April 20, 2007

Black Spending Power

According to data compiled recently by essayist and retired patent attorney Richard Everett, African Americans are projected to have spending power of approximately $1 trillion a year by 2010. That will be a significant increase over the roughly $800 billion Blacks are believed to have spent in 2006.

The projection was part of a collection of data Everett compiled to showcase Black progress in America over the last 40 years. His essay concludes that Black accomplishments during the 40-year-period "are absolutely remarkable considering the handicaps imposed on African Americans by the preceding 340 years of racism." Among his other findings were that revenues for Black-owned businesses reached $88.6 billion in 2002 - up 24 percent from 1997 and median Black household income rose to $30,858 in 2005 - up from $25,642 in 1985.

$1 trillion seems like a number to celebrate. However, if we focus on "spending power" then we will be bamboozled and flim-flammed. Spending power ain't realy POWER because it does not translate into the power to have a sustained impact on our own destiny. Black folks spend too much time puffing out our chest about this so-called "spending power" ... when actually all that the $1 trillion dollars equals is our "disposable income" ... and Black folks surely know how to dispose of our income. We give away our money faster than any other ethnic group in the country. Only 5% of our disposable income stays in our community. We only spend 5% of our income with Black-owned businesses.

It’s not what you earn; it’s what you keep.
Poor people pay interest; rich people earn interest.

If you have a dollar and the otherman has a dollar. You give 95 cents of your dollar to the otherman. Are you surprised when the otherman's roads are better; the otherman's public schools are better; the otherman's homes and cars are better? When you only keep a nickel out of your dollar in your own community ... can we be surprised when the police don't respect us; when our children don't respect us; when our school systems are bankrupt; when our public services from the local government are substandard. Spending power doesn't equal POWER.

You shouldn’t work for money; money should work for you.
Don’t have champagne tastes with a beer budget.

$1 trillion seems like a number to celebrate. Nevertheless, a whopping 24.9 percent of all Blacks are still officially classified as poor and critics complain that despite its absolute size, Black income is failing to create Black wealth because it tends to flow into Black communities and right back out.

Villagers, don't be bamboozled. the difference between income and wealth when it comes to power is simple --> wealth flows from your net worth. What happens to you if you missed two paychecks? Many of us would be homeless if that happened.

Check out a person’s net worth and you can see how wealthy he or she is. The government tells us that the typical white household had over 10 times as much accumulated wealth (or net worth) as the typical Black household. The median net worth (assets minus liabilities) for the typical white family was $88,651 compared to $7,932 for Hispanics and $5,998 for Blacks. Do you begin to see the trick bag that is placed over our head when we focus on "spending power"?

Credit is a good servant but a poor master.
Stop ending each month with more month than money.

Villagers, the next time you see the statistics on Black Buying Power, stop and think about the word “power” and what it means in that particular context. Power for whom? Yes, it’s Black Buying Power, but it’s power for those who receive some 95% of our $1 trillion everyday. It is power for others to purchase fine homes and cars. It is power for others to build their own communities. It is power for others to send their children to college. It is power that allows the otherman to maintain their collective hold on the economic system of this country.

Jim Clingman uses the term “Black Buying Weakness.” If we continue to give our power to someone else through our conspicuous consumption of their products and services, we will continue to have billions of dollars in aggregate income and only thousands of dollars in individual family wealth. Additionally, we will continue to have the power of income rather than the power of wealth, which only allows us to our pay bills, continue to work on the proverbial plantations, purchase all of our needs and wants from the proverbial company store, and create the power of wealth for others.

Do you remember the systems of sharecropping and dependence upon the company store shown in the final episodes of the Roots miniseries? It seems like we are repeating that same history today as we convert our $1 trillion of spending power into relative miniscule amount of wealth that Blacks have. We could never catch up then, and we will never catch up now, if we continue to depend upon income rather than wealth.

The power of wealth manifests itself in ownership and control of income-producing assets and infrastructure such as banks, hotels, manufacturing facilities, real estate, distribution channels, and other wealth-builders and wealth-retainers. The power of income manifests itself, via the transfer of that income to others, in ownership and control of assets by others from whom Black folks must purchase our very sustenance. If we allow that system to continue, by pouring the vast majority of our income into the vast pools of wealth owned by others, we will always be on the bottom of the economic heap. Yes, some of us will still have the latest cars, fine homes, stock portfolios, and high positions (jobs) in corporate America, but collectively we will remain an income-rich and wealth-poor group of Africans in America.

We must take stock of our economic position in this country by understanding that income is not wealth. Villagers, you are encouraged to redirect more of your income toward your own people, just like other groups do. And, the next time they count how much money we have collectively, they will add a footnote that says, “Black spending among Black owned businesses has increased significantly, the result of which is an increase in the net worth of Black families as well as an aggregate increase in Black wealth.

