The End of Illth
In search of an economy that won’t kill us
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In search of an economy that won’t kill us
The closest example I could find of the watershed model lay in an old warehouse in Glanville, a crumbling neighborhood in Cleveland. There, I encountered the antithesis of a shareholder-owned coal mine: a worker-owned business that installed solar panels throughout the city. At the time I visited, Ohio Cooperative Solar (which is now known as Evergreen Energy Solutions) employed twenty-one men and women, mostly from Cleveland’s lower-income neighborhoods. But OCS wasn’t a welfare experiment; it was a business, one that was turning a profit five months after launching.
OCS was part of a larger network of worker-owned businesses in Cleveland called the Evergreen Cooperatives. The Evergreen network was founded in 2008, after the new CEOs of Cleveland Clinic, Case Western Reserve University, and University Hospitals — all of which are located within a one-mile radius of what’s known as Greater University Circle — started giving serious thought to the eight square miles of shuttered businesses and derelict homes in the neighborhoods that surround their institutions. At the peak of the manufacturing boom in the 1950s, Cleveland was the seventh largest city in the country; today it is the forty-fifth largest and among the poorest.
The “anchor institution” CEOs knew that their organizations were spending $3.5 billion per year on goods and services from outside the Cleveland area. So they asked themselves: Why not redirect some of that purchasing power in order to create an economy that would employ men and women from the surrounding neighborhoods? If only 10 percent of that $3.5 billion was redirected locally, it would inject $350 million into an area facing an unemployment rate of over 25 percent.
The philanthropic Cleveland Foundation ponied up $3 million in seed money, the institutions each added $250,000, and the Evergreen Cooperatives were born. The primary goal was to create good, environmentally sustainable jobs that would not be outsourced. The co-op’s pilot business was the Evergreen Cooperative Laundry, which set up shop in October 2009 to service the Cleveland Clinic and University Hospitals. Today the laundry, which uses energy-efficient washers and dryers, is housed in a one-story LEED-certified building. Facing the street are three frescoes, each featuring the slogan PEOPLE PLANET PROFITS. That is the succinct philosophy of the Evergreen Cooperatives, and it suggests how their model upends the usual socialist–capitalist antipathy. The laundry employs fifty men and women, who clean twelve million pounds of linens a year and who will eventually own 100 percent of the company. Are they socialists who own the means of production, or capitalists who own their own company? The answer, I suppose, is that they represent a new economic model that eschews such false dichotomies. They have solid jobs and are accumulating wealth.
The basic economic logic of any Evergreen Cooperative is to say to the anchor institutions, “What can we provide that you will buy?” The answers tend to fall along three streams: waste, food, and energy — goods and services that cannot be easily outsourced. OCS formed soon after the laundry, with the goal of providing thirty installations of 100 kilowatt solar panels for hospitals, schools, and municipal buildings across Cleveland. In 2009, the Ohio legislature mandated that, by 2012, 60 megawatts of the energy used statewide must be solar-generated. But because most of the anchor institutions were nonprofits, they couldn’t benefit from the federal government’s 30 percent kickback to businesses that invest in solar energy. Instead, OCS installed a 42 kilowatt unit on the roof of the Cleveland Clinic, which paid rent on the panels plus another 12 cents per kilowatt hour for the energy generated — comparable to the rate they paid for electricity from the grid.
I pulled my truck up behind OCS’s four-story warehouse on a sweltering day in the summer of 2010. All five of its four-person work crews were out on installation jobs. But office manager Loretta Bey met me at the loading dock and offered to show me around while I waited for then CEO Steve Kiel. (Kiel left the company in 2011.) We wandered among stacks of shipping pallets loaded with solar panels, and Bey explained the basic operation of a large wet-spray unit used to blow insulation into leaky walls. (When inclement weather prevented OCS from installing solar panels, the company provided a variety of weatherization services for homes and schools). We stopped at Bey’s small, unair-conditioned office, which was filled with photos of her family. I asked her what she thought of OCS. “This is the best job I’ve ever had, by far,” she said. “I feel like I’m part of this company versus just working for it.”
While about 11,000 U.S. companies offer some form of employee stock ownership, far fewer give workers real input into decisions. OCS operated on a one-worker/one-vote model, for everyone from the CEO to the newest hire. They all gathered at 7:30 on Monday mornings to discuss company business. “It’s like we’re part of the board,” Bey told me. “We don’t look at Steve as a superior. He’s equivalent to us.” And Kiel was paid accordingly, at least compared with the average American CEO, who makes 300 times more than the average employee at his firm. OCS’s bylaws, Kiel told me, stipulated that the highest-paid member of the cooperative could never be paid more than five times the earnings of the lowest-paid member.
After a six-month apprenticeship period, OCS employees could apply to join the broader Evergreen Cooperatives. If voted in, they received a $3 per hour raise and began buying into the company through a payroll deduction of 50 cents per hour. In about three years, this would add up to $3,000, an ownership stake that, based on the co-op’s projections, could be worth $65,000 in another six years. (Median household income in the neighborhood is $18,000.) Still, Bey told me, “Being an owner is nice, but it isn’t the most important thing. We’re a team, and for a team to win, it has to be profitable. So everybody has to do the best they can to help the team. That’s what makes it work.”
