Opinion: Save America. Congress must pass both Bills and Raise the Debt Ceiling as matter of National Security, Realpolitik, and Re-invigorating the United States. People need to get vaccinated. And, understanding the Iraq Petro Dollar Grift and the Afghanistan War Stimulus Grift. By Quinton Mitchell ©

Table of Contents

  1. Intro
  2. Supporting Biden and moving on from Trump for the sake of unity. Republicans should have a backbone and find another leader
  3. Realpolitik. See the Game for What Is
  4. You must spend money to make money. We must pass the bills, increase the debt ceiling, etc.
  5. The Situation We Face
  6. Consequences of not raising the Debt Ceiling
  7. The Price of the Wars. Another major reason we must raise the debt ceiling is that the wars were funded on credit that bears interests
  8. The Iraq War was about the Petro Dollar Scheme, The Afghanistan War as about stimulus for the Military Complex, and women were never a big factor in being in Afghanistan
  9. Links, Sources, Continued Reading
  1. Intro

The United States needs to pass both the Infrastructure Bill and Reconciliation Bill, raise the debt ceiling, continue to vaccinate itself (for example, China has a 70.78% full vaccination rate with a much larger population as compared to the United States which has a 54.50% full vaccination rate with a much smaller population. Source: https://ourworldindata.org/covid-vaccinations, data from 9/24/21), phase in tax increases on the highest earners (which can be reduced down the road) such as raising the marginal tax rate, i.e., the amount a person pays after reaching a certain income threshold, because the USA is in “decline”, or, rather at a point of “redefining itself” and “repurposing” itself for the future.

The USA still wields power from the ability to apply sanctions on nations through payment systems, a vast nuclear weapons arsenal, the largest navy with reach extending to the Artic to the South China Sea, a strong control of air-space (the high ground), a large land force, treaties, alliances, iconic brand name goods and services, culture, a control of global supply lines, and even domestic resource reserves both dirty (coal, shale, offshore drilling) and clean (sunny deserts, geothermal potential, and wind and tidal power capabilities, etc.).

2. Supporting Biden and moving on from Trump for the sake of unity. Republicans should have a backbone and find another leader

I’m not concerned with Donald Trump. He’s gone. Good. Trump’s geostrategic policy was nothing more than a consolidation of right-wing isolationist talking points collected from the internet, which put the USA actually in a more weaker position where its power was mocked, questioned, and worst, it opened up the window to America’s traditional enemy in Russia, and even gave China a slight moral victory because they were able to hold-out strong against Trump’s Trade War that was never resolved. Trump represented contraction rather an expansion, and for reasons we may never truly know without getting lost in a web of real and fake conspiracy. That’s why I am supporting Biden. Simply because he’s a calming force. I don’t shame him for his age. As far as what I’ve seen, he’s been conducting business and giving speeches just fine, despite his age. He brings a level of reassurance as the USA hits the drawing board, but frankly, the biggest internal detriment to US unity are Trump hanger-ons, whom interestingly have an ideology, outside of its white reactionary politics hidden behind a co-option of patriotism and regalia, that in many ways comes from abroad despite the veneer of Americana, e.g., The Epoch Times, a Chinese conspiracy newspaper bought the most Facebook ads for Trump during his 2016 run (Gilbert, 2016), but also many elements of the Alt-Right in the USA (who have been agitators) “surprisingly” have many affinities for Russia. I don’t care if Republican’s dislike Biden. That’s their right to do so, but frankly at least support a Republican who understands US Realpolitik and the concept of cause and effect, and “adverse effects”.

3. Realpolitik. See the Game for What Is

You must view geostrategic power away from “politics”. Politics is merely a means to an end, so you must see the end and not get caught up in the means always. See the game for what it is. The US is powerful because we run off debt. We don’t have such a great way of life because it’s funded by taxes. Taxes are political suicide for any Public Finance 101 student, but real leaders know they must raise them periodically. Debt fuels the US way of life. Taxes are nothing more than minimum payments on debt at this point, and America’s quality of life is mostly sustained by debt, but we defend this debt with a powerful military, i.e., no one will call our debt because they fear our military.

But we also sell our debt as an investment tool which links other nations to us, so they want us to succeed, and this increases our closeness as far as trade, currency conversion, investing in US companies or vice versa, military alliances, etc. Further, the US spreads the idea of “freedom”, i.e., a libertine manta and thus it spreads pop culture, etc., i.e., America markets itself as a Dream, tourist destination, etc. The USA also uses multi-national corporations to extend trade lines which need military defense to protect them thus this extends America’s scope of power and interference in the affairs of others, yet these corporations extract resources to fuel growth back home, but also sells products abroad where the profits come home, and this all helps to prop up the USD Dollar. Lastly, the US spreads its power by the value of its currency, which is backed by our military, by the fact we sell our debt to allies and they vouch for it, but we also require that all global oil transactions be done in US dollars first thus making the US the middleman for the Earth’s most vital resource (for now), thus this scheme helps props up the dollar which feeds into everything else. For a superpower to sustain itself it can’t afford to not invest itself, similarly to how it can’t afford to maintain key alliances (NATO, AZNAC, EU, the UN, NORAD, USNORTH, AFNORTH, India, Japan, etc.), but it must also stay relevant and grow, i.e., it must lead and innovate (creating core competencies that no one can’t do as good and at the same scale, but also investing in the future, i.e., emergent technologies, e.g., semiconductors, green technology, space, etc.).

The strength of the USA as compared to Russia and China is that they are largely homogeneous. They don’t have the vast racial, ethnic, religious, gender, cultural, and lifestyle freedom that the United States does, thus giving the United States a competitive advantage for something such as…espionage, translations capabilities without must investment, spreading American ideals to families abroad, etc. Yet, America unfortunately because of its political system, that is overwhelming controlled by a private interest making up a smaller part of the overall US population, applies things such as identity politics ends up being its own worst enemy in many cases, and nations like China and Russia can use strong central authority over a homogeneous population to achieve objectives. Even when it comes to COVID-19, the sheer amount of paranoia and political conspiracy theories relating to the virus, has made the USA fall behind its number one competitor in China.

4. You must spend money to make money. We must pass the bills, increase the debt ceiling, etc.

But as far as the upcoming debt limit situation, the spending bills, etc., you must spend money to make money, and this is the underlying economic manta of all superpowers.

No superpower sustains itself with being frugal, for example, oil companies aren’t raising their own armies to go take Middle East oil to prop up the Petro Dollar Racket, but rather the government, i.e., the Department of Defense does that, and business benefits. Similarly, to how the US Navy defends trade routes for the benefit of the US economy.

The economic mantra of all superpowers and of both US political parties (even though Republicans don’t like admitting it) since World War II has been Keynesian economics, i.e., you deficit spend, swap debt with allies and this affects the balance trade as currencies adjust to one another, i.e., if another nation’s currency is stronger they invest in the USA, but if the USA’s currency is weaker in relation to an ally then this helps the US sell products because they’re more affordable in foreign markets, etc.

For example, China is expanding and investing with large infrastructure projects such as the Belt and Road Initiative, which expands land trade routes, and builds and buys seaports, etc.

A part of hegemony is outspending your competitors. Debt isn’t bad. It’s only bad if you waste that debt on things that don’t result in a Return on Investment. Not only do superpowers have to make debt to spend to sustain the level of comfort the population is used to (hoping productivity is at an ample level to make up for the debt), but creating debt also helps a superpower sell that debt to other nations for investment purposes thus making them supportive of the superpower in question since they want their investments to do good. Basically, making debt and selling it is a way of having “control” and “influence”.

The Infrastructure and Reconciliation bills would pay themselves off over time because you’ll make jobs such as in construction (a vital sector for Americans), people will stimulate the economy, and to be honest, the tax rate needs to be raised as a good faith gesture to US bond holders (such as our allies) considering the USA has had 21 years of tax cuts dating back to George W. Bush, i.e., the USA can’t shop itself out of debt (supply side economics) but actually has to do gestures to make good that it can pay its bills and investors on time.

So, the USA needs to pass these bills, raise the debt ceiling, continue to vaccinate itself, and phase in tax rates on the highest earners to sustain its role as a super-power to help pay for the 20 years of wars but also help pay for upgrading the US machine. I repeat, you can’t make money, if you don’t spend money, but if you spend a lot of money, you got to throw some money at the bills.

5. The Situation We Face

(1) There’s the Bipartisan Infrastructure Bill but also the Democrat Reconciliation Bill which would need 51 votes as compared to 60, with the latter being a tough battle because Republicans don’t want hand Democrats any of their campaign promises such as clean energy, poverty initiatives, universal pre-K, etc., nor do they want to anger any special interests, but Republicans also wanted the Israel Iron Dome Missile System in the spending bill but instead a separate $1 Billion bill was created and passed in the house that it is majority held by Democrats, i.e., they came to a middle ground so the Iron Dome didn’t stall the other bills, (2) The Federal Reserve is stating that it will ease off of buying, i.e., propping up equities (the stock market) and Mortgage-Backed Securities (housing sector),  meaning that the Federal Reserve won’t be helping to bloat asset prices as much anymore meaning that the market could face a correction as reality kicks in as opposed to the artificial monetary policy implemented by the Federal Reserve to prop up the US economy. Essentially the stock market and housing market will have to go back to real market principles and the Fed won’t be buying assets to keep them afloat, especially as they gauge unemployment numbers. The Feds easy money policy benefitted the rich because it bloated the stock market, it made borrowing against higher valued assets for money much easier thus allowing them to get more money on artificially bloated assets, (3) Only 55% of Americans are vaccinate against the Corona Virus meaning there’s still uncertainty in the market about new variants, potential new restrictions, etc., (4) There’s a manufacturing bottleneck in all sectors including oil, gasoline, and natural gas (where energy is affected also by natural disasters, geopolitical conflicts), due to the drastic drop of demand due to CV19 but then the drastic increase in demand as the USA crawls back to normalcy.

6. Consequences of not raising the Debt Ceiling

If the debt ceiling isn’t raised, in any case, then the government could shut down and there would be no bills but if the government shuts down then that (A) would freeze billions of federal spending that stimulates the US economy such as through federal contracts to private businesses such as defense contractors, research projects, military base operators, etc., (B) federal workers (including the troops) would be put on hold, (C) the US Credit rating would be hit, (D) US bond holders such as our allies would lose value on their investments, (E) US Treasury auctions would be cancelled, etc.

Aimee Picchi (2021) stated, “The U.S. economy could plunge into another recession this fall if Congress fails to lift the debt ceiling and the nation is unable to pay its obligations, according to an analysis by Moody’s Analytics chief economist Mark Zandi. The fallout would wipe out as many as 6 million jobs and erase $15 trillion in household wealth, he estimated in a report.” Further, Picchi (2021) stated, “In real terms, the nation would soon return to high unemployment rates, approaching 9% compared with its current rate of 5.2%. Also, come November 1 checks for millions of Social Security recipients would be delayed, Zandi noted. And stock prices would likely plunge by one-third, sparking that $15 trillion loss in household wealth. Meantime, mortgage rates and other interest rates for things like credit cards and auto loans would spike.

This could slip the US to a recession if the US debt ceiling isn’t raised because of the contraction in government stimulus and spending, and even a possible run or mass sale within the US stock market.

Further, not passing these bills, and/or not raising the US Debt ceiling would be a moral and psychological defeat for the American people, creating a sense of nihilism or indifference and hopelessness, who have suffered from constant drama and scandal from the 1) the January 6th Capitol Insurrection, 2) over a year and half of COVID lockdowns, a US death toll exceeding over 500,000 Americans, and revolts against restrictions, 3) the summer of 2020 protests across the nation against police brutality and the conversation about race relating to Black Lives Matters, and reaction movements such as Blue Lives Matters, 4) a COVID-19 stock crash which affected worker’s 401(k)s because the US didn’t get ahead of the crisis, which may have delayed retirement for workers – at an age who are more at risk of COVID – from retiring, even though the US stimulus packages did help the market rebound, 5) media wars dating back to the Russia-Gate situation, Ukraine Gate situation, the government shutdown over Trump’s Border Wall, 6) mass shootings, 7) a growing Fentanyl drug death crisis, 8) unemployment and homelessness, 9) an increasing crime rate as life returns to “normal” as lockdown restrictions ease up, 10) a refugee crisis from Central America largely due to drought and crime, but also from Haiti due to political destabilization, a 7.2 Magnitude earthquake, and hurricanes, etc.

Essentially, if the government shuts down then that would accelerate inflation because the money supply has been increased over years, but that created money is pegged to US Treasuries which the Federal Reserve holds as collateral to justify expanding the money supply, in which money is injected into the economy via banks via cash or an electronic debit-credit system. If the government shuts down and the debt ceiling isn’t raised that basically means “the government is late on its payments or doesn’t have enough to cover its payments”, i.e., it’s in default, meaning the money created and injected into the economy doesn’t have a “full faith and credit” insurance policy on it, meaning it loses value and things become more expensive. This would mean to curb inflation the government should have raise taxes, and the Federal Reserve would have to gauge whether it keeps interests rates low to stimulate or to tax money i.e., increase interest rates so the created money pays for itself.

Biden says he wants both bills on his desk to be signed otherwise he’ll veto whatever comes to his desk. Biden’s strategy was to reach across the aisle on the Infrastructure Bill but for his party to have their own bill to fulfill campaign promises but with Democrats having a slim margin majority they need Republicans but also Centrist Democrat like Mnuchin and Sinema, but Mnuchin and Simena have essentially knee-capped their own party.

These bills need to be passed but also the debt ceiling needs to be raised to push these bills through, but the debt ceiling also needs be raised separately because of the deficit ran up by the previous Trump Administration, i.e., he kept spending high but slashed taxes, applying a sort of “protectionist meets supply-side economics” ideology that was consulted by Reaganites such as Arthur Laffer, which was a continuation of 16 previous years of tax cuts starting with George Bush and continuing with the Obama Extension of the Bush Era Cuts.

Essentially, we need to pay for our bills that are already on the books, but we also need to pass the new bills which would require a debt ceiling raise, i.e., the debt ceiling needs to be raised for two reasons (pre-existing debt obligations that have added up from previous administrations which bear interests, which includes the bills for the wars) and making room to afford the Bipartisan Infrastructure Bill and Democrat Reconciliation Bills.

The only issue with the Democrat Reconciliation Bill is that Republicans don’t care to give Democrats anything, they would love for them fail on their campaign promises, many of the agendas of the Democrats might go against special interests, and Republican want to hurt Democrats for political reasons though they can hide behind “fiscal responsibility” talk points, i.e., “we’re spending too much, our kids will have to pay for it, it will causes inflation”, etc.

