President Obama Recently hit the reset button on his presidency with a renewed emphasis on job creation and small business development. He said in his 69-minute State of the Union address: “We can’t afford another so-called economic ‘expansion’ like the one from the last decade—what some call the ‘lost decade’—where jobs grew more slowly than during any prior expansion.”
Playing the role of consensus builder-in-chief, the president has attempted to break gridlock within a dysfunctional Congress to enact elements of his ambitious domestic agenda including measures to provide small business with working capital and tax incentives in hopes of expanding payrolls. Obama also fine-tuned his message to reassure an increasingly restless public skeptical that his initiatives will eventually put America back to work.
Amid the political wrangling, however, millions of African Americans are battling a brutal post-recession economy. High unemployment. Record foreclosures. Massive business failures. If crisis conditions persist, we will witness the constant decline of the African American professional and entrepreneurial class as well as the rapid decimation of black wealth. What can be done to fix these daunting problems and, in turn, advance black America in 2010 and beyond?
To address these issues, Black Enterprise in partnership with Wal-Mart held its own forum to evaluate the economic and financial state of black America. Under the banner, “20/20 Vision: A Look Ahead at Black America in the Next Economic Boom,” the event brought together private-sector decision makers and public-sector policy makers to discuss, debate, and dissect issues vital to the future of African Americans and the nation as a whole: jobs and workforce readiness; small business and innovation; and financial reform and wealth building. The analysis came from a group of the best and brightest including be Board of Economists members Bernard Anderson and Thomas Boston; BE100s CEOs Janice Bryant Howroyd of temporary services giant Act-1 Group and Bill Mays of Mays Chemical; and financial powerhouses Christopher Williams of Williams Capital Group L.P. and Eugene Profit of Profit Investment Management. Input was also provided from a cadre of Obama administration officials: Labor Secretary Hilda Solis, United States Trade Representative Ron Kirk, White House Domestic Policy Council Director Melody Barnes, Commerce Department Senior Advisor Rick Wade, Presidential Economic Advisor Jared Bernstein, and National Director of the Minority Business Development Agency David Hinson. In reviewing policies in wide-ranging areas such as the green economy, education, global trade, financial reform, and capital formation, many of these officials encouraged forum participants to play a role in the policy-making process by offering suggestions and feedback.
Using the dialogue and ideas from forum sessions, be has developed the first draft of an action plan for black America—a series of initiatives that serve as policy recommendations for the Obama administration as well as directives for African American business.
JOBS & WORKFORCE READINESS
BLACK ENTERPRISE: How will African Americans fare as the economy continues to recover from the Great Recession?
Anderson: We now have conditions that are likely to produce very limited job creation as we go forward. In fact, it is very likely that we will not return to full employment as measured at a rate of 5% to 5.5% unemployment for four years. There are glimmers of hope. One is the emphasis that the president placed on those measures that will accelerate the creation of jobs in small businesses. Unless we have an increase in consumer spending [and] business investment for plant and equipment, we will not have the increase in aggregate demand. So simply giving tax credits to hire people won’t work. Only when businesses believe that the recovery is sustained and there is some reasonable future increase in the demand for their products will you see an increase in full-time hires.
BE: Are we going to continue to see the trend of a permanent temporary workforce?
Howroyd: Companies are no longer going to hire the way they traditionally did. Temporary employment is going to be a permanent part of the workforce landscape. In my opinion that’s a good thing. Temporary work gives you an excellent opportunity to learn skills, reset skills, and re-evaluate where you are. Companies look at that temporary workforce when they’re ready to make full-time hires. We’re going to have to rethink how we achieve and how we earn a living. We’re going to see nimble, agile employees. We need to make certain that our folks are aware that they’ve got to gain the skill sets that allow them to have those very fluid job opportunities.
BE: What is the role of HBCUs in training this new workforce?
