Transformative Economic Development: Summary of the March 14th Forum

By Penn Loh and Jonathan Feinberg

On Thursday March 14th, more than 30 gathered for the Practical Visionaries Forum on Transformative Economic Development (see video here). The session featured MIT urban planning professor Phil Thompson and MassINC Research Director Ben Forman. In addition, Aaron Tanaka (formerly of Boston Workers Alliance) and Juan Leyton (formerly of Neighbor to Neighbor Massachusetts) offered first responses.

MassINC’s Transformative Redevelopment Proposal

Forman spoke first about MassINC’s Gateway Cities project, which supports revitalization of 26 mid-sized cities in Massachusetts (such as Lawrence, Lowell, New Bedford, Springfield, and Worcester). Once the bedrock of the state’s middle class, these cities are struggling with poverty and loss of jobs and investment. But together, the Gateway Cities represent about one-fourth of the population in Massachusetts. MassINC’s strategy includes supporting these cities to work together on state education and transportation policy, which is often dominated by Boston area interests.

In terms of the economy, Forman laid out the framework in MassINC’s new report Transformative Redevelopment: Strategic State Policy for Gateway City Growth and Renewal. This strategy assumes that the Gateway Cities can be economic anchors for their regions and that it is depressed real estate markets (where development costs outweigh potential returns) that are prohibiting private investment. Forman noted that these Gateway Cities will likely remain primarily residential and thus will “live and die by their human capital.”

MassINC recommends a $1.7 billion state program to provide support for transformative redevelopment, primarily to help bridge the development gap in the real estate market. Forman noted that these Gateway Cities alone do not have the expertise or the resources to overcome many of their barriers. Thus their strategy includes building the governance capacity to do the planning. Much of the state money would go towards a redevelopment fund that would be targeted at investments with the highest impacts. Many things have been tried, he said, including building the courthouse, the downtown mega-development, or growing out from an anchor university or hospital. But many more approaches will have to be taken.

Forman acknowledged that one of the biggest challenges is to ensure that these redevelopment projects produce benefits for the people in these cities. He believes that these cities can absorb some gentrification without displacing existing residents because the housing prices are already so low. He also pointed to the difficulty of the politics in these cities, where the elected leadership is not always representative of the growing immigrant populations.

The Cleveland Model

Thompson then took the floor to share an innovative development model being pursued in Cleveland. He was co-author of the recent report The Anchor Mission: A Case Study of University Hospitals Vision 2010 Program. But before getting into the specifics, he shared his thoughts on economy in general. He said that economy in Greek times referred to the household unit (including women and slaves) and was considered the private sphere. But today, economy is coming out of that private sphere into the public. And as a result democracy ought to apply. The challenge is to think about a “public economy”, one in which today’s equivalent of Greek-era women and slaves can have a say.

Thompson then laid out three key drivers behind Cleveland’s anchor institution model. First are the ideas of Gar Alperovitz and the Democracy Collaborative at University of Maryland. They worked with Cleveland leaders on an economic development strategy driven by worker-owned firms. The basic idea is import substitution – locally producing more of what is currently imported. While goods imported from outside the region may be cheaper, production by local worker-owned cooperatives keeps more of the money circulating locally. It can also have other social and environmental benefits, such as lower transportation emissions. Thompson believes that local manufacturing with the advent of “3-d printing” is the wave of the future and could displace the import of goods from factories in China and elsewhere.

Second, Thompson introduced the University Hospitals (UH) motivation to help improve their surrounding neighborhoods. The crime and deterioration of the areas around the hospital were making it harder for them to attract doctors and nurses. The hospital had also suffered from poor relations with the surrounding community. Finally, in Ohio nonprofit hospitals are required to dedicate a certain percentage of their revenues towards community benefits. Thus, the hospital itself had high motivation to pursue a different course that would both improve its image as well as the conditions of its surrounding neighborhoods.

The third driving force, according to Thompson, was Cleveland Mayor Frank Jackson. He was frustrated that the city could not do more affirmative action and programs targeting lower income neighborhoods. But a private institution like University Hospitals could potentially do even more than the city to promote local hiring and contracting.

The University Hospital’s Cleveland 2010 program included a massive $1.2 billion construction project as well as procurement through the newly launched Evergreen Cooperatives. Evergreen is becoming renowned for launching a series of networked worker-owned coops in businesses serving the local anchor institutions. They have a commercial green laundry, a solar installation firm, and have just opened a lettuce-producing greenhouse.

In the construction project, UH overcame a number of challenges that often stymie local hiring and contracting initiatives. First, UH hired in-house a black architect who oversaw all construction management. They then hired only firms that would also help resource smaller minority and women-owned firms, such as assisting with bonding. UH also established a project labor agreement with the construction trade unions to meet targets for hiring local, minority, and women workers. An independent third party company was hired to oversee and monitor the implementation of this agreement to overcome problems with implementation.

