Washington, D.C. — A new issue brief published by the Center for American Progress’ National Advisory Council on Eliminating the Black-White Wealth Gap provides a blueprint for how a future presidential administration could revamp a long-neglected agency housed within the U.S. Department of Commerce: the Minority Business Development Agency (MBDA). This is the first in a series of briefs published by the council that will provide new ideas for steps that an incoming administration can take to close the Black-white wealth gap.
Despite comprising 13 percent of the U.S. population, Black Americans own less than 2 percent of small businesses with employees. This disparity is caused by stark and persistent racial inequities in wealth and access to capital. If financial capital were more evenly distributed, Black Americans could enjoy similar business ownership rates to their white counterparts and there would be approximately 860,000 additional Black-owned firms employing more than 10 million people.
While the MBDA has been limited by meager funding and a narrow purview throughout its 50-year history, the issue brief argues that if given adequate funding and authority, the MBDA could help meaningfully reduce the racial wealth gap and increase the creation and success of Black-owned businesses over the coming years.
The MBDA’s unique history and structure would allow a future administration to expand the agency’s activities without new authorizing legislation. While a meaningful expansion of the MBDA could take many forms, the brief lays out five ideas that would significantly affect the wealth gap:
Initiate an economic equity grant program that would fund municipal projects that foster wealth creation, opportunity, and minority business development in Black communities
Launch a minority-serving institution business center initiative within the MBDA, located in historically Black colleges and universities and tribal colleges and universities, which would provide startup capital and technical support for students and community members interested in starting or expanding their own businesses
Create an office of research and evaluation charged with studying barriers to wealth and business development in Black, Indigenous, and other communities of color
Allow the MBDA to lend low-cost, government-backed capital to licensed minority business investment companies to invest in brown- and Black-owned businesses
Establish an office of advocacy and intergovernmental affairs to score the effects of proposed legislation on minority-owned small business creation and success and the economic concerns of Black, Indigenous, and other communities of color
“Throughout our history, Black Americans have unjustly been denied the economic access to capital and the political protection of that capital, free of theft, fraud and terror, to fulfill substantial levels of entrepreneurship,” said Darrick Hamilton, co-author of the brief, council member, and incoming Henry Cohen professor of economics and urban policy and university professor at The New School. “Efforts to build wealth in Black communities must include serious public policy interventions that redress our current economic structures. The MBDA has not been adequately financed and structured to fulfill its mission of promoting just and inclusive entrepreneurship.”
“The next administration must not only say closing the racial wealth gap is a priority; they must put forward concrete policy changes to close it. Small business ownership will not close the gap alone, but these five new ideas provide a plan for revamping the MBDA in a way that not only removes structural barriers to opportunity, but also increases the creation and success of Black businesses in particular—both of which are essential to closing the racial wealth gap,” said Danyelle Solomon, vice president of Race and Ethnicity Policy at the Center for American Progress.
Read: “A Blueprint for Revamping the Minority Business Development Agency” by Connor Maxwell, Darrick Hamilton, Andre M. Perry, and Danyelle Solomon