The power of income or the power of wealth. Which would you prefer for our people?


credo said...

Great post. I like the term otherman. Why we are unemployed or Why so many of our brothers are in prison could explain the harm of keeping only 5% of a trillion dollars of wealth.

We mimic the otherman, in our practice of concentrated wealth. We leave the old neighborhood, and spent only in the new neighborhood. We hire from the new neighborhood, and exclude those who are just as smart but not as qualified from the old neighborhood.

I was told yesterday, that I was overqualified for a job. My daughter stated how can you be overqualified to serve people. The answer, low expectation. Few expect for you to come back to the old neighborhood to share your skills.

It's mines. I am claiming it.

Anonymous said...

Hi villager. Let me apologise for the length of the post, first. I'm not so good at expressing myself.

I was a little hesitant to jump in on this thread for multiple reasons. I don't have a strong grasp of economics nor am I from the black community. However, let me share something about my own community and maybe this will help you understand what my thoughts on this subject are.

I live in a town with a population of probably less than 3000. The town itself was the birthplace of steel in Canada, and has basically relied on the steel industry to keep it going. We have very little else and most of the labour force is now employed in surrounding towns. Most of our spending also takes place in other towns with little coming back into the community to support other business ventures or even community services. Federal and local goverments have less focus on smaller communities and step in only when it's already too late or not at all.

Recently, a decision was made by the company that owns our steel/railcar plant to shut it's doors this year. This plant at one time had a labor force of 1500 plus. Currently, a little over 200 are now working. With little else to sustain the town, we are looking at the possibility of having to share even our most basic services just to be able to keep them going.

Our children are discontent because there is basically nothing for them to do in their own community which also means a growing problem with drugs and alcohol. The lack of business and services means no jobs. No jobs means adults with families are having to leave, in a lot of cases going out of the province in order to find work that will provide them with a future that is more secure. Our town, it's traditions, it's culture, are quickly coming to an end and will soon be non- existent.

Communities will only be maintained viable by spreading the wealth within that community. We relied on one industry to keep this town alive. We put nothing into development of other business or services. We're now paying the price for that. Sad.

Anonymous said...

Excellent post, Villager. The part where you reported that so many of us "pay interest" whereas other flks "earn interest" is particularly telling. And you're right; I've been hearing us jump up and down about how much spending 'power' us black folks have for decades. But we're still poor. Figure it out.

It's good to get us thinking more critically about information like this, and you've done a great job of that here.

Unknown said...

credo - I hope that you are persistent in your efforts. It is only when we are persistent in our efforts to uplift our people that we will be successful. Hopefully, each of us will take to heart these thoughts as we spend (or earn) our next dollar.

box 1715 - You never have to hesitate about sharing your voice here in the Electronic Village. Although my posts come from an Afrikan-centered perspective ... I seek feedback from villagers all over the world. Having your voice here from Canada is important. I hope you will share it often with us in the future.

Your story about your town in Canada is on point. We can only hope that our political leaders understand the impact of their actions. Many times the action (or inaction) that we have today will come home to roost many years later. I hope that you/your city are able to find creative ways to save itself.

btw, I love your avatar. Is that you in the photo?

Keith - I appreciate your kind words. We have to get beneath the hype in so many situations. However, like we're taught in most cop movies ... "just follow the money". Imagine the difference we could make if we found ways to keep more of our so-called 'spending power' in our own community? Buy Black is a powerful concept if only we would learn to do it more often.

Content Black Woman said...

I am all for the wealth. If we could really get this together as a people, we could have so much leverage. However, isn't that what a white person who happens to be angry and bigoted most afraid of?

Danielle said...

Excellent post. It is kinda funny we both spoke of the power of the purse and how that power can be distributed along many different worthy lines.

Keep doing what you do, and I will be here with you.

JD said...

Even the lowest level of the other man will talk about stocks, mutual funds and investment as a whole.We are consumers and need to exhibit our wealth. my mom always said to have something to show for your money. Investments such as houses are a start and low dept is a help toward gaining in net worth. The very basic thing is the be prepared to earn a good living. We often fall short in education.

Anonymous said...

I’m glad I ran across your blog; you have some great stuff here.

You make some powerful insights in this post, particularly pointing out the fact that the endgame is wealth, not income. This is one of the mantras that Black Enterprise magazine emphasizes and which too few people in our community truly realize. We love to consume, and sometimes I think that if Black folks stopped buying BMW’s and Lexus’s then the economies of Germany and Japan would collapse. Too many people think a car is an investment.

There’s one area in which my ideas are a little different, though. This will sound heretical, so bear with me, but I think there is far too much discussion and hand-wringing about supporting Black owned businesses.

