The ghettos were an open sore and “crack blew through [them] like the Four Horsemen of the Apocalypse," leaving behind disease, suffering, and acute poverty.9 By 1986, Newsweek declared crack to be a bigger story than the Vietnam war or Watergate.10 Once the nation focused on crack abuse, it was hard to pay attention to the larger, less sensational probl em of structural poverty. As Adam Walinsky, President Kennedy’s speechwriter, exclaimed: “If we blame crime on crack, our politicians are off the hook. Forgotten are the failed schools, the maligned welfare programs, the desolate neighborhoods, the wasted years. Only crack is to blame. One is tempted to think that if crack did not exist, someone somewhere would have received a Federal grant to develop it."11
Crime, drugs, and gang violence eventually enveloped the ghetto. Segregation, poverty, and a distrust of police led to increased crime, which led to further marginalization, poverty, and even more policing. According to Jill Leovy’s study of black crime, Ghettoside, high rates of murder among black men are a by-product of poverty, a history of distrust of the white justice system, and especially of segregation. “Indices of segregation are strong homicide predictors. Homicide thrives on intimacy, communal interactions, barter, and a shared sense of private rules."12 Max Weber defined a functioning state as one that “claims the monopoly of the legitimate use of physical force within a given territory." According to Leovy, “slavery, Jim Crow, and conditions across much of black America for generations after worked against the formation of such a monopoly where blacks are concerned." Because the law failed to “stand up for black people," brutal gang “laws" filled the void.13 Black men viewed the American legal system with suspicion, and so extralegal violence filled the void and ordered the lives of young black men; it also took their lives. As crime increased, so did community trauma and isolation, which limited opportunity for young black men in the ghetto. With few ways out, crime became ubiquitous— or as James Baldwin explained, “not as a possibility, but as the possibility."14
Instead of dealing with the complex set of forces causing black crime, the state response was to contain it, lock it up, and demonize black criminals. American politics became a ratcheting up of “tough on crime" sound bites. President George H. W. Bush defeated Democrat Michael Dukakis in 1988 by infamously linking him to a convicted black felon, Willy Horton, who, while serving a life sentence in Massachusetts, was given a furlough from which he never returned and went on to commit a rape and robbery. This occurred while Dukakis was governor of the state, and Bush’s chief strategist Lee Atwater bragged that he would make Willy Horton a household name. By repeatedly airing television ads featuring Horton, the Bush campaign stoked fear of black crime and pegged Dukakis as being too soft on crime. Bill Clinton heeded the lesson, and when he was running for office in 1992, he went to Arkansas to witness and tacitly encourage the execution of a mentally incapacitated black criminal, Ricky Ray Rector. He won the election on a tough-on-crime, antiwelfare platform.15
As president, Clinton escalated the War on Crime, and incarcerations steadily increased during his administration. The Clinton administration also slashed funding for welfare and public housing and initiated a “One Strike and You’re Out" public housing policy that resulted in many evictions. By the year 2000, almost 800,000 black men were in prison, compared to 600,000 who were in college.16 Thus, there were more black men in prison than had been held under slavery in 1850.17 After serving time, ex-felons could not find jobs, and many lost their right to vote. King’s legacy assumed an even more cynical meaning under President Clinton, who used King’s words to admonish the black community. In 1993 Clinton told a congregation at the Masonic Temple in Memphis Tennessee, where King had delivered his “Mountaintop" speech:
If [Martin Luther King] were to reappear by my side today and give us a report card on the last 25 years, what would he say? . . . You did a good job, he would say, letting people who have the ability to do so live wherever they want to live, go wherever they want in this great country. . . . But he would say, I did not live and die to see the American family destroyed . . . I did not fight for the right of black people to murder other black people with reckless abandon.18
It is more likely, however, that if Dr. King had been alive, he would have lamented the fact that blacks were still living in segregated and impoverished communities and suffering from the resulting crime that accompanied their situation. Clinton celebrated the fight against segregation as a “mission accomplished,” but the reality was that while the War on Crime and the War on Drugs were heating up, the fight against housing segregation had long since halted.