It’s interesting to note that Republicans have caused the last two sequestrations, i.e., government shutdowns because a funding bill was passed by the September 30th deadline. They did it under the Paul Ryan, Rand Paul, John Boehner years for Republicans against President Barack Obama during the Affordable Healthcare Act debate, but they also did it again when Trump didn’t get his Border Wall (which he claimed Mexico would pay for). Democrats haven’t caused any so far this millennium, but Mitch McConnell’s goals is to reframe it as if it’s only the Democrat’s fault for being frivolous, when in essence the US has been frivolous under his watch for two decades now, and most of the money creation from debt expansion trickled upwards to big businesses (special interests, i.e., Congress’ donors).

So, both sides are playing a Russian Roulette game. In theory Biden could concede to Republicans, pass one of the bills, and the Congress raises the debt ceiling, or Republicans can play ball, pass both bills and raise the debt ceiling. But the buck is more on Republicans. Why? Because it’s the right thing to do for America to pass both and raise the debt ceiling. It is not only a matter of national security so for the sake of American hegemony, but it would help reinspire and motivate America which finally takes a stance to invest in itself in a way no living American has experienced, except those who remember the New Deal of FDR.

I don’t believe necessarily in the broad accusation of inflation or too much spending because deficit spending is how the United States operates, and spending will pay itself off over time and be an engine for growth. To make money you have spent money.

The USA to sustain its’ scope of power must recoup, reset, redefine, and re-initiate, i.e., it needs to get its house in order, and invest.

7. The Price of the Wars. Another major reason we must raise the debt ceiling is that the wars were funded on credit that bears interests

The USA has invested in costly wars with no actual Return on Investment and paid for it on debt rather than raising taxes as previous Presidents had done, but meanwhile China and Russia haven’t been engaged in such large-scale costly regime-change wars, yet instead they simply sit back to let the beast bleed itself, use any fiascos created by the Americans for propaganda purposes, and even piggy back on US efforts (such as Russia entering Syria) to push their way onto the table of geostrategic issues.

For example, according to the Associated Press (2021) referencing a study conducted by Brown University on the cost of the Afghanistan and Iraq, which was reposted by The New York Post (2021), “…President Harry Truman temporarily raised top tax rates to pay for Korean War: 92%. Amount President Lyndon Johnson temporarily raised top tax rates to pay for Vietnam War: 77%. Amount President George W. Bush cut tax rates for the wealthiest, rather than raise them, at outset of Afghanistan and Iraq wars: At least 8%. Estimated amount of direct Afghanistan and Iraq war costs that the United States has debt financed as of 2020: $2 trillion. Estimated interest costs by 2050: Up to $6.5 trillion.”.  

8. The Iraq War was about the Petro Dollar Scheme, The Afghanistan War as about stimulus for the Military Complex, and women were never a big factor in being in Afghanistan

The Iraq War wasn’t about Weapons of Mass Destruction, but it was about sustaining the Petro Dollar racket, i.e., all global oil transactions must be conducted in US Dollars (middleman strategy), meaning this racket helps to keep the US dollar as the premier currency and world reserve currency (you need US dollars on hand to make oil trades). Essentially you can’t do business in the lifeblood that runs the world, oil, i.e., “The Spice Must Flow” (Frank Herbert Dune quote), unless you convert to USD dollars first.

Saddam wanted to subvert this knowing his large oil reserves would be a hit to the US order, separate himself from the global economic order which the USA is the de-facto power, and this would have undercut the scheme. So, the Iraq War was all about propping up the Petro Dollar scheme. The oil interests where then handed over to oil companies of allies who support the racket largely because they have a deep interest in ensuring the American economy, the USD, and US bonds (such as Japan buying Treasuries for its pension program) are sustainable.

The Afghanistan War was mostly a Ponzi scheme and racket itself. An ill-planned nation-building strategy was applied for finding…one person, i.e., Osama Bin Laden, and the Taliban even offered to hand him over, but the Bush Administration turned this offer down, selling it to the American people as “We don’t negotiate with terrorists”, because he knew there was money to be made.

The Taliban didn’t attack the United States, but rather Osama Bin Laden and others, hailing from US ally Saudi Arabia did, and Osama was hiding out in Afghanistan. Take this analogy, when Carlos the Jackal was committing terror attacks and hiding out in Europe did the USA…bomb Europe? No. The Bush Administration needed Afghanistan to insert the idea of a Global War on Terrorism, when really the main prize was the Iraq War for the Petro Dollar scheme. Afghanistan was an ideological springboard for Iraq, the bigger prize.

Yet, since we were in Afghanistan, we ended up staying there for 20 years, but we applied a hard-to-win Nation-Building Counterinsurgency “Hearts and Mind” War against the Taliban, who had sympathies in the public and the US was seen as outsiders bringing danger to the people, such as if the Taliban saw Afghani farmers talking to Coalition forces, they could be retaliated against.

An unwinnable war without defined realistic objectives and actual investments in improvements of the lives of the people is a “money pit”, and that’s all the Afghanistan War was meant to be. It’s as if the US government handed over Atlantic City on the grounds of cleaning it up to the Mafia Five Families who control contractors, but the contractors do the minimum because they know the government will pay them, they can waste time to bill more labor costs, and in many cases, they conspire with the criminal elements already in the city, etc.

Afghanistan could be distilled as simply being a stimulus for the US economy where the defense sectors employ many Americans. So, Afghanistan was sort of like a stimulus booster shot for the US economy, that became even more important after the Wall Street created 2008 Global Financial Crisis (a reason why Obama did the troop surge during a Recession), more so than being a mission to install a functional democracy in the nation. The wealthiest Americans who are shareholders, defense contractors, etc., made 20 years of profits funded by US taxpayers via debt, but they also benefited from bailouts, an easy money Federal Reserve policy, and tax cuts from three US Presidents. That’s the main reasons why war-hawks on both sides wanted Biden to extend the Afghanistan withdrawal deadline. It wasn’t to “save the women of Afghanistan” (which is a travesty of their condition), but it was about money…ensuring contractors could bill as much as possible especially after the September 30th fiscal new year resets, Congress members with investments would get paid, etc. The US and its allies had 20 years to aggressively support women but likely feared antagonizing the patriarchal system of the people they claimed to be trying to help.

Women’s rights were a part of the equation and a great way to talk up Western Liberal ideals, but realistically women’s rights were always counterintuitive to the reality of many aspects of Afghan culture. Sure, you see historical photos of women in the past in mini-skirt and attending college, but this era was before the introduction of Islamic radicalism when Afghanistan was a monarchy and even when it was a Communist nation, so deconstructing Islamic radicalism after these political eras were already over was a very hard task amongst an ethnically diverse and poor population. What were we supposed to do as we left a war that needed to be left? Kidnap all the Afghanistan women so Afghanistan would be a Bacha Bazi “sausage fest” (https://en.wikipedia.org/wiki/Bacha_bazi) and use that as leverage over the Taliban?

Should we have created “all girls schools” on US military bases so when we finally withdrew, we could quickly fly them away to the West, possibly taking them from their families? Or were we supposed to stay, negotiate with the Taliban (which Trump did but Republicans would only allow this move because it was Trump, for example if Obama even tried to negotiate with the Taliban the GOP would have used that against him), and then try to include the Taliban into a functional government, which they would never accept because they’re religious first, and political when convenient, i.e., they would have never accepted any of the political parties, coalitions, the Northern Alliance of the Panjshir Valley, etc.

9. Links, Sources, Continued Reading

https://www.businessinsider.com/epoch-times-pro-trump-facebook-ads-2019-8

https://ourworldindata.org/covid-vaccinations

https://www.politifact.com/article/2021/sep/10/democrats-reconciliation-bill-what-you-need-know/ https://www.cbsnews.com/news/debt-ceiling-default-6-million-jobs-15-trillion-wealth/

Understanding issues facing African American Owned Businesses from Brand-Image to the Supply Chain

Understanding issues facing African American Owned Businesses from Brand-Image to the Supply Chain

Applying Quality Management to African American Businesses

MGMT 691 Graduate Capstone Proposal

By Quinton M. Mitchell

M.S. Management (Operations Management) 2018

Embry-Riddle Aeronautical University (Worldwide Campus)

ABSTRACT

The purpose of this research paper is to (1) Explore any limitations to branding products or services created by African Americans as Black-Owned by conducting a literature review which analyzes scholars who argue for and against segregated economies, i.e., protected enclaves; (2) Understand consumer behavior differences between African Americans and other groups by understanding theories such as the Customized Communication Incongruity Theory by Arora & Wu (2012) and Socialization Theory by Ward (1987); (3) Explore how marketing and advertising affects African Americans and how diverse/positive marketing campaigns improves black success; (4) To show positive gains within the African American community but also to explore the hindrances to African American economic productivity such as higher insurance costs, lack of capital markets, sensitivity to economic conditions, etc., and (5) Discuss Supply Chain issues in African American businesses by using black-owned breweries for a test industry to implement concepts just as strategic alliances, best practices and/or to emulate practices such as those used by Japanese Keiretsu.

Table of Contents

  1. Managerial Problem stated as a Research Question…………………………….…….5
  2. Setting/Background……………………………………………………………………5-6
  3. Research Activity……………………………………………………………………….6-7
  4. Literature Review………………………………………………………………………7
    1. To open the community or to close off the community?……………………………7-10
    2. The underlying psychology of branding and marketing pertaining to African Americans…………………………………………………………………….10-12
    3. Disparities between African American Owned Business and White Owned Businesses……………………………………………………………………12-16
  5. How African Americans respond to brand image & issues regarding advertising and media portrayals…………………………………………………………………………….16-20
  6. African Americans in the Supply Chain & the need for Strategic Alliances or Joint Ventures………………………………………………………………………………20-32
  7. Is the Japanese Keiretsu model appropriate for African American Breweries? ….33-39
  8. Conclusions………………………………………………………………………….39-41
  9. Annotated Bibliography…………………………………………………………….40-44

List of Figures

Figure 1.          2017 Top Black Owned Businesses by Black Enterprises…………….22

Figure 2.          Michael Porter’s (1979) Five Force of Competition…….………………32

Figure 3.          Zaibatsu vs Keiretsu by Yonekura (1985), cited by Grabowiecki (2012) …………33

Figure 4.          Theoretical Model for African American Brewery Consolidation………36

Keywords: African American, #business, #behavior

Managerial Problem stated as a Research Question:

Does the resurgence of labeling products as “Black Owned” has its limitations? Should African American owned businesses think bigger and take a risk by creating brand campaigns that targets a larger non-race specific consumer base? Should smaller African American owned firms join forces through concepts such as strategic alliances, joint-ventures, or even the Japanese concept of Keiretsu? Is it safe to view the black community as a singular entity, or does a complex intersectionality exists within the black-community, and, if so, which ideology, or which marriage of ideologies, is more effective at achieving sustained success for African Americans? In addition, can the establishment of a supply-chain network between African American owned businesses help improve visibility of brands, maximize economies-of-scale, improve service/item quality or value, and increase profitability?

I. Setting/Background:

African-American in business have a long history in the United States ranging from entrepreneurs or CEOs who have gone to build empires or sustain already established business empires; to running established firms who have made catered services and products towards African-Americans and the world at large, and the number of African-Americans winning managerial positions in name-brand American firms since the Civil Rights movement. Yet, Black-Owned businesses faces a plethora of issues ranging from access to credit, the risk-reward aspect of certain industries, and the fact that African-Americans, as with most Americans, have benefited positively from, while also being negatively impacted by the effects of globalism, the loss of labor protection, the hyper-competition of corporate multi-national companies.  

In addition, Gillian B. White (2017) wrote an article that noted black CEO representation peaked in 2007 but has been slowly dwindling due to removal or retirement. As a result, I am arguing that black-owned businesses who market their products as “black owned” instead should market their products towards all consumers, regardless of the self-empowered notion of supporting black-owned businesses, because the level of product visibility and profitability will increase. Essentially, be black-owned, sure, and be proud of that, but market and win customers regardless of who they are. However, this paper is not an indictment of Black-Owned branding, but rather an argument that the call for branding products as such should of course be from a sense of empowerment, but not to the extreme of exclusivity which could have detrimental effects on capital accumulation and distribution of profits amongst the community. Why have one market, when you can compete with larger companies in multiple markets? To support Black-owned businesses and possibly improve the quality-of-life of certain African American communities, thinking bigger and expanding consumer bases can increase African American economic prosperity. For example, we know that Toyota is a brand of cars that is obviously made in Japan, and the brand is synonymous with quality, but the Japanese benefit from a clever branding strategy where the products does the talking for the culture. The goal of this paper is to provide recommendations to assist black-owned businesses, not from a stance of exclusion, but rather to further normalize products for all consumers regardless of race.

II. Research Activity:

A brief background into African American business ownership from a historical perspective will be presented. In addition, a historical view of race-centric marketing will be presented to strengthen the premise that race and marketing are often in unison. This historical perspective will lead up to my initial business problems facing the community and then I will follow up on conceptual ideas that could generate benefits. Giving dues when needed to the current landscape, I will then offer my recommendation for focusing on brand-image marketed towards a diverse consumer base, which in my opinion, can increase black economic output without labeling itself as “black-owned”, but if a firm decides to brand themselves as black-owned, which is justified considering the complex history of the United States, then there needs to be a strategic re-training of the thought process to challenge oneself to expand what new markets black Americans can or should participate in. Qualitative research will then be discussed to link the marketing of brands to the importance of the supply-chain.

Finally, a summary of the supply-chain as far as key aspects will be discussed and then I will construct a conceptual supply-chain or strategic alliance theory in which an African American business owner could formulate strategic ideas. The goal of this project is to emphasis strategic-thinking while loosely threading upon the quality management philosophies of early scholars such as Deming, Juran, and Crosby, to get Black-owned business owners to think more expansionist-minded, while simultaneously being inclusive towards all communities.

IV. Literature Review

A. To open the community or to close off the community?

Cummings (1999) presents a study comparing African American entrepreneurs conducting business in the ghetto’s protected- market versus the suburbs or larger Metropolitan Statistical Areas and argues that African American firms outperform when operating in larger non-segregated environments. Cummings (1999) provides a qualitative and quantitative study regarding the flaws of racially-segregated economies by touching upon the enclave-theory and protected market theory by referencing researchers such as Drake & Clayton (1945), Cummings (1980), and Light & Rosenthein (1995). In the study, Cummings (1999) states, “Although racial segregation may be a prime factor promoting ethnic and enclave enterprise, it simultaneously undermines business growth and development”. In addition, Cummings (1999) shares findings from Brimmer and Terrell (1971) who states that African American entrepreneurs who depend upon a segregated-protected market have high potential for failure. Moreover, when faced with desegregation and group dispersion, businesses that depend exclusively upon an enclave market are likely to fail (Brimmer and Terrell, 1971).

