CEED: Landscape Analysis
Context
The State of Arkansas is generally viewed favorably for its friendly business environment. However, outside of manufacturing and agribusiness, the state has struggled to attract 21st-century enterprises. Contributing factors include an undereducated and generally low-skilled workforce, stagnant neighborhood economies, a lack of widespread investment in technology and innovation, all absent a strong entrepreneurial ecosystem inclusive of the state’s diversity.
The founders of two of the state’s wealthiest and most notable corporations — Walmart, Inc. and Tyson Foods — relocated from Oklahoma and Missouri, respectively, to pursue opportunities in Arkansas. However, the wealth generated by the state’s largest companies has not been a shared experience among all demographics.
The University of Arkansas’ Walton College of Business is home to the Arkansas Business Hall of Fame. In its 20-year history, only four women and four people of color have been inducted out of 86 total inductees. Of the women, two were inducted jointly with their husbands. Of the persons of color, three were native Arkansans who built their companies outside of the state.
The Segregation Economy
The aftermath of the 1957 desegregation crisis led to a series of local social and economic policy decisions that significantly contributed to Little Rock’s current economic landscape. During this period, segregation policy emerged as a response to efforts to quell racially moderate political governance and bi-racial unionizing. In effect, such defiant segregation policy appears to have been uniquely designed to suppress the type of economic progress represented in the city’s vibrant 9th Street corridor — historically, Little Rock’s most prominent entrepreneurial ecosystem for people of color — separating the minority from the heart of the city, isolated in proximity to Little Rock’s affluent white class.
During this period, an AFL-CIO-supported Black political class emerged to elect a racially moderate Mayor and City Council. In 1956, that administration awarded the city’s bus charter to union-owned Citizens Coach Company who removed Jim Crow signs and, according to Arkansas Historian Michael Pierce, “never instructed their drivers to enforce segregation ordinances.” Motivated by the public integration of the city’s bus system and racially moderate economic policy, segregationist resistance demanded the adoption of a city-manager system. This anti-democratic government oversight subjected Little Rock to a weak-Mayor structure that still exists today, alongside an endowed, appointed City Manager. These actions normalized segregation policy for decades to follow.
In retrospect, Little Rock’s 1950s segregation policy was much more than resistance to desegregation; rather, it appears to have been organized in concert to pervert any effort or program, federal or otherwise, to deliver shared economic prosperity.
Slum Clearance and Urban Renewal
Little Rock’s Slum Clearance Referendum of 1950 greenlit the city’s pursuit of federal dollars as authorized by the Housing Act of 1949, funds that were aimed at improving housing conditions post-WWII. Slum clearance, an effort to curb urban blight, began in 1951 when the Little Rock Housing Authority (LRHA) cleared a large section of the Dunbar neighborhood, the first of multiple historically African-American communities cleared for urban renewal. Major land acquisitions, made possible by slum clearance, also occurred in other majority-Black neighborhoods, including Philander Smith, Granite Mountain, and Westrock, formerly Little Rock’s westernmost African-American suburbs.
Between 1950 and 1966 — the height of Little Rock’s slum clearance and urban renewal programs — much of the inner-city residential and commercial space necessary for Interstate 630 was acquired.
The impact of urban renewal was felt beyond the domestic sphere. In 1968’sThe Impact of Urban Renewal on Small Businesses, author Brian Berry states, “Since Negroes make up the largest percentage of persons in the low-income levels, Negro-owned businesses in Negro communities undergoing urban renewal generally have high liquidation rates.” This provides evidence of a sobering, yet intentional, consequence of segregation policy known as urban renewal in Little Rock.
The Socio-Economic Divide
In April of 1963, the Highway Department began construction on the first phase (or middle segment) of Interstate 630 (I-630), which ultimately stretched from University Avenue to Dennison Street and opened to public traffic in May of 1973. The second phase (or western segment) stretched from U.S. Interstate 430 to University Avenue. The third and final section slated for construction ran from Dennison Street to what is now Interstate 30, wedged through downtown Little Rock’s well-established neighborhoods and prominent African-American business districts, such as the historic 9th Street corridor.
