Community-Led Economic Regeneration – What Can We Learn From Cleveland, Ohio?

It’s time to bring not for profits, philanthropy, cooperatives and government together as part of a community-led economic regeneration with an eye on the successful Cleveland Model in the US, writes Krystian Seibert from Philanthropy Australia.

The surprising US presidential election result has been met with an avalanche of analysis over what led to Donald Trump’s shock victory. One reason, which has popped up over and over again, is that segments of the “working class” in states such as Ohio and Pennsylvania felt “left behind” by the economic system and that Trump’s victory was partly a backlash against economic inequality and dislocation in the US.

States such as Ohio and Pennsylvania were once centres of industry, but in many parts of these states, factories have shut down and thousands of jobs have gone with them, some overseas.

Globalisation has led to economic growth in the United States – but this growth and its associated employment has been uneven and often concentrated in places that can seize the opportunities of the “new economy”. We hear a lot about the rise of Silicon Valley, but while it has been booming, many parts of Ohio and Pennsylvania have been going bust.

We can certainly question whether Trump has the solutions to these problems, but there’s no denying that there has been considerable economic dislocation in the US, resulting in rising economic inequality.

While places like Ohio are sometimes rather negatively referred to as part of the “rust belt”, Ohio is actually the location of an inspiring example of what can happen when a community – including local philanthropic and not-for-profit organisations, cooperatives and government – comes together and decides to build a new future.

That’s the story behind the Evergreen Cooperatives. Located in Cleveland, they’re an innovative initiative which focuses on supporting community-led economic regeneration in an area of the city impacted by economic dislocation and experiencing high rates of unemployment and poverty. Given their success, the Evergreen Cooperatives are now often being referred to as the Cleveland Model.

Illustrated in the diagram below, the Cleveland Model involves the establishment of several profit-for-purpose cooperatives which are owned by their workers, who are residents of the surrounding community. “Anchor institutions”, in this case the city’s major hospitals and universities, procure services from these cooperatives. This short video explains the model in more detail.

Funds to support the establishment of the cooperatives were provided through a combination of grants from the Cleveland Foundation (the world’s first community foundation), as well as loans from the City of Cleveland and a community development bank. The Cleveland Foundation played a critical convening role by bringing the local community together at the very outset, leading a process which came up with the idea and then made it happen. Together with partners such as the Democracy Collaborative, it did extensive planning and due diligence and continues to be closely involved to this day.

So far there are three cooperatives – one providing industrial-scale laundry services, one which operates a large greenhouse that supplies green produce, and one which installs solar panels and energy efficient technologies. More are planned.

The use of cooperatives and anchor institutions is particularly notable. “Normal” businesses could have been established instead of cooperatives, but the Cleveland Model is predicated on the premise that “ownership matters”. The workers are local residents, and as owners of the cooperatives, they have a much greater stake in the future of the cooperatives and of their community. They aren’t just being given a job, they and their community are being empowered in a very real way.

The anchor institutions procure billions of dollars in goods and services as part of their operations, but previously, little thought was given to how much of this benefits the local community. Procuring services from the cooperatives means that the anchor institutions can support the creation of more jobs for local residents. The anchor institutions aren’t going to pack up and move away, so they contribute towards the long-term financial sustainability of the cooperatives and enable them to focus on securing new customers beyond the anchor institutions.

The Cleveland Model is an alternative to other more conventional responses to economic dislocation. Often governments tend to fund job training programs when a major employer shuts down – but these are of little use if there are no quality jobs around. That’s why the Cleveland Model focuses on creating quality jobs which meet the needs of the local community.

Tax breaks and other subsidies for existing and new businesses are also common, but what happens when those tax breaks or subsidies end? By using cooperative structures, the Cleveland Model connects with the local community in a very direct way. It’s worker-owners are the community, and that provides much more of an incentive to succeed than what tends to often be quite marginal tax breaks and subsidies.

So, what does all this mean for Australia?

Well, we’re also seeing economic dislocation here. In areas once supported by large scale manufacturing such as Broadmeadows in Victoria and Elizabeth in South Australia unemployment is now 26.2 per cent and 35.1 per cent respectively.

With the closure of our last automotive manufacturing plants happening as we speak, this is likely to worsen.

In the Latrobe Valley in Victoria, the planned closure of the Hazelwood Power Station has drawn further attention to the challenges faced by a community already experiencing high unemployment, with more jobs set to go when it closes in March next year.

The responses so far have tended to be the conventional ones described above – involving one or all of training programs, tax breaks or subsidies.

It’s time to think outside the box and trying something which we haven’t tried before in Australia.

The Cleveland Model is working in Cleveland, so much so that it’s now being implemented in other US cities such as Rochester, New York. Why not see if it can work in Broadmeadows, Elizabeth or the Latrobe Valley?

The time is right to bring community, philanthropy, not for profits, cooperatives and government together in these or other similar areas in Australia, and see if we can do things differently.

About the author: Krystian Seibert is the policy and research manager with Philanthropy Australia.