Rueben & Queen (2015) studied how African American owned businesses suffer adversely from unequal access to capital markets and the prevalence of institutional barriers. Although not universally appreciated, African Americans have a long history of entrepreneurial achievements against odds. African Americans are more likely to start a business, yet, are less likely to succeed (Rueben & Queen 2015). Rueben & Queen (2015) stated that the success of minority businesses to employ more workers and raise the productivity of workers is essential to U.S. economic growth, considering the U.S. labor forecasts (U.S. Bureau of Labor Statistics 2012, as cited by Rueben & Queen 2015), the 2025– 2050 outlook on the U.S. labor market is expected to grow slowly with most of growth coming from 55 million by minorities and immigrant workers. Further, despite these increases in the number of African American owned firms, African American entrepreneurs tend to participate in industry sectors with less capital requirements for start-up and expansion. However, some of these industries have lower revenue streams. Yet, when African American entrepreneurs operate in high revenue generating industries, their average annual revenue and average annual payroll per employee are significantly lower than their white counterparts (Rueben & Queen 2015).

The yearning to empower black businesses has led to a conflict in policy ideologies as presented by Cummings (1999). The enclave economy theory alludes to the positive outcomes associated with racially or ethnically segregated communities, but considering the criticisms presented by Tabb (1970) such as (1) smaller markets, (2) lower income consumers, (3) higher insurance rates, (4) inability to access credit, (5) higher rates of theft, and (6) limited access to capital, there are parties at be that wish to open the black community to larger markets but from the stance of community re-invigoration, yet not entirely from a segregated mentality. According to Cummings (1999), community-based development initiatives are activities inspired by or aimed at service social groups in a locality. In addition, community-based development initiatives also refer to those efforts organized by people who share a common urban geography (Blakely 1994).  

Strategies that come from inwardly focused values and not economic realities are likely not going to make a competitive advantage (Barney & Hesterly, 2015, p 6). This touches upon my argument regarding the general trend in the growth – as far as a calling or social justice movement – of marketing products or services as Black-owned. There is nothing wrong with this, yet there are many assumptions and a diversity of ulterior motives that can occur when there is a calling for a segregate mentality. Such as, considering the social nature of human beings when classified, there can be a limit on the expressive modes – which can be profitable – that a group feels they can participate in. I call this a “culture-trap”, in which the standard or traditional culture is such a firm aspect of identity, that deviating to innovate for an individual, can have detrimental social and psychological effects. In addition, this “culture-trap” not only limits innovation, it can lead to issues such as brain-drain (when intellectuals leave the community in order to associate themselves with more supportive individuals), attrition (leaving the community), and the recycling effect of standard discourses when relating to issues effecting a community.  Also, there have been clear examples of black-on-black business crimes or political corruption, in which the culprits have often used the calling for black segregation for their own financial and personal gains.

 There seems to be a standard agreed upon set of values for African-Americans when consciously entering the business arena, i.e., a sense of liberation and self-empowerment, and although these yearnings are noble and arguably justified considering the sociopolitical and economic truths of African-American culture (slavery, segregation, red-lining, police profiling, etc.), yet the ultimate goal is, of course, to empower the group, yet it has to be based inevitably on an open-market, non-exclusive long-term agenda – with active but non-exclusive black participation – where products or services are focused on the bottom-line of profitability, penetrating new markets (both physical, i.e., foreign countries, but also unrealized cultural markets, i.e., cultural facets of American culture with black participation but that aren’t associated with black cultural as a whole) and the realization of a multicultural globalist reality based on a post-racialist idea or aspiration.

However, the claims provided by Cummings (1999), Rueben and Queen (2015), and Tabb (1970) are rebutted by Chaplain (2012) who argues that integration has destroyed the black economy. The black community lacked the requisite socio-cultural characteristics to develop a robust entrepreneurial tradition and, second, that integration, as an independent variable, destroyed black-owned business. Chapin (2012) studies the affects of government regulations which highly curtailed African American business growth and this provides more historical background on my study. Since insurance is a major part of entrepreneurship and running a business, Chapin (2012) study can shed light on the emotional reasons many African Americans are compelled to market their goods as black-owned and might give credence to the calling for black separatism. Yet, a major focus for business ownership growth and development in the African American community must be on the strategic expansion of the employer firms (Rueben & Queen 2015).

Chaplin (2012) seems to be of the vein of intellectuals who argue segregation as a benefit to African-Americans; however, Chaplin (2012) is sensitive to history, and only seems to be basing his premise on the fact that systemic injustice such as a society built on “white Affirmative-Action” had a detrimental effect on blacks, even though black communities formulated under this system and showed signs of progress. Yet, Cummings (1999) study on the undermining of business growth and Rueben & Queen (2015) study which shed light on the future growth of minority groups in the United States, I feel that there is a calling for creating a black-owned business mentality, yet, there is also the need for it not be exclusive. Essentially, we need more entrepreneurs and businesses owners, but the underlying motivation must be global and catering towards all people.

B. The underlying psychology of branding and marketing pertaining to African Americans

Jeffrey Steven Padoshen (2008) presents a compelling study into how African Americans value and apprise goods based off unique characteristics of their community. As “minority” groups such as African Americans and Latinos grow in overall proportion to America as a whole, particular attention must be placed on the understanding of their consumption characteristics (Padoshen, 2008). Padoshen (2008) presents a study that investigates word-of-mouth and brand loyalty within the context of durable-goods purchases in the African American community to see if there are effects on purchase decisions when a supplier was at one time linked to the slave trade, and if there’s a preference for purchasing products which come from black-owned companies. Padoshen (2008) provides a historical background into African American communication by referencing Thorp & Williams (2001) who argued that African American uprooting from their African homeland destroyed the means of communication. Further, Padoshen (2008) references Harris-Lacwell (2004) & Gothard (2001) who argued that oral-storytellers remedied these severed means of communications (Thorp &Williams, 2001) within the black community. Padoshen (2008) references Gothard (2001), Thorp & Williams (2001), & Harris-Lacwell (2004), & Miller & Kemp (2005) many times throughout his insightful study. Both Gothard (2001) and Miller & Kemp (2005) defined word-of-mouth communication within the context of the African American community – a major part of African American culture – as having four (4) distinct elements, which is trust, respect, open-voice, and black-to-black communication.

Regarding the open-voice element of African American culture, which I deem as important, Padoshen (2008) references Miller & Kemp (2005)  who defined this element as the ability to have an exchange of opinions that might not be welcomed by the outside population, and that the Black Church is highly trusted institution in the black community because it is solely owned and controlled by the black community and is a “prime exemplar” of an open-voice facilitating venue, considering, according to Harris-Lacewell (2004) and Miller & Kemp (2004) – as referenced by Padoshen (2008) – the Black Church is seen by many as the critical location for the definition of truth, which, fostered by open interaction, allows individual to enter a process that helps them create a greater and more acceptable worldview. In Padoshen (2006) study, it was summarized that the Black Church (Harris-Lacwell, 2004; Miller & Kemp, 2005), & Barbershop, Beauty Salons and other informal settings (Gothard, 2001; Harris-Lacwell, 2004) helps fosters black-to-black communication. “Authentic” African American community leaders “who tell it like it is” (Tharp and Williams, 2001) also play a large role in the fact that they are seen with respect, and therefore become a preferred source of information (Padoshen, 2008). Further, Street cred can also have mass appeal (Miller and Kemp, 2005) in which a highly respected celebrity exposes their like (or dislike) for a product (Padoshen, 2008).

According to Padoshen (2008), African American culture is one in which greater distinctions are made between outsiders and insiders compared to Anglo-American culture (de Mooij, 1998) and significant weight is attached to personal qualities. For many African Americans, premium brand names and symbols are mechanisms that reflect the hard and long portrayal of higher aspirations (Miller and Kemp, 2005). Further, Miller & Kemp (2005) speaks into how African-Americans favor brand-names because it is reflecting a “badge” or “badge of honor”, particularly for a group who was largely relegated to be an outsider, thus, wearing brand-names helps to include these people into the overall larger culture.  In addition, Padoshen (2008) states that African Americans have indicated that when purchasing automobiles, brand nameplate, looks and style are more important in their purchase decision than safety when compared to Anglo Americans (Packaged Facts, 2006).

Padoshen (2008) references one of his prior studies (Padoshen & Hunt, 2006) to support his claim that historical treatment of African Americans, similar that of Jews who suffered under the Holocaust, can have generational effects when buying products from sources who are equates with supporting or benefiting from the systemic injustices that kept that their people subjugated. The most important finding of Padoshen (2008) finding is that, African Americans indicate that they are no more trusting of the advice they receive in comparison with that of Anglo Americans. Padoshen (2008) research is an exceptional example of the dilemma facing most African Americans in my opinion, which is that studies – even if objective without any sort of racial bias – assumes a distinct racial and sociopolitical characteristic than that from the larger culture they are technically a part of. This bias, even if assumed on noble grounds to prevent an issue such as systemic injustice, can never lead to a full understanding of human nature. Essentially, we can define a group up to a point, but can never fully know a group, or even a group understanding itself entirely, which isn’t a bad thing – from a business perspective, this is new unrealized markets and ways towards profitability.

C. Disparities between African American Owned Business and White Owned Businesses

Tang & Smith (2013) conducted a study that researched African American business disparity in comparison with White-owned businesses regarding market segmentation, product differentiation, and competition, but their findings suggested that the difference was not statistically significant. Tang & Smith (2013) studied the largest African-American owned employer firms from 1998-2008, as published in Black Enterprise Magazine, in which businesses on the list must be at least 51 percent African American-owned if a private company, or African Americans must own at least 51 percent of the controlling shares if the company is publicly traded and be willing to voluntarily provide financial data. Yet, Tang & Smith (2013) admits a bias in their research as far as selection of candidates from the Black Enterprise Magazine, in that some of the firms on the list may be “front companies”, in that they are non-African American owned but registered as such and that certain actual African-American owned firms may not have given up financial data to maintain a non-disclosure position. From personal experience in government and corporate procurement, where seeking minority, woman-owned, or general small (no-racial assignment) businesses is a goal, I have found this misrepresentation of classification as something endemic in the procurement field. 

Tang & Smith (2013) utilized a contingency (environmental)-view to study Black business disparity when compared to White-owned businesses, in which they cite Aldrich’s (1979) definition of a contingency-view as explaining variations in firm performance from the interaction of the organization and environment, in which environments affect firms through the process of making or withholding resources, and the top three environmental contingencies are complexity, volatility, and munificence. Munificence is defined as very liberal in giving or bestowing or characterized by great liberality or generosity (Munificent, n.d.). Tang & Smith (2013), summarizes their utilization of the contingency (environmental influenced)-view, by saying, “When the rest of America catches a cold, Black America gets the flu. In other words, declines and dips in environmental variables like income, GDP, and labor supply will have a greater negative impact on black businesses. The number and type of contingent environmental factors able to influence the performance of established African American firms is undoubtedly numerous.”

A large motivator in conducting their research, Tang & Smith (2013) cited Fairlie & Robb (2012) who stated that it is estimated that closing the revenue gap between minority and non-minority owned businesses would add $2.5 trillion to the US economic output, creating 11.8 more jobs in America; Fairlie & Robb (2008) who stated that performance disparity might stem from issues of start-up capital, owner’s education level, and prior business experience, and Keollinger et al (2007) who stated that African-Americans have lower personal wealth, greater difficulty in obtaining financing, less education, and lack of entrepreneurial legacy. Further, Tang & Smith (2013) cited research by Puryear et al. (2001) which found that African-American owned businesses were the only minority group to report medium gross sales significantly lower than their white comparison sample, and African-American businesses where the least success as rated by their owners. In addition, Tang & Smith (2013) states that some of the studies pertaining to performance disparity between African-American and majority-owned firms, focus almost exclusively on sale proprietors or entrepreneurial firms undergoing the start-up stage (e.g. Buckley, 2002; Puryear et al, 2001; Richtermeyer, 2002); However, the focus on more established business will likely shift from overcoming liability of newness and survivability to concepts such as market segmentation, product differentiation, and competition as the business moves through the typical life-cycle (Hofer, 1975 – as cited by Tang & Smith, 2013).

Overall, Tang & Smith (2013) concluded that (1) the complexity and volatility associated with one of the most difficult US business environments since the 1940s (the Global Recession, in my own words) may increase the performance disparity between established African American and White-owned firms; (2) that existing knowledge about African American entrepreneurial firm performance may not transfer to larger, more established African American businesses; (3) their findings do not suggest that emerging African American firms should avoid entering complex and volatile industries;(4) emerging African American businesses often operate in industries that are more favorable, marked by less complexity and volatility such as construction, wholesale trade, and manufacturing (US Department of Commerce Minority Business Development Agency, 2011), but these industries are characterized as relatively low growth industries (Tang & Smith, 2013); (5) a “strategic choice” approach would imply that despite unfavorable industry characteristics, African American businesses may be able to actively shape their future and control their environment (Child, 1972), responding to threats and opportunities created by environmental change by altering organizational strategies in ways that enhance performance (Pfeffer and Salancik, 1978; Porter, 1980). The task for African American businesses then becomes developing the capabilities or distinctive competencies needed to overcome isolating mechanisms and mitigate industry conditions (Tang & Smith, 2013).

