CLEVELAND: MOVING BEYOND CONVENTIONAL APPROACHES

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By Dante Dallavalle and Michael Palmier
This article was adapted from the Left Out podcast episode titled “Cleveland, A New Model?"

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Cleveland, Ohio as of late is on the minds of many people.  Cleveland is celebrating the end of a half-century sports title drought with the Cavaliers winning a NBA championship.  Likewise, the Republican National Convention, which embodied this year’s political theatre, turned eyes towards Cleveland.  With an estimated 50,000 visitors projected to attend the event, police and even FBI officials went door to door and asked potential protesters and civil rights activists their itinerary for the week of the 18th-21nd.  Missing, of course, from the euphoria of the sports world and spectacle of mainstream politics, was any serious discussion of how to respond to the near half century decline of cities that were once the heart of the US economy let alone realistic solutions. Yet, only a 15 minute drive from Quicken Loans Arena, where the GOP convention was held, one can find a local initiative, underway for nearly a decade, that is making waves in alternative approaches to community development, the Evergreen Cooperative Initiative.

By now, we have become familiar with rust-belt cities like Cleveland, their rise in the early and mid-twentieth century and the now nearly five decade decline. Evenso, placing Cleveland into this context is necessary to understand the aims of the Evergreen Cooperative Initiative. Once a thriving hub for the steel and automobile industry and home to numerous fortune 500 companies, Cleveland has seen manufacturing companies leave in droves. This migration of jobs produced the usual results, population decline the most obvious. From its peak of 900,000 in 1950 it is now below 400,000, a more than 50% decline, and the trend does not seem to be stopping. Recent estimates by the US Census Bureau find that Cleveland is the second fastest shrinking city in the nation second only to Detroit.

Poverty stemming from the systematic migration of manufacturing, the concomitant dwindling of tax revenue, and the wake of the 2008 economic crash, has made life for Cleveland residents, already precarious, even harder. A Brookings Institution report  released in March 2016 found that Cleveland ranked 9th nationwide in highest amount of people living in concentrated poverty (28%), which is defined as individuals living in communities where 40% of the population lives at or below the poverty rate.  If the definition is adjusted to include communities where 20%  of the population is at or below the poverty rate the percentage jumps to 63%.  

Concentrated poverty is different than the standard poverty rate in that it measures not only how many people are nominally poor but takes into account spatial distribution, that is, how many people who are already termed poor live in communities where others are also considered poor. This is important because when poverty is concentrated, upward mobility, an already difficult phenomenon to achieve, becomes even more unattainable.  In addition, other psychological and social problems arise: mental health declines, crime increases, and all within communities which do not have access to resources required to remedy these systemic consequences. Though population movement and poverty are sometimes connected, (those with the resources move away from cities to find new work, those without stay behind) the recent case of Cleveland is different. As Natalie Holmes, a research analyst in Brookings Metropolitan Policy Program and co-author of the aforementioned Brookings report was quoted stating, “People are becoming poorer in place...People are staying where they are. Their incomes are just dropping."

And it is not simply higher or stable incomes that need to be achieved, rather it’s the building of community wealth and assets. It is one thing to be able to have income to purchase your basic needs: food, clothing, housing, health care. However, wealth-building, that is the ownership of assets, creates economic stability by allowing for long-term saving, hedging against incomes that may change in the future. People often cite the drastic disparities in income in the US, yet, at a national scale, wealth inequalities are far more staggering.  A report conducted by the Institute for Policy Studies reveal that in the U.S. 400 individuals own more wealth than the bottom 196 million, a distribution that has been correctly described as medieval. In the context of Cleveland, where 53.3% of the population is black, the question of wealth-building becomes even more acute as gains in wealth made by blacks (mostly though home ownership) were wiped out in the 2008 recession.

The question of generating both income as well as community wealth confronts the tensions of capitalism directly in cities like Cleveland. Capital's mobility and labor’s immobility set the context for stagnation and decline as large companies are ‘free’ to abandon cities and their respective populations while those same people are ‘free’ to lose good paying and historically unionized jobs.  As capitalism continues to deliver the bads and typical government responses such as tax abatements and subsidies to lure companies back are no longer feasible or fail to truly remedy mounting social and economic pressures, the idea of turning to the same old ‘solutions’ becomes unpalatable.

