For starters, former Confederate states legally extended the multibillion-dollar slavery franchise—with the US government’s complicity.
Julia Mejia, an at-large Boston city councilor and chair of the City Council Committee on Civil Rights, recently held a hearing on potential reparations for Black Bostonians. Afterward, a reporter asked me if I thought Black-owned businesses should receive reparations. I was taken aback, as I’d never heard the question before.
Many misunderstand the case for reparations, thinking it’s strictly related to slavery. But slavery was just the beginning of systematic discrimination and denial of opportunities to Black Americans. From Andrew Johnson’s reversal of the order to provide formerly enslaved families with 40 acres of tillable land, to the denial of pensions to those same people for their years of hard work building the country, to the passage of Jim Crow laws during Reconstruction, the New Deal’s transformative programs that excluded African Americans, the Great Society reforms that failed to change Black America’s fortunes, and the institutional practices that disadvantage Black people to this day, centuries of injustices have hindered Black Americans in their efforts to build wealth.
On Long Wharf, a monument tells the story of Boston’s role in the trans-Atlantic slave trade. The monument reminds us that Boston—yes, Boston!—was a hub for ships carrying African people who were sold into slavery. I gave the reporter’s question some thought and settled on six reasons why Black-owned businesses deserve reparations.
1 – Legalized Segregation
Richard Rothstein’s book, The Color of Law, explains the role the federal government played in segregating America and how its actions have disadvantaged the Black community. Segregationist laws and policies began centuries ago and continued far longer than most people realize. Post-Civil War Black codes denied Black Americans the ability to rent or buy land in many states, so they couldn’t become self-sufficient or start their own businesses. Black workers had to sign contracts ensuring they received the lowest pay possible, and anti-enticement measures prevented prospective employers from paying higher wages. In this way, former Confederate states legally extended the multibillion-dollar slavery franchise—with the US government’s complicity.
More recently, the GI Bill systematically disregarded Black veterans. Under the original bill, which expired in 1956, 4.3 million World War II veterans received home loans totaling $33 billion, and nearly 8 million benefited from government-subsidized education or training. But vanishingly few were Black, because the programs were structured so most Black veterans couldn’t take advantage of them. For example, Ira Katznelson documents, “Of the 3,229 GI Bill guaranteed loans for homes, businesses, and farms made in 1947 Mississippi, only two were offered to black veterans.” This further widened racial disparities in college attendance, employment, homeownership, and wealth.
2 – Redlining and banking discrimination
While white Americans were historically able to get loans with just their word and a handshake, the federal government actively discriminated against Black Americans through the Home Owners’ Loan Corporation and the Federal Housing Administration. This went beyond individual prejudice and bias; it was government-imposed racism through redlining.
Despite the outlawing of such practices, the damage persists. McKinsey & Company found there are fewer banks in Black neighborhoods than in white ones, and the Federal Deposit Insurance Corporation reported that 13.8% of Black households had no bank account in 2019, compared to 5.4% of American households overall.
The dearth of banks in Black communities harms families and businesses alike, leading many to rely on exploitative check-cashing services and payday loans instead of standard checking and savings accounts. A good banking relationship and access to capital are critical to business owners and entrepreneurs; not being able to form such relationships places extra burdens on Black-owned businesses.
Financial institutions continue to discriminate against Black-owned businesses in bonding, insurance, and lending, severely and disproportionately limiting access to capital and growth opportunities.
3 – Preventing slaves from patenting inventions
America has always had Black inventors, but for many years the patent system didn’t protect their work. Because they weren’t considered American citizens, enslaved people couldn’t legally hold property, including patents. As a result, Black Americans couldn’t start businesses based on their inventions. Most Black inventors of the time never profited from their inventions, despite their significant contributions to America’s economic growth. Instead, their enslavers largely reaped the rewards.
4 – Destruction of Black Wall Streets
Despite leaving slavery with little education and few, if any, financial resources, Black Americans established thriving business districts across America following the Civil War, often called Black Wall Streets. Recently, we marked the 100th anniversary of the destruction of the Black Wall Street in the Greenwood district of Tulsa, Oklahoma. Few people know that at least seven other Black Wall Streets were similarly destroyed in the United States. From the 1898 Wilmington Massacre in North Carolina to the 1923 Rosewood Massacre in Florida, white mobs destroyed Black-owned businesses and property throughout the South. These attacks resulted in incalculable losses. Black Americans who had pulled themselves up by their bootstraps saw their hard-earned wealth destroyed.
5 – Disparities in municipal contracting
To promote racial equity, many municipalities took steps to increase procurement from Black-owned businesses. The success of these programs led to a backlash: lawsuits alleging that such preferences were unconstitutional. In 1989, the US Supreme Court ruled that minority set-asides and goals were unlawfully discriminatory unless disparity studies justified their need.
Boston, like many municipalities across Massachusetts and the Commonwealth, conducted such studies, informed by public hearings reminiscent of the South African Truth and Reconciliation Commission hearings. People waited hours to testify about the discrimination they’d experienced when attempting to do business with the government. I remember one official leaning over and saying to me, “They are coming forward because they think we are going to address the wrongdoing. Unfortunately, we are just gathering evidence for a report.”
Boston’s latest commissioned report shows the city spent $2.1 billion on contracts over five years, but only .4% went to Black-owned businesses. Similarly, Massachusetts state agencies spent $4.8 billion in 2020, yet Black-owned businesses received only $11 million in state contracts. Why? Because federal, state, and local governments have failed to enforce their own laws.
These numbers are so low that they could not have occurred by accident. The lack of enforcement alone should be cause for a class action suit to obtain restitution for Black-owned businesses. Or the municipalities and state could pay restitution voluntarily—in other words, reparations.
6 – Inequitable federal aid in response to COVID-19
Pre-pandemic, Black-owned businesses were already more vulnerable than their white counterparts, with about 58% at risk of financial distress (compared with about 27% of white-owned businesses). Then things got worse. Black business ownership fell over 40% between February and April of 2020. One reason: many Black-owned businesses couldn’t get loans until the third round of the Paycheck Protection Program—assuming they survived that long. Overall, white applicants had a 60% success rate in obtaining PPP loans compared to only 29% for Black business owners.
When Black-owned businesses can’t participate in government contracts, profit from their inventions, can’t get financing to grow their businesses, and aren’t protected from angry, destructive mobs, fewer dollars circulate in the Black community. Black Americans perpetually toil, invent, build, and innovate, even under the harshest circumstances. Imagine what we could all do together with the right resources and opportunities.