It is on black community-leaders to be open-minded (challenging the culture-trap I referred to earlier and opening new ways of thinking, while community member simultaneously keep open-minds as to not be lead to narratives which might not account for the entire truth) considering Thorps & Williams (2001) claim that authentic leaders who “tell it like it is” have strong community influence as cited by Padoshen (2006); in the African-American community, greater distinctions are made between outsiders and insiders with weight attached to personal qualities (de Mooji, 1998 – as cited by Padoshen, 2008); brand names and symbols are signifiers of higher aspirations and are considered badges-of-honor (Miller & Kemp, 2005 – as cited by Padoshen, 2008), so much so that safety – at least relating to automobile purchases – is largely a non-impactful decision (Packaged Facts, 2006 – as cited by Padoshen, 2008); African-Americans are no more trusting than Anglo-Americans (Padoshen, 2008); closing the revenue-gap between whites and blacks would add $2.5 trillion to the US economic output (Fairlie & Robb, 2012 – as cited by Tang &Smith, 2013); African-Americans have lower personal wealth, greater difficulty in obtaining financing, less education, and lack of entrepreneurial legacy (Keollinger et al, 2007 – as cited by Tang & Smith, 2013); more established firms will shift from survivability and newness to market segmentation, product differentiation, and competitions (Hofer, 1975 – as cited by Tang & Smith, 2013); information on African-American start-up and entrepreneurial performance many not reach established African-American firms, the Global Recession had a negative impact on the African-American community, and African-American firms often operate in less volatile or complex industries with relatively slow growth (Tang & Smith, 2013; US Department of Commerce Minority Business Development Agency, 2011), yet, these unfavorable characteristics – speaking to volatile and complex markets – may be able to actively shape African-Americans futures (Childs, 1972 – as cited by Tang & Smith); the black church, barber-shop and beauty salons and other informal settings fosters open interaction (Gothard, 2001; Harris-Lacewell, 2004 & Miller & Kemp, 2004 – as cited by Padoshen, 2006 and 2008). 

V. How African Americans respond to brand image & issues regarding advertising and media portrayals

Kristen Bialik (2018) of the Pew Research Center, noted that (1) more than 40 million blacks live in the United States, making up around 13% of the nation’s population according to 2016 Census Bureau estimates (US Census Bureau, 2016); (2) The share of blacks ages 25 and older who have completed four years of college or more has also roughly doubled during that span, from 12% in 1993 to 24% in 2017 (United States Census Bureau, 2017); (3) There were 4.2 million black immigrants living in the U.S. in 2016, up from 816,000 in 1980, according to a Pew Research Center analysis of census data, and recent growth in the black immigrant population has been fueled by African migration at 39% of the overall black immigrant population in 2016, up from 24% in 2000, but about half of all foreign-born blacks (49%) living in the U.S. in 2016 were from the Caribbean (Lopez & Radford, 2017, as cited by Bialik, 2018); (4) the wealth gap between blacks and whites decreased among lower-income families but increased among middle-income families. The Great Recession of 2007-2009 triggered a stark decline in wealth for U.S. families and further widened the already large wealth gap between white and black households (Konchhar & Cilluffo, 2017); (5) There has been a steady increase in the share of Americans who view racism as a big problem in the U.S. – especially among African Americans since 2009, when Barack Obama was elected. In 2017, about eight-in-ten blacks (81%) said racism is a big problem in society today, up from 44% eight years prior. By comparison, about half of whites (52%) said racism is a big problem in our society, up from 22% in 2009 (Neal, 2017), and (6) An overwhelming majority of blacks (92%) say whites benefit at least a fair amount from advantages that blacks do not have. This includes nearly seven-in-ten blacks (68%) who say whites benefit a great deal. By comparison, 46% of whites say whites benefit at least a fair amount from advantages in society that blacks do not have, with just 16% saying whites benefit a great deal (Oliphant, 2017).

Dimofte, Johansoon, & Bagozzi (2010) conducted a study based off a survey sample pool from an online panel of more than three million consumers in the U.S. where the pool was stated as being generally reflective of the overall American consumer base – seeking equal representation among factors such as gender equality and educational attainment, although the sample relating to African Americans had more African American female respondents and when relating to Hispanic Americans had more younger male Hispanic respondents. Dimofte, Johansoon, & Bagozzi (2010) then compared global brand recognition among diverse ethnic groups by basing their main concerns on Phinney’s (1996) definition of ethnicity and his first aspect of ethnicity which is cultural values, attitudes, and behaviors of groups.

Dimofte, Johansoon, & Bagozzi (2010) drew conclusions based from survey data analysis and a structural equation model which suggests that associations with global brands as a general category vary across ethnic groups, such as Caucasian consumers showing less of an appreciation of global brands, whereas African Americans and Hispanics show similar patterns to those of prior research such as that of O’Hara (1987) who suggests African Americans & Hispanics have more similarities to markets in lesser developed nations; the research of Alden, Steenfamp, and Batra (1999) who posited that most global brand findings are based on cross-national samples and that the global brand effect is particularly strong in less developed countries, and the research of Darley & Johnson (1993) who presented that African American marketplace behavior and attitudes toward advertising reflect those observed in less developed countries in Africa and Asia, including more positive attitude towards globalization. Furthermore, Dimofte, Johansoon, Bagozzi (2010), states, “U.S. consumers tend to be more diverse than in most mature market economies, with large ethnic-based market segments”, thus enabling Dimofte, Johansoon & Bagozzi (2010) to identify potential differences between Caucasian Americans and ethnic minority market segments. 

Dimofte, Johansoon, & Bagozzi (2010), understanding the complex issues with gathering, organizing, defining, and measuring global brand research, admits that research on global brands is more limited (Keller, 2007). Minority groups are young on average than the rest of the U.S. population and thus are more attractive to marketers (Dimofte, Johansoon, & Bagozzi 2010). Further, O’Hara (1987) & Pitts et al. (1989) as cited by Dimofte, Johansoon, & Bagozzi (2010) states that African American segment has long been of special interest to marketers, with products adapted for their special needs, especially in cosmetics, personal care products, food, and print media.

Dimofte, Johansoon, & Bagozzi (2010) indicates that it is generally accepted that consumption behavior, especially a conspicuous brand choice, is to some extent reflective of individual identity and social aspirations, thus, choice of brand especially for product categories with social visibility, constitutes an expression of identity and achievement, or, in other words, self-expressive markers and identity forgers considering global-brands are well-known and widely recognized, which thus makes them more adept and effective at service a social function. Overall, Dimofte, Johansoon, & Bagozzi (2010) summarizes African American and Hispanics generally favored globalization; Caucasians did not think that global brands had higher quality, but Caucasians did feel global brands had consistent quality; African Americans and Hispanics perceive the prices of global brands as higher, but all three groups show a cognitive consistency that global brand is a relevant attribute, and that African Americans and Hispanics favor higher quality although the sale of higher quality goods are best marketed when the aspiration-factor is implied and not emphasized.

Arora & Wu (2012) conducted a study that researched how positive and negative stereotypes were found to impact ad-evoked feeling and brand equity, by theorizing that stereotypes through print advertising generates Customized Communication Incongruity. The results of the study conducted by Arora & Wu (2012) concluded that for positive stereotypes, both males and females prefer positive stereotypes, and positive stereotypes influenced ad-evoked feelings that influenced brand equity for both genders. Further, the Arora & Wu (2012) study concluded that brand loyalty and perceived quality dimensions of consumer-based brand equity were not significantly impacted by negative ad-evoked feelings, with males more agreeable of negative stereotype advertising than females, but both genders still generated negative ad-evoked feelings. The simplest way to summarize Arora & Wu’s (2012) theory of Customized Communication Incongruity, is when an individual sees an advertising that results in a mismatch or distortion of values or expectations. Thus, their study relating to racial stereotype-based advertising is meant to study how people react to media that is arguably stereotypical, and whether this response has effects on brand-value.

The Customized Communication Incongruity Theory by Arora & Wu (2012) builds off schema-based research provided Leoff (2002) who suggested that ads that do no match advertising expectations are more likely to draw consumers’ attention and proceed more extensively than ads that match advertising expectations, thus providing a way for brands to stand out. Advertisers have a strong influence on shaping consumer perceptions as advertisements can either help eradicate the negative perceptions of African Americans, or they can facilitate pervasive stereotypes, which may increase racism (Arora & Wu, 2012). In other words, ad campaigns that break stereotypes can spur continued interests. Arora & Wu (2012) cited Stevenson & Swayne (2011) whose research suggested that as of the late 90s, there were a small percentage of black models used in in magazine advertisements when compared to the general population. Further, Arora & Wu (2012) cites Cohen & Garcia (2005) who suggested that application of negative stereotypes of a racial group, with media as a reinforcement tool, brings discrimination and stigmatizations to the front, and media when based on stereotypes can have adverse effects to self-esteem, self-efficacy, and even level of achievements.

Fortenberry & McGoldrick (2011) conducted a study on outdoor advertising regarding African Americans and found that there are differences between white and black consumers’ receptiveness to outdoor billboard advertising. These differences are highly significant across each of the items within the scale of receptiveness, measuring awareness, influence on patronage, information conveyance, and overall attitude toward the medium. The receptiveness difference is at least in part a function of education and income, and the differences lose their significance only at the highest levels of both. Maybe surprisingly, the affluent black consumers without college education show higher levels of receptiveness (Fortenberry & McGoldrick 2011).

Yet, Fortenberry & McGoldrick (2011) cites Ward’s (1987) socialization theory, in order to find reasons for why college-educated affluent blacks mimic less receptiveness to billboards similar to that of their white counterparts and concluded that education socializes people to be more critical away from family and personal social bonds, and that the increased income generated by furthering education helps people migrate to areas where billboard advertising isn’t as common or accepted. Lastly, Fortenberry & McGoldrick (2011) cites Morris (1993) and Yoon (1995) who summarized that Black Americans demonstrated a greater degree of openness in discussing the influence of billboards within their society and supported the views that they have strong interest in material possessions.

Yuki Fujikoa (1999) conducted a study to show the effects of vicarious contact via television on stereotypes of African Americans among White and Japanese college students, in which the study provided some evidence that television messages had a significant impact on viewers’ perceptions when first-hand information was lacking. The study suggests that perceived positive portrayals of African Americans on television are effective in reducing negativity (Fujikoa 1999). It is more effective to reduce negative stereotypes of African Americans when we interact with many different African Americans who display counter-stereotypical behavior than when we interact with intimate African American friends (Fujikoa 1999). Since television can show a variety of positive African American models to a relatively large audience, television seems to have a great potential for stereotype reduction. Fujikoa (1999) cites Berg (1990) who stated that stereotypes are not necessarily negative, but they can destructive or bad when used by the dominant group to underscore majority-minority differences or to make some other (e.g. ethnic minority) groups inferior. Further, Fujikoa (1999) cites Berg (1990) who stated that interracial contact helps develop a mutual relationship between members of the two ethnic groups (e.g. White and African Americans), and we may expect an improvement in racial attitudes.

VI. African Americans in the Supply Chain & the need for Strategic Alliances or Joint Ventures

To develop insights into how a black supply chain would look like, we must first see which industries employ large numbers of African Americans, and then select a specific industry to go further. Regarding industry participation, more than half of the 106,566 African-American (AA) owned employer firms (67,665 or 63.5 %) participate in only 5 of the 22 major North American Industry Classification System (NAICS) sectors: (1) Health Care/Social Assistance, (2) Professional/Scientific/Technical Services, (3) Retail Trade, (4) Administrative Support/Waste Management, and (5) Construction. This leaves fewer than 40 % (36.5 %) of these firms in the remaining 17 industry classifications” (Rueben & Queen 2015). Further, according to Rueben & Queen (2015) stated that while critics will contend that this revenue disparity between African American business owners and other groups is due significantly to the type of industry in which most African-American business owners participate (lower earning, labor-intensive sectors versus higher earning, capital-intensive sectors), this analysis does not support that contention. Although African-American business owners do not have high participation rates in manufacturing and utilities sectors which are high yielding, capital-intensive industries, the highest industry sector participation for African-American businesses include 5 of the top 10 revenue generating industries for all firms (Rueben & Queen 2015).

Yet, to reiterate, Rueben & Queen (2015) more than half of the 106,566 African-American (AA) owned employer firms (67,665 or 63.5 %) participate in only 5 of the 22 major North American Industry Classification System (NAICS) sectors: (1) Health Care/Social Assistance, (2) Professional/Scientific/Technical Services, (3) Retail Trade, (4) Administrative Support/Waste Management, and (5) Construction, yet these 5 industries are included in the top 10 revenue generating industries for all firms.

Black Enterprise Research (2016), of the organization Black Enterprise, which defines itself as a total media firm whose goal is providing premier business, investing, and wealth-building resources for African Americans, presented the following list of top-performing African-American firms.


Figure 1 – Black Enterprise Research List of Top African American Businesses by Revenue (2016)

According to the United States Census Bureau (2012) the North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for collecting, analyzing, and publishing statistical data related to the U.S. business economy. NAICS was developed under the auspices of the Office of Management and Budget (OMB), and adopted in 1997 to replace the Standard Industrial Classification (SIC) system (U.S. Census Bureau, 2012). NAICS codes from personal experience are important because from a government procurement standpoint, many solicitations are issued based on NAICS codes, so the more a firm has diverse NAICS codes, the more chance they have at being discovered by government contracting agencies, but also the higher possibility of the firm relating their company’s unique products of services to that of government issued solicitations. For example, while in the United States Air Force, while serving with the 325th Contracting Squadron at Tyndall Air Force, Florida, when soliciting for commercial items, equipment, commercial construction, IT products etc., I was required to find sources based on NAICS codes. If a firm didn’t have a NAICS code listed under their profile either in the Government-Point-of-Entry called Federal Business Opportunities or through another market research tool such as the Small Business Administration’s Dynamic Business Search (http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm), then than firm might be overlooked. 

A brief skim over the top twenty firms as provided by Black Enterprise Research (2016), it seems to align to the research provided by Rueben & Queen (2015) with Health Care/Social Assistance, Professional/Scientific/Technical Services, and Retail Trade (which I will caveat as including automotive parts sales and food services) being represented. Yet, from the view of any onlooker in this paper, there is something missing: there are no actual large name, visible brand names, or brand-name manufacturers on the list, i.e., Ford Motor Company, General Electric, Starbucks, etc.

This leads back to issues facing African-American firms such as (1) unequal access to capital markets and the prevalence of institutional barriers (Rueben & Queen, 2015), (2) issues of start-up capital, owner’s education level, and prior business experience (Fairlie & Robb, 8008 – as cited by Tang & Smith, 2013), and the reality of a historical treatment in which African-Americans entered the business arena when the United States was already on its way to de-industrialization and globalization, i.e., the cost and liability of being a large manufacturer were disadvantageous to African-Americans. So, it seems that African American firms are highly active either as suppliers within already established supply-chains that supplements larger manufacturers – either as multi-year contract suppliers through agreements with larger firms, or as stand-alone units that are smaller than more visible corporate entities such as Fortune 500 companies. African-American firms can generate profits, but as far as dominating markets in comparison with standard Fortune or S&P 500 firms, it seems that African-American firms are used by these firms to maintain smaller demographic specific markets (for example, Johnson and Johnson owing a firm that sells black hair-care products) or helping achieve their larger strategic-goals by making including them as suppliers within their supply-chains.

