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Separate and unequal paths to business

When a bank turned down George Johnson for a business loan, he got creative. He returned and told the bank he needed $250 to take his wife on a vacation — and was approved. Then he invested the cash in his business, which became the first Black enterprise to trade on the American Stock Exchange.

Why it matters: The highways to success in the U.S. market economy — in entrepreneurship, corporate leadership and wealth creation — are often punctuated with roadblocks and winding detours for people of color.

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George E. Johnson in his office holding a few of the products made by Johnson Products Co., Inc. Photo: Bettmann/Getty Contributor

The story of how Johnson created his namesake company exemplifies the barriers Black Americans face in building a business decades after slavery and Jim Crow laws.

  • Born in a three-room sharecropper's shack in Mississippi, Johnson dropped out of high school and worked as a door-to-door cosmetics salesman.
  • Johnson and his wife Joan used their "vacation loan" and another $250 loan from a friend to create a hair relaxer for men in the 1950s, then promoted their products in Black-0wned magazines and newspapers.
  • Eventually, the personal care products company vastly expanded after advertising on "Soul Train," the American music-dance television program created by Don Cornelius, another Black risk-taker.

But the Johnson company's rise relied on the couple outsmarting a banker and finding other Black-owned businesses to promote their products, highlighting the discrimination in banking and the systemic barriers they had to navigate to access capital and markets.

Despite a jarring racial wealth gap, there are many examples of successful Black, Latino, Asian and Native Americans in business. Lesser known are the systemic roadblocks that these communities and businesses face.

McDonald's became one of the greatest generators of Black wealth in America, historian Marcia Chatelain wrote in "Franchise: The Golden Arches in Black America."

  • The chain sought Black franchise owners after 1968, provided jobs in impoverished areas, and sponsored Black Little League teams and gospel choir events.
  • But the proliferation of fast-food restaurants in communities of color gave rise to obesity and diabetes and added to health care costs.
  • A group of Black franchise owners last year accused McDonald’s of racial discrimination for steering them to underperforming stores. Last Tuesday, a federal judge dismissed a lawsuit brought by the owners.

In cities across the U.S., local Black business communities have been demolished in the name of “urban renewal.”

  • In the Jackson Ward neighborhood of Richmond, Virginia, the turn of the 20th century gave rise to "the birthplace of Black capitalism." But laws creating the Jim Crow South and construction of Interstate-95 through the area destroyed those thriving enterprises.
  • On Chicago's Maxwell Street, a flourishing Mexican American business community and hub for the area's diverse immigrant culture was mostly demolished over decades to make way for the expansion of the University of Illinois at Chicago.
  • In New Orleans and Kansas City, a cohort of mostly white bureaucrats saw nonwhite areas, with cheaper land and less solidified political opposition, as fit for demolition, following a national playbook that ran "urban renewal" construction.

The bottom line: The U.S. provides economic opportunities for all Americans through entrepreneurship, professional achievement and investments. But for nonwhite Americans, systemic barriers remain an obstacle to creating wealth.

  • People of color make up 40% of the nation's total population,yet the typical white family has eight times the wealth of the typical Black family and five times the wealth of the typical Hispanic family, according to the Federal Reserve.

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