As a result, 90 minority firms got contracts and 100’s were hired from the community. According to Thompson, UH totally changed its image with the community and saw charitable donations go up significantly. One woman in the neighborhood even bequeathed her home to UH.

Thompson finished by mentioning a new IRS rule that now requires nonprofit hospitals to do more to plan for and provide community benefits. This could be more impetus for hospitals to follow the Cleveland model and do more local sourcing for goods. He and the MIT Co-Lab are working in the Bronx and trying to determine how to work with hospitals there. They are also in discussions with Mondragon to see if there are opportunities for Mondragon to open up a cooperative manufacturing facility.

Aaron Tanaka responds

Tanaka said that he is very excited to talk about how democracy applies to the economy. As an organizer, he said, it is difficult to talk about jobs and a different vision. But that is the challenge that he took on while Executive Director at the Boston Workers Alliance (BWA). Along with some notable project victories like barring questions about arrest records on job applications, BWA helped some of its members start up Roxbury Green Power, a microenterprise that collects waste grease from local restaurants to process into biodiesel fuel. The group also learned about and sponsored talks on participatory budgeting, a process started in Porto Allegre, Brazil, that is now spreading throughout the US to include Chicago, New York City, and Vallejo. The basic idea behind participatory budgeting and other similar projects is the development of processes and institutions for people to directly participate in shaping their government’s budget.

Tanaka views this type of work as part of a search for new, democratic, and participatory economic forms beyond neoliberal capitalism and centralized state socialism, the two most dominant economic paradigms in recent global history. This kind of discussion is especially important when trying to organize communities around job creation, and attempting to explain why any other system is better than the one we have. Tanaka called specifically for a greater need for accountability and enforcement in development policies, and is now working with the Economic Justice Funding Circle to support these kinds of initiatives.

But also, there is a great need for public education around economic democracy. What would happen if anchor institution spending in the form of PILOTS (Payments In Lieu Of Taxes) were to be used in participatory processes? Participatory processes have demonstrated a real shift in people’s relationship to government. What would democratic economic planning look like, where consumers could collectivize their spending power and negotiate directly with producers? Tanaka’s question is, essentially, how do we change the nature of people’s relationship with – and understanding of – the economy?

Juan Leyton responds

Leyton raised some challenges based on his experience with Neighbor to Neighbor Massachusetts, which organizes in a number of low income cities outside Boston. First, he mentioned that we need to deal with the state deficits. New revenues are always tough to raise. We need to figure out how to get the public resources for transformative development: where would the $1.7 Billion come from to fund MassINC’s Transformative Redevelopment plan? Making the income tax more progressive is a first step. But he noted that while Massachusetts’ Congressional delegation is seen as very liberal, our state legislature is controlled by more conservative Democrats.

Another challenge is that the state constitution does not recognize cooperatives, so that would need to be addressed at some point. There is also the issue of Boston versus the rest of the state, confirming what Forman raised about the challenges facing Gateway Cities. This issue is perhaps best illustrated through the transportation debate. Most of the solutions proposed for Massachusetts’ transportation policies focus exclusively on Boston. Holyoke and Springfield have no extensive mass transit, regional transportation authorities are underfunded, and it takes at least an hour to get from Lynn to Boston, a 20 minute drive. The gas taxes proposed to help fund public transportation, moreover, will disproportionately impact lower-income folks who have no option but cars in areas that have inadequate public transportation.

Finally, Leyton asked if we are really ready on the ground to make the deals with the hospitals and other anchors. This is a challenge for us. He thought that we are not really talking about it seriously yet, but the conversation is growing. Even with funding available for workforce development, the combination of unfavorable legislation and a lack of readiness on the ground are hampering potential future work.  He is working with an emerging effort to build a Boston Center for Community Ownership that would help communities and workers develop more cooperative enterprises.

Questions and Discussion

The following is a summary of some of the themes that arose during the questions and discussion without citation to any individual speaker. [Note that the video recording ends before the questions and discussion.]

One main theme raised in the final question session is the relationship between organizing the community and these transformative efforts and how to better connect them up.  One of the major problems identified is in getting the financing to the community organizations ready to do the work. As citizens, we are not trained to see public money as our money, and therefore as accountable to us. This type of shift in recognition may be necessary in transforming debates around resource problems.

However, the real problems are not financial, they are political. There is a real lack of cooperation between community organizations, state government, and unions. Where is the balance between the efficiency of top-down and the validity of bottom-up development processes? The top-down model of Cleveland’s Evergreen coops is still challenged with the difficult transition to worker ownership, leading to a fundamental question: how do transformative enterprises fit into a broader movement building framework?

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Distinguished Senior Lecturer and Director of Master of Public Policy and Community Practice, Tufts University Department of Urban & Environmental Policy and Planning

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