INTRODUCTION

Private entrepreneurship historically has been one of the paths

to full participation in our free enterprise system. But blacks and Spanish surnamed persons, who constitute a majority of the population of the District of Columbia, own fewer than 10 percent of the city's businesses. It is for this reason that the District of Columbia Advisory Committee to the U. S. Commission on Civil Rights initiated

an inquiry to determine to what extent discrimination has played a part in limiting minority business enterprises.

In carrying out its investigation, the Advisory Committee held two closed meetings at which it heard from a number of minority businessmen and representatives of technical assistance organizations, concerning entrepreneurship in the District of Columbia.

These

witnesses assisted the Advisory Committee in analyzing the issue considered in this study: whether or to what extent minority businessmen are denied loans, loan guarantees, or other forms of credit by the traditional money markets because of race.

The Committee is aware that there are many reasons why minority businessmen are not participating equitably in the operation of business enterprises within the District of Columbia. But as the Committee was told, a major problem is the lack of equity and debt capital necessary to operate on a level enabling them to maintain economic growth and development.

Traditionally, banking institutions have applied what are generally known as the 3 C's of credit credit, character, and

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capacity

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as the criteria for extending business loans. The

validity of these criteria was one of the issues focused on by witnesses who appeared before the Advisory Committee.

Further, it has been generally accepted that all Americans have a right to ownership of land, and a right to free access to the job markets, both public and private. Equal housing and equal employment opportunity legislation have been enacted to insure these rights, but equal access to loans or the economic benefits of business ownership have not been precisely legislated. As economics know, without reasonable access to land, labor, and capital it is almost impossible to develop viable business enterprises or to participate fully in the free enterprise system. If individuals are unable to participate therein because of race, they are thereby denied a substantial civil right.

On October 12 and 13, 1972, the Advisory Committee held a two-day public hearing in Washington, D. C. to which it invited government officials, owners of businesses, representatives of technical

assistance organizations, and bankers.

before the Committee.

Twenty-nine witnesses appeared

This report summarizes the information, obtained through interviews and the information presented during the open and closed meetings. The conclusions and recommendations drawn from this information by the Advisory Committee are presented in the hope that they will lead to remedial action in an area which is receiving increasing attention.

The District of Columbia Advisory Committee believes that successful niacrity businessmen in the District will add to the strength of the local econcity. However, the Advisory Committee realizes that there are many other factors besides finance that determine a businessman's success, and that there are many determinants regarding the stability of the District's economy.

Minority businessmen operating in the District have experienced many difficulties and there are many reasons for these difficulties. Philip Hammer, an economist who has studied the economic growth potential of Washington, D. C. gave the Committee an economic overview of the Washington area and its implications for new businessmen in Washington:

Entrepreneurial opportunities within the city,
measured by the number of establishments, have
been disappearing at an alarming rate. Instead
of broadening our base of new enterprises to take
advantage of the rapid expansion of this region
and to provide new opportunities for our heavily
minority population that has long been denied
access to full participation in the economic
system, we have been shutting the doors almost
daily.

Mr. Hammer said that there are three factors primarily responsible

for the economy's decline in the District of Columbia:

1.

2.

3.

The absence of a substantial manufacturing base in the
Washington metropolitan area;

The presence of strong centrifugal forces that are prying
loose the central area's business structure;

The sharp competition for the kinds of local jobs that
offer entrepreneurial possibilities.

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The trends in District business have not been encouraging. According to Mr. Hammer, only 3.6 percent of the metropolitan

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Washington's employment, representing about 44,000 workers, was in manufacturing in 1970. It is the lowest proportion of any metropolitan Furthermore, capital for new and expanded

area in the United States.

business enterprises is flowing predominantly to the suburbs.

However, Mr. Hammer said that he felt that there were oppor

tunities for new business development

business development.

specifically new minority

He cited the following reasons:

1. The District has a $2 billion economy measured in terms
of personal income which means that it has a consumer
capacity to support business and commercial activities.

2. The District is predominantly a city of strong neighbor-
hood and commercial districts fully capable of attracting
additional investments and generating new enterprises.

3.

4.

5.

The disadvantaged areas within the District are areas of
new business potential, offering major opportunities for
redevelopment.

The Federal Government, the District's major employer, is
permanently rooted in the central city and will continue
to provide a tremendous employment base for the central city
economy.

The dispersal of many types of enterprises to the suburbs has created major voids in the business structure serving the District. In many activities, the District is in short supply which offers opportunities for new development.

Mr. Hammer said there are also prospects for new development ' offered by the construction of the subway underway by the Washington Metropolitan Area Transit Authority, and the activities related to the nation's Bicentennial. Hundreds of millions of dollars will be spent on physical facilities and improvement.

The opportunities, therefore,

outweigh the disabilities, according to Mr. Hammer.

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Mr. Hammer concluded:

We have done no more than scratch the surface in
exploring new ways of owning, financing, and
operating private businesses within a revised
urban renewal framework. But we do not have to
wait for these developments in order to expand
minority enterprise in the District. I think the
potentials are out there and strong efforts can

reverse the negative trends of the past two decades.

According to Mr. Hammer, minority businessmen face solid opportunities in the District of Columbia but have also faced severe

problems in the past owing to the movement to the suburbs. Moreover, minority businessmen have also faced inherent disadvantages in their efforts to attract the equity and working capital which they need to survive and prosper.

The traditional criteria for determining bank loans are tailored to the white businessman with his years of experience as an entrepreneur. These principles often handicap minority businessmen, because many do not have a formal education, lack substantial savings, and lack contacts in the business world. Yet, they are the crucial entrepreneurs who will determine in large measure the economic future of the District of Columbia.