Reviving the ghetto economy

Richard Sanders is fortunate. He owns a grocery store in Harlem, and he's black. Increasingly, small businesses in Harlem are being bought up by Yemenis, Pakistanis, or Koreans; many in Detroit are owned by Chaldeans from Iraq.

In low-income black communities across the nation, black-owned businesses have fallen on hard times. Indeed, in many of these neighborhoods, more stores are boarded up and vacant than are in operation. The dearth of local commercial enterprise is a major cause of economic depression and crime in these areas. And it adversely affects the quality of life by obliging residents to walk many long blocks to the nearest grocery store, laundromat, or pharmacy.

Jobs, often provided by local businesses, are hard to find in the inner city. Each entrepreneurial ethnic group tends to hire its own, and unemployment among blacks is high. Young blacks with nothing to do become even more discouraged when they see their elders also unoccupied. In some neighborhoods, the briskest trade is in narcotics, and the principal employers are drug dealers. In such an environment, even children can be enticed into illegal means of making money.

Whatever is spent in legitimate businesses seldom remains in these communities. While fast-food chains can be found in depressed black neighborhoods and provide some low-level jobs, the profits inevitably go elsewhere.

Since the 1960s, the more prosperous blacks -- some of whom had owned local businesses -- have gradually been moving out of inner cities. There are many fewer black-owned businesses in ghettos today than in earlier years. More capital than ever is needed to start a business, and in the ghetto, crime has jacked up insurance rates to prohibitive levels. Moreover, it is difficult for a store owner to obtain credit in an area where virtually all his potential customers are poor.

In general, lending institutions regard inner-city black communities as financial ``disaster areas.''

Richard Sanders came to New York from the South as a young man. He took over the Fine Fair Food Store from his cousin 12 years ago, after his own store burned down. His three sons work with him in the store, and he employs six local people, including a gospel-singing butcher who is allowed to take off periodically to go on tour with his choir. Studying success instead of failure

``I'm here seven days a week, and my kids work every weekend,'' says Mr. Sanders with a smile. ``It keeps them out of trouble. And they don't object, because they know this'll be theirs someday.''

Across Adam Clayton Powell Boulevard is another grocery store, much more modern-looking than Sanders's. There, behind inch-thick bulletproof Plexiglas -- a ubiquitous security measure in ghetto stores -- the clerks are olive-skinned and speak Arabic among themselves.

``They're Yemenis,'' Sanders says. ``They hire their own. Lots of stores around here are being bought by Yemenis. They pay cash -- $120,000, whatever. They got it in a suitcase. I don't know where they get it. A black store owner can't even get a loan.''

Blacks -- 12 percent of the population -- control 7.4 percent of the wealth in the United States, and one-third of them live in poverty, many in neighborhoods that are largely economic wastelands. What can be done to stimulate local economies and offset stagnation and crime in low-income black communities?

Robert L. Woodson, director of the National Center for Neighborhood Enterprise in Washington, D.C., believes that more can be learned from studying how some blacks have succeeded than from studying how others have failed. He feels that traditional programs designed to help the poor have been largely ineffective, because they have fostered dependency and discouraged self-help.

``Our approach is to take a poor neighborhood, find someone who's succeeding there, and study their success,'' Mr. Woodson says. ``We find out who's surviving, who's thriving, in spite of poverty conditions, and analyze how they manage to do that. People learn how to be successful from studying success.''

The role of Woodson's center is to put successsful black businessmen in touch with grass-roots organizations that are helping blacks in low-income areas to revitalize their local economies. It has already identified some 230 such groups across the country and acts as a networking liaison between them. These groups also apply the self-help philosophy to other major problems affecting the black community, through family counseling, education, and help for single mothers, teen-age fathers, foster children, and families in need. The need for investment in the ghetto

Paul L. Pryde, a Washington management consultant, is a member of the Council for a Black Economic Agenda, founded by Woodson. The council is a group of black businessmen, entrepreneurs, academicians, economists, and neighborhood representatives, whose mission is to develop a policy agenda for blacks based on private initiative, self-help, and economic development. Mr. Pryde is concerned with ways to create jobs by encouraging investment in low-income communities.

``Most of the jobs created in the American economy in recent years have come from new companies,'' Pryde says. ``The problem is that there are very few incentives to start new companies in black communities.''

Pryde points out that risk capital is a key ingredient enabling people to start businesses. But risk capital is rarely available in low-income communities, and blacks often lack the financial support systems operating within other ethnic groups. Asian communities, for example, often have internal revolving credit associations to help people borrow from one another and start their own businesses.

``Most development of black communities is difficult because an unfavorable market structure makes it difficult,'' says Pryde.``But market structures can be changed. You've got to make it possible, even profitable, for people with savings to invest in things that benefit the poor. You can't do it by exhortation. But if you create incentives for people to invest in certain areas, they'll do it.''

One such incentive, Pryde suggests, would involve changing real estate tax benefits so as to encourage construction in low-income communities.

Instances of large organizations joining forces with small community businesses are on the rise. The Local Initiative Support Corporation, based in New York, encourages community development with grants from major corporations, in an effort to rebuild both housing and economic enterprises in such communities as the South Bronx and low-income areas of Chicago. Seedco, which recently received a grant of $4.5 million from the Ford Foundation, encourages institutions such as hospitals to form partnerships with community groups, hire local people, and purchase material from local suppliers. Training young entrepreneurs

When it comes to work opportunities for inner-city youth, crime often wins out over legitimate endeavor. New Entrepreneurs, a Camden, N.J., program, takes up this problem.

Former social workers George Waters (black) and Aaron Bocage (white) have devised a curriculum to teach young people how to start their own businesses. The course includes identifying work opportunities in the local community; consulting with lawyers, marketing experts, and accountants; lining up business management; bookkeeping; fund raising; and drawing up a business plan.

Participation in the course has resulted in a number of businesses being started, from janitorial operations to photography services. The program is also expanding horizons by showing ghetto youth that with the right information, they, too, have a realistic chance of participating in the American dream. So far, the training program has served 100 young people in Camden and is being replicated in five cities around the country.

``We believe that there are opportunities everywhere -- in a housing project or on a farm,'' says Mr. Waters. ``We want to show these kids that they can make an honest living. Many of them start their own businesses, but some will simply become better employees. We reinforce in them the idea -- which we ourselves believe -- that no matter how bad things are, despite a bad economy or a bad home environment, this is America. If you work hard and if you work smart, you can make money, no matter where you live.''

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