In the face of this historical reality we can no longer, in the words of Gar Alperovitz, “remember the future,” where we use a theory of change that projects assumptions from the past to attempt to solve the problems in the present. What we need are alternatives.Interesting questions then emerge from this realization: What mode of economic development can ensure the creation of well paying jobs that are guaranteed to stay rooted in neighborhoods while building community wealth? Would the workers who witnessed their jobs being outsourced have chosen to shut down their own factories if they had a say in the matter? (The history of Ohio and other states gives a definitive no.)  How can we ensure that newly created businesses can withstand a globally competitive market?  How can we make certain that gains made by new businesses are distributed equitably - guaranteeing that gains made by the enterprise translate into gains for the workers?

Questions like these are what informed the Evergreen Initiative in Cleveland, a structure that connects worker cooperatives, a 501(c)3 non-profit, and deep-rooted local institutions together. By drawing on already well-established local institutions’ resources, the Evergreen Cooperative Initiative aimed to develop worker-owned cooperatives that give employees a stake in the workplace, a share in the profits that are produced, and the ability to acquire equity in the companies themselves.  This essentially answered the question of both income and building assets and equity for a sustainable, long-term solution to community development.  Integrating worker-owned cooperatives under a 501(c)3 - which also manages a general fund for future cooperative development - was explicitly done with the idea of community wealth-building in mind. Taken together, worker-owned cooperatives, connected to anchor institutions and a local non-profit not only builds wealth for workers and the community, it forecloses the possibility of shipping newly created jobs out of state or overseas.  In short, it was the lessons from deindustrialization and globalization that informed the creation of Cleveland’s Evergreen Coops.

EVERGREEN’S GENESIS AND STRUCTURE 

The Evergreen Cooperative Initiative was started in 2008 as a joint-effort to spur local economic development in an area of Cleveland known as the Greater University Circle.  This area includes six low-income neighborhoods consisting of 43,000 residents with a median household income of $18,500.  At the center of the project was the development of worker cooperatives which would provide steady employment, living wages, healthcare benefits, and most importantly an avenue to begin developing assets through equity and ownership within the company itself.  Challenges to achieving this goal included overcoming the primary obstacles that worker cooperatives (or any small businesses for that matter) face when endeavoring to enter a market successfully. These included securing initial start-up capital, technical support, procuring steady contracts and cultivating the ability to scale.   

Although the structure of Evergreen is certainly  a new response to the question of community development, the approach has its precursor in the Mondragon Corporation of the Basque region of Spain.  Started in the 1950s as a single cooperative polytechnic school, it has grown to nearly 100 coops today that employ over 90,000 people worldwide.  A lesson that Mondragon has taught Evergreen lies in the importance of developing networks in and between institutions, a point made by MIT’s Community Innovators Lab in a recent paper.

“In a market based economy the cooperative business form suffers from several strategic challenges when operating independently. One worker cooperative on its own is most likely doomed to fail in a highly competitive global economy. However, an ecosystem of several worker cooperatives and support organizations can create an infrastructure that leads to sustained growth and expansion. In Mondragon the cooperative network expanded from a single cooperative polytechnic school to a network of 256 industrial, retail, finance, educational, and research and development firms.”

Evergreen, using Mondragon more as an inspiration than a template, went on to create an ‘ecosystem’ of cooperatives and support organizations that fit their local context, what was referred to as “...a high resource initiative in a low resource environment” by Professor Nicholas Zingale of Cleveland State University. This ecosystem includes the Evergreen Cooperative Corporation (ECC) which is a non-profit 501(c)3 organization and, according to its CEO John McMicken, acts as a sort of umbrella organization “to guide the overall mission and maintain it over time.”  Underneath the ECC  there are the three worker-owned coops: Evergreen Cooperative Laundry, Evergreen Energy Solutions, and Green City Growers.  

