If we want to reduce racial economic disparities, we must change our economic development playbook from small and scattered investments to a comprehensive strategy offering wealth-building tools in every ALANA (African, Latinx, Asian, and Native American) community. Some of these tools do not cost anything, while others require sustained investment to remove racial barriers to success.
We need to empower individuals so they may transform their economic conditions and overcome systemic barriers of racism. Only if these conditions are met will we reduce racial economic disparities.
The above insight is derived from my three decades of work as a community economist and professor in Saint Paul, Minnesota. Let me elaborate on my approach.
When I first came to Minnesota in the late 1980s, I was struck by the negative portrayal of ALANA communities. Yet, as an ALANA economist, I knew there was a vibrant ALANA economy. This led me to begin documenting the economic contributions of ALANA communities—as consumers, entrepreneurs, taxpayers, and cultural bearers with global networks. When I do so, many tell me they greatly appreciate having an economist from Concordia University celebrate and document their value. This is especially critical when a particular ALANA community is attacked and labeled as a deficit or threat. However, my work has never been embraced by the elite, and I often wondered why. Then it struck me that the denial of value is the bedrock of exploitation.
I use the term “ALANA” because it clearly identifies who I am writing about and moves away from another bedrock of exploitation: color as the basis of quick and easy discrimination. The term also focuses on two groups hit hardest by racism—African descendants of enslaved people and Native Americans. Including Native Americans at the end of the phrase ties all of our identities to the first people in this land.
Over the past two decades, I have been actively involved with a multiethnic organic coalition that operated under the umbrella OneMN.org. This group operates like the gazelle, quickly convening ALANA leaders to respond to community needs from redistricting to bonding. When the pandemic hit ALANA communities, negating decades of economic progress, we convened again, our pain further compounded by the murder of George Floyd and its devastating impact on our communities.
During the heart of the pandemic and civil unrest in Minnesota, this multiethnic coalition emerged as the ALANA Brain Trust, a network of individuals and organizations that work to bring capital and capacity to the community. We asked the Federal Reserve Bank of Minneapolis to be the “lender of last community resort” and back a billion-dollar community investment bond. We asked the state of Minnesota to back a $100 million loan guarantee fund that could leverage $1 billion in investment capital for ALANA communities. We asked our congressional leaders to make changes to the Paycheck Protection Program (PPP) to channel funds directly to ALANA communities and to invest in a microloan program. We asked the state to make low-interest loans from state investment funds and leverage the deposits of public money in the banking system. And in PPP’s second round, we launched an alliance of banks and nonprofit lenders to actively serve ALANA communities. We also launched a network of youth leaders to build community leadership capacity.
Recently, the Minnesota House Select Committee on Racial Justice invited me to testify on the economic costs of racism in our state. The committee is chaired by two ALANA women legislators, Representative Rena Moran and Representative Ruth Richardson. I estimated the total lifetime cost at $287 billion. That is lost income, lost business revenue, and loss in household wealth and lifetime earnings.
I also estimated the value of the economic contributions of the ALANA economy to the state to be $1.4 trillion—bigger than the gross domestic product of Mexico. This large amount includes the value of lifetime earnings as a reflection of economic potential.
The Minnesota House has done something revolutionary around inclusion this session. I heard House Speaker Melissa Hortman refer to the strategy of inclusion as “butter in the batter.” Having assisted my mom and aunts making Christmas cakes, I could see very easily how powerful that strategy can be. ALANA legislators have been appointed to the most powerful committees in the House. Representative Moran chairs the powerful Ways and Means Committee, and Representative Richardson chairs the Education Policy committee. Consequently, I have been invited to share with legislative committees on the economic costs of racism and what we call the “Minnesota Solution.”
So, what is the Minnesota Solution to racial economic disparities? First, we need to change our perspectives in three areas that have traditionally led to exclusion and disinvestment in ALANA communities.
- We need to change how we view ALANA communities from deficits to assets—for example, in Minnesota, a $1.4 trillion asset! ALANA communities are key players in the economy as consumers, entrepreneurs, taxpayers, talent, cultural assets, civic capital, and global connectors.
- Investing is not a zero-sum game. Rather, as the African American proverb goes, we lift as we climb. Investments in ALANA communities will bring jobs, income, and wealth building for all.
- We need to acknowledge that systemic racism exists and has taken a multigenerational and multidimensional toll. Consequently, we need a sustained, comprehensive strategy for economic, political, and social empowerment of ALANA communities.
In terms of economic assets, the Minnesota Solution calls for policymakers to view ALANA economic development in a comprehensive manner and invest accordingly. Among these tools are the following:
- capital (loan, grant, equity, alternative finance)
- land banks/land trusts
- business incubators/makerspaces
- loan guarantee funds and related public finance tools
- public contracting goals
- business protections against predatory lenders
- investing in community development financial institutions (CDFI) and other community organizations
- workforce development
- business support services (legal, finance, insurance)
- support for ethnic cultural districts
These issues—and some of the ways our Minnesota plan would address them—are described below:
Limited access to capital is a prime cause of stunted growth for ALANA businesses. We need to offer not just loans but also equity funding. In the current economic crisis, many ALANA-owned businesses have little capacity to take on new debt, so grant or forgivable-loan funding is important. There are vast segments of businesses, especially micro businesses, that rely on alternative finance, ranging from community pools to Islamic financing tools.
