Volume 28, Number 4

What to Do in the Event of Capital Flight

Fred Schepartz

Fire sale on Madison’s north side this month!

Food processing and meat packing equipment from the venerable Oscar Mayer plant, in operation since 1919 in Madison, Wisconsin, will go on auction. The diligently maintained equipment is all in excellent condition, and it’s gotta go. Pennies on the dollar!

Thus plays out an American Tragedy, performed countless times all over the country. Oscar Mayer is closed, and who knows what will take its place.

Production ended in June as part of a corporate restructuring announced after former Oscar Mayer parent Kraft Foods Group merged with H.J. Heinz Co. in 2015. Rather than invest a little money into what was a perfectly viable, albeit outdated food-processing operation, Heinz opted to close the plant. Heinz is building a brand new automated plant in Davenport, Iowa. The automation will result in a severe net loss of jobs.

The Oscar Mayer auction will be conducted by Reich Brothers Holdings and Rabin Worldwide. who bought the plant earlier this year. All along, Heinz claimed they would make a good-faith effort to find a buyer, though many doubted their sincerity. However, they did find a buyer, albeit one who specializes in liquidation. Of course, given their lengthy experience with industrial liquidations, Reich and Rabin should be able to maximize the auction proceeds.

To be fair, it probably was unlikely that a different type of buyer would have stepped forward. Oscar Mayer was not exactly a turnkey operation. The facility is outdated, and a fair amount of remediation is probably required. On the other hand, Oscar Mayer could have continued as a perfectly viable operation, given an excellent workforce and equipment that still functioned adequately, assuming a new owner did not want to squeeze out more profits through automation that squeezes out the workforce.

What happens next?

Will Reich and Rabin squeeze every cent out of a cannibalized facility before leaving behind a blood-drained corpse for the City of Madison to deal with?

R & R claim that their goal is to clear out the facility and then repurpose it as best they can, with a goal of bringing in new and likely multiple tenants next year. They further claim that demolition is not in their plans. Rabin and Reich will have to do a major overhaul of the water, sewer and electrical utilities at the property, which could cost upward of $20 million.

We’ll see.

Taking their words at face value, I admittedly feel cautiously encouraged.

For now, the City and the overall community are taking the opportunity to give input as to what should be done with the facility.

Here’s my two cents:

If R & R keep their word and seek tenants at the plant, priority should be given to worker cooperatives. In fact, I would go a step further. The facility should be converted to a worker-cooperative incubation center.

I’ve written about the concept of a WCIC before, also in the context of a brownfield site. The gist of it is that if you have an abandoned area, especially one abandoned through capital flight, a WCIC is an excellent way to revitalize that site in a manner that is sustainable, with the most benefit to the community. Jobs at a worker cooperative by their very nature serve the community by creating wealth that stays in the community.

The former Oscar Mayer plant is enormous. If the building is gutted but kept mostly intact, there would be a ton of space that could house numerous worker cooperatives that could manufacture everything from clothing to processed food products.

In addition, the site could house a worker-cooperative leadership institute that could train cooperative members in the governance of their cooperatives. The training should also instruct interested cooperative members in the training of future cooperative members.

It should be noted that Madison has excellent resources for such a training venture. The University of Wisconsin Center for Cooperatives devotes a great deal of resources to training cooperative members. With the help of the UWCC, a WCLI could be established to enable coops to better run their own businesses.

And another thing the City should do is establish a trademark for Madison Coop goods to help create a brand.

If R & R are serious about tenancy, they should welcome worker cooperatives with open arms. These coops would make good tenants that would be likely to stay for the long haul.

Extensive outreach is needed to make this idea work. It would be especially important to reach out to minority and immigrant communities that would especially benefit from the establishment of a WCIC.

But this idea needs support. There needs to be a public/private partnership, and there needs to be support from local, state and federal governments.

As of right now, the City of Madison is in the first year of a five-year, $3 million cooperative initiative. I applaud the City for doing this, but that is just a drop in the bucket. The money is helpful, but serious funds are needed to provide grants and loans to fledgling coops. The State of Wisconsin needs to match those funds in a serious way.

Unfortunately, Scott Walker is more interested in giving billions to Foxconn for a smoke-and-mirrors promise of future jobs rather than spending millions to develop small home-grown businesses. And it should be noted that Foxconn has a horrible record for pollution and labor relations, and has a history of breaking promises such as it made to Wisconsin.

I seriously doubt that Walker knows anything about worker cooperatives. Earlier this year, Walker held a live chat on Facebook. I submitted a question about worker cooperatives and whether he would consider matching the funds allocated by the City of Madison. Much to my surprise, Walker actually responded to my question.

He didn’t answer my question, however, but pivoted into mansplaining about the budgeting process and accused me of being just another greedy special interest. I guess Walker didn’t get the memo that because Wisconsin is one of the few states where cooperatives are enshrined in state law, that Wisconsin is the Delaware of cooperatives.

Well, hopefully we can elect a governor who is not tone-deaf on issues of viable economic development, because this is a formula that could work anywhere in the state and anywhere in the country.

Cities need to allocate millions to develop WCICs. States need to allocate tens of millions, and the federal government needs to allocate hundreds of millions. I said this way back during the early days of the Obama Administration. What if the federal government allocated a billion dollars to worker cooperative development, especially in areas devastated by capital flight? How much impact would that have?

Trump has given lip service to supporting American businesses. This would be a way for the federal government to put its money where its mouth is.

But we can jumpstart this process right here in Madison, Wisconsin, by writing a new playbook and creating a powerful model of sustainable economic development by the people and for the people.