It’s no secret that Black people are incredibly industrious; today’s Black Britons are aspirational. 68% aspire to start their own businesses and generate economic success (Department for Communities and Local Government, 2013). However only 4% of Black people in the UK actually go on to start businesses (Cameron, 2010), and when they do, they fail frequently and miserably (Ekanem, 2012). Now, in some ways failure is an inevitability of business – some 50% of all start-ups fail in their first five years (Anderson, 2014). However, the manner and frequency in which Black businesses fail speaks to a wider endemic problem. A defeat in pursuit of an elusive Black economy – i.e. a system of producing, consuming and transferring wealth to and within the Black community but never seems to benefit the Black community.
The solution is as well known as the problem. In the acclaimed words of Marcus Garvey: be Black, buy Black and think Black and all will take care of itself. However today, prospects of a Black economy are bleak, especially where Black people are continually over represented in poverty, unemployment, and social housing statistics. Perhaps the failure of the Black Star Line and Garvey’s other ventures are excellent examples of how untrue this simple formula is. Garvey’s businesses did not fail because individuals failed to be, buy and think Black; they primarily failed because of Hoover’s determination to decimate Garvey’s legacy. In other words institutionalised and structural racism caused Garvey’s ventures to fail; and for an innumerable number of budding Black entrepreneurs, financial exclusion and discriminatory lending practices continue to cause and/or contribute to the failure of Black commerce. The cumulative effects of which seem to persist in undermining Black economics in a number of explicit and discrete ways.
To some degree Garvey was right. The inability of Black people to buy Black undoubtedly affects an economy’s potential to build wealth. Beyond Black Britons earning on average 23% less than their white counterparts (Richardson, 2016), the Black economy in the UK is worth less than other ethnic minority economies such as some booming Asian dominated markets. Statistically, Black people in Britain simply don’t redistribute wealth back into themselves. This would be excusable if Black Britons were a group of spendthrifts, in 2006 The Guardian estimated the UK Black economy to be worth £4.5 billion. On a whole, Black Britons are willing to utilise their spending power, just mainly outside of their own race.
Minority consumers are also known to regularly spend a disproportionate amount of their income (compared with their white counterparts) on high end goods. BAME consumers are three times more likely to own a BMW than the population in general, and twice as likely to own a Mercedes-Benz ( Race for Opportunity, 2010). They are also known for showing more loyalty to brands outside of their race than white consumers (ibid). The ‘Black Pound’ circulates less than two times before leaving the community.
On reflection, excessive consumerism should be unsurprising because consumerism is an important factor in identity formation. In the 18th century, as individualism continued to grow, advertisers became more advanced in categorising ownership of possessions as an intrinsic expression of self (Friends of the Earth, 2013). The arrival of TV, backed by extensive marketing techniques all assisted in creating and perpetuating social attitudes of “I am, because I have, “I have, because I am free” – free to choose what to buy and when to buy, and free to develop an identity based upon what I have, not who I am. It is an identity forged upon personal achievement (as measured by worldly goods) as apposed to social constructs such as race, class or religion. Consumerism offered a chance of socio-economic inclusion. Is it any wonder that the “liberty to consume” (Friends of the Earth, 2013) has such a stronghold in largely excluded and disenfranchised communities like the Black British one?
Marry that now with communities whom have suffered decades of literal financial exclusion. Black communities have traditionally experienced an ‘inability, difficulty or reluctance to access mainstream financial services.’ (McKillop and Wilson, 2007, p. 9). When the Windrush generation found themselves ostracised from the financial markets, many turned to community savings and loan arrangements such as the pardner, also known as ‘Pardna,’ where groups would co-operatively save and distribute money outside of the traditional banking systems (Williams, 2012). Perhaps, unfortunately, these are systems which have lost their popularity (Williams, 2012). At the turn of the 21st century more research found that 92% of families with white mothers have bank accounts while 87% of families with Black mothers have bank accounts (Barnes et al 2005). The prevalence of Black people in the “unbanked” category strongly indicated that any group unable to access the benefits of modern banking suggested an inability to retain regular and stable employment (Khan, Financial Inclusion and Ethnicity: An Agenda for Research and Policy Action, 2008b). Thus creating cycles of poor financial capability for generations to come. As a collective, Black people are unable to receive the benefits of the strengthened economic well being that financial inclusion brings (Khan, Financial Inclusion and Ethnicity: An Agenda for Research and Policy Action, 2008b).
The Runnymede Trust also note that BAME individuals tend to suffer financial exclusion in credit, insurance, savings and financial advice. Their research uncovered that “roughly 60% of Asian and Black British people have no savings at all (twice the rate for white people without assets and savings)”. A huge factor in starting businesses, obtaining mortgages and amassing assets (ibid). This is partially explained by the number of Black people in low income jobs, considered unemployed or inactive or receiving social security benefits. It paints a very bleak picture for the future of Black economics.