During the 1976 election, candidates from both parties took Nixon’s lead and opposed any measures pushing integration. Gerald Ford committed to making sure “all constitutional rights are fully protected,” while refusing to impose integration on white neighborhoods, which he labeled an “ethnic treasure.” Jimmy Carter said, “I see nothing wrong with ethnic purity [of neighborhoods] being maintained. I would not force racial integration of a neighborhood by government action.” The rhetoric of “ethnicity” allowed policymakers to pretend that the racism and segregation that had created inner-city ghettos were akin to protecting “ethnic culture,” as though the segregation had been voluntary. The cliched “celebrating diversity” replaced the harsher accusation of “segregation” and could not be challenged as discriminatory.19
The Fair Housing Act mandate to “affirmatively further” fair housing came to be interpreted only as a mandate to oppose outright discrimination in housing. Active integration simply stopped being discussed, and even communities that were flagrantly segregating housing continued to receive block grants. Ultimately, the FHA was an empty promise. The act allowed the country to publicly denounce segregation while never actually pursuing integration.20 In a testament to how permanent segregation had become, major U.S. cities responded to overcrowding and housing shortages in the ghetto by constructing large-scale public housing projects, which maintained and bolstered segregation patterns. By 1980, the isolation index for the black ghetto was the same as it was during the pre-Depression era of bombings and racial covenants, despite the passage of laws outlawing discrimination.21
Segregation, white flight, and declining home values continued to hamper black families’ ability to grow wealth.22 In 1984, black middle-class families had only twenty cents of wealth for every dollar of wealth held by white middle-class families.23 Half of black children were growing up in poverty. Wherever poverty was concentrated, education was subpar, and crime replaced legitimate institutions.24 While de jure racism was now illegal, economic forces set in motion by years of segregation and discrimination were still perpetuating black disadvantage. But as for targeted race-based economic programs—there were no new ideas.
The racial compromise struck during the Nixon era proved as durable as it was weak. When it came to the racial wealth gap, every administration after Nixon’s focused on some variation of black capitalism. The OMBE was still the coordinating branch for black business initiatives, although, starting with the Ford administration, the program was no longer called “black capitalism.” Now it was referred to as “minority enterprise.” The OMBE’s budget remained small and its mission continued to be vague. When the OMBE and SBA minority programs were evaluated by a Commerce Department report in 1975, it was found that most of their programs amounted to little more than “technical assistance to minority firms.”25
One could not tell this from the way it was discussed. President Ford called the OMBE “undoubtedly the most popular and visible program started by a Republican administration geared specifically toward minorities” and “the single domestic program positively identified within minority communities as a Republican brain-child.”26 As part of the Railroad Revitalization and Regulatory Reform Act of 1976, Ford created a new agency called the Minority Business Resource Center within the Department of Transportation. The National Business League called the bill “the first original piece of legislation to re
cognize minority enterprise as a national objective.”27 President Ford reiterated the GOP mantra that black capitalism “is not a civil rights or jobs program.” This was not an apology—it was a boast. Those programs had developed a negative association by then. “It is a business program,” said Ford.28
President Carter appointed more African Americans to federal offices than any president before him, but he had no coherent or visible message on black poverty or civil rights.29 He expressed a strong public commitment to black capitalism programs, stating in 1977 that “building strong minority business enterprise is in the national interest because they contribute to our efforts to reduce unemployment and to stimulate community development.”30 His administration doubled government purchases from black firms and deposited substantially more federal dollars in minority-owned banks.31 In 1977, President Carter promoted the Minority Bank Deposit Program in a memorandum to all of his heads of departments and agencies, urging them to use minority banks. Carter boasted that the program had begun in 1970 with about $3.7 million of funds deposited in thirty-one participating banks, and that by 1977 there was $86.6 million in over eighty minority banks.32
The SBA’s contract set-asides became a point of public controversy in 1978 when Mike Wallace of 60 Minutes aired an expose revealing several grant recipients as fronts for white construction firms.33 The Carter administration studied the program in 1979 and found that it suffered from a “lack of focused leadership; lack of consensus on major goals and objectives; inadequate utilization of limited resources; and unrealistic business expectations."34 The minority businesses getting grants were floundering, and the program, having no clear mandate, was riddled with inefficiencies.35 After the report, the Carter administration in 1979 streamlined programs at the OMBE and renamed the agency the Minority Business Development Agency (MBDA). The change in name also marked a shift in philosophy. Now the agency focused exclusively on ensuring minority business success. It would try to pick among the most successful minority businesses and provide them with assistance.