This insinuates that (1) winning long-term contracts with larger firms is vital and (2) overcoming capital-constraints and operating in a globalist reality is something that needs to be realized by Black business owners. The second statement, can be fulfilled either through government financing programs, such as grants, loans, or obtaining government contracts; private financing from large banks who have a goal of supporting minority-owned business; private financing through black-owned banks, such as Carver Federal Savings Bank (https://www.carverbank.com/), who theoretically can target or work with viable black-owned firms to issue credit for start-up firms or established firms while simultaneously expanding their reserves, and/or luring in foreign-direct investment through acceptable financial institutions, particularly in developing regions such as Africa in which the majority of black immigration to the United States are coming from.

Whitfield & Farrell (2010) conducted a study that suggested that African American executives were less likely to perceived constructive dimensions of organizational culture. Whitfield & Farrell (2010) references Gomez-Mejia & Palich (1999) who stated that a diversity inclusive corporate culture is said to improve innovation and adaptiveness in heterogeneous market segments faced by international companies, and Crook et al (2008) who stated that building diverse supply-chains is seen as an additional effective means of increasing a firm’s performance similar to employer diversity. Additionally, Whitfield & Farrell (2010) references the United States Small Business Association (2001) who stated that minority-owned businesses have been a growing segment of the U.S. economy, nearly doubling as a percentage of the economy from the mid-1990s to early 2000s, and Eroglu, Green Thornton, & Bellenger (2001) who stated that this growth has become a business necessity. 

Whitefield & Farrell (2010), concludes their research by stating, “There is some cause for optimism among these findings of perceptual differences. Between the non-minority buyers and the African American supplier CEOs the significant difference is that these suppliers see the buyer culture as less constructive. The African American CEOs see less passive defensiveness and less aggressive defensiveness than the buyers. For the African American, the views are different from Caucasians but not extreme or opposite. The Hispanic minority CEOs perceptions are more divergent from the perceptions of Caucasian buyers. For the Hispanic supplier CEOs, the buying organization culture appears defensive to cultural diversity.” In summary, regardless of what color the supplier or buyer is, when purchasing firms that are white-owned or black-owned, or for suppliers who are black-owned or white-owned, there is an easier framework to conduct business.

Selecting a specific industry and developing a specific-supply chain model for a firm is theoretical for this paper. Speaking for the need to implement standard Supply-Chain concepts such as Enterprise Resource Planning systems (SAP, Peoplesoft, Oracle), utilizing third-party logistic firms, speaking to supply-chain concepts such as Statistical Delivery rates or Quality control, or issues of warehousing, doesn’t necessarily offer coherent strategies for improving African-American firms. Instead, the research I have pulled insinuates that African-American firms are profitable yet tend to operate in the role of supplier to larger firms, considering the capital constraints are often to daunting to be an effective large scale manufacturer or conglomerate, and/or African-American firms tend to operate as stand-alone entities functioning within the larger economy and catering towards customers either on a non-exclusive first-come first-serve basis regarding their products (restaurants, logistics companies, healthcare services, or IT services), or operation on an exclusive-basis in which products or services are catered towards unique cultural taste such as barbershops, cosmetics, etc.

For African-American owned firm to reach economies-of-scale – considering the institutional barriers, capital constraints and business realities – strategies such as strategic alliances or joint-ventures between African-American owned firms could be implemented to join forces thus facilitate maximizing economies-of-scale. This strategy could reconcile the realities of the modern American business environment which is defined by expensive labor costs, the potentiality of collective-bargaining or unionism, and free-trade in a globalist reality. By developing strategic alliances or joint-ventures between African-African firms, even if firms are unrelated to each other as far as the products or services they offer, this could help pool human and financial capital, limit tactic knowledge, facilitate mutual marketing of each other’s products, etc. Essentially, since African-Americans were introduced to the free-market of the mid-to-late twentieth century, when being a stand-alone manufacturer was becoming a more daunting task, African-American firms can combine forces, under single incorporation, in order to have more a visible and real impact on the economy. Former separate CEOs could then serve as board-members and by pooling together each other’s profitability under one roof this could help this theoretical firm get public financing which would then create more capital to expand into Afro-centric markets but also markets that aren’t racially exclusive. This compounding effect would not only have a social effect on the general public because people would be able to associate a large-scale firm with African-American success but could help create capital that could be targeted on innovation that would otherwise be non-existent if firms operated as stand-alone units.

For African American firms to reach the level of profitability that can have a global effect but also a community-empowering effect, the goal must be about winning a competitive advantage. A firm has a competitive advantage when it can create more economic value than rival firms (Barney & Hesterly, 2013, p 8). In addition, Barney & Hesterly (2013) states that competitive advantage is when a firm creates more economic value than rival firms, and economic value is simply the difference between the perceived benefits gained by a customer that purchases a firm’s products or services and that full economic cost of these products of services. In order words, the customer must think a product or service has more value (Benefits > Cost = Value) than that of competitors, but the firm is liable of sustaining this perception of higher value by providing quality services or products.

To achieve competitive advantages, not at the expense of other Black-owned businesses, African American firms may benefit through strategic alliances, joint-ventures, or the Japanese concept called Keiretsu.  In a joint venture, the companies start and invest in a new company that is jointly owned by both parent companies (Marzec, 2016). A strategic alliance is a legal agreement between two or more companies to share access to their technology, trademarks, or other assets. A strategic alliance does not create a new company (Marzec, 2016).

Regarding the concept of Keiretsu, Minor, Patrick, & Wu (1995) referenced both The Economist (1991) which stated that the most inclusive definition for keiretsu is that they are families of firms with interlocking stakes in one another, and Cohen (1985) who stated that keiretsu were encouraged by guidance, tax incentives, financial guarantees, direct subsidies, and protection from foreign competition. Further, Minor, Patrick, & Wu (1995) explains that keiretsu were the descendants of the pre-war zaibatsu, which were vast mining-to-manufacturing conglomerates based on the banking system, but the zaibatsu were disbanded, yet restriction on cross-shareholding were lifted; One of the unique aspects of keiretsu is that from 20 per cent to 40 per cent of stock is owned by member companies of its own keiretsu, and 60-80 per cent of the keiretsu stock is never traded; Horizontal, or bank-centered, keiretsu bring companies together to work on long-term projects that would be financially impossible for a single firm. These projects often turn out to be highly profitable because foreign competitors cannot take advantage of such partnerships where antitrust laws are more stringent (Boarman, 1993), and the vertical, or supplier keiretsu, forms when major manufacturers, such as an automobile maker or manufacturer of household electrical appliances, contract with suppliers for sole sourcing in exchange for production agreements excluding other buyers. Japan’s keiretsu, Korea’s chaebol, and Mexico’s grupos have played an important role in their countries’ development since the Second World War. These industrial conglomerates, bound by family ties, long-standing friendships, common ownerships and interlocking directories, and closely allied with their national governments, have spawned and linked industrial clusters in agriculture, minerals, basic industry and manufacturing – raising national productivity and their nation’s international competitiveness (Minor, Patrick & Wu, 1991).

Regardless of the organizational structure of Black-owned firms there always needs to be an emphasis on quality. High-quality goods and services can provide an organization with a competitive advantage (Evans & Lindsay, 2014, p 4). Further, Evans & Lindsay (2014) summarizes the Three Gurus of Quality Management – Deming, Juran, and Crosby – by saying, “Despite their significant differences to implementing organizational change, the philosophies of Deming, Juran, and Crosby are more alike than different. Each view quality as imperative in the future competitiveness in global markets; makes top management commitment an absolute necessity; demonstrates that quality management practices will save, not cost money; places responsibility for quality on management, not workers; stresses the need for continuous, never-ending improvement; acknowledges the importance of the customer and strong management/worker partnerships; and recognizes the need for the difficulties associated with change the organizational culture” (p. 64). 

Many of the African American firms on the Black Enterprise Research list, such as automotive parts suppliers, can be defined as contract manufacturers. According to Evans & Lindsey (2014) a contract manufacturer is an organization that performs manufacturing and/or purchasing and/or pushing need to produce a product or device not for itself, but as a service to another (Evans & Lindsay, 2014, p 43). This segment could be a good test to try out a strategic alliance, or, on a grander scale, a Keiretsu. Yet, in my own research, in I attempted to build an Excel spreadsheet based on the Black Enterprise Research (2016), to organize the data to find similar African American owned automotive part businesses. I did online searches into the businesses and conducted System for Award Management searches of the particular businesses’ registration and NAICS codes, but I felt the data of Black Enterprise Research (2016) wasn’t that viable for my model, however, it is valuable for basic information purposes.

As a result, I decided to propose an idea about what a black-owned Keiretsu in the brewing industry would look like. So, let’s talk about beer and wine – a favorite subject to many, even though there are other far more intensive fields (engineering, sciences, technology, high finances) that could have an impact, yet, I don’t have the technical acumen on these subjects, so any suggestions would be theoretical.

Brewers Association (2017) conducted a study that was based on two national surveys conducted by the Brewers Association on two national surveys: the annual Beer Industry Production Survey (BIPS) and the Brewery Operations Benchmarking Survey (BOS). The Craft Brewing Industry Contributed $67.8 Billion to the U.S. Economy in 2016, more than 456,000 Jobs

Small and independent American craft brewers contributed $67.8 billion to the U.S. economy in 2016. The figure is derived from the total impact of beer brewed by craft brewers as it moves through the three-tier system (breweries, wholesalers and retailers), as well as all non-beer products like food and merchandise that brewpub restaurants and brewery taprooms sell. The industry also provided more than 456,000 full-time equivalent jobs, with more than 128,000 jobs directly at breweries and brewpubs, including serving staff at brewpubs (Brewers Association, 2017).

Mark Snider (2016) of the USA Today did an article about the advancement of African Americans in craft brewing. Snider (2016) interviewed Kevin Blodger, of the Brewers Association, who chairs a diversity association at the organization, who stated, “While the numbers aren’t huge, I think there are more people of color starting to own breweries, work at breweries and be part of breweries. – there is not much advertising budget. It is a word of mouth thing, and if you look at the people that were originally involved in craft beer, it was white men. And we tend to associate with people that look like us.” Appealing to minorities will help sustain craft beer’s double-digit growth, which for several years has outpaced the comparatively flat overall U.S. beer market. Sales of craft beer rose 10%, or $23.5 billion, in 2016, amounting to a 21.9% share of the total market, the association says (Snider, 2016). Further, more blacks are imbibing craft beer. In 2016, African Americans made up 12% of weekly craft beer drinkers, up from 10% the year before, according to the Yankelovich Monitor survey (Snider, 2016). Interesting in the same article by Snider (2016), Garrett Oliver, an African American brew-master at the Brooklyn Brewery, stated, “why is craft brewing such a monoculture?”, yet, in the same article, Mark and Sharon Ridely – African American owners of Brass Tap Brewery (in predominately black Prince George County, Maryland – states that their brewery attracts a majority of out-of-town white customers from the nearby convention center but they do see a good minority population.

I personally feel that this all goes back to my argument of a “culture trap”. The overall culture of African Americans has not been exposed to the potential profitability of the craft-beer market. So, Mr. Garrett’s frustration might not be a systemic issue as far as blatant discrimination or disallowing black beer-brands, but more so traditional marketing towards African Americans has led them away from the industry. This possibility is both an internal and external issue that cannot be easily boiled down as discrimination, considering consumers are largely responsible for driving sales.  Essentially, if they don’t know, they simply don’t know, or if it’s not popular – considering the arguments from researchers presented earlier in this paper – they may not choose to participate or buy craft-beers because it’s not seen as a status-symbol, etc.

Anheuser Busch InBev NV (AB InBev) is a Belgium-based company engaged in the brewers’ industry. The Company owns a portfolio of over 200 beer brands. The Company’s brand portfolio includes global brands, such as Budweiser, Corona and Stella Artois; international brands, including Beck’s, Leffe and Hoegaarden, and local champions, such as Bud Light, Skol, Brahma, Antarctica, Quilmes, Victoria, Modelo Especial, Michelob Ultra, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske, Cass and Jupiler. The Company’s soft drinks business consists of both its own production and agreements with PepsiCo related to bottling and distribution arrangements between its various subsidiaries and PepsiCo. Ambev, which is a subsidiary of the Company, is a PepsiCo bottler. Brands that are distributed under these agreements are Pepsi, 7UP and Gatorade (Reuters, n.d.).

After reading that last paragraph, it easy to see the sheer reach of AB InBev from shelf-space to what we see every single day, from daily sports games to major sporting events such as the Super Bowl, NASCAR, Stanley Cup, PGA master’s Tour, NBA Finals, etc. With rise of the Hispanic population in the United States – which a great thing that helps fulfill the American Dream – I have noticed a rise in beer sales catered towards Hispanic-Americans from Modelo, Pacifico, and Tecate. This is great, but I do notice that it might be another example of a missed opportunity for African-Americans who either assume themselves entirely to be represented within the larger context of society, or to simply not think that this market is for them. Owning a space within the beer industry can have a positive economic effect not only on the black community, largely considering that to many black leaders in urban communities that alcohol or other products are sold within the community by outsiders.

Yet, based on the example of Anheuser Busch InBev NV (AB InBev), the sheer scale of large corporations makes it harder for smaller businesses, i.e., corporations can prevent new entrants into markets with new entrants being a concept presented by Michael Porter (1979). The five forces of competition by Porter (1979) include (1) Threats of new entrants, (2) Bargaining power of suppliers, (3) Bargaining power of customers, (4) Threats of substitute products or services, and (5) Jockeying for position among current competitors in the industry under question. According to Porter (1979) the weaker the forces collectively, however, the greater the opportunity for superior performance. Further, Porter (1979) states, the seriousness of the threat of entry depends on the barriers present and on the reaction from existing competitors that entrants can expect.

If barriers to entry are high and newcomers can expect sharp retaliation from the entrenched competitors, obviously the newcomers will not pose a serious threat of entering (Porter, 1979). Regarding barriers of entry which relates to the threat of new entrants (which would be a consolidated black brewing business for my model), Porter (1979) provides six major sources for barrier of entry which are (1) Economies of Scale, (2) Product Differentiation, (3) Capital Requirements, (4) Cost disadvantages independent of size, (5) Access to distribution channels, and (6) Government Policy. Interestingly, the second major source for barriers of entry as provided by Porter (1979) which is Productive Differentiation relates to the beer industry, with Porter (1979) stating, it is perhaps the most important entry barrier in soft drinks, over-the-counter drugs, cosmetics, investment banking, and public accounting. To create high fences around their businesses, brewers couple brand identification with economies of scale in production, distribution, and marketing (Porter, 1979).