Later I spoke with crew leader Mike McKenzie, who echoed Bey’s sentiments. “You feel like it’s part of your own,” he said of the cooperative, “so you take it a lot more seriously. People work better together because of the common goal of being more efficient and making the company more profitable. You share in the profits and you have some say in the direction of the company.”
If that sounds like syndicalist thinking, rest assured that when Kiel showed up in his businessman’s attire, he looked like the last person to lead a revolution. He spoke with Bey about some invoices that needed her attention, and then he and I walked up to his office on the top floor of the warehouse. I told him about the twenty-nine dead miners in West Virginia, the two in Kentucky, and asked if he thought the Evergreen Cooperatives model could be applied to coal mining.
He responded by bringing up a town called Mondragón, in another mountainous region, Spain’s Basque Country. Like Appalachia, the Basque region is set off from the rest of the country by both geographical boundaries and a distinct cultural identity that grew in some ways out of that physical isolation. During the Spanish Civil War, the Basques sided with the Republic, which promised them regional autonomy. In 1937, Franco rained down retribution on the Basque capital of Guernica, and took as prisoner a young Catholic priest named Don José María Arizmendiarrieta. After the war, José María was appointed the parish priest of Mondragón, where he preached a gospel of collective responsibility, rather than one of individual salvation. Inspired by José María, five Mondragón men established Spain’s first worker-owned company, Ulgor, in 1955. Like OCS, Ulgor started with just a handful of workers. Its original constitution and bylaws stated that it would permit no outside shareholders, that all business decisions would be made by workers with equal voting rights, and that all profits would be distributed directly to each worker’s capital account. José María didn’t develop a systematic or ideological framework for the cooperatives, but he said this of their spiritual and social vision: “Cooperativism seeks to create a new state of conscience, of culture in a word, through the humanization of power through democracy in economic affairs, and through solidarity, which impedes the formation of privileged classes.” Today Mondragón is home to 120 cooperatives that employ more than 80,000 worker-owners, and it earns some €14 billion annually.
Kiel traveled twice to Mondragón with other members of the Evergreen Cooperative, and they were using the town’s model for guidance and inspiration. “The economic renewal will be moral,” José María said, “or it will not exist.” Echoing the priest, Kiel told me, “If you can collectively and cooperatively enter into an industry that is run for profit but practices some morals in that — community-based morals — you don’t have to take everything and put it in the pocket of the highest producer.” Instead, concentrations of wealth were to be distributed more fairly, to the men and woman who had, after all, earned it.
As CEO of Massey, Don Blankenship hadn’t dug up an ounce of coal, but in his last year at the company he walked away with $17.8 million and a deferred compensation package valued at $27.2 million. Kiel told me that under the formula OCS had developed, profit-shares were determined one third by a worker’s wages, one third by the hours he or she had worked that year, and one third by his or her overall tenure with the company. The model sought to reward commitment to the co-op and to the community.
 Blankenship ran Massey Energy from 1992 until 2010, when stockholders forced him into retirement. In June of 2011, Alpha Natural Resources bought Massey for $8.5 billion. Today, it is the third largest coal company in the United States and the fifth largest in the world, operating 150 mines and forty coal-preparation plants.
“The deal we make with employees is that this is not an overnight ATM machine,” Kiel said. “You’re going to have to work here eight to ten years before you see the benefits of ownership. . . . What we get in return as a community is people living in these neighborhoods for long periods of time with long-term job security, and that leads to the entire community stabilization we’re looking for.” What’s more, when the workers are the stakeholders, long-term thinking about what’s best for the company replaces the short-term, profit-driven motives of today’s average shareholder. “Most capitalists have a return-on-investment threshold,” Kiel said. “Typically venture capital is going to put up a million dollars up front and will look to get a [huge] annual return. We don’t have that capitalist on board, so we have a different measure, which is how many people can we hire.”
A business paradigm that doesn’t involve venture capitalists and hedge-fund managers seems almost unthinkable in this country, or at least it did before the financial collapse of 2008 and the rise of Occupy Wall Street. Then, for the first time in ages, we allowed into our collective conversation honest talk about the fallout from income inequality and the fundamental unfairness of a country run by the now-famous one percent. Economist Milton Friedman, who may have been wrong about many things when it came to deregulated, laissez-fair economics, was right about this: “Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.” Today, the economic model set down in Cleveland is alive and available, and the unsustainable logic of our current financial system may soon make it very much inevitable.
More from Erik Reece:
From the December 2005 issue
Percentage of British elementary-school students who think Isaac Newton discovered fire:
The earth once had three moons; the two lost moons may have crashed into the surviving moon, or been sucked into the sun, or flung out of the solar system to drift through deep space.
In Florida, an 87-year-old World War II veteran flying touch-and-go drills in a Cessna collided with an airborne skydiver. “There was a ‘woof’ sound,” said a witness, “like falling on your face into your pillow.”
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