The laundry facility was the first cooperative to launch in 2008 and serves clients in the hotel, hospital, and nursing home industries.  It is a LEED Gold certified facility, the first of its kind in the region, currently employing 45 people full-time.  The second coop, Evergreen Energy Solutions came into being shortly after the laundry facility in 2009.  They design, develop, and install solar panels as well as provide construction services, LED lighting retrofits, and energy audits/weatherization services, currently employing 25 full-time workers.  Lastly, there is the Green City Growers operation.  Started in 2013, it one of the largest (3.25 acres) urban greenhouse facilities in the country, growing organic produce and supplying communities throughout the area.  Currently they have 38 full-time employees, although with sales growing they project 45 total full-time employees by the end of 2016.   

One should note that all three cooperatives stress an ecologically-sustainable approach, hence the name Evergreen.  All three are tied to the community explicitly though their relationship to the ECC non-profit (ECC has a 20% stake in each cooperative), which, if the time ever came, would prevent any one of the cooperatives moving out of the community or state. Additionally, each one of these cooperatives pays 10% of all their profits back into the Evergreen Development Fund managed by the ECC, the goal being for the fund to facilitate the creation of new cooperatives down the line.

What are called anchor institutions comprise the third piece in the Evergreen Model which   demonstrate how historically-rooted institutions can and should be utilized for spurring local development. These institutions serve a dual purpose. First, they provide the start up capital necessary to form the cooperatives, which  totals roughly  $25 million to date, as well as technical assistance and resources needed to incubate the cooperatives. Second, the anchors act as customers for the products created by each cooperative, providing a stable customer base out of the door.  Anchors included the Cleveland Foundation, the Cleveland Clinic, University Hospitals, Case Western Reserve University, and the municipal government.  Organizations such as the Democracy Collaborative and the Ohio Employee Ownership Center also played vital roles in lending the technical support and guidance for the cooperatives to form.

Nicholas Zingale, a professor at Cleveland State University, commenting on the Evergreen Initiative pointed out that what made it so innovative was that it is, “...tinkering around with what is already there to create societal good.”   This includes working with anchor institutions but also transforming what he referred to as ‘loose spaces’  in a paper he co-authored focusing on the Evergreen Initiative,  into dynamic areas of community development. For example, a 10-acre area of 35 abandoned homes, once the picture of rust-belt urban blight, is where the greenhouse used by Green City Growers now resides.   

What becomes clear is the Evergreen Cooperative Initiative, though integrating worker cooperatives into its structure, is not how most would conceptualize the creation and management of worker cooperatives.  Rather than being formed from the ground up, with a group of workers pooling their own resources to create the capital necessary to start a relatively small-scale operation the Evergreen Initiative was financed by members of an already existing initiative, namely the Greater University Circle Initiative (GUCI), started in 2005 by the Cleveland Foundation, to address, “...the specific challenges of some of Cleveland’s most disinvested neighborhoods.”  Though Evergreen was able to successfully use the GUCI to identify and connect with interested anchor institutions the top down approach that ensued led to important problems, some of which still need resolving.

STUMBLING BLOCKS, PAST AND CURRENT

The ‘Cleveland Model’ did not come without its problems. The most stark are its unmet expectations in regards to both job creation and profit sharing.  Indeed, these aspects held particularly transformative prospects for the Evergreen Cooperative Initiative when it began. In a 2010 article in The Nation Ted Howard, one of the chief architects of the initiative claimed that worker owners would have  $65,000 of employee equity after seven years of employment. This has proven to be a gross overestimation as two cooperatives have only recently begun to become profitable with the third Green City Growers scheduled to be in the black this year.  Employment opportunities have also missed their mark. Early forecasts hoped for 10 cooperatives by this time, ideally generating nearly 500 jobs. Currently there are 3 cooperatives employing 125 people in total between all three enterprises.  The expectations have lead some in the Cleveland area to question whether or not the $25 million could have been better spent to help more people.

There has also been the problem of inter-institutional relationships with anchors.  The initiative’s founders had relied largely on the idea of procuring contracts from the surrounding institutions that had supported the materialization of the cooperatives.  However, institutions such as the Cleveland Clinic, Case Western Reserve University and University Hospitals did not initially sign with Evergreen Cooperative Laundry (ECL), because of existing contractual obligations or other developments that foreclosed opportunities for a steady workload.  The recent contracts obtained by ECL have largely been fortuitous, highlighting the institutional miscommunication that had potentially fatal consequences for the new enterprise. Similarly, Green City Growers still finds it difficult to compete with other lettuce and herb growers for contracts.