The Porter’s (1979) theory relates to the Tabb (1970) statement regarding African American businesses in which Tabb (1970) stated inability to access credit and limited access to capital as being a hindrances. Capital Requirements are Porter’s (1979) third major source of barrier to entry. Essentially, African American breweries must hurdle over larger firms’ brand-identification that is bolstered by their economies of scale, distribution, and marketing, but also African American firms need better access to capital. However, Porter’s (1979) sixth major source of barrier of entry which is Government Policy, might be to the advantage of African American owned firms (breweries within my example), by utilizing Equal Opportunity regulations under the Civil Rights Act to challenge practices in retailing such as “pay-to-play rules”, which can help African American firms fight for shelf space which is vital in brand identification. Further, Government Policy such as Small Business Administration loans might be an asset to minority ran businesses or breweries.

FIGURE 2 – Michael Porters (1979) Five Competitive Forces

Bray (2016) stated that shareholders of SABMiller and Anheuser-Busch InBev on Wednesday approved a deal valued at more than $100 billion to create a giant in the beer industry that would control some of the world’s best-known brands, including Budweiser, Corona, Hoegaarden, Leffe and Stella Artois. The takeover of SABMiller by its larger rival, Anheuser-Busch InBev, was approved by shareholders despite objections from some SABMiller investors. The combined company would account for 27 percent of beer sales worldwide and would have annual revenue of about $55 billion. The deal would also give Anheuser-Busch InBev, already the world’s largest brewer, a substantial operation in Africa, where it has little presence, and greater dominance in Latin America (Bray, 2016).

VII. Is the Japanese Keiretsu model appropriate for African American Breweries?

The beer market, as pertaining to African Americans could benefits from a Keiretsu model. If there are already large corporations – arguable white-owned – even though the intention of these large partnerships, strategic alliances, or corporations built on buyouts exists, then maybe African American owned breweries should join forces to compete. Imagine a scenario where black-owned breweries, self-made home-brewers (who could be outlets for market research by testing their beer directly with the public, friends, or even at church festivities), and bottlers came together, either by combining forces, by mergers and acquisitions thus alleviating Economics of Scale and possibility limitations to Capital Requirements as provided by Porter (1979), etc. On top of this, imagine these firms coordinating over warehousing space (which feeds into the supply-chain concept of Just-In-Time ordering and 3PLs – Third Party Logistic companies), entering into joint contracts with bottling companies where they could possibly get advantageous pricing for buying more volume, entering into future’s contracts with hops or grain suppliers, sharing workers from brewers or people in offices who do administration work, but, most importantly – yet, not essential – is all of this were coordinated through a black-owned bank who could issue loans and help expand reserves. Yet, even though I do feel this idea could work, yet, when regarding matters of black-owned banking as unifying factor to issue new debt or underwrite equity on the investment side of things, there are some concerns, which are presented below.

FIGURE 3 – Zaibatus vs Keiretsu by Yonekura (1985), cited by Grabowiecki (2012)

Grabowiecki (2019) provides information relating to keiretsu by mentioning that there are two types of keiretsu with the first being horizontal (Kinyu, i.e., financial based), non-hierarchical types (descending from prewar zaibatsu and generally associated with trading houses, e.g., Sogo Shosha), less tightly coordinated, which are connected by credit relations with a common bank and give preferential treatment to partners or joint ventures. Further Grabowiecki (2019) states that Vertical (Shihon, i.e., capital) keiretsu, on the other hand, are networks of subsidiaries operating within large corporations and subordinated to them by means of capital and long-term production-distribution relations (Grabowiecki, p. 182); has a pyramidal structure of shareholding and of personnel transfers (from core company to first-tier suppliers, from first-tier to second-tier, and so on) (Grabowiecki, p. 183) and clearly centralized executive managers (Grabowiecki, p. 186, para. 3).  

Further, Grabowiecki (2019) references Gerlach & Lincoln (2004) and Flath (2005) by stating where the vertical keiretsu operates within an industry, broadly defined, the horizontal keiretsu consists of firms from virtually every major industry in the economy, with especially strong representation in the key industries of the postwar high-growth period that was the era of its greatest strength (heavy industry, petrochemicals, materials processing, and banking and trading (p. 182). There are only six horizontal keiretsu which are Mitsui, Mitsubishi, Sumitomo, Fuji, Sanwa, and Dai-Ichi Kangyo (Grabowiecki, p. 182-183 who cites Lynn & Rao, 1995).

In other words, a horizontal keiretsu is a type of conglomerate or a large business who has their hands within many industries, sometimes unrelated industries, and the first firm, personally, that comes to mind is General Electric. General Electric has multiple business-lines ranging from traditional lighting, healthcare, aviation, power, and renewable energy. General Electric (GE) is an example of a firm pursuing an unrelated diversification strategy, in which Barney & Hesterly (2016) states that when less than seventy percent of a firm’s revenues are generated in a single-product market and when a firm’s businesses share few, if any, common attributes, then that firm is pursuing a strategy of unrelated corporate diversification.

Yet, since most African American owned breweries likely lack equity or the presence of underwritten shares (stock, bonds, commercial paper, notes, debentures), the concept of keiretsu, specifically that of a vertical capital driven type, would not work. However, the keiretsu precursor in the zaibatsu would. Keiretsu, formal joint ventures, and strategic alliances seem more in line with larger more established firms, but a “micro-zaibatsu” could prove promising.  Interestingly, a horizontal keiretsu on a micro-scale would work better where now separate African American owned breweries would form a “family”, zaibatsu, or “cartel”, set up a holding company in a state such as Delaware for tax-purposes, but the parent company would do coordination of operations, supplier relations, marketing, wholesaling, advertising, etc. The profits from retail would flow into in the holding company.

FIGURE 4 – Theoretical Model for African American Brewery Consolidation by Quinton Mitchell (author of this paper)

Sharon Nunn (2017) stated that the number of black-owned banks operating in the U.S. has been dropping steadily for the past 15 years and fell to 23 this year, the lowest level in recent history, according to the Federal Deposit Insurance Corp. That has left many African American communities short of access to capital and traditional financial services, according to some banking experts. The 2008 recession hit the black banking sector especially hard, and if the current rate of closures of about two a year, as well as the industry-wide reluctance or inability to start banks, continues, black-owned banks could disappear entirely within the next eight to 12 years. Such banks comprise just a sliver of the overall U.S. financial sector, with collective assets of $5.5 billion, versus $16.3 trillion in the industry overall (Nunn, 2017). Yet, Nicholas Lash, a professor at the Loyola University Chicago, emphasized the decline of black-owned banks as being slightly insignificant presented by Nunn (2017), stated, “Size-wise they’ve been small. – So, their total impact on black communities cannot be very, very large.”. I find these last set of statements interesting but true. Let’s be honest, most Black Americans bank at everyday – white, if you wish to call them that – banks, which is also indicative of how much embedded African-Americans are already into the standard way of American life, from student loans, mortgages, investment banking, credit cards, etc.

This further calls the argument for black separatism into question, with the largest argument being that African Americans are already…Americans embedded with in a system, as with many others regardless of group. Yet, like my argument about furthering strategic-alliances, joint-ventures, or, in my opinion of Keiretsu, it also seems that black-owned banks need to join forces considering the completing fact stated by Nunn (2017), which is, “A prolonged period of low interest rates and intense competition, as bigger banks slowly move into under-served areas, have combined to contribute to the black banking sector’s decline, even after the recession’s end.”

Tanasia Kenney (2016), of Atlanta Black Star, presented five black breweries: (1) Black Frog Brewery of Toledo, Ohio, founded by United States Armed Services veteran, Chris Harris – which has marketability across racial spectrums considering the military veteran status, [http://www.blackfrogbrewery.com/]; (2) Cajun Fire Brewing Company of New Orleans, [http://www.drinkcajunfire.com/home.html]; (3) Harlem Brewing Company, [http://www.harlembrewing.com/]; (4) Harlem  Blue Brewery [http://www.harlemblue.com], and (5) 18th Street Brewery of Gary, Indiana  [http://www.18thstreetbrewery.com/]. Further, as detailed by Snider (2018), there is Brass Trap Brewery of Prince George County, Maryland, the Brooklyn Brewery, and Baltimore’s Union Craft Brewery. In addition, there is a black-owned winery based out of the famous Napa Valley, California, called the Brown Estate.

Higgins, Toms, & Uddin (2016) presented a study into the British beer industry regarding the industry’s usage of tie-arrangements, and the effects of risks and allocation of surplus between brewer and tenant. Further, Higgin, Toms, & Uddin (2016) studied how the British employed a model in the 1990s that was defined by vertical integration controlled by larger brewers over estates of tenants or directly-manage pubs, where the manger is technically an employee of the brewer and is only salary but does not incur most of the risk, however, doesn’t benefit from most of the profits. Yet, this model was challenged by regulators and brewers had to divest portions of their “tied estates” aka pubs or retailers. The new model brought a hybrid-systems where tenants managed pubs and licensees were paid based on percentages of property owned and beer sales margins (Higgins, Toms & Uddin, 2016). In other words, pubs, and retailers instead of being direct fronts from brewers at the end of their value or supply chain, instead gained a level of autonomy, to win more profits, but also, they incurred more the possibility of risk which could hurt profits.

Hybrids facilitate cooperation and reduces transaction cost (Higgins, Toms, & Uddins, 2016). Long-term inter-dependencies and relations contracting occurs in hybrid contexts that are neither hierarchical nor purely market based; personal relationships, reputation, and trust can also be important and counteract the purely cost driven motives that might underpin network governance (Higgins, Toms, & Uddins, 2016). Lastly, Higgins, Toms & Uddins (2016) states that sharing human capital binds networks together and improves their performance, as does the products technical specifications, thereby creating process improvements, and product development opportunities.

Imagine if these companies somehow worked together, while simultaneously operating like a Keiretsu (entering mutual contracts as far as marketing, distribution, bottling, information sharing, and warehousing), but having their finances controlled – at least partially at first – by a black-owned bank. Imagine a beer and wine conglomerate called…John Henry Beverages Global, which is a beer conglomerate, founded by black entrepreneurs, with initial funding and underwriting performed by a black-bank with supplementary financing from traditional banks (Bank of America, J.P. Morgan Chase – who would only be willing to voucher for debt only after profitability forecast are shown – but who could benefit on assisting a minority firm). A collective of breweries who hold cross-shares in each other but is marketed as an all-inclusive beer and wine holdings group that caters to all Americans (marketing itself upon on the Black American experience that inspired the nation as a whole – i.e., the Legend of John Henry which has an aura of hard-work in the face of adversity). Additionally, products can be sold in emerging markets, such as Africa where in certain nations beer is popular and sports such as soccer has a large following which offers an advertising and sponsorship opportunity.

According to Maureen O’Hare (2017), Nigeria overtook Ireland as the world’s second largest Guinness market, and Cameroon is the fourth-biggest market for Guinness and the beer is also brewed in Kenya, Uganda, and Namibia. Africa, with its $13 billion beer market, is the biggest source of beer sales for the owners of Guinness, the British multinational Diageo.

VIII. Conclusion

            Labeling a business as black-owned is not a bad move at all, considering the historical plight against African Americans. For example, African Americans did not have fair voting rights for 77% of the time the USA has been an officially independent nation. Trans-Atlantic slavery existed from the late fifteen-hundreds to the late eighteen-hundreds. 1776 (though September 17, 1787 was the official signing of the Constitution) to 2020 is 244 years. 1776 to 1965 (the year the Civil Rights Act was signed) is 189 years. 189/244 is .7745 or 77.45%, meaning African Americans since a declaration of American independence did not have voting rights for almost 80% of the time we have been officially in existence. Yet, the first recorded African slaves were brought to Jamestown, Virginia in 1619 after being abducted from Angola (The History Channel, an A&E Network, 2020). 2020 from 1619 is 401 years and 1619 to 1965 is 346 years. 346/401 is .862 or 86.2%. Thus, for only 55 years since 1965 (my father was born in 1959), African Americans have been able to have a political say in the 401-year history of what we become the official United States of America. You can further add weight to these numbers/percentages by adding this following fact by O’Donnell (2019) who stated that by 1890, the top 1 percent of the U.S. population owned 51 percent of all wealth. The top 12 percent owned an astounding 86 percent. The lower 44 percent of U.S. population—almost half the country—owned just 1.2 percent (O’Donnell, 2019). The sheer weight of not having voting rights mixed with the sheer volume of wealth owned by a few white hands, and adding on additional European immigration (Hispanic included depending on how they identify) and brutal Jim Crow Laws has resulted in the African American community statistically being left behind, and, sadly social ostracized for it. Lastly, add the fact that African Americans since the 1900 to 1990 only made up 11.6 to 12.1% of the population, yet, in 1910 – the Jim Crow Era – 90% of African Americans lived in the American South (Bennet, Martin  & Debarros, 1993, Census.gov, p.2).  

Yet, even when facing the residual effects of the past which still lingers on, the ability for the African American community to incubate wealth and prosperity is a noble task which must be taken seriously, e.g., promoting self-confidence in academic environments which values African American history/achievement and continuing to support Civil Rights legislation over fair access to federal contracts, minority small business set-asides, and equal opportunity regarding employment/job recruitment. However, the black community must not only incubate wealth, but it must also have an open-economy model which continues to gain loyal consumers across racial lines, national boundaries, etc. The claims that segregation was better for African Americans might have some truth to it but the economic scale I would argue would always be limited with that approach.

IX. Annotated Bibliography

Arora, A. S., & Wu, J. (2012). How can you activate ‘incongruence’ in ‘customized communications’ through african-american stereotypes? measuring ‘customized communication incongruity’ in advertising. Journal of Marketing Development and Competitiveness, 6(5), 83-106. Retrieved from http://search.proquest.com.ezproxy.libproxy.db.erau.edu/docview/1316073349?accountid=27203

Bialik, K. (2018, February 22). 5 facts about blacks in the U.S. Retrieved April 29, 2018, from http://www.pewresearch.org/fact-tank/2018/02/22/5-facts-about-blacks-in-the-u-s/

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What is Trumponomics? A simple explanation

Too good to be true? A ticking time bomb? A brilliant strategy? Short term vs Long Term?

