Saturday, February 13, 2010

The Cleveland Model

The Cleveland Model


By Gar Alperovitz, Ted Howard & Thad Williamson

The Nation

February 11, 2010 -  March 1, 2010 edition


Something important is happening in Cleveland: a new

model of large-scale worker- and community-benefiting

enterprises is beginning to build serious momentum in

one of the cities most dramatically impacted by the

nation's decaying economy. The Evergreen Cooperative

Laundry (ECL)--a worker-owned, industrial-size,

thoroughly "green" operation--opened its doors late

last fall in Glenville, a neighborhood with a median

income hovering around $18,000. It's the first of ten

major enterprises in the works in Cleveland, where the

poverty rate is more than 30 percent and the population

has declined from 900,000 to less than 450,000 since 1950.


The employees, who are drawn largely from Glenville and

other nearby impoverished neighborhoods, are

enthusiastic. "Because this is an employee-owned

business," says maintenance technician and former

marine Keith Parkham, "it's all up to us if we want the

company to grow and succeed."


"The only way this business will take off is if people

are fully vested in the idea of the company," says work

supervisor and former Time-Warner Cable employee

Medrick Addison. "If you're not interested in giving it

everything you have, then this isn't the place you

should be." Addison, who also has a record, is excited

about the prospects: "I never thought I could become an

owner of a major corporation. Maybe through Evergreen

things that I always thought would be out of reach for

me might become possible."


These are not your traditional small-scale co-ops. The

Evergreen model draws heavily on the experience of the

Mondragon Cooperative Corporation in the Basque Country

of Spain, the world's most successful large-scale

cooperative effort (now employing 100,000 workers in an

integrated network of more than 120 high-tech,

industrial, service, construction, financial and other

largely cooperatively owned businesses).


The Evergreen Cooperative Laundry, the flagship of the

Cleveland effort, aims to take advantage of the

expanding demand for laundry services from the

healthcare industry, which is 16 percent of GDP and

growing. After a six-month initial "probationary"

period, employees begin to buy into the company through

payroll deductions of 50 cents an hour over three years

(for a total of $3,000). Employee-owners are likely to

build up a $65,000 equity stake in the business over

eight to nine years--a substantial amount of money in

one of the hardest-hit urban neighborhoods in the nation.


Thoroughly green in all its operations, ECL will have

the smallest carbon footprint of any industrial-scale

laundry in northeast Ohio, and probably the entire

state: most industrial-scale laundries use three

gallons of water per pound of laundry (the measure

common in industrial-scale systems); ECL will use just

eight-tenths of a gallon to do the same job. A second

green employee-owned enterprise also opened this fall

as part of the Evergreen effort. Ohio Cooperative Solar

(OCS) is undertaking large-scale installations of solar

panels on the roofs of the city's largest nonprofit

health, education and municipal buildings. In the next

three years it expects to have 100 employee-owners

working to meet Ohio's mandated solar requirements. OCS

is also becoming a leader in Cleveland's weatherization

program, thereby ensuring year-round employment.

Another cooperative in development ($10 million in

federal loans and grants already in hand) is Green City

Growers, which will build and operate a year-round

hydroponic food production greenhouse in the midst of

urban Cleveland. The 230,000-square-foot greenhouse--

larger than the average Wal-Mart superstore--will be

producing more than 3 million heads of fresh lettuce

and nearly a million pounds of (highly profitable)

basil and other herbs a year, and will almost certainly

become the largest urban food-producing greenhouse in

the country.


A fourth co-op, the community-based newspaper

Neighborhood Voice, is also slated to begin operations

this year. Organizers project that an initial complex

of ten companies will generate roughly 500 jobs over

the next five years. The co-op businesses are focusing

on the local market in general and the specific

procurement needs of "anchor institutions," the large

hospitals and universities that are well established in

the area and provide a partially guaranteed market.

Discussions are under way with the "anchors" to

identify additional opportunities for the next

generation of community-based businesses. Evergreen

Business Services has been launched to support the

growing network by providing back-office services,

management expertise and turn-around skills should a

co-op get into trouble down the road.


Significant resources are being committed to this

effort by the Cleveland Foundation and other local

foundations, banks and the municipal government. The

Evergreen Cooperative Development Fund, currently

capitalized by $5 million in grants, expects to raise

another $10-$12 million--which in turn will leverage up

to an additional $40 million in investment funds.

Indeed, this may well be a conservative estimate. The

fund invested $750,000 in the Evergreen Cooperative

Laundry, which was then used to access an additional $5

million in financing, a ratio of almost seven to one.

An important aspect of the plan is that each of the

Evergreen co-operatives is obligated to pay 10 percent

of its pre-tax profits back into the fund to help seed

the development of new jobs through additional co-ops.

Thus, each business has a commitment to its workers

(through living-wage jobs, affordable health benefits

and asset accumulation) and to the general community

(by creating businesses that can provide stability to



The overall strategy is not only to go green but to

design and position all the worker-owned co-ops as the

greenest firms within their sectors. This is important

in itself, but even more crucial is that the new green

companies are aiming for a competitive advantage in

getting the business of hospitals and other anchor

institutions trying to shrink their carbon footprint.

Far fewer green-collar jobs have been identified

nationwide than had been hoped; and there is a danger

that people are being trained and certified for work

that doesn't exist. The Evergreen strategy represents

another approach--first build the green business and

jobs and then recruit and train the workforce for these

new positions (and give them an ownership stake to boot).


