Beyond Throwaway Cities: How To Build An Export-Proof Local Economy

One solution involves fostering “green community wealth building”—that is, linking green development to institutions that inherently increase stability. This kind of wealth building can take a variety of forms, including employee ownership, nonprofit ownership, public ownership, and locally based private ownership. Most vibrant cities already have a substantial number of institutions that are inherently far more anchored than ordinary business firms. Among these, for instance, are universities, government agencies, and hospitals.

The goal of green community wealth building is to increase the proportion of capital held by actors with a long-term commitment to a given locality or region. In publicly traded firms, the central objective is to maximize profit for shareholders, whether it involves moving from one city to another or not. Green community wealth, on the other hand, is tied to place. Public enterprises, employee-owned firms, neighborhood-owned enterprises, and nonprofits all are rooted in particular communities. Communities with a higher proportion of such capital are better positioned to achieve economic stability and plan effectively for a low-carbon future.

A dramatic illustration of the new approach has been developed in Cleveland, historically one of the leading cities of American capitalism. Home to John D. Rockefeller, Cleveland was known as the world’s “nuts and bolts” capital. At one time it was second only to New York City in headquartering Fortune 500 companies. In 1950, Cleveland’s population exceeded 914,000.

Times have changed. By the 2010 U.S. census, Cleveland’s population had fallen below 400,000. But the legacy institutions remain—namely, the city’s leading hospitals and universities. Daily, more than 50,000 people commute to the Cleveland Clinic, University Hospitals, Case Western Reserve University, and the other so-called anchor institutions (“eds,” “meds,” and other place-based, mainly public or nonprofit, institutions) within the University Circle, a small business district located roughly four miles (6.4 kilometers) northeast of downtown Cleveland. The purchasing power of these institutions (in addition to salaries and construction) exceeds $3 billion a year. But surrounding the University Circle are low-income neighborhoods with 43,000 residents, whose median household income is only $18,500.

Can this pattern be changed? Its economic consequences in low-income neighborhoods are devastating, and the pattern is equally damaging from an environmental standpoint. Cleveland also exhibits a classic pattern of sprawl. A new strategy spearheaded by the Cleveland Foundation, and involving neighborhood groups, major hospitals and universities, as well as city government, aims to reverse both the economic and environmental devastation. (The Democracy Collaborative, home to two of this article’s authors, was involved in the planning.)

In what has come to be called the Cleveland model, the goal is to leverage the city’s existing anchors—in this case, hospitals and universities—to provide a long-term market for new worker-owned cooperatives while providing living-wage jobs and access to business ownership to employee-owners situated in surrounding low-income, largely African American communities. The first point is to recycle purchasing power to achieve greater stability. The second—and critical—point is to target firms owned by people who live in the community and create an ongoing stabilizing effect.

The first of Cleveland’s planned network of cooperatives opened its doors for business in September 2009. The co-op industrial-scale laundry is a state-of-the-art, ecologically green commercial facility capable of handling ten million pounds of health-care linen a year. Its sophisticated business plan provides all employee-owners a living wage and health benefits. After seven years on the job, if current projections are realized, each employee will have a $65,000 equity stake in the enterprise.

In October 2009, a second employee-owned, community-based company began large-scale installations of solar panels for the city’s largest nonprofit health, education, and municipal buildings. (The company also provides home weatherization services.) Another business scheduled to start operations within six months is a year-round hydroponic greenhouse capable of producing three million heads of lettuce and approximately 300,000 pounds of basil and other herbs a year. Many other enterprises are in the planning stage.