African American and Business Term Paper

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Black Women: Diversity and Inclusion Programs - Are they really assisting?

In the last few decades, researchers, policymakers, economic development experts, and analysts of public policy are increasingly concentrating on the aspect of entrepreneurship in the African-American community, with respect to devising distinct strategies for facilitating economic success. Establishment of set-aside initiatives for minorities (or disadvantaged business initiatives) is one political strategy which serves as an instrument for enhancing small, poor businesses' chances of survival. Several of these businesses were African-American-owned and -run businesses (House-Soremekun, 2007; Chatterji, Chay & Fairlie, 2013). This paper will look into the economics-politics interrelationship, by analyzing the aforementioned disadvantaged business initiatives' effect on African-American businesswomen's economic outcomes.

The research question that this paper poses is: Are the programs (such as the set-aside initiatives) that are designed to support small and disadvantaged (or minority) business owners really successful -- or do they rather perpetuate inequality in the system?

The reason this question is important is because it focuses on a real problem that researchers have exposed -- namely, the that even though African-American women are increasingly employed in the business sector, very few are business owners or shareholders. Yet federal initiatives have been developed for decades that are meant to encourage women to become business leaders. However, as researchers have noted in the past, there is a "frontier myth" that exists in the business world in America and the hero of that myth is the "romanticized cowboy" -- the African-American, much less the African-American woman, does not fit neatly into that narrative (Miller, 2004, p. 47).

The study will examine the experiences of African-American women as small business owners in the city of Cleveland, OH, in order to address this question. The study will conclude by addressing the findings and discussing what it means that African-American women are both encouraged to take ownership and yet at the same discouraged by an inherently bipolar system that strives towards two opposing goals at once.

Policy Background (IN THIS SECTION -- HISTORY OF GREAT DEPRESSION -- READ "WHEN AFFIRMATIVE ACTION WAS WHITE" AND ALSO GIVE PERSPECTIVE FROM THAT ANGLE)

Set-aside initiatives for minorities first developed during the 1930s, with President Roosevelt's Great-Depression-era New Deal initiatives for addressing economic issues (House-Soremekun, 2007). The 1933 Unemployment Relief Act prohibited discrimination against people on the basis of color, creed or race. Requirements were stipulated, making it compulsory for companies that received federal governmental contracts in metropolises inhabited by a large share of Black people to employ a particular percentage of Blacks.

The primary focus of the SBA (Small Business Administration), instituted in 1953, was small-sized largely-White American businesses, rather than exclusively minority businesses. This body grew continually until, in the year 1958, it permanently became a federal agency (Chatterji et al., 2013). In this era, a key area of focus was: offering loans as economic aid to small enterprises, in addition to aiding them with federal contract receipt.

President Nixon's Executive Order (EO 11458) of March 1969 offered the basis for establishing a national-level initiative to assist minority entrepreneurs (Chatterji et al., 2013). The U.S. commerce secretary was assigned the responsibility of overseeing this program, for developing local-, state- and federal- level processes and facilitating long-term growth of minority companies. Therefore, innumerable federal department heads had to present reports detailing the strategy they will adopt for attaining positive outcomes, to the commerce secretary. The result was the Minority Business Enterprise Office's establishment.

As Katznelson (2005) shows, the U.S. Supreme Court has had a history of interpreting the "set-aside" program of the federal government in disparate ways, and its attempts to explain it in view of the Constitution and/or codes of its own devising have caused the waters of the affirmative action movement to become muddied. At bottom, Katznelson (2005) indicates that the affirmative action policy of the federal government is only one aspect of the government's approach to minorities -- and the government is more than capable of exhibiting many faces. With the 1980 Fullilove v. Klutznick case (448 U.S. 448), for instance, the Court ruled in favor of the federal government's "10% set-aside program to aid minority business enterprise" (Katznelson, 2005, p. 219). Yet less than a decade later, the Court would offer up a different take on the issue. The 1989 ruling in City of Richmond v. J. A. Croson Co. (488 U.S. 469) was viewed as a step back for affirmative action because the Court here rejected "a minority set-aside program in Richmond, Virginia, as not meeting" the Court's test for providing "convincing evidence of prior discrimination" (Katznelson, 2005, p. 220). In other words, the set-aside program was not to be implemented across the board -- but only in specific cases where strict criteria were met.