Strikingly, the project has substantial backing, not

only from progressives but from a number of important

members of the local business community as well. Co-ops

in general, and those in which people work hard for

what they get in particular, cut across ideological

lines--especially at the local level, where

practicality, not rhetoric, is what counts in

distressed communities. There is also a great deal of

national buzz among activists and community-development

specialists about "the Cleveland model." Potential

applications of the model are being considered in

Atlanta, Baltimore, Pittsburgh, Detroit and a number of

other cities around Ohio.


What's especially promising about the Cleveland model

is that it could be applied in hard-hit industries and

working-class communities around the nation. The model

takes us beyond both traditional capitalism and

traditional socialism. The key link is between national

sectors of expanding public activity and procurement,

on the one hand, and a new local economic entity, on

the other, that "democratizes" ownership and is deeply

anchored in the community. In the case of healthcare

the link is also to a sector in which some implicit or

explicit form of "national planning"--the movement

toward universal healthcare--will all but certainly

increase public influence and concern with how funds are used.


Whereas the Cleveland effort is targeted at very low-

income, largely minority communities, the same

principles could easily be applied in cities like

Detroit and aimed at black and white workers displaced

by the economic crisis and the massive planning

failures of the nation's main auto companies. Late in

October, in fact, the Mondragon Corporation and the

million-plus-member United Steelworkers union announced

an alliance to develop Mondragon-type manufacturing

cooperatives in the United States and Canada. Says

USW's Rob Witherell: "We are seeking the right

opportunities to make it work, probably in

manufacturing markets that we both understand."


Consider what might happen if the government and the

UAW used the stock they own in General Motors because

of the bailout to reorganize the company along full or

joint worker-ownership lines--and if the new General

Motors product line were linked to a plan to develop

the nation's mass transit and rail system. Since mass

transit is a sector that is certain to expand, there is

every reason to plan its taxpayer-financed growth and

integrate it with new community-stabilizing ownership

strategies. The same is true of high-speed rail.

Moreover, there are currently no US-owned companies

producing subway cars (although some foreign-owned

firms assemble subway cars in the United States). Nor

do any American-owned companies build the kind of

equipment needed for high-speed rail.


In 2007 public authorities nationwide bought roughly

600 new rail and subway cars along with roughly 15,000

buses and smaller "paratransit" vehicles. Total current

capital outlays on vehicles alone amount to $3.8

billion; total annual investment outlays (vehicles plus

stations and other infrastructure) are $14.5 billion.

The Department of Transportation estimates that a $48

billion investment in transit capital projects could

generate 1.3 million new green jobs in the next two

years alone. There are also strong reasons to expedite

the retirement of aging buses and replace them with

more efficient energy-saving vehicles with better

amenities such as bike racks and GPS systems--the

procurement of which would, in turn, create more jobs.


President Obama has endorsed a strategy for making

high-speed rail a priority in the United States. In a

January 28 appearance in Florida he announced support

for rail expansion in thirteen corridors across the

nation based on an $8 billion "down payment" for

investments in high-speed rail included in last year's

stimulus package. The administration plans an

additional $5 billion in spending over the next five

years. Interest at the state level is also strong; in

November 2008 voters in California approved a $10

billion bond to build high-speed rail.


Even more dramatic possibilities for a new industry

organized on new principles are suggested by experts

concerned with the impact of likely future oil

shortages. Canadian scholars Richard Gilbert and

Anthony Perl, projecting dramatic increases in the cost

of all petroleum-based transportation, have proposed

building 25,000 kilometers (about 15,000 miles) of

track devoted to high-speed rail by 2025. Along with

incremental upgrades of existing rail lines to

facilitate increased and faster service, they estimate

total investment costs at $2 trillion (roughly $140

billion each year for fifteen years).


All of this raises the prospect of an expanding

economic sector--one that will inevitably be dominated

by public funds and public planning. In the absence of

an effort to create a national capacity to produce

mass-transit vehicles and high-speed-rail equipment,

the United States in general, and California and other

regions in particular, will likely end up awarding

contracts for production to other countries. The French

firm Alstom, for example, is likely to benefit

enormously from US contracts. The logic of building a

new economic sector on new principles becomes even more

obvious when you consider that by 2050 another 130

million people are projected to be living in the United

States; by 2100 the Census Bureau's high estimate is

more than 1 billion. Providing infrastructure and

transportation for this expanding population will

generate a long list of required equipment and

materials that a restructured group of vehicle

production companies could help produce--and, at the

same time, help create new forms of ownership that

anchor the economies of the local communities involved.


As reflection on transportation issues and the current

ownership structure of General Motors suggests, the

principles implicit in the nascent Cleveland effort

point to the possibility of an important new strategic

approach. It is one in which economic policy related to

activities heavily financed by the public is used to

create, and give stability to, enterprises that are

more democratically owned, and to target jobs to

communities in distress. The model does not, of course,

rely only on public funds; as in Cleveland it serves a

private market and hence faces the "discipline" of the market.


We are clearly only on the threshold of developing a

sophisticated near-term national policy approach like

that suggested for transportation--to say nothing of

the fully developed principles of a systemic

alternative. The Cleveland experiment is in its

infancy, with many miles to go and undoubtedly many

mistakes to make, learn from and correct. On the other

hand, as New Deal scholars regularly point out,

historically the development of models and experiments

at the local and state levels provided many of the

principles upon which national policy drew when the

moment of decision arrived. It is not too early to get

serious about the Clevelands of the world and the

possible implications they may have for one day moving

an economically decaying nation toward a new economic vision.




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