It has also been revealed that Black people are less likely to take up home insurance products. This is compounded by the frequency of burglaries in social housing and deprived areas, which inevitably increases the cost of this insurance (Khan, Financial inclusion and ethnicity: Summary, 2008). Consequently, geographical factors frequently hamper Black people from moving up the financial ladder because financial institutions rely on “postcode based risk-scoring” in their risk evaluations when lending money. The bearing of this “is so grave that Khan argues it may amount to “indirect discrimination” (Khan, Financial inclusion and ethnicity:Summary, 2008). Discrimination that in 2011 lead to the then Deputy Prime Minster Nick Clegg ordering an investigation into racist lending practices of our banks and credit unions. Though the investigation cleared the banks of racist practices, the Minority Ethnic Enterprise Centre of Expertise insisted that people of Black African origin are four times more likely than so-called “white firms” to be denied business loans outright (Morris & Farrel, 2011).
So let’s be clear, discriminatory lending practices damage the Black economy for Black African and Black Caribbean-owned businesses, which are much more likely than Indian, Pakistani and white-owned businesses to be rejected for loans outright (Department for Communities and Local Government, 2013). Black African and Black Caribbean-owned businesses are significantly more likely to feel discouraged from applying for finance than an Indian, Pakistani and white-owned business (Khan, Financial Inclusion and Ethnicity: An Agenda for Research and Policy Action, 2008b). In addition, when loans are granted to Black African businesses in the UK, the loan amounts given are significantly lower than the amounts requested (ibid). Overall, the ongoing financial exclusion ensures that getting a successful Black business venture off the ground is profoundly difficult.
Nonetheless, to this author, it’s in the subtler strands of financial exclusion that Black people continue to silently suffer, i.e. the lack of adequate financial knowledge. Effective financial inclusion goes beyond access to services; it also incorporates effective financial education. To be financially included, individuals need to have both an “understanding of financial concepts with the skills and motivation to plan ahead, find information, know when to seek out advice and apply it to their own life” (Mitton, 2008). BAME groups are “woefully under-informed about basic financial concepts” (Lusardi and Mitchell, 2007). 25% of ethnic minority owned businesses report a lack of self-confidence with finance, above the average level of 16% (Stuart Fraser, 2005). Here, the intersection of racial and social hardship gives rise to a double disadvantage for Black people in the UK.
In Khan’s view, poor educational attainment in primary and secondary level mathematics might indicate Black Britons miss out on general and more targeted financial education. He advises that poor literacy may leave minorities unable to decipher complex financial jargon, much to their detriment (Khan, Financial Inclusion and Ethnicity: An Agenda for Research and Policy Action, 2008b). Poor financial education has hindered Black Britons in many ways, the ability to effectively manage money, or seek the relevant help when needed for example. Unfortunately, minorities whom are statistically frequently indebted are twice as likely to be penalised for their misfortune (Henry, 2014). Yet, mainstream means of tackling Black financial illiteracy – such as The Financial Capability Strategy for the UK – has no analysis of the impact of poor financial capability on ethnic minorities.
Black people have to address their economic disadvantages themselves. If we really want progress, it is time to rid ourselves of the shaming and stigmatising attitudes towards our community when they cannot manage their money (Ekanem, 2012). In this aspect, Garvey’s instruction to think Black comes to mind.
So what’s the solution? If the trouble with Black economics lies in the intersection between racial and other inequalities. Progress can only be made when all of these inequalities are challenged. Or, in the words of the eponymously named former charity Equanomics UK, the solution is not just Black economics, but ‘Equanomics.’ meaning to build awareness of and challenge the structural inequality in our system. We need to overcome barriers to education, employment and self-employment for minorities.
The research of the Equanomics group and that of the Runnymede Trust offer crucial insights into the areas that require improvement. Both organisations recommend targeted financial policies such as bank disclosures on the ethnicities they lend to (The Runnymede Trust). Equanomics also created a detailed business plan offering a multifaceted approach to tackling economic inequality by focusing on lobbying parliament to implement effective legislative and policy changes (Equanomics UK, 2010).
In conclusion, however far the Equanomics definition can remedy the troubles with Black economics, as Garvey outlined, the attitudes and behaviours of Black people are part of the problem. Let’s first overcome at community and personal level for a Black economy to flourish. Categorically, greater financial education across the community is imperative, and fortunately is growing. Increasingly Black community projects, even our own platform, are offering financial skills training. Black people, remember – wealth cannot be distributed if it does not exist. Wealth is unlikely to be retained by those who do not understand how to conceptualise it, let alone manage it (Ekanem, 2012).