While the City-proposed I-630 wasn’t originally part of President Eisenhower’s Federal Highway Act of 1956, it experienced cash shortages after its second phase. I-630 joined the federal interstate system, which provided cash to finish the controversial third and final segment, thanks in large part to the spearhead efforts of influential Arkansas Congressman Wilbur Mills, for whom the interstate is named. Mills, former Chair of the powerful House Committee on Ways and Means, was lobbied by pro-urban renewal interests, including the head of LRHA George Millar, who implemented urban renewal programs that strategically displaced and relocated thousands of poor and African-American families.
Relocation reports show that, out of 19 relocation case studies published throughout the urban renewal era, all 19 of the featured families were relegated to areas south of I-630, and little to no migration west. Today, economic growth and mobility in Little Rock is most prominent in West Little Rock, while communities south of I-630 are among the poorest in the city, scoring at or below the poverty line.
“Black Capitalism” Sets New Precedent
Merhsa Baradaran, author of The Color of Money: Black Banks and the Racial Wealth Gap, defines Black capitalism as a means of Black people helping themselves, absent capital injection and economic justice. She argues that, “while a generation of white Americans had gained wealth through discriminatory government-sponsored credit subsidies for student and mortgage loans, Mr. Nixon pointed blacks to the free market and wished them luck.”
Baradaran suggests that Black capitalism set a precedent for economic policy in urban America. She points to programs such as Reagan’s enterprise zones, Clinton’s new market tax credits, Obama’s promise zones, and, most recently, Opportunity Zones as programs rooted in Black capitalism philosophy. She concludes, “these programs fail because the benefits of capitalism always accrue to the owners of the capital, not to the people living in enterprise zones or promise zones. Using capitalism to fix the racial wealth gap will work only if there is a means to transfer capital, assets, wealth or housing.” Such an account emphasizes the need for, and form of capital necessary to the success of entrepreneurs emerging from distressed communities.
Resilient and Re-Emerging at the Close of the 20th Century
A 1987 study by Timothy Bates identified nationwide traits and trends exhibited by self-employed minorities. According to Bates, minority enterprises were “heavily concentrated in several lines of small-scale service and retailing activity that held minimal potential for growth.” The study also shows that a majority of minority firms had “low annual sales (less than $25,000), and high failure rates. This trend of slow growth and high rates of failure have led to an ever-widening disparity between minority businesses and the overall business community.”
Contrast findings in the study that reveal the re-emergence of a minority entrepreneurial class in spite of disparate conditions. “Of greater interest, self-employed minorities are making progress in skill-intensive fields that offer higher earnings. Areas of greatest self-employment expansion are attracting a better-educated, younger group of minorities; the minority business sector appears to be undergoing a transformation that is broadening its industry composition substantially,” Bates contends.
This provides evidence of resilience among entrepreneurs of color, underscoring the value and economic potential of improved and expanded entrepreneurial participation among women and people of color.
An Emerging Innovation Economy
In 2014, metro Little Rock’s business community launched the Venture Center to increase the number of technology-based startups in the area as well as attract talent to technology-related fields. Venture Center houses several accelerator programs. These include the VC Fintech Accelerator, which offers participating founders a $50,000 initial investment; founders are eligible to pitch for up to an additional $100,000 to $300,000, awarded to winners at the end of the program. Venture Center programs have grown to include a fintech accelerator program focused on community banks, regular pitch competition events, a small business pre-accelerator in partnership with the Greater Little Rock Chamber of Commerce, and a new student entrepreneur education partnership with the University of Arkansas Pulaski Technical College. According to a recent case study released by The Venture Center, companies involved in the incubator created more than 445 jobs, generated $28 million in revenue, and raised a combined $39 million in capital.
Despite demonstrated commitment to economic growth, Arkansas ranks 48th in innovation, according to Bloomberg’s U.S. State Innovation index. A study performed by the Milken Institute ranks Arkansas 48th in its Human Capital Investment sub-index, which measures factors such as education investment and home access to Internet and technology. Milken’s Risk Capital and Entrepreneurship Infrastructure index ranks Arkansas 36th, an improvement from 41st just two years prior.
These statistics indicate great potential for a robust innovation economy within the state, while emphasizing a desperate need for widespread investment in fundamental access to technology, knowledge capital, and technical assistance, as well as improved proximity to resources for the region’s underserved communities.
