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Does the Black Community Understand the Language of Economics?

April 24, 2015

US_Logo2Universally Speaking

Rahim Islam is a National Speaker and Writer, Convener of Philadelphia Community of Leaders, and President/CEO of Universal Companies, a community development and education management company headquartered in Philadelphia, PA. Follow Rahim Islam on FaceBook(Rahim Islam) & Twitter (@RahimIslamUC)

Rahim Islam

Rahim Islam

The struggle for equality in America for Black people has been a long and onerous one and to this day has not been achieved. Blacks rank last in almost every positive category and invisible in the one category that matters the most – WEATLH. In my humble opinion, this will never change until we understand the language of economics.

Blacks must understand how the race is run. This race is an economic race and it’s all about capital and wealth.

Capital is the resource that is used to propel business starts and business expansions. Every major corporation that is on the Fortune 500 needed capital to not only start but to regularly expand.

Universal Academy for the College Bound Leadership team and Rahim Islam (Photo by Parkhill Media)

Universal Academy for the College Bound Leadership team and Rahim Islam (Photo by Parkhill Media)

Usually these companies were owned by individuals therefore requiring individuals to provide their own capital or many times a family member or close friend. Walmart, Sears, Ford, Bell Atlantic, Comcast, you name it; they all had similar starts with private individuals investing in the start and then growing the companies and taking them public. Regulated by the federal government, these companies’ sell an ownership position and or debt of their companies on the open market (stocks and bonds) in return for capital.

It is this monetary investment (capital) that allows entrepreneurs to take their ideas to the market and some are successful and some are not. Capital is the “at risk” fuel that allows businesses and entrepreneurs to thrive.

Former Milwaukee Alderman and Common Council President, Willie Hines with Rahim Islam, President/CEO, Universal Companies (Photo by Parkhill Media)

Former Milwaukee Alderman and Common Council President, Willie Hines with Rahim Islam, President/CEO, Universal Companies (Photo by Parkhill Media)

In a fundamental sense, capital consists of anything that can enhance a person’s power to perform economically useful work—a stone or an arrow is capital for a caveman, who can use it as a hunting instrument, and roads are capital for inhabitants of a city, and money is the capital for business.

Money invested in a business venture with an expectation of income “at risk,” and recovered through earnings generated by the business over several years.

It is generally understood to be used for both capital expenditures (growth and expansion) and sometimes used for working capital (i.e. covering your overhead during the period when revenues are just starting).

Visiting Upper Kuts Barbershop near UACB Lee Campus (Photo by Parkhill Media)

Visiting Upper Kuts Barbershop near UACB Lee Campus (Photo by Parkhill Media)

Wealth is the abundance of valuable resources or valuable material possessions, specifically money that one has earned and many times inherited.

An individual, community, region or country that possesses an abundance of such possessions or resources (money) is considered to be wealthy.

A key characteristic of wealth is the ability to earn and make money from the excess money that one has (money makes money) – these funds are not ever needed to cover any aspect of the individual’s needs or that of their family needs.

In addition not needing to work, wealthy individuals are able to create even more wealth because the nature of wealth is that money follows money – meaning opportunities to make money are constantly being presented to those that have wealth, why?

Damien Smith, Rahim Islam, Dr. Ramel Smith (Photo by Parkhill Media)

Damien Smith, Rahim Islam, Dr. Ramel Smith (Photo by Parkhill Media)

These individuals have so much discretionary wealth, they’re able to take financial risk that the average person is unable to do and as a result, they are rewarded at higher levels of returns which create even more wealth – this is why the rich get richer.

Where you start matters – very few Black people have been able to become wealthy. Sure we have a few Black people that have become millionaires but it pales in comparison to the thousands of white individuals who have become billionaires and or the documented tens of thousands of existing white millionaires.

We constantly hear about how the Black community earns nearly $1 Billion income annually and this is supposed to be a powerful number.

The truth of the matter, with unemployment and underemployment at such high levels and with nearly two-thirds of Black people living at or near poverty levels, I argue that the number that would be more appropriate would be near $3-4 billion annually.

Today, too many of our children are born into poverty compared to white children because where you start is absolutely critical, and Blacks continue having to play catch up to whites.

UACB Lee Campus (Photo by Parkhill Media)

UACB Lee Campus (Photo by Parkhill Media)

The fact of the matter, Blacks we can’t get income confused with wealth – income is what we received when we sell our labor and it’s virtually impossible to become wealthy from income, especially when many of us spend more than what we earn.

Above we describe what wealth is and the real measurement we should be looking at is how much of America’s wealth (est. $110 trillion) does the Black community own.

The answer is near zero and this makes the economic race nearly impossible to win, impossible for Blacks to compete with whites.

This is more troubling and points directly to the overwhelming advantage that whites had over Blacks as a result of slavery when you factor in that most experts state that nearly 85 percent of all wealth is generational (inherited) and very little wealth is created by the current generation.

There is a direct link to the overwhelming economic benefit enjoyed today by white people, businesses, and institutions.

This competitive advantage is lethal and plays out in every sector of American life.

This is also why very few Black for-profit companies are adequately capitalized and hardly any of our non-profit institutions are endowed. The Black community lacks resources that the white community takes for granted.

The Black community lacks capital because the Black community lacks wealth.

Black people must understand the language of economics and understand the economic disadvantage that Blacks have when compared to whites. Simply put, because of the nearly 350 years head start and the enslavement of tens of millions of Black people with no compensation for the entire duration, the American institution of slavery produced unbelievable economic gains and wealth for white America with a good portion of that wealth in play today.

I liken Blacks in America and our lack of capital like being in a hatchet fight in the dark with no hatchet and our competition has several hatchets and night glasses.

Black people, especially the Black leadership, have to understand that in the economic race we are significantly behind the eight ball and the clock keeps ticking (the disadvantages continue to grow).

This can be challenged but it requires that we act like we’re behind and not like we are ahead.

Let me ask you a question.

If you’re significantly behind in the first quarter of a football game, would you operate the same way if you were behind the same in the fourth quarter?

I believe that you’re game plan in the fourth quarter would be much different than the game plan in the first quarter.

Why? Because, you recognize that you’re not only behind, but lack the time to make the points necessary to win.

Black people, we are behind and time is against us because, today there is no public opinion that values the lopsided race that Blacks have had to compete in – we are led to believe that we are all on an equal playing field. What’s more sad is that even Blacks have bought into this nonsense.

While things are bleak, there is hope if we do what we’ve been unable to do to date – work together, work as a collective.

Blacks achieved their highest level of economic growth prior to 1960 (segregation) because we were forced to work as a collective.

We must get back to group and collective economics which is the foundation for the self determination of Black people.

When you have your own financial institutions (i.e. banks, insurance companies, savings and loans, etc.); you have the infrastructure to construct your own homes (i.e. real estate development, construction, and brokerage); when you can provide the bulk of goods and services (i.e. furniture stores, grocery stores, car dealerships, etc.); when you can provide your own health services (i.e. hospitals, medical faculties, etc.); and when you’re able to provide your own food source, you will create wealth and transfer that wealth to the next generation. This wealth will become capital for the next generation of entrepreneurs. Blacks must understand the language of economics if we are to have any chance of getting out of this mess.

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Popular Interests In This Article: Money Smart Week, Rahim Islam, Universally Speaking

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