, including affirmative action, relied primarily on the voluntary participation of private firms and government agencies. But these companies and agencies had no experience with this type of social activism. Even the philanthropic involvement of U.S. businesses had not been directed at addressing ghetto poverty. Congressman Wright Patman quipped in 1968 that “while our cities fell into decay and Negro youths rioted in our streets [the Mellon Foundation] sent thousands of dollars abroad to uncover the dust of centuries and study Roman and Etruscan town plans."107 The Nixon administration sought to change this orientation and to direct the attention and good will of American firms toward the inner city.

  The administration asked large companies and banks to help alleviate ghetto poverty by increasing minority franchise opportunities, investing in minority businesses, and lending to minority businesses. With weak incentives, few complied. These efforts were to be coordinated through the National Center for Voluntary Action. Even the conservative Wall Street Journal reported in 1970 on the “stillborn” business volunteer program. According to the Journal, the volunteer committee’s administrator conceded in a “masterful understatement” that they “have not been able to treat very many of the nation’s social problems up to now.”108

  In 1970 the Harvard Business Review surveyed the top 500 industrial corporations and business leaders about their participation in the black capitalism programs; it found that only a handful of business executives had made any financial contribution to black businesses. The executives believed that there was not enough financial incentive to participate. Most revealing in the survey was the report’s finding that “Whatever may be said in public, it is clear from many private conversations that most of the existing efforts by white corporate executives to assist black business came about as a result of fear engendered by the ghetto riots, threats, and pressures from militants, and to some extent pressure of influence from government officials.” With only fear as a motivation to help, the researchers concluded that “we cannot leave the promotion of corporate involvement in developing minority business solely to the conscience and moral views of corporate executives.”109

  Though few businesses volunteered, that is not the impression the public received. Several corporations, including AT&T and Coors, took out a series of long-form advertisements to promote all the ways in which they were helping black business. General Motors President James Roche served on Nixon’s advisory council and publicly promoted black capitalism initiatives, stating that it was the responsibility of businessmen “who have worked within and gained from the free enterprise system, to help others share in it. It is us, who must cherish the freedom in free enterprise, to assure that it is freely open to everyone.”110 (General Motors had indeed gained from free enterprise, but they had also gained from $4 billion in federal defense contracts over the prior ten years.) Despite such advertisements, most of these companies put up little or no money at all. Perhaps this was because of the slow economy. According to

  Undersecretary of Commerce Rocco C. Siciliano, “It’s hard to imbue businessmen with social consciousness when business is bad."111 Or perhaps Theodore Cross was right when he said that white businesses would never give up power voluntarily.

  In 1970, Whitney Young lamented, “I remember listening to the head of a major corporation brag about all his firm was doing. After some close questioning, I found the sum total of these grand efforts added up to less than two dozen summer jobs for black youths in only three of the sixty cities in which that company operates."112 In 1969, Young had proposed a National Economic Development Bank that would look like a cross between the Federal Reserve and the World Bank, with regional offices across the country to help black communities finance community self-help projects.113 He was a committed advocate of black self-sufficiency until he met his untimely death in 1971 in Lagos, Nigeria. His last printed words appeared in the New York Times three days after his death. They were words of disappointment. He called corporate America’s engagement with black capitalism the “great copout." He blasted the business community for being dilettantes, first flirting with civil rights and then quickly moving on to other “causes." He said that “the period of corporate activism in social concerns [1967-1969] coincided with two phenomena of great importance—a booming economy and the spread of urban rioting." Young said of the corporate executives, “when he’s trying to help solve social problems four hundred years in the making, create
d by the racialist attitudes of companies and unions like his own, he suddenly expects fast returns and instant successes."114

  If there were no fast returns for corporations or for the black community, Nixon did reap a fast and instant result from black capitalism. The biggest win for his administration was that black capitalism turned out to be a very effective antidote to militant black uprisings. Nixon and his FBI had targeted the Black Panthers as enemies of the state. “The Black Panther party, without question, represents the greatest threat to the internal security of this country," said J. Edgar Hoover. Hoover had sent FBI agents to infiltrate the Panthers’ ranks and subvert their organization. Panthers were imprisoned, harassed, and even killed by the administration in showdown after showdown. Party leaders like Huey Newton and Eldridge Cleaver led the movement at its height from prison and from exile in Cuba, respectively. However, the Panthers were killed not by force, but by a slow drying up of funds and supporters due both to a change in the environment and to a subtle subversion of their cause by President Nixon.115 First, the Vietnam war abated and the draft diminished, so they lost support from white student protesters who no longer had a shared colonizer to fight. The other base of their support was a large part of the black community—the moderates. This group was neutralized by superficial concessions from the administration. The concessions were black capitalism and affirmative action.

  Nixon masterfully adopted and co-opted the black radicals’ demand for power and then used it against them by turning it into a vague yet beguiling promise of black capitalism. The movement’s leaders themselves were divided over the lure of black capitalism. A 1972 Washington Post article titled “The Transformation of the Panthers" featured two cartoons side by side—on the left was Huey Newton holding a gun with a bandolier across his chest, and on the right was Newton holding a bag of golf clubs. As it turned out, Newton and Bobby Seale were now manufacturing gold bags in Oakland, California. The venture was a means of funding Panther activities, but it sometimes looked like a racketeering operation.116 In the early 1970s, the Black Panther newsletter urged blacks to “Support the businesses that support our community."117 A revolution having been thwarted, the Panthers put aside talk about “capitalist bloodsuckers" and moved toward a more “pragmatic" approach of small black businesses. According to noted black sociologist Robert Staples, “one of the most curious turnabouts was the Panthers’ embrace of Black Capitalism."118

