Weighing the promise of big tech to black America

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Floyd’s murder sparked widespread street protests and called for racial justice in the Fortune 500 boardrooms. But during Corporate America’s official answers Often felt like crisis PR disguised as philanthropy, Netflix’s approach stood out. The company’s stake in Hope was just a small part of a plan devised by a middle-class human resource manager who researched Blacks-run banks in his spare time. On his advice, the company pledged to invest 2 percent of its cash holdings in financial institutions and organizations that directly support black communities – a proportion of corporate assets that at the time of the announcement were approximately $ 100 million. As Netflix’s net worth rose, the theory worked, including that of black companies and nonprofits like Ferdinand’s.

Netflix’s announcement also included a call to action. The streaming giant urged other companies to follow suit and use some of their money on black business initiatives. “This is not a charity,” said Aaron Mitchell, Netflix’s director of human resources, who spent months preparing the Black Banks proposal. “This is not a single time.”

Whether switching from Netflix is ​​enough is another question. That summer, a handful of tech companies – Amazon, Apple, Facebook, Google, Microsoft, Netflix, and Tesla – hit a total valuation of $ 9.6 trillion, about a quarter of the total S&P 500. Meanwhile, black communities have weathered decades of divestment. to struggle in a segregated economy that has lasted long since the extermination of Jim Crow, and the nation’s wealth is more unevenly distributed today than it was before Great Depression. Hope, with the help of Netflix, wants to reverse this flow of inequality. “We basically want to import deposits, import capital into these wealth-hungry communities,” says Bynum. But will Netflix stay loyal to these communities?

Bill Bynum, Hope CEO.

Photo: Max Hemphill

Have black banks has been cherished as a secret of racial resurrection since the end of the civil war. In 1865, Freedman’s Savings Bank was chartered by Congress for the benefit of the newly emancipated slaves and described by Frederick Douglass as “his people’s path to a share in the world’s wealth and welfare”. Decades later, in America’s most successful black enclaves of the early 20th century, institutions like St. Luke Penny Savings Bank in Richmond, Virginia and Mechanics and Farmers Bank in Durham, North Carolina were helping black people buy and house homes financing new businesses. For generations, black leaders across the ideological spectrum, from Booker T. Washington and WEB Du Bois to Martin Luther King Jr. and Malcolm X, have encouraged their people to meet their own financial fate by controlling banks. And in any case, before the civil rights era, white-owned banks rarely lent black people. “There are many reasons people are drawn to black-owned banks,” said Mehrsa Baradaran, a law professor at UC Irvine and author of The color of money: black banks and the racial wealth gap. “Solidarity and necessity above all.”

But these institutions, along with their customers, have long been on the knife of financial distress. A hundred years after slavery, blacks were systematically excluded from well-paid blue-collar jobs, and today they still face higher unemployment rates than whites. The practice of red-lining, a government-sanctioned policy of marking black neighborhoods as financially dangerous for investment, has denied many people access to their homes, historically the easiest route to intergenerational prosperity and financial stability. Redlining was banned in 1968, but even today, mortgage approval algorithms still favor white homebuyers over their black counterparts. Business loans and venture capital also still flow far more into white entrepreneurs than black entrepreneurs. These factors have contributed to a huge and persistent racial wealth gap: while the median net worth of the white family is $ 171,000, the median net worth of the black family is $ 17,000. And that loophole makes it nearly impossible for black-owned financial institutions to generate large amounts of wealth without greater integration into the wider financial system.

To function efficiently, banks and credit unions need collective contributions from both those who make deposits and those who take out loans. The money you keep in your savings account can be loaned to a business owner; The business they have built can, in turn, create jobs in your community and give workers more money to spend and save. And some of this income can flow back to the original bank in the form of additional deposits. This dynamic, known as the money multiplier effect, underpins America’s economic prosperity. But this virtuous cycle breaks down in churches that lack capital. “Banks are not magic,” says Baradaran. “If there is no wealth in the black community, they cannot create it from nothing.”



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