The Origins of Black-Owned Businesses and Why They Matter Today

Black-owned businesses provided essential goods and services to their communities throughout American history while creating wealth. 

August is National Black Business Month, which engineer and entrepreneur, Frederick E. Jordan, started in 2004. It’s a time of year to recognize how historically disadvantaged Black businesses have been and the vital role they play in working to close the racial income gap in this country.

The reason we celebrate National Black Business Month is because of what owners have had to overcome in this country’s history.

Black People Were Banned From Participating in Mainstream Society, So Their Businesses Had to Provide for Their Communities 

Black-owned businesses have been around for as long as any others, but what National Black Business Month recognizes are those that have dealt with the unique challenges of operating under the racist institutions that have existed throughout the history of the United States.

These Black-owned businesses date back to this country’s infancy. There are many prominent examples of formerly enslaved people who had gained their freedom, started businesses, and became successful in an overwhelmingly discriminatory society where the institution of slavery was still central to the country.

Even after the last enslaved people were freed in 1865, the rise of Jim Crow and segregation meant that Black and white people lived in two separate Americas.

Black people were barred from participating in mainstream society. They weren’t allowed in white restaurants, universities, churches, or businesses, so they had to start their own. 

While Jim Crow laws and segregation were meant to keep Black people down and keep them from having the same opportunities as white people, they inadvertently created a “Golden Age” for Black-owned businesses from 1900 to 1930. The number of Black-owned companies doubled from 20,000 to 40,000 between 1900 and 1914, according to The National Negro Business League. The distinction of a business being “Black-owned” became increasingly prevalent.

This success was met with backlash. White supremacist ideology was on the rise across much of the South during this period, with the Ku Klux Klan resurging to prominence. The summer of 1919 is nicknamed “Red Summer” because of the spike in racial violence.

Black-owned businesses were thriving in the segregated city of Tulsa, Oklahoma, in 1921 when a white mob attacked Black businesses in the largest race riot in the country’s history, often called the Black Wall Street massacre. Two days of violence left as many as 300 dead, 800 injured, and fires destroyed countless businesses and residencies, leaving as many as 10,000 Black people homeless.

When the Civil Rights Act of 1964 outlawed segregation, the cultural and geographic differences formed over centuries didn’t magically disappear. That’s why even today, the terms “Black church” and “white church” evoke different images, even though today, in theory, anyone can go to any church.

Institutions Like Segregation Have Shaped Much of Modern Society, Even If It’s Been Gone for Almost 80 Years

Just as the importance of Black universities and churches to their communities didn’t just disappear after segregation, neither did the importance of Black-owned businesses. 

Black-owned businesses still matter because the inequalities caused by centuries of slavery and segregation are still prevalent today. Racial gaps in income, wealth, and health outcomes still exist today, so supporting Black-owned businesses is essential.

Many argue that because racist institutions like slavery, Jim Crow, and segregation are long gone, it’s unnecessary to label a business as Black-owned or celebrate their accomplishments.

But these institutions aren’t long gone. They caused irreparable damage to the Black community and have effects that are abudantly visible today. While these may seem like ancient history, they weren’t that long ago in the grand scheme of things. 

Segregation ended less than 80 years ago. There are plenty of Black people alive today that are old enough to remember segregation and the impact it had on their lives. On the other side of that coin, some who perpetrated and wholeheartedly believed in segregation are still around, possibly believing in those same ideologies.

Black-Owned Businesses Continue to Strengthen Their Communities

There is still tremendous wealth inequality between Black and white people in the United States. Black people comprise 12.4% of the American population but possess just 2.4% of the nation’s wealth. In 2020, the median household income for white households was $74,912, while it was just $45,870

Black-owned businesses are one of the best tools for closing this gap, with over three million in the United States today, generating $206 billion in annual revenue, and creating 3.56 million jobs.

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