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Limitations of the Black Businessman, by Eugene P. Foley

Eugene P. Foley became the National Administrator of the Small Business Administration (SBA) in 1963. Under Foley, the SBA created a pilot loan program to encourage business ownership among African Americans. In this conference transcript from 1966, Foley attempts to motivate black entrepreneurs by debunking several “myths” of black business ownership.

Limitations of the Black Businessman

There are myths carried by Negro businessmen and by Negroes in general. The first one has to do with the lack of credit; the second one, with the Jewish merchant; and the third one, with the state of poverty of the Negro community. We investigated these in terms of the Negro entrepreneur in Philadelphia.
In terms of financing, it is true that the Negro businessman has a tough time getting credit, but he does not have any more trouble getting credit than any other small businessman. The Drexel Institute made an actual count of every Negro businessman in Philadelphia. (For those of you who are interested in the field of statistics: in 1960, the Census Bureau counted only about 1,600 self-employed Negro merchants in that city. There actually are about 4,200 Negro businessmen in Philadelphia.) There are no millionaires, but there are about 10 who may have a net worth of approximately $100,000—which, in business circles, does not make them outstandingly successful, but does make them comfortable and secure. Nevertheless, 10 out of 4,200 obviously is not very many. Thus, when we talk about the Negro business community, we are talking about the familiar pattern of retail trades and services—very small businessmen, who in this country just cannot get credit. Sixty per cent of all the small businessmen of this type in Philadelphia just do not have any banking relationships.
Banks have branches in the Negro areas of Philadelphia, and they do make loans to Negroes. They make two types of loans: consumer loans and mortgage finance loans. They make them every day and have been for years. But they do not make business loans to Negroes for the same reason that they do not make them to the same type of white businessmen anywhere else in the city of Philadelphia: business loans are very risky loans. For instance, since World War II, one branch has been making, on the average, fifty consumer loans a month to Negroes; but in its history it has made only two loans to Negro businessmen. I think it is very important to overcome the myth. It is true that Negro businessmen lack credit, but it is not because of a special prejudice peculiar to financial institutions. The banks are in the Negro area to make loans, and therefore, to make money. Very small businessmen—Negro or white—cannot get loans simply because of the risks to the banks.
. . . We took a consumer survey on five different items. We asked eighty-four Negro housewives, in a very small, two- or three-block area in Philadelphia, where they bought these items. Seventy-five Negro housewives shopped exclusively at Negro grocery stores. This was also the case with drug stores. With cosmetics, there was a slight majority for white stores. With dry cleaning, there was a slight majority for Negro stores. With gasoline, there was a considerable majority for white stations.
We asked the women why they shopped in the white store or Negro store. The white store was always “lower priced.” The Negro store was invariably “more convenient.” When we compared the prices of nineteen various grocery items in white and Negro stories in that area, we found that the median prices of most of these articles were actually the same. There were four or five items which were higher priced in white stores, and three or four which were higher priced in Negro stores. This is something I am going to have to look into further. . . . But we have found so far that the median prices in white stores are slightly higher than in Negro stores—contrary to the overwhelming impressions of the Negro housewives in the area. The Jewish merchant is not, in my judgement, an unfair competitor.
With regard to the poverty of the Negro community, we found that, although it is undoubtedly a poor area, there are many white merchants there who are making a very handsome profit.
[. . .]
Why is it that only 10 of the 4,200 Negro businessmen in Philadelphia are significantly successful? We cannot say that the Negro is inherently not capable. When he started on an even keel with the white merchant in the nineteenth century, he was in every business that the white merchant was in, and he was very successful. Furthermore, I am convinced . . . that the Negro is, indeed, capable. . . .
I do not really know why the Negro businessmen are not successful. I think the lack of success probably relates to . . . the feeling of powerlessness. An entrepreneur has to have several qualities: thrift, self-confidence, hope, riskiness. Many Negro businessmen seem to feel “What’s the use?” They never really stick with the problem long enough. I think it is the apathy and the tendency to give up so fast—characteristics of all of the social complexes within the Negro community—which probably have had an effect on the Negro as an entrepreneur.

Eugene Foley, conference transcript “American Academy,” reprinted by permission from Daedulus, Journal of the American Academy of Arts and Sciences, 95, no. 1 (winter 1966): 425-28.

Answer the following questions in your notebook—this will be collated so that you can print or e–mail your work when you are finished.

1. Both Asa Lee (see Document 2) and Eugene P. Foley attempt to encourage African American entrepreneurs to start their own businesses. How do their approaches differ? Whose approach is more likely to motivate a potential business owner such as Walter Younger? Why?

2. What are the strengths and weaknesses of Foley’s attempt to debunk the “myths”?

3. Foley concludes his report by stating that the lack of success of black businessmen relates to a “feeling of powerlessness” and “apathy.” Do either of these terms characterize Walter Younger? Does Foley’s conclusion bolster or undermine his attempt to motivate black businessmen?

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