Anchoring Wealth: A People-and-Place Approach to Local Economic Development through Worker Cooperatives in Cleveland
/Worker cooperatives—businesses that workers collectively own and manage—offer an opportunity to ‘anchor’ wealth in the community, particularly in communities where deindustrialization has led to high unemployment and disinvestment in community institutions. Cleveland is one such Rust Belt city: greater Cleveland ranks in the top 10 metropolitan areas for concentrated poverty, with 28.2% of the metropolitan area’s poor residents living in extremely poor neighborhoods.
In 2009, a broad group of stakeholders in Cleveland came together to try to address the city’s economic development challenges by means of an innovative ‘place-and-people-based strategy.’ Evergreen Cooperatives is an effort led by the Cleveland Community Foundation, which engaged anchor institutions—University Hospital, the Cleveland Clinic, the Veterans Administration hospital, and Case Western Reserve University—to leverage the buying power of these institutions in arranging procurement from networked worker cooperatives composed of local residents. Cooperatives incubated to-date include a laundry service, a solar panel installation and weatherization firm, and an urban gardening service for local businesses.
The Mayor’s Office of Economic Development invested $1.5 million in low-interest seed loan capital in 2009, and the Cleveland Community Foundation itself capitalized the project with a $3 million revolving loan fund. In 2012, University Hospital committed $1 million to Evergreen over four years. The procurement purchasing power of the university and hospitals stands at $3 billion. That money was previously mostly flowing out of the community; Jane Jacobs, emphasizing the potential for import-substitution at the city level, would not have approved. She wrote in “Cities and the Wealth of Nations,” “economic life develops by grace of innovating; it expands by grace of import-replacing."
The Evergreen Cooperatives are a mixture of Robert Giloth’s “enterprise economy” (investing in local industry, with wariness of ‘chasing fashionable new economic development,’ and emphasis on higher multiplier effects—via attention to sectors, clusters, and anchor institutions) and “social economy” (social returns, cooperative ownership, investor/entrepreneur networks).
The Evergreen Cooperatives are also in some ways an example of Michael Porter’s cluster ideas applied to central city redevelopment. Porter defines clusters as “geographical proximate group[s] of interconnected companies and associated institutions in a particular field, linked by commonalities and externalities.” He practically sparked a movement in the 1990s with his ideas about clusters in the “inner city,” arguing that a cluster approach in central cities could address unmet local demand, and put to work an underemployed workforce.
The cooperatives ‘leverage the advantage’ of being in downtown Cleveland, and make use of clusters that go beyond firms to universities, research institutes, and specialized financial products. The role of the CBOs involved resembles what Porter describes as their ideal role: guiding a business-based model by advising, lending to, and operating a business, while supporting on access to government finance. Additionally, the initiative makes use of what Porter calls “strategic subsidies,” a competitive advantage strategy that diverges from the kind of incentives that seek to lure footloose capital with no inherent logic to be in their particular location.
However, there is a key distinction from Porter’s approach in that the Evergreen Initiative goes beyond creating clusters to thoughtfully plan for jobs for local residents, attempting to root these firms in the community. As Giloth writes of Porter, he is a “welcome alternative to smokestack and stadium-chasing approaches to inner-city redevelopment, [but] has not yet demonstrated concretely how the strategic growth of firms translates into jobs for low-income people or into revitalized places.”
The Evergreen Cooperatives represent an example of what Giloth calls targeted economic development: “targeted” economic development implies that the initiative does not just “assume benefits will flow to excluded populations.” Evergreen Cooperatives provides jobs to low-income residents of seven historically disinvested neighborhoods surrounding Cleveland’s University Circle district. There is a saturation of seventeen of Cleveland’s major institutions in the area of Greater University Circle, with over 60,000 jobs, yet the median income in these residential neighborhoods was $18,500 in 2012, with unemployment at 24 percent.
Indeed, the Evergreen Cooperatives would in fact be an example of what Karen Chapple calls “neighborhood saturation,” which goes one step beyond targeted economic development in order to invest not just in people through jobs and asset-building, but also to invest in place. The broader initiative is investing in physical development (housing stock and commercial real estate), as well as community engagement (better including residents in neighborhood improvement plans). This is an example of “investing in people through place,” and represents an attempt at what Chapple refers to as endogenous development, building up a place with both locally-rooted industry and interventions to create a more favorable environment for future sustainable business development.
While the Evergreen Cooperatives seem to in theory embody much of what the community economic development (CED) field has learned about best practices, it is difficult to scale. The goal was to create ten businesses that employ 1,000 people from the target neighborhoods. To date, three businesses have been incubated (with others in the pipeline), creating over 100 jobs, with over 50% of these jobs going to people from the target neighborhoods. More impact evaluation is needed of the multiplier effects of the jobs that have been created, as well as more analysis of what the key barriers to scale have been.
Anna is a Master's Student in the Department of City and Regional Planning at UC Berkeley, with a concentration on Housing, Community, and Economic Development. Anna’s academic interests and professional experience center around social, racial, and economic justice, and planning for more equitable cities.