A scene from Do the Evolution by Pearl Jam with artwork by Todd McFarlane

Trump as a President reminds me of a not so iconic Ronald Reagan since Trumpism doesn’t permeate culturally throughout the nation, i.e., it’s not equated with culture, aesthetics, art, and lacks an ideology that Americans can look to as a model for replication (nuclear family, house, etc.). This gap is largely due to his polarizing nature but also the fact that he’s effectively an ‘online president’ thus his reach or impact is lost in the abyss of cyberspace, solipsism, etc. He also reminds me a bit of Gerald Ford yet he also reminds me of President Hoover who signed in the Smoot-Hartley Tarriff Act which may have played a strong role in global economy what led up to WW2 during the Depression.

Reaganomics for low taxes and regulations (x) Keynesian ideology, subsidies, etc. for government stimulus (x) Easy Money policy with low-interest credit to provide incentive for consumption (x) Protectionism on products to block foreign competition but also protectionism on labor via his immigration stance (x) Corporatism since the USA is dominated by multi-national corporations who can (a) Maximize economies-of-scale and (b) spread US economic hegemony by opening markets – which thus expands the military, i.e., trade needs defending – and generating transactions backed by the US dollar, i.e., propping up the US dollar around the globe.

I made the comparison in the past that it’s basically Nazi economics with despite the term National Socialist insinuating socialist, the Nazi regime were actually Cartel Capitalist, but they used the socialist term for political reasons when they absorbed a part of the militant branch of the remaining socialists who had broke away from the liberal party in Germany. The Nazis ran a state-subsidized capitalist economy ran by Industrialist Cartels and Commissars, who acted in the free market but were given directives from the Nazi Party when need be such as regarding price-controls. It was state-subsidized capitalism, or 3rd Way and 3rd position that mixed socialist ideas with corporatism and capitalism and in many ways this is what the USA did under FDR but the USA was able to use its Industrial capacity and resource wealth to decimate the Nazis with the help of Russian manpower and British support.

Yet, it lacks centralized control methods and communication mediums to make direct and quick managerial decisions. I’m not advocating for this because it would be frightening for the Executive to dictate the economy, but, in theory, the lack of direct communication to make real-time managerial decisions is an inhibitor. Trump has Twitter to bully businesses but doesn’t have for example an actual Enterprise Resource Planning System such as SAP to pull all the economic data and make a direct decision, particularly when it comes to the lower level smaller businesses impacted by some of his policies. Trump has been good for corporate America economically, but many businesses are socially opposed to Trump since they’re adopting diversity, sustainability, etc., at least in theory, not necessarily practice. Corporate America is already aligned to Globalism to create profits and despite an easier business environment (cheap credit, low taxes, cheap energy, lack of pollution standards, etc.), the Trade War seems to have been a kink in their long-term growth plans. Plans which are arguably not purely business in nature but also socio-political, i.e., spreading business to spread America democracy such as policies dictated by think-tanks such as the Council for Foreign Relations, Trilateral Commission, Council of Americas, etc. Trumponomics also disrupted supply-chains, yet, in a good way, from both an economic diversification standpoint and that of national defense, since this has driven production from China and diversified supply chains to places such as Vietnam, India, Bangladesh, Mexico, etc.

Easiest way to understand the economy is to think of a Trinity or Triangle. Treasury issues an insane number of IOUs and bonds, i.e., it creates credit for itself. The Fed buys a lot of those bonds for its portfolio which it can sit on and wait for them to mature, sell to other buyers like other Central banks, etc. The Fed triggers the mints to print cash if necessary by monitoring economic health and making decisions at FOMC (Federal Open Market Committee meetings) regarding the Money Supply and uses “knobs” to “adjust” the flow of money such as the federal funds rate (rate at which banks issue uncollateralized loans to each other in overnight markets), discount window (rate at which the Central bank charges banks who take out loans from it and banks must put down collateral if they borrow from the Fed, i.e., discount rate, base rate, repo rate, e.g., the repo market. It’s as if the Fed is a Pawn Shop but banks turn in loans or securities but come back and purchase them when they have the cash to pay. Note: spikes in the overnight lending rates often indicates a problem, i.e., lack of liquidity in banks such as the cash the vanished during the subprime mortgage crisis), reserve requirements (the amount of cash banks have to keep in their vaults), and the prime rate (the rate put on loans given to borrowers, i.e., the public). The banks get that cash, loan it, make profit on interest. The money loaned is injected into the economy, spent, taxed. Taxes go to the government and the government pays its bond holders when Treasuries mature which loops back to the Federal Reserve. The cash throughout this process that was created is given life, is definitized, etc.

Fascist symbols in the US Congress.

The USA as a 3rd Way economy is a type of fascist model of economics regardless who is in power. It’s effectively state-subsidized corporatism ran by industrialist and the Federal Reserve who controls the cash, which is something that the National Socialist did in Germany. Yet, Trumponomics isn’t as organized considering it doesn’t seem to have councils of industry or Commissars over a given industry in organized bodies that report to him and he doesn’t really employ price-controls or mandates, yet, when it comes to his tariff policy such as that on steel, in a way he’s propping up, i.e., fixing prices for certain commodities. In a less scary way, Trumponomics might be equated with German Ordoliberalism though Trump isn’t organized enough as far as having a relationship between unions and trade schools to educate the works for the 21st century economy, particularly with his general theory of bring back jobs to the United States. Germany’s economy and Trumponomics have a lot in common but in Germany they have an educational system that facilitates the subsidized protected market-capitalist economy. In Germany which in high school you’re trained to essentially go directly to work for the big companies such as Bayer, Mercedes, Thyssen Krupp, etc. Trump’s notion of picking up an industrial city in China and landing it back in the Midwest with all the issues of pollution, toxicity, smog, slumping wages, etc., is naive in 2020 onward. Repatriation of manufacturing is important but a bit nostalgic and a little illogical. For example, the higher labor costs of the USA would mean manufacturing would have to automate and instead of direct manufacturing jobs, a nation such as USA which is advance would have to invest more in technician training, engineering, etc.

https://newrepublic.com/article/145331/art-laffer-intellectual-rot-republican-party.
Source. Art Laffer and the Intellectual Rot of the Republican Party
The godfather of supply-side economics and inventor of the “Laffer Curve” is largely discredited by his peers, but revered by Trump and the GOP.
By Jeet Heer
October 18, 2017

Trumponomics is a mix of Reaganomics particularly the ideas of Arthur Laffer, associated with Pepperdine University, who theorized that lowering the tax rates drastically would be able to generate an ample amount of revenues based on growth, consumption, and transactions. Easy. The more you spend at lower rates you can make just as much as if you spend less at higher rates. Yet, this requires a culture of avarice, materialism, consumption, and petty competition. This lower tax rate in theory can cause a repatriation of American money stashed in foreign banks, boost conspicuous consumption, encourage investing in equities but also in real estate and possibly improve the chances for mergers & acquisitions to maximize economies-of-scale in business. Yet, the money coming back doesn’t necessarily make it to the people or small businesses but is injected into stocks which are taxed at a lower capital gains rate as compared to income tax rate, thus the rich get richer without the benefits of trickle-down economics. Art Laffer despite what low taxes does believe you need taxes. His spin is that you can’t a nation into prosperity, which sounds logical, but it negates the fact that even as wealth arises in the Milton Friedman sense of “a rising tide rises all ships”, it doesn’t factor into account things such as the possible burden of inflation on the general public, wealth disparity, wealth hording, etc. Consumption is also highly wasteful and horrible for the environment. Further, it doesn’t resolve issues such as price gouging such as the steadily increasing cost of healthcare or prescription drugs for no reason besides profit, mark up, and middle men.

Then you add to this idea the overarching economic theory of Keynesianism which is an ideology developed by John Maynard Keynes after WW2 who theorized that states can create demand by making credit and central banks balance the money supply with actual productivity in the economy in order to curb inflation which is when the money supply exceeds demand. Inflation is just that. When you have too many dollars (think of them as bills of credit, or chunks of a massive US credit card in the form of paper dollars) is in circulation but they’re not being utilized, they simply don’t go to the burner, but they’re already booked against that “account” of the nation, thus the money supply raises or absorbs into prices. Inflation is an inevitability so it’s about jugging growth and the volume of money so the range between the two stays stable. Think of money like water and what you pay for as something that floats. Too much money and too little growth to work those dollars into existence, i.e., give them value, then water rises and in a worst-case scenario can spill over.

The value of money is a complicated thing. Value is part perception based on the mind alone but it’s also what generates as supply and demand work themselves out. The value of money to me could bu summarized as 1) perception 2) volume, i.e., supply 3) productivity of the nation 4) demand 5) liabilities and debts and 6) the underlying value of assets of the nation as a whole such as land, resources, precious metal reserves, etc.

Regardless, Trumponomics adds to the Reagan/Laffer idea of lower taxation with Keynesian deficit-spending to help facilitate growth in the overall economy. So, Donald Trump isn’t Anti-Federal Reserve because they control the money supply and he’s not a true conservative as far as cutting federal spending, or at least cutting federal spending that isn’t from social welfare programs. For example, he’s added on more than 100 billion to the already $600+ billion Defense Budget.  

John Maynard Keynes

Trumponomics could be best understood as steroid capitalism with tariffs. Low taxes for growth, a low-interest credit card for growth, and tariffs to stimulate domestic industry (though, labor costs and regulations are much higher in the USA).

The only issue with Trump’s view on Monetary Policy is that since the 2008 Financial Crisis the Federal Reserve has injected billions, if not trillions, of dollars into the financial system since the money we thought was there prior to the collapse, simply vanished and caused a ripple effect throughout global markets. With so much money in circulation that was effectively made from thin air (well, really, they were printed by holding Treasury bonds and notes as collateral) the Federal Reserve must monitor inflation by reviewing economic growth, job numbers, etc. Essentially, ensuring growth doesn’t slump too much with so much excess capital. This why things seemed so anemic under Obama. It was a slow crawl out of that mess. It wasn’t his fault that from Alan Greenspan in the 1990s under the Clinton Administration and the poor fiscal policies of the Bush Administration. Yet, when the Fed engaged the economy in 2008 and 2009, they were able to use Quantitative Easing to essentially create a simulation economy with printed money & manipulated lower rates into order to keep our economy running with accessible liquidity and cash, but an incentive to use that cash without much penalty.

I was obsessed with understanding what went wrong in 2008 and 2009. I use to own this copy of Ben Bernanke as Times Person of the Year. He implemented Quantitative Easing by holding excess IOUs from the Treasury to trigger the mints to print cash and with low interest rates. This basically made a simulation economy to make things seem better while growth restored to catch up to the money supply over a decade. Now the Fed wants to raise rates to reconcile this era but Trump wants low rates for his economy and economic record.

By the time Obama left, a lot of the Feds work was paying off with the economy recovering, but Trump came in as it was rebounding and took the credit for it, however, granted he did inject a massive steroid shot into the economy. Yet, arguably it could be considered he injected steroids into a marathon runner who just had a heart attack and the stress of speculative growth could cause it to pass out, i.e., have a recession.

Donald Trump using Twitter has often antagonized the Federal Reserve, likely appealing to the Tea Party Ron Paul Anti-Fed crowd he absorbed, to get the Fed to do the things that Tea Partiers state they dislike, which is printing money. Yet, the Tea Party’s “Gold Standard” ideas is archaic since there’s not enough gold to meet the demand of massive global liabilities, credit, etc. Trump wants lower interest rates, so credit stays cheap and even chimed in on the idea of having negative interests’ rates, which means you’d be taxed for savings but rewarded for taking loans. This money for nothing and tricks for free (Dire Straits reference) type of economics can have a negative effect particularly when it comes to the valuation of stocks. For example, the Fed “prints” money (holds bonds as collateral and chimes the mints to print), that goes to banks, but banks must loan that money, but they typically loan it in massive loans to corporations. Corporations in turn use accounting tricks to book the loan as an asset rather than liability, so their accounting statements makes them look better off than what they are, and this bloats their stock price, which continually bloated by the nature of speculation by traders on the floor hunting for commissions. Or, companies waste the cheap credit by giving large CEO compensation packages, attempt poor acquisitions, or they invest in assets such as real estate, but real estate prices can implode. So companies do the right thing such as investing in capital equipment upgrades, or pay of their current “credit card” with another low interest credit card.

A major problem of “Money for Nothing” economics is that it promotes “Poser Capitalism” in that companies that should be closed or bought out can sustain themselves on credit rather than take away profits (not to be confused with EBITA. Earnings Before Taxes, Interests, Taxes, and Amortization). Yet, what happens if they can’t even pay their principal back because they’re not profitable? There’s been major credit downgrades in the corporate bonds market because even if with cheap external credit, companies still are issuing corporate bonds, but many are rated as junk. This phenomenon is called “Zombie Companies”. Things look nice and feel nice largely on speculation, but the numbers aren’t as great as what they seem.

Yet despite some concerns in corporate bond markets, everything seems OK in this field, but we’ll see. We’ll see.
Greed is Good, Milton Friedman

Regardless, the last major factor of Trumponomics is that is an experiment since he is using Protectionism with tariffs. This is logical on a paper. If you’re going to implement tariffs you need to do as much as possible to boost growth in other ways such as slashing taxes, cutting energy regulations for cheap energy, and continuing federal spending. Essentially, Trump has hedged his bet on bringing jobs back to America by making a pro-business pro-growth policy at home. The overall issue with his fiscal policies and his view of Monetary policy is that we’re spending more than what we make but also the cost of living is ticking upwards naturally due to inflation. The US right now seems to be undergoing a type of “passive inflation”. The money is out there but not really in the pockets of the people but since the money is in existence and not being used properly that inflation ticks up, slowly, but surely. You can’t hide the fact that X amount of bonds are attached to X amount of excess dollars in circulation. They’re on the books. So, while the majority of capital is in the hands of corporations and thus their majority investors, that cash not in circulation, is sitting there, slowly ticking on inflation, but inflation is trickled to the average American via Cost of Living Increases, higher prices (also due to tariffs in theory), etc. The average Americans are likely paying a higher effective tax rate in proportion to income to that of the rich but also paying a slow inflation tax. In addition, they’re priced out of the marketplace when it comes to stocks.