If black capitalism had been launched as a response to the deviant ghetto economy, the connection was no longer apparent.36 However, the politics were still appealing. Denouncing discrimination, avoiding systematic race-based economic reform, not pushing integration, and heralding black business—ensuing administrations pursued the political path Nixon had forged in addressing racial inequality. President Reagan perfected the rhetoric of the libertarian ideology that Goldwater had initiated, and he sharpened the weapon of “free-market capitalism" against government aid. While fighting both welfare and minimum wage hikes, he claimed he was waging a fight for the black community. “We are the party of real social progress," which meant moving toward an “opportunity society," not a welfare state. The way to deal with poverty in the black community was not government aid, but tax cuts. When President Reagan spoke to minority business owners in 1987, he explained that tax cuts “created opportunity for those who had before been economi cally disenfranchised: the poor and minorities."37 In line with his “trickle-down" economics theories, Reagan equated his cost-cutting “Economic Bill of Rights" with fighting for civil rights. “Let’s complete the civil rights movement by writing a guarantee of the American dream into the Constitution, a guarantee that America will always be, for our children and our children’s children, the land of opportunity."38
While cutting antipoverty programs, Reagan enthusiastically supported black business. Speaking to the NAACP in 1981, he extolled black business leaders, saying that minority business development “is a key to black economic progress. Black-owned businesses are especially important in neighborhood economies where the dollars, as I said, spent have a beneficial multiplier effect.’’39 Here was Garvey and Malcolm’s theory of control of the black dollar. Here was also Milton Friedman’s theory of free enterprise as the bulwark against discrimination. “A free economy helps defeat discrimination by fostering opportunity for all," promised Reagan.40 In a 1982 speech, President Reagan declared that for the rest of his administration, the first week of October would be Minority Enterprise Development Week.41 In 1983, he issued an executive order requiring federal agencies to issue annual goals on increasing procurements from minority businesses.42 The 1988 GOP platform promised “we will increase, strengthen, and reinvigorate minority business development efforts to afford socially and economfcally disadvantaged individuals the opportunity for full participation in our free enterprise system."43
As for the ghetto, Reagan promised that lower taxes and fewer regulations would revitalize the area and attract more small businesses. He began to call inner-city ghettos “enterprise zones." The 1984 GOP platform had called on Congress to pass legislation to help “enterprise zones, to draw a green line of prosperity around the red-lined areas of our cities and to help create jobs and entrepreneurial opportunities."44 Apart from tax cuts, Reagan did not offer any specific plans to create jobs or opportunities. The free market, it was believed, would take care of the rest.
While the theory and infrastructure of black capitalism continued unabated, its original purpose—as a remedy for the ghetto economy and a response to the black power movement—changed over time. For example, both Presidents Carter and Reagan put forth initiatives to include women in the SBA and MDBA grant programs.45 Reagan’s Women’s Business Ownership Act of 1988 mandated that the SBA provide additional aid to female-owned enterprise.46 Black capitalism initiatives and affirmative action had begun as a politically neutralizing response to one of the biggest racial uprisings in history, but now these programs encompassed business support for all minority groups, including women. The theory of black enterprise was no longer discussed as an antipoverty measure, and certainly not as a black power initiative. Rather, it came to be conceived of as providing positive role models for minority communities and “diversifying" white male-dominated fields. Nor were these programs about remedying past injustice, which, according to the Supreme Court, was now unconstitutional.