I say this for two reasons:

First: because it puts the focus on the Black consumer and where he's spending his money instead of focusing on the Black entrepreneur. For example, I’d love to see more corner gas stations and markets in Black communities owned by the folks who live in those communities. The problem here is not that Black folks decide to send their money outside of the community – it’s that relatively few folks within that community take the step to buy and run those businesses. And as we all have seen – this is a niche that has been filled (very profitably) by other ethnic groups.

Good for them and shame on us.

Second: Because, generally speaking, Black owned businesses shouldn’t be focused on Black consumers. Sure, Black spending power is around $800 billion, and that’s a lot of dollars – but the Gross Domestic Product of the United States of America is around $13 trillion.

That’s a lot of spending power, and we need to be transferring those dollars into wealth. So if I have something to sell, I’m going to roll my sleeves up and sell it into that $13 trillion pool.

Truly “Black owned” businesses will always be a relatively small part of the economy – simply because the idea of a “racially owned” company will gradually become irrelevant. Black folks should be taking part of their income and using it to buy stock in the Chevron, Citibank, Wal Mart, and whatever other stock happens to float your boat. You become the owners of those companies. And when profits are good and the share prices are up you’ll see your net worth gradually increasing with the rest of America. And that’s the whole idea...

I like the blog...I'll be coming back to check it out.

Anonymous said...

Excellent blog, and I'm very glad to have come across it.

I live in the UK, and the issue is the same. It would be interesting to get some statistics on this from the UK, but I believe it is pretty much the same: that black 'spending power' is on the increase.

Like you say, the focus of such surveys should not be how much we have to spend, but what we spend it on as the true measure of our power.

I lived in Johannesburg, South Africa, last year and one of the most alarming things I saw in the township Soweto (where i used to spend a lot of time) was the number of black South Africans driving the very latest Lexuses, BMW's, Porsches etc yet who lived in a very run down house (if you could even call it that), in the the poorest township areas.

It's a very backwards mentality we have, but one that is not helped by living in an ultra materialistic, consumerist society which tells us we are only worthwhile if we have the latest cell phone, X Box or are wearing head to toe Gucci. In addition, the education system all over the world teaches that the point of doing well, going to college and gettting a job is in order to be able to buy things: a house, a car, a big TV, holidays etc. We are not taught, whether Black or White, to use our money to CREATE more wealth for ourselves or our communities.

Western society teaches us to give away what we have, as this apparently is what makes 'the good life'. Most people often confuse being rich with being able to consume as much as possible. It's worse for Black people who having had so little for so long have been made to believe that being a valuable, powerful member of society means being able to buy all the things that they see White people with.

Ultimately it's up to us to educate ourselves and our community about what a valuable tool and resource money is for building a great future that will enable us to become truly, truly powerful.

It would also, however, require a major shift in our collective consciousness to an abundance mentality where we realise that appearances are not all that counts and that clothes/cars/plasma screens maketh not the man.

Keep up the writing!

Unknown said...

Content Black Woman - Methinks that it is time for us to stop worrying about what the otherman is thinking. We need to do what is right for us, our families, our neighborhoods and our community. Just my thought...

Danielle - The power of the purse (or wallet) shouldn't be ignored or overlooked! Let's look for ways to support one another. Even here in the blogosphere .. are there ways that we can help each other monetize our blogs? Something to consider?

James - Your mother's advice was strong! Hopefully, those of us in the AfroSpear can help to spread the word about the importance of financial literacy education. Low debt ... man, I wish that I thought about that more a few years ago (smile)!

peace, Villager

Unknown said...

Christopher Smith - Your points are well-taken. I do think it is important for Black-owned businesses to exist and flourish. I agree tht they should seek all $13 trillion in the marketplace .. not just Black consumers. However, I do think that Black consumers should make conscious effort to support Black business. There is no doubt that Black businesses hire other African Americans in much higher proportion than white-owned businesses. Anyhow, I appreciate your comments and hope you will visit with us often!

LolaThank you for visiting our village. Your comments are on point and provide an interesting context because of your residence in Europe and South Africa. I look forward to visiting your blog as well!

peace, Villager

Unknown said...

I just wanted to chime in my 2 cents....

I think the post starts off on a great point... then gets off track.

"poor people pay interest, rich people earn it".

That was the motto of the first half.... and its correct. It preaches conservative spending habits. Buy what you can afford, using credit as little as possible.

When it gets to the buy-black part.. that has its own power and message. HOWEVER. Buying at this rate, be it white, black, orange, green, at the end of the day you are still giving your 95 cents to SOMEONE other than yourself. Members of the black community will get richer if you spend 95% of your money on their things.... but you will not. DONT SPEND AS MUCH... should be the bottom line

Unknown said...

Nathan - Point well taken! You remind me of information that I haven't been sharing with my blog reaaders in quite awhile. I need to get some more economic empowerment and inclusion posts up & running. Thank you for the worthy comment!