Volume 21, Number 1

Capital? We Don’t Need No Stinkin’ Capital

Fred Schepartz

Labor, properly organized, accompanied by sufficient community support equals capital. That is the lesson of the Cleveland Model.

Cleveland, like many Rust Belt cities, is an economic disaster area. Its population has dropped to less than half of what it was in 1950. Glenville, the Cleveland neighborhood where worker-owned Evergreen Cooperative Laundry is based, has a median annual income of roughly $18,000. Yet, in the depths of the worst economic downturn since the Great Depression, something amazing has happened.

Last year, Evergreen Cooperatives was born. Spearheaded by the private, non-profit Cleveland Foundation, grants and loans were secured, allowing for the creation of the Evergreen Cooperative Development Fund with the purpose of creating worker-owned cooperatives, starting in the Glenville neighborhood, thus taking advantage of the presence of a university, a hospital and a large medical clinic in the neighborhood and the subsequent demand for a variety of services that previously had been provided by non-local businesses.

Last year, Evergreen Cooperative Laundry and Ohio Cooperative Solar were born. Aside from being worker cooperatives, both businesses are significantly green. Green City Growers, an urban hydroponics greenhouse, and Neighborhood Voice, a community newspaper, will open their doors later this year.

Taking a cue from Mondragon Cooperative Corporation in the Basque region of Spain, each Evergreen cooperative is obligated to pay 10 percent of pre-tax profits into a cooperative development fund.

The Cleveland Model is a significant development given the devastation wrought by capital abandonment, not just in Cleveland, but all throughout the Rust Belt. Capital abandoned the inner city in favor of the suburbs. Capital abandoned the north in favor of the Right To Work south and west. And when the imposition of neo-liberalism in developing nations allowed capital to sidestep local labor and environmental laws and regulations, capital abandoned the United States.

During the current recession, we’ve seen a different variety of capital abandonment. Fearful of financial instability, capital hoards its resources. The financial sector won’t loan money to businesses. The Obama Administration is desperate to launch a new green economy, but capital is unwilling to risk the resources on a new, unproven economic sector.

This points out a significant advantage of the sustainability model versus the profit model. The reluctance of capital to venture into untested waters is understandable, given the financial risk. Obviously, a cooperative wants to turn a profit, but the cooperative is not out to maximize profits. Its board of directors does not demand tribute. There is no CEO demanding an eight- or nine-figure salary. In addition, risk is spread among more people in a cooperative, so cooperatives are willing to go where capital fears to tread.

Obviously, it takes money to start a worker-owned cooperative business. In the case of the Cleveland Model, this was accomplished through community support, with funding coming from area foundations, locally owned banks and municipal government, along with some federal grants.

When capital abandons a place, the solution is that labor can become capital, if properly organized and with sufficient community support. And given that capital has abandoned a great deal of this country, the Cleveland Model is a solution for Anywhere, USA. We as a nation need not be held hostage by capital.

Workers need to march back to the shuttered factories where they used to work and decide they will resume building goods in those darkened plants. And that effort needs to be supported by the community and by local, state and federal government. The Obama Administration must lead the way by allocating economic stimulus money for the formation of worker-owned cooperatives. Imagine the impact of one billion dollars provided as seed money for workers' cooperatives. That’s a little more than one tenth of one percent of the total amount of money allocated for the stimulus. This would be money well spent. Not only would it get people back to work relatively quickly, but it would provide a conduit for long-term economic growth.

Lest I paint too rosy a picture, I should mention that I have heard a critique of the Cleveland Model that it is top-down and thus paternalistic. I believe that criticism is fair. I have not visited any of the Evergreen Cooperatives, so I cannot say this with utmost certainty, but it appears that the management and leadership structure is superimposed upon these cooperatives rather than grown organically from the membership. My sense is that the Cleveland Foundation et al. probably believe professional leadership is necessary, at least in the beginning, for these cooperatives to survive, that it was absolutely necessary for hired-gun technocrats to be brought in to run things.

While The Nation absolutely gushed about the effort it took to organize these cooperatives and how green these businesses are, there was not a word about what it’s actually like to work in any of these places.

Are these workplaces democratic? Is it a humane work environment? Are workers paid a living wage?

A workers' cooperative that does not have these things is not much of a cooperative. At Evergreen Cooperative Laundry, there is the hope that workers can accumulate upwards of $65,000 in retained equity within 10 years. This is an admirable goal, but is it realistic or is it pie-in-the-sky? And to achieve that goal, are workers paid a substandard wage? I don’t know.

For the Cleveland Model to succeed in a meaningful way, each workers' cooperative must have self-rule and self-determination. It is imperative that management provides training opportunities so the workers can learn how to run their own business because, when it’s all said and done, it’s their business, and no one will know how to run it better than them.

I do sincerely hope a form of the Cleveland Model can be implemented on a national scale. Capital has abdicated its responsibility to the citizens of this country. The Cleveland Model teaches us that together, we can live without capital by essentially generating it ourselves.

A tsunami of new cooperatives could create thousands upon thousands of new jobs and could get America back in the business of building good that the rest of the world wants to buy. But to make this a truly worthwhile endeavor, the cooperative movement has to be proactive in its efforts to train and organize those who might form these future cooperatives, so the future cooperative members can be best equipped to organize themselves.