But perhaps the largest difficulty confronting what has now become known as ‘The Cleveland Model’ stems from the same structure that made the initiative possible in the first place. Bringing democracy into the workplace not only transforms the relations of work by granting workers a say in the processes behind production and equity within the enterprise, but it changes the consciousness of workers themselves. Yet, to what extent Evergreen has done this is questionable. An REDF report on the initiative’s progress, a must read for those interested in the internal dynamics of the Evergreen cooperatives, emphasized that the coops are multi-stakeholder cooperatives and not worker-owned cooperatives as we traditionally think of them. Though they are legally structured to one day become stand-alone coops according to McMicken, they are currently under a “tight governance structure,” where ECC, the umbrella non-profit, is directly involved in important managerial decisions.  Such decisions included stepping back from a completely democratic governance structure as well as making tough decisions about cutting wages for worker members.  The drastic cultural shift according to the report, “led to a significant drop in morale” as it became clear that the early  projections, cited above, were simply not attainable.

The REDF report points out what loomed in the background of these decisions; the issue of debt financing. Remember, the Evergreen Initiative looked to employ community members from impoverished neighborhoods thus, workers did not have capital initially. To deal with this  Evergreen Coops relied heavily on capital from the the Evergreen Cooperative Development Fund which gathered low interest loans from anchor institutions, local banks, HUD and New Markets Tax Credits. Though these loans allowed workers to own their full share of the cooperatives it also created a debt burden that made it difficult to run a surplus.

Professor Zingale, commenting on this structural arrangement pointed out that  “one of their largest challenges is to get the workers themselves to embrace their role as not just workers,” but worker-owners, something he claims may be, “a residual of the top-down approach.”  Because key decisions pertaining to the development of the Evergreen Cooperative Initiative took place before worker-owners  were present, namely what to produce and whom to produce for, and many decisions are still made at higher levels of management, the visceral connection that many workers who start their own cooperative have in relation to their business and work is still yet to be fully achieved.  Josh Davis, writing for Grassroots Economic Organizing raises some serious questions about how decision making within the cooperatives takes place. Moreover, he makes a compelling case in another piece that through this top-down institutional arrangement, intentionally or not, many of the same racial, economic and power inequalities found in our capitalist economy have been reproduced within Evergreen Initiative.

Though receiving due press coverage for its novel approach to community development early on Evergreen is certainly not a panacea and indeed has important problems that still need to be worked out. Certainly there is a great deal to learn from the model of combining  worker cooperatives with a community development non-profit and anchor institutions in terms of what works and what doesn't.  If we do not ignore these issues but instead discuss and debate them openly with the goal of improving upon rather than dismissing outright, Evergreen can serve as both example and inspiration for cities and communities across the country.







Showing 2 comments

  • commented 2016-07-31 20:50:33 -0400
    We have been following orders from the top for so many decades…. most people do not know how to actually become a part owner in a cooperative… just like our democracy right now is basically been removed in favor of two corporate parties “managing the outcomes” every four years. I look around today and see people blindly working 60+ hours a week and making the same money I did in 1979 working 40. It’s incredibly sad to see us devolve back to a time before unions ever existed.
  • commented 2016-07-29 01:56:29 -0400
    The article and podcast are interesting, and I hope others will use this information to start similar projects. The idea to engage anchor institutions seems very important. It is disappointing that worker self-direction (WSD) is out of reach for now. If they do achieve WSD how will that affect the anchor institutions that support that just outside the enterprise, while the workers in those institutions are subject to more regressive models? How could large anchor institutions develop WSD within? Professor Wolff talked in the show about the necessity for government help to develop WSD. It gave me an “Ah Hah!” moment (I should have imagined and thought about it anyway, but I’m thankful for the insight). Corporations spend and work very hard to establish their social benefits with governments. It can make huge differences for them, and it can do the same for Coops and Collectives. When Coops can compete and win against capitalist enterprises, the coops might still loose if the capitalist enterprises have unfair advantage with the state. A serious coop and collective effort should probably develop a way to compel state contribution toward their success. Anchor institutions could facilitate this, and it would seem consistent with an effort to develop WSD within the anchor institutions themselves.
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