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The Cleveland Model

Submitted by News Desk on Tue, 02/16/2010 - 2:12pm
Source: 

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
neighborhoods).

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.