In the 1978 case Regents of the University of California v. Bakke, a plurality of the Court upheld race-based preferential treatment in university admissions, but rewrote the underlying premise of affirmative action in the process. Justice Lewis Powell held that the only “compelling state interest" that could justify affirmative action was increasing “diversity."47 It was no longer a legitimate state interest to create programs meant to remedy past discrimination.
Understanding what this meant for the prospect of future reforms, Justice Thurgood Marshall wrote a forceful and plaintive dissent. Having personally waged a fight against centuries of unjust laws and having case by case “rethreaded parts of the Constitution itself, stitching the Negro, at long last, into the fabric of the nation," Marshall knew the stakes involved.48 He explained to the Court that the “legacy of years of slavery and of years of second-class citizenship in the wake of emancipation could not be so easily eliminated." He could not believe that the Constitution stood as a barrier to remedying such a legacy, especially as it had only been a decade since the civil rights laws had banned racial discrimination, and too little had changed. “Measured by any benchmark of comfort or achievement, meaningful equality remains a distant dream for the Negro." Marshall explained that blacks were still economically disadvantaged, a position that was an “inevitable consequence of centuries of unequal treatment." Marshall pleaded that “bringing the Negro into the mainstream of American life should be a state interest of the highest order" and warned that a “[failure] to do so is to ensure that America will forever remain a divided society."49
Affirmative action for the sake of diversity survived, but the obvious theory that blacks had suffered past injustices that continued to cause present problems did not. Neither did the black capitalism set-aside program. In 1989, a white construction company sued Richmond’s minority set-aside program, arguing that the program violated the white company’s constitutional right to equal protection under the law. In City of Richmond v. Croson, the Supreme
Court agreed and ended the program. The Court rejected Richmond’s claim that “past societal discrimination" could justify a racial preference. Justice O’Connor even summoned Dr. King’s rhetoric in order to reject any program that would favor blacks over whites, stating that “the dream of a Nation of equal citizens in a society where race is irrelevant to personal opportunity and achievement would be lost in a mosaic of shifting preferences based on inherently unmeasurable claims of past wrongs."50
King’s confused legacy was often wielded as a potent weapon in opposition to affirmative action programs. When Attorney General Edwin Meese tried to eliminate minority hiring goals in 1986, he said that his plan was “very consistent with what Dr. King had in mind." When Louisiana Governor Mike Foster signed an executive order eliminating affirmative action in his state, he said, “King sort of believed like I do. I can’t find anywhere in his writings that he wanted reverse discrimination."51 That was not what King had believed. In Where Do We Go from Here, King had said, “A society that has done something special against the Negro for hundreds of years must now do something special for him."52
While the judicial branch was dismantling the executive branch’s black capitalism program, the legislature was enshrining features of it in the law. In 1989, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) in response to the savings and loan crisis. The act was primarily focused on regulating the failed thrift sector, but it also included a much less discussed provision on minority banks. Section 308 of FIRREA, entitled “Preserving Minority Ownership of Minority Financial Institutions," contained the first legislative decree concerning minority banks. Section 308 did not authorize any financial help to black banks, but instructed the FDIC, Treasury, and the now-defunct Office of Thrift Supervision to pay attention to the sector—specifically, to work toward preserving “the present number" and “character" of minority deposit institutions. For example, in the event a minority institution was threatened with failure, the law said that bank regulators should work to ensure that the bank’s minority nature was preserved by, if possible, merging it with another minority bank in the region. The act also mandated federal regulators to provide “training, technical assistance and education programs" to all minority banks as well as to work to “promote and encourage" new minority banks.53
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