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Part of the reason for these differing faces is found in the composition of the Court itself, which like federal government administrations and Congresses is constantly prone to change. For example, Justice Kennedy replaced Powell, which altered the dynamic of the Court. Yet, other political and socials factors were present as well. The 1980s were a time when Reaganomics was moving American in a new direction -- back to a "club rule" type of democracy -- and Court rulings allowed for more restrictions to be placed on affirmative action programs and for more "aggrieved whites to challenge existing programs" (Katznelson, 2005, p. 220). Thus, what was meant to be a policy to assist marginalized minorities in the business world had, by the 1980s, become a politicized issue where the original intent was no longer viewed with the same importance by the leading authority figures of the time.

By the 1990s, the issue of affirmative action had returned to the fore under the Clinton Administration, and the concept of political correctness was becoming popular. A somewhat more liberal Court allowed that "the unhappy persistence of both the practice and lingering effects of racial discrimination against minority groups in this country is an unfortunate reality, and government is not disqualified from acting in response to it" (Katznelson, 2005, p. 220). The battle between right and left, liberal and conservative, racism and responsibility, continued to wage. Under this battle lay an even more important question, however: how to adequately address the issue of inequality and racism? The set-aside initiative was supposed to be the answer.

Set-aside initiatives are of two kinds. One entails allotment of a specific dollar value or share of total governmental contracts to minority contractors. The other involves allotment of a specific share of governmental contracts to suppliers and subcontractors from minority communities, by prime contractors (Rice, 1991; Myers, 1997). Percentage goals are different for different schemes, and even occasionally within schemes in case of different purchases (e.g., construction contracts, professional services, and services and goods procurement). MBELDEF's (1988) information on local-level set-aside initiatives suggest that percentage goals vary from 1%-50%. The percentage goal of a majority of initiatives lies between 5 and 15%. These initiatives are typically supplemented with procurement officers offering additional general support to minority business owners (Bates and Williams, 1993).

Problem Statement

Over time, minority businessmen have been granted several billion dollars' worth of contracts (Boston, 1999). With the enactment of the 1977 Public Works Employment Act and the 1978 Omnibus Small Business Act, practical goals pertaining to procuring contracts and dollars for minority companies could be established (House-Soremekun, 2007). But in spite of the big money involved, astonishingly little quantitative proof is seen with regard to their impacts, particularly on minority enterprises' formation. This has resulted in a political and legal dispute in relation to these initiatives.

Research Questions

1. Have businesspersons enrolled in, or profiting from, set-aside initiatives for minorities enjoyed more success compared to nonparticipating minority businesspersons?

2. Have businesspersons belonging to particular kinds of industry participated more in such initiatives?

3. Should better-educated businesspersons enroll more in such initiatives?

4. Should well-established and older businesspersons enroll more in such initiatives?

Research Significance

This research is especially imperative, owing to recent challenges, on local as well as national levels, against policies for affirmative action, and set-aside initiatives for minorities (by extension). This research will offer a legal and historical perspective on the present debate pertaining to minority set-aside initiatives' survival. Additionally, it will explore their empirical effects on Black businesswomen and will contribute to existing literature on the subject, thereby contributing to decision-making in regard to the future of these programs. Finally, this study forms a central aspect of my studies. I will be able to complete this course successfully through the successful completion of a number of academic activities and assessments, including this research work.

Literature Review

Chan and Myers (1996) explore construction contract and public procurement award to non-minority and minority businesspersons prior to, during, and following the execution of the set-aside initiative of New Jersey. The authors discovered that receipt of contracts by minority businesspersons and minority bidders, increased in number. A growth was also witnessed in contract volume. Boston (1999) revealed that participation of minorities in Atlanta government contracts increased from 0.13%….....

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