  Exiled Black Panther Eldridge Cleaver split with Newton and Seale and maintained an anticapitalist stance. He wrote Stokely Carmichael, who had recently stepped down from Panther leadership, an open letter in 1969 calling him out for providing the administration with a potent weapon against the black community. Black capitalism was just a continuation of black exploitation, according to Cleaver.119 He said that Carmichael had surrendered “black power" to the Nixon administration to be corrupted into “black capitalism," thereby rendering the term and the movement powerless. “It has been precisely your nebulous enunciation of Black Power," he scolded Carmichael, “that has provided the power structure with its new weapon against our people." Cleaver believed that by letting Nixon use the terminology of black power, the activists had surrendered the force and potential of the revolutionary idea to be corrupted by the administration who would “cash in" on the slogan and use it to “ease the black bourgeoisie into the power structure."120

  Cleaver had hit on a tension in the black power philosophy—was it possible to derive black power as a concession from the white power structure, or could the movement’s aims only be achieved through complete political sovereignty brought about by revolution against that power structure? The genesis of the black power ethos was a natural enough response to white oppression, a rebuttal to white power, but would white power have to be defeated to achieve black power, or would half measures do? For the Panthers, the objective had always been pol itical independence, but at least part of the movement was persuaded that black power could be achieved through economic success. This is what black capitalism was proposing.

  The theory behind developing a separate black economy had been that economic power would lead to political power, but perhaps they had it backward. If the rollout of the black capitalism program had demonstrated anything, it was that economic power could not be achieved without government help. American businesses, banks, and homeowners had all benefited from being inside the power structure and receiving its bounty. Blacks had been on the outside, and their lack of political control translated into a lack of economic power. Until black people could access the levers of political power, they could not unleash government or business support, both of which were essential for economic success. In fact, the only reason government or business had contributed anything at all to growing black businesses had been as a reaction to the threat of violence that the Panthers and militants had created. The initial Black Panther movement had held a modicum of power, even if it was a weak and artificial power derived from fear. But this fear was the reason the business community and the federal government had focused on black ownership in the first place. The black capitalism program and its reliance on the white power structure removed this source of power.

  It also deprived the black community of another important source of power derived from collective action. By dividing the community between the entrepreneurs and the masses of consumers, the black community was placed at cross purposes. By linking large white corporations with aspiring black businessmen, the race cohesion— that rage the Panthers had channeled and amplified—was dissipated. This, in turn, removed the incentive for businesses to participate in black capitalism. Black capitalism also cannibalized the budget of the War on Poverty—the OEO budget was successively cut and siphoned off to OMBE programs. The War on Poverty, which was designed to help the poor of all races, was instead being diverted to help aspiring black entrepreneurs, isolating the black community from yet another source of strength—the interracial collective action of the poor.

  An expert in political detente, Nixon used black capitalism to let out just enough steam from the pent-up pressure cooker of rage in the poverty-stricken ghetto to squelch the brewing revolution.121 Ultimately, black capitalism was anemic and utterly unresponsive to the needs of the black community. But it was vague enough to offer just the hope needed to cool the boiling anger just as it was about to spill over. With this one move, Nixon took the sting out of the black radicals’ demand for black power, jettisoned Johnson’s antipoverty programs, maintained his opposition to integration, and even won the support of many black leaders. Checkmate.

  The harvest of black capitalism was the retreat of the black radical groups from center stage and the emergence of a more pragmatic, moderate, and “business-oriented” black leadership. A black leader who embodied this change was Jesse Jackson, who went from a forthright denunciation of black capitalism in 1969 to becoming its champion just a year later. In 1969, he called black capitalism a divisive force in the black community, which should be seeking “total economic development of the Black community” instead of “a few additional entrepreneurs.” He had said that attaching “the name ‘Black’ to capitalism is not a description, but a diversion.” By 1970, he advertised his “Black Expo” as “an annual trade fair for black business, both local and national, as well as a general celebration of black capitalism.”122 He sounded Nixonian when he said in 1970 that blacks “would rather own A&P [grocery store] than burn it.”123 He urged blacks to focus less on fiery speeches on the corner of 125th and 7th Avenue and try to own the corner instead.

  Jackson became a champion of black businesses and celebrated them without hesitation. “Our banks grooved,” explained Jackson, “[be]cause we fed the 40 stores in the black community and put our money in our banks, that all future stores in our community be built by us." He praised the Harlem Freedom National Bank and said that its financial strength was “[not a] manifestation of goodness, but power." Jackson urged blacks to harness the influence of the black
dollar and invest in black enterprise. Jackson’s operation PUSH (People United to Save Humanity) asked the black community to buy insurance from black insurers and deposit money in black banks.124 Several other black groups and institutions, including the National Urban League, the NAACP, and Howard University, launched programs focused on promoting black businesses after the program launched.125 Even the Nation of Islam, black nationalists who had a long-standing policy of staying out of politics, endorsed Nixon’s black capitalism program in the April 1970 issue of Muhammad Speaks.126

  The celebratory focus on black business success, spurred by Nixon’s public rhetoric, led to a renewed social and cultural emphasis on black business within the black community. In 1970, Black Enterprise launched as a new magazine primarily focused on highlighting black business success. In 1973, the magazine debuted a list of the top one hundred black-owned businesses, which prompted Nixon’s praise as “clear evidence that the government, in active partnership with the private sector, can create the kind of climate of opportunity in which those with energy and drive can share more equitably in the rewards of the world’s most productive economic system."127 Established black periodicals like Ebony and Jet began to feature a black business section highlighting black business success stories.128 One of the most popular 1970s television shows, The Jef-fersons, featured George Jefferson’s successes and struggles as a dry-cleaning tycoon in Harlem and opened with the theme song “We’re Moving on Up."