The Importance of the Black Dollar
Ever heard of a collective good? Quick economics class refresher! A collective good is something like a greener environment, which everyone can enjoy whether they contribute to it or not. The problem with these goods is that people have the incentive to ‘free-ride’ and enjoy say, the recycling effort of others while being lazy about doing it themselves. The outcome? Too few people recycle and we all live in a world of waste and pollution. The same thing occurs with the collective good of a thriving ‘black economy’, one of good jobs and strengthened communities. The convenience of ordering from Amazon or shopping at a Walmart wins out. Some of us assuage our guilt by telling ourselves that our contribution won’t really make a difference. Or perhaps, like good ‘slacktavists’, we make ourselves feel better by wearing a BLM t-shirt or liking social media posts that talk about social injustice. BUT if this is all everyone does, communities will stay stuck in a stagnant rut.
Collective goods aren’t easy to overcome, I know. That is the bad news from the economics textbook. The good news? Your purchase actually DOES make a difference. What economists call ‘a marginal contribution’ is extremely powerful. (Just ask those with a high ‘marginal tax rate’).
If we truly thought about all the benefits that buying black brings, perhaps we would be inspired to do it more often.
So what does it exactly do? First and foremost, your dollar contributes to a sustainable community. Most minority or woman-owned businesses are small. And small business is the jobs generator for the nation. They are also more likely to use other small suppliers, further entrenching the positive feedback loop. More people employed in your neighborhood translates into less crime and improved community health and wellbeing. A thriving community also attracts other investors and organizations, such as housing developers, schools, churches and service providers.
Patronizing black and women-owned business also means ensuring a continued supply of services and goods tailored to the unique needs of these shoppers. AND it means NOT supporting business that for years have ignored the black consumer, or worse. Do you really want to contribute to the uber-wealth of certain beauty brands that only have only reluctantly acknowledged that different skin and beard types exist? That think that celebrating black history month means putting a hypocritical statement on their website about valuing a diverse staff…while promoting only white male managers?
It is true that patronizing these businesses can be slightly more expensive than say a Walmart, especially if these vendors are small and therefore have higher costs. (And this at a time when our budgets are being squeezed by inflation.) But as you can see, the black dollar has a more powerful uplifting effect than many official charities…and it is a form of support that is far more enduring (that old ‘teach a man to fish’ adage).
People often use the analogy of voting to describe the effect of buying black, in other words, your dollar is your vote for a more equitable world. But voting is a rare occasion for most of us and a bit more of an all-or-nothing scenario. A better analogy might be like a healthier diet. You don’t have to give up meat entirely to help the planet and your cholesterol – every vegetable you eat helps. So before you one-click on Amazon, browse a black-owned store and imagine your action transforming the world.
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About the Author:
Krista Tuomi is a professor in the International Economic Policy program at School of International Service, American University. She has worked for many years as a policy analyst in the areas of innovation and investment. Her regular Bizwomen column, media interviews, and research focus on topics that include angel investing, crowdfunding, non-profit management and fundraising.
She also conducts workshops in the US and abroad on all forms of small business and non-profit financing. Her passion for the field of innovation and entrepreneurship extends to her pro-bono work.
Currently, she works with SCORE, Greenwood, Boots to Business, Martha’s Table, Black Girl Ventures, Syracuse’s Institute for Veterans and Military Families, and the Angel Capital Association.