Land trusts or land banks are another important set of tools, primarily because they provide mechanisms for a community to have site control after a history of redlining that depleted ALANA wealth systematically. Various models of land trusts and land banks are available to build affordable housing or affordable commercial rentals.
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ALANA entrepreneurs are very creative, and so the availability of makerspaces and business incubators in a community can serve to launch innovative startups.
We are also challenging the state of Minnesota and local governments to use a very powerful tool to encourage public private partnerships—loan guarantees, a tool used in our state during the pandemic. We contend that a $100 million loan guarantee fund can leverage a billion dollars in investment. Our toolbox should also include “big finance” tools for real estate development. ALANA real estate development professionals have the creativity and talent to bring to life inclusive commercial real estate development projects that would add greatly to community wealth building, jobs, and income. They just lack the capital.
Public contracting with ALANA businesses is another important issue. For decades, the percent of contracts let to ALANA firms has hovered around two percent. Yet this is such a powerful tool to reduce racial economic disparities. So, the ALANA Brain Trust has proposed that both public contracting dollars and state bonding dollars should be allocated to ALANA projects/businesses in proportion to the population. Currently, the ALANA population in Minnesota is 18 percent.
Protections against predatory lending: While consumers benefit from fair lending laws, this is not the case for small businesses. Consequently, many ALANA businesses have become victims of predatory lenders. One woman business owner we worked with was paying an annual interest rate of over 200 percent. The lender acted with impunity, and under current laws we had no recourse. California and New York have shown the lead in offering protections against predatory business lending.
Business support services: Most ALANA businesses are in the microbusiness category. The average sales of an ALANA-owned business in Minnesota, for example, is around $165,000, compared to $1 million for white-owned businesses. A subset of these also face language barriers. For these reasons, many ALANA businesses need accounting and financial support. Many also lack a social media presence and were hurt during the pandemic when the whole economy went online. Legal and insurance consulting is also much needed.
CDFIs: We have some very innovative and stellar CDFIs and community development corporations in Minnesota’s ALANA communities, some of which cater specifically to Native American, Latinx, Asian, African American, or African immigrant businesses. However, their capacity is very small relative to need. One reason PPP did not effectively reach ALANA communities has been the lack of capacity of these organizations to serve large segments of the population.
Ethnic Cultural Districts: Over the years, I have been part of a creative group of community developers who have leveraged cultural assets in diverse low-income neighborhoods to build community wealth. I call them cultural destinations. In Saint Paul, one can experience the vibrancy of a Bangkok night market at Little Mekong; or African rhythms, art, and music at Little Africa; or theater at one of the nation’s premier African American theaters—the Penumbra Theatre in the historic Rondo district.
In my former role as director of city planning and economic development under Saint Paul’s first African American mayor, Melvin Carter, we took this concept further and integrated city resources from planning to zoning to invest in seven cultural destination areas. Minneapolis has launched a similar concept called cultural districts. Cultural destinations in low-income ALANA communities can be powerful economic tools, as they empower individuals and at the same time build community wealth.
Workforce Development: We also must focus on our ALANA workforce, who are losing millions in lifetime earnings because many lack the right academic or technical credentials to access higher paying jobs. Some promising strategies around “opportunity occupations,” for example, can help improve career prospects. In Minnesota, the potential work force, around half a million in school or higher educational institutions, represent $1.5 trillion in lifetime earnings—if they all graduate with a bachelor’s degree. Here also we find the education policy playbook needs to be changed.
The following illustration shows what a comprehensive strategy could look like:
To effectively reduce racial disparities, the billions flowing through the state, cities, and towns across Minnesota need to be invested in wealth-building infrastructure. If not, we will miss this opportunity to build long-term wealth in ALANA communities. Investments are not enough. We also need to remove barriers to success. At the core is the imbalance of power, which runs the gamut of institutions from foundations and nonprofits to the government.
In my doctoral research, I illustrated the importance of a comprehensive strategy of economic development, which I call the Policy Mandala, that connects economic resources and tools, individual empowerment, and systemic change to achieve authentic development. Kerala in India is noted for its achievement of high educational and health outcomes for the poorest of the poor. The process of consciousness-raising empowered individuals to access resources and education that led to these outcomes. There are lessons from this experience—and its intense focus on human development—that I believe can be applied even in the very different context of ALANA communities in Minnesota.
The murder of George Floyd in the heart of Minneapolis brought to the fore the brutality of systemic racism. Yet it has also helped sow the seeds for a comprehensive strategy for economic empowerment. Let us hope Minnesotans and the nation rise to that challenge.
Dr. Bruce Corrie is a community economist and professor at Concordia University and co-steward of the ALANA Brain Trust. Read about his work at www.empoweringstrategies.org.