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Government Should Aid Businesses Based on Impact, Not Identity | Commentary

Obscurely nestled between the 50th and 60th anniversaries of the Brown v. Board of Education decision and the Civil Rights Act of 1964 is a much overlooked milestone. That is the 55th anniversary of the creation of the Office of Minority Business Enterprise, the predecessor of the Minority Business Development Agency as we know it today.

But it is an agency whose existence is centered on social identity over broad social impact. And for that reason, while its core services should remain, the entity itself should be dissolved by Congress authorizing the president to consolidate redundant or unnecessary federal agencies.

To be sure, social inclusion to correct generations of racial discrimination in the field of business is a laudable effort, but the means of doing so must be rigorous.

We must not confuse identity-based outputs for impact-centered outcomes. How much capital and contracts MBDA helps secure for scaleable business owners of color should not trump the need for such beneficiaries to be among the enterprises that assist in sustaining communities and improve local and regional economies.

Created by executive order by President Richard Nixon in 1969, this government entity was established to provide inroads to federal contracting opportunities for business owners of color. The initiative targeted African-Americans in the wake of the Rev. Martin Luther King Jr. assassination the year before, making its original intent to suppress rather than to redress long-standing disparities in business opportunities based on race.

Nixon reportedly believed the best way to stem ongoing racial unrest was to create more Black capitalists — people who would have an actual stake in society through business ownership.

However, there are three reasons racial disparities in business should not be addressed by the MBDA.

First, the name itself is antiquated and increasingly meaningless. By the time the MBDA gets sufficient funding to operate, the “minority” it will serve will be white people. Also, “minority” is a simplistic and imprecise proxy for racial hardship.

Business owners of color from communities that are over-represented in commerce do not need race-specific help. It is also questionable how much race-specific help the approximately 40 under-resourced Minority Business Development Centers in this country can actually provide their clients. With increased funding, the Small Business Administration’s Small Business Development Centers are capable of providing essential services MBDCs provide.

Second, its mission is skewed. Instead of an agency that primarily seeks to assist large-scale businesses that contract with the federal government and customers overseas, tax-payers need an entity that focuses on assisting businesses serving the most economically distressed communities in America.

While the last annual MBDA performance report published in 2012 highlights how many jobs were created and retained by MBDA clients, there is no evidence that its services produced even a trickle-down effect from these achievements that benefited the communities of color who are suffering the most in the wake of the Great Recession.

Third, the MBDA’s services revolve around a poorly defined problem.

The mission of any such government entity should be about social impact, not social identity. Social impact is represented by outcomes that influence the broad well-being of individuals, families and communities. And when such impact is concretely addressed, issues of social inclusion will improve as a consequence of clearly defined goals that include how reflective the business sector is of the ethnic diversity of the national population.

While the federal contracting, industry-specific technical support, export assistance, and overall reporting are invaluable, these services can be subsumed within other parts of the U.S. Department of Commerce and better funded to have a broader impact on the revitalization of struggling local and regional economies. Equally important is the mandate to change all government agencies’ metrics from race-based outputs to economic justice-based outcomes.

There already exists a government agency with the primary goal focusing on local and regional economies. It’s called the Economic Development Administration within the U.S. Department of Commerce. Part of its mandate is to fund initiatives that promote economic revitalization in neighborhoods across the U.S. It, too, is woefully under-funded. However, the EDA is better suited to address issues of social inclusion and social impact that relates to meaningful community economic development and addresses the growing racial wealth gap than the MBDA.

For that that reason, Congress should reauthorize the Reorganization Act of 1939 with the same two-year sunset provision in order to expedite consolidation of federal agencies, starting with the dissolution of the MBDA.

By consolidating governmental efforts to promote meaningful community economic development, we can encourage and support the healthy growth of businesses that seek to sustain our most vulnerable and under-represented communities.

Chris Rabb is the social impact fellow at the Innovation and Entrepreneurship Institute at Temple University Fox School of Business. He is the author of “Invisible Capital: How Unseen Forces Shape Entrepreneurial Opportunity,” and recently presented at TEDx Philadelphia. He is part of The Op/Ed Project Greenhouse with The Center for Global Policy Solutions.

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