Lomax: We need college-ready young people. They need to get the rigorous academics that will prepare them to study STEM disciplines; they need the math and the science. And then they need colleges that are ready to receive them [and] that will give them flexible schedules that will enable them to work and study at the same time. They need childcare. They need other supports. I want to make clear that as we talk about the African American community, we can be grounded in HBCUs but we have to talk about national educational solutions. HBCUs are enrolling about 14% of all African Americans pursuing a bachelor’s degree. Most African Americans who pursue post-secondary education start at community colleges. Don’t just point at black institutions and say, ‘You’re not getting it done.’
SMALL BUSINESS & INNOVATION
BLACK ENTERPRISE: What do the fastest-growing black-owned businesses have in common that’s allowing them to grow, particularly in light of the times we’re in?
Boston: The thing that distinguishes really high-growth companies from those that kind of meander along is that high-growth companies plan for growth. Those companies set high-growth targets and [put] in place the kind of management changes that allow them to reach those targets. The second ingredient is what we call value innovation. It’s the ability to find a market space that you can occupy for a time that competitors can’t get into. You can grow and don’t have to worry about prices [or] competition.
Hinson: At the end of the day, African American businesses need to grow to size and scale. One of the things that has to change is how African American businesses work together. If one company is too small to be the prime, that company needs to consider a strategic partnership or joint venture relationships to gain the size so they can be a prime contractor. We have to get bigger quicker but the way to do that is to look more closely at where we can integrate, where we can acquire another company or be acquired, as well as looking closely at opportunities to globalize.
BE: So what should black CEOs look for in a partnership?
Garner: We’ve been successful working with Wal-Mart to position ourselves to be able to grow from the expertise and corporate partnering to better prepare us to take advantage of the stimulus opportunities coming down the pipeline. For construction companies such as mine, it’s very important to look at your business model [and] retool it because it’s one thing to be able to focus on the federal government but you also have to be prepared for the private market space.
Mays: Access to capital is one of the biggest problems that small businesses face and if I can provide that access through connections with financial institutions, direct investment, or just pulling some strings then I have tried to do that. These businesses understand that you don’t have to spend 20 years before you finally get to $20 million. You can get there pretty quickly if you can get just one or two contracts. I have found that investing in and helping these businesses get to a stage sooner rather than later makes them much more viable.
FINANCIAL REFORM & WEALTH BUILDING
BLACK ENTERPRISE: What can be done to restore trust in financial services and stimulate investment within the African American community?
Profit: One big factor is financial literacy: really understanding what diverse investing is about, what your expectations should be, and why you should be investing in the first place.
Deavens: I think just increasing transparency [will help]. As we’ve gone through the financial crisis, a lot more time and effort has been focused on communication with customers, explaining to them how our investment philosophy works.
BE: And what about proposed financial regulations?
Deavens: There were a lot of failures in the financial services arena in terms of understanding the risk and being judicious about the nature of the risk. I think there were some failures as regards to the regulation of those companies to appropriately police the risk. And I think there’s some lacking in terms of financial literacy among consumers. So there is a lot of blame to go around and a lot of opportunity for improvement going forward.
Profit: I can understand why there’s a healthy degree of frustration with our industry—the fact that Wall Street was able to essentially be bailed out and then we sit in a situation where the economy still is not improving and Main Street is still suffering. It’s not that I disagree with the fact that we need some regulation; you can’t have a free market economy without a rule of law. But I think to move the needle, there has to be a little bit of give on the rhetoric and a focus on what we can get done in this current environment.
Williams: What concerns me is that if we encounter the same scenario that threatens the viability of one or more very large financial institutions, there has been absolutely nothing that’s been put in place that will lead to a different outcome than the one we’ve just experienced—which is to bail them out again.
BE: What will spur banks to start lending again?
Williams: There has to be incentives, and it has to be economically worthwhile for the banks to lend. They’ll do what’s in their economic interest. If they feel they can borrow at 0%, invest a little more than that and make money and never lend, that’s what they’ll do. I find it frustrating to see Congress, the president, whoever, upset at banks for doing what they are not restricted from doing. You put the carrots and the sticks in the way that will keep their actions consistent with the actions you would like for them to have.
This article originally appeared in the April 2010 issue of Black Enterprise magazine.