Low interest rates are great but not always responsible in the long run. The worst case scenario that we may face if things due ever hit a recession again is that the Fed can hold on to the leverage it has currently such as the bonds from the Recession era it hasn’t off-loaded, but the Fed won’t have many tricks to again besides negative rates or potentially lower reserve requirements mandatory for banks (keeping more cash in circulation). I fear that we might go to a type of 1970s Inflation Era which will only be curbed by massive interest rate hikes such as that done by Paul Volker in the early 80s, or we might enter the Japanese Lost Decade. An era where all tricks have been used but there’s an excess of debt and excessive printed cash that prices goes up and growth stays anemic lows. Yet, the funny thing about recessions is that by the time the general public notices them is that recessions may already be on their way of being over with. Further, there’s “different” types of inflation such as earnings recessions as opposed to industry recessions, i.e., companies not making as much money as what was projected versus a specific industry taking a massive hit. Recessions are often triggered by large “strikes” to economy such as what went down in the Tech Bubble of the late 90s, Housing Crisis of the late 2000s, the rampant spending of Reagan after the Cold War, or the Inflationary Era of the 1970s as the USA adjusted to the dropping of the gold standard, high war spending in Vietnam, and the Oil Crisis when Saudi Arabia protested Israel. The general rule of thumb on Recessions is that they also tend to appear every nine years or so, meaning that if 2009 was a Recession then we should’ve been in one by 2018 but…we had Trumponomics to divert it with his steroid package but it doesn’t mean the internal issues aren’t there, aka, it has been kicked down the road. I don’t want a Recession, though they can afford good buying opportunities particularly since equities are expensive, but I can predict a recession happening sometime after the 2020 election. If Trump wins it will be kicked down the road but something will likely explode such as a Corporate Debt bubble and he won’t’ be able to run, or Democrats will win and on perception alone (not even economics) people (rich people) will make a run on market (Cayman Islands, Switzerland, pillow money).

Gerald Ford’s Whip Inflation Campaign

The one way to reconcile any sort of issues with Trumponomics would’ve been to have done a direct Quantitative Easing to the public, i.e., give the people money to spend by crediting money into people’s accounts based on income, dependents, and liabilities, so Americans spend that cash to stimulate economies, pay off debt, but then likely take out more debt for lifestyle upgrades (homes, cars) at higher interest rates so banks stay healthy. Additionally, a higher tax rate is needed to fulfill bond obligation, pay down federal debts that are interdepartmental debts (money other departments own each other), and reduce the tax burden on majority of Americans, i.e., the 95% who spend money everyday in ways based on their individual choices which thus aligns with the capitalist concept of creative destruction and supply and demand. The middle class is better essentially as spending money than the rich and they often are better at selecting products which meets their desires and demands, which thus translates into the actual winners versus posers in the stock market. Then a reasonable higher interest rate policy while things are still healthy is probably needed.

A theory on how to fix the Student Loan Situation or the Debt Burden without direct-taxes. The Federal Reserve: What the elites, banks, corporations, and stock market don’t want us to think about by Quinton Mitchell

I could be wrong but a guy can dream or theorize.

Print money. Force banks to credit it into peoples accounts. People will pay down their debt or blow that money buying things or invest in themselves. Or, print money and directly pay the student loan companies. The Treasury and IRS on the preceding year’s tax return will have a section where people declare their actual debts, and then the Treasury calculates their “credit” based on debt-to-income ratio, the Cost of Living Adjustments for the area they live, number of dependents, and even special perks such as veteran, disabled veterans, etc., statuses. Everyone will pay higher prices over time through inflation, collectively. For an ad hoc analogy, would you rather pay 2.25 for a simple candy bar and be debt free now, or still be debt ridden and pay for a candy bar that’s around the same price today at 1.99? Whenever an “old timer” uses that “back in my day” analogy, what they don’t mention is they do notice the price increase, sure, but the relative price of everything went up, so they don’t really notice.

Whenever the Democrat candidates talk about free education or cancelling student loan debt, I’m down for that, but the issue is they’re talking about taxation and new entitlement programs. This is fine and general polling suggests that people are for this, but wants and reality, especially regarding our still massive lobbying industry is the issue. Sure, we can definitely pay for these, such as for example, by cutting and capping the Defense Budget, yet, the Military Industrial Complex is an ecosystem, not explicitly a few major prime contractors. The M.I.C. is small businesses, medium businesses, independent contractors, suppliers, the works. From uniforms made in a factory in Vermont, to IT services, to food vendors at every cafeteria on every base for enlisted troops, to barbers, office supplies, extension campuses of universities that provide education to troops, major construction firms and their smaller subs, all the apartments and houses near bases, etc. As far as the pricing structure of college as is, it was largely the government that helped drive up prices by subsidizing it, but also pure waste and greed by administrators, not to mention poor inefficiencies in how colleges operate, such as having small private expensive schools not merging into comprehensive university systems and/or running efficient endowment portfolios. Not to mention the fact that private business gets an easy ride when it comes to labor since they have no overhead in the game. Candidates are forced by hiring criteria to go to school, just to complete in a competitive global, yes, global economy. Unlike the Mike Rowe psy-op, not everyone can simply got trade skills, and I have a theory (jokingly) is that the reason why people have some many tattoos, is because so many people didn’t go to college and because tattoo artists, or we have so many “funky” hairdos is because everyone is a hair stylist (these are cool professions – not hating). Lowering hiring criteria by companies; merging smaller schools; increasing the quality of a high school diplomas so it’s an equivalent to an associates degree, etc., would help. YET… we have a trillion dollars of existing student loans with no bailout protection. We can either 1) Tax the rich or 2) Print Money and charge everyone inflation – the rich included – over time.

Regardless, this bailout of the people, a peoples’ QE (Quantitative Easing) already should’ve happened, because if the US economy ever hits recession again (with some saying we’re beyond the 9 year average, so we’re due), then the Federal Reserve won’t have many tools to use (despite, negative interest rates as is the case in the EU, and/or, continuing to hold onto Treasury bonds), and of course big business will get bailed out (it’s basically in the US Auto Industry’s soul to do this). The people will get boned, still pay taxes, still pay inflation, conservatives will blame immigrants, liberals will blame rich people, but everyone will suffer from increased unemployment (all in a nation Since banks will see a loss as people pay off credit card, auto loan, mortgages, student loans, medical loans, etc., the banks can be recouped by a future interest rate hike and/or higher taxes on the rich and corporations, i.e., the banks make money eventually, but the “Free Money” theory would help clean the slate so we can all move forward. Banks might lose out on long term low interest loans, but they’ll gain in the future from higher interest long rate loans, but the slate will be clear for the people, and a higher interest rates improves savings (you get more interest on personal deposits).

The Austrian, Jeffersonian, Rand or Ron or Ren or Stimpy whatever Paul crowd, is right but wrong on the Fed (I don’ that hate Ron Paul). Yes, it is weird. However, if it truly worked for the people it would be great. If the government charter’s the bank, then don’t revoke it, just make them help actual Americans. The problem is that it serves as a private bank for elite industrialist and banks, with people coming in last – just happy to have a job in an economy with built in business-cycle busts from inevitable declines in aggregate demand and consumption, that we justify as being “natural forces”.

My mind is a little fuzzy on the schematics of how it all works, but the general ideas is what I’m aiming for. To get to the point, the Federal Reserve has been pumping billions upon billions into the financial system while the general public goes on about their daily lives… Dancing With the Stars, Netflix show-binges, drooling over Instagram models, and countless hours to letting Joe Rogan keep us entertained. I believe we’re currently in QE4 or Quantitative Easing Round Four, meaning that since the 2008 Financial Crisis causing the Great Recession, that the Federal Reserve and US Treasury have infused billions upon billions of dollars into the Financial System and thus the Corporate and Wall Street Sector.

The general public got none of that directly. Can the people get at least one round of direct QE to themselves and directly into their own pockets? Quantitative Easing is a monetary management policy by the Fed that came during the Recession under Ben Bernanke. The Fed bought large volumes of potentially worthless bonds from the Treasury when the floor fell out from under us as the Subprime Mortgage bubble busted, and by holding those bonds, they vouched for the US economy, but used their “tool set” of “knob adjustments” to help, such as lowering the benchmark interest rate, adjusting reserve requirements, etc. This helped with to help stimulate growth in an anemic economy and there wasn’t much Obama really could do but act cool and entertain or inspire us in bits as the economy recovered. Taxes were already low. The Fed was involved… We were in a bad spot. Trump got the good end of it as the economy was rebounding upward in the last years of Obama, but Trump injected adrenaline and cocaine directly into the heart. The Fed and Treasury bailed out the economy and the elites and nothing came of it…no major arrests, and slap on the wrist fines. The sad truth is…the rich wanted the economy to tank, the same way Black Friday shoppers hope they can go crazy at a liquidation sale.

To add insult to injury, relating to my reference of QE4 is that the Fed pumped in billions to help the financial system. According to McCormick and Harris (2019), ” In its first direct injection of cash to the banking sector since the financial crisis, it laid out as much as $75 billion a day in temporary cash over four days to quell the funding crunch and push the effective fed funds rate down. In what are known as overnight system repos, the Fed lent cash to primary dealers against Treasury securities or other collateral. ” Further, McCormick and Harris (2019), adds, “In the week of Sept. 16, a lot of cash flowed out of the repo pipes just as more securities were flowing in — meaning that suddenly there wasn’t enough cash for those who needed it. That mismatch drove overnight repo rates to 10% on Sept. 17, from about 2% the week before. More alarming for the Fed was the way volatility in the repo market pushed the effective federal funds rate to 2.30%, above the 2.25% upper limit of the Fed’s target range — just as the Fed was preparing to drop that ceiling to 2%. “

The banks can get billions of dollars pumped into their reserves or portfolios, but that “created money”, is being charged to the general public over time through inflation, then…why can the Federal Reserve, give the public their own round of Quantitative Easing? Seriously, the Federal Reserve could pump money into the banks, force the banks to credit that money into people’s accounts, and people could pay down their debt, but pay “inflation tax” over time as prices gradually increase as the supply of dollars balances out with the aggregate demand of the overall economy. Essentially, we’ll pay inflation gradually over time, and with the public paying down debt, with their actual earnings from their labor, they will use that money to stimulate the overall economy through consumerism and consumption.

This is how the Financial System works in my head. I call it the “Financial Trinity”. The Treasury issues IOUs, i.e., bonds, notes, bills, coupons, etc., but then sells them to the public, with the majority going to average citizens, mutual funds, foreign banks or foreign national trusts (such as the Japanese Pension program), corporations, etc. Yet, the Federal Reserve buys the vast majority of these IOUs which it holds on its portfolio. The Federal Reserve holds this debt as collateral to vouch for the government, but also more importantly to vouch for the dollar. By holding this collateral the Federal Reserve triggers the mints (though people say the “Fed doesn’t print money”) to print cash, drive them to banks, deposit them in vaults, then those dollars are lent at interest rates to the general public, and the bank takes their cut. Banks then put a level of reserves with the Fed as collateral and banks and/or the Fed often make special interest rate loans between themselves in the overnight lending window and commercial paper or repo markets. When bonds mature, the Treasury pays its bond holders (largely from tax revenues taxed from the overall economy which is linked to the banking system), but remember, the largest one is the Federal Reserve. It’s a cycle.

(1) Treasury issues IOUs (2) Federal Reserve “buys” those and holds them as collateral (3) Mints print money and that money goes to banks (4) banks lend out the money, collect interests, and people use money in the productive economy. Banks also have a special market or “repo” market (think pawn shop as stated by McCormick & Harris, 2019) when they borrow money to meet payroll, etc. (5) Treasury collects taxes and then as bonds mature they pay bond holders, with one of the largest being the Federal Reserve, and the Fed can either hold on to those bonds or they let them expire from their portfolio. Inflation occurs as the volume of supply of dollars adjust to the demand for those dollars. “Dollars” don’t simply disappear, but since they’re accounted for, if there’s an excess their value absorbs into prices and prices rise over time. Dollars in a fiat based or Keynesian system serves as a stimulus, away from fixed assets like gold which tend to be horded by gold-holders, but that stimulus has to be used correctly and rarely does the actual cash get directly infused into the peoples’ pockets. It goes to banks who lend that cash out to high-dollar real estate projects, which is one reason why real-estate is so vital to the economy (jobs, mortgages, people double-dipping on their mortgages, middle men doing paperwork, appraisers, realtors, property taxes which typically goes to funding school systems, etc).

One major issue is that corporations take out large low-interest loans either directly or by borrowing against their market equity, i.e., their stock. They hold that cheap credit cash on their books, and some use tricky double-accounting methods to classify that debt as an asset, or they use that cheap credit for capital upgrades to facilities, buying assets such as real-estate or land (which can go underwater if real-estate prices goes down), CEO compensation packages, capital for mergers & acquisitions, etc. The stock market in part is doing so good, not entirely because of fundamentals such as steady quarterly earnings, but rather the stocks are bloats from abundant cheap credit made by the Fed and used by opportunistic corporations. It’s honestly a good thing we have somewhat low rates… 2%-3% as a benchmark rate because the market is uncertain regarding Trump’s trade tariff deadlines. The more uncertainty in the market, the more investors start digging into books to see if businesses are truly vital as they claim to be, not to mention, increased prices through supply-chains which can result in decreased earnings.

Some corporations are clever and efficient at playing this “live off your credit card” “faking it to you make it” game, but others are “zombie companies”, which are companies that should’ve failed, have been bought out or liquidated, but keep swiping their credit card to stay open. Corporations go even further by issuing their own bonds, i.e., corporate bonds, but by being so over-leveraged they ranks as junk bonds. I’m sure the stock market is “healthy” but a lot of it seems like credit based bloated stocks, mixed with the upward bidding wars of floor trading, and even algorithmic “nano-second” buying, selling, and shorting such as done by Jim Simmons with his theory of quantitative investing through his hedge-fund Renaissance Technologies.

I call the idea the Free Cash Theory. I see why not. It should only happen every couple of decades, if not at the beginning of each century, or at least when wealth disparity and ownership of the means of the production (Marxist accusations in 5…4…3…2..) gets out of control. If the Fed can afford 75 Billion for four days straight, or whatever the amount actually came out to, the fact that the Fed has been subsidizing Wall Street with cheap credit to bloat stock prices and drive speculation, simply means they can afford to help the people. With real balls or ovaries of steel from Congressional leadership and the White House, and act of humanity by the Fed, then we can truly help to wipe the slate clean for average Americans and move into the future. It’s not too late to save 3rd Way Democratic Capitalism, but the system needs to turned upside down to benefit an era of small-to-medium businesses, families, entrepreneurs, inventors, farmers, etc.

Sources:

https://www.washingtonpost.com/business/the-repo-markets-a-mess-whats-the-repo-market/2019/12/10/ed4488ae-1b58-11ea-977a-15a6710ed6da_story.html