The three stories you wil find below—and the seventeen others included in our new report, Cities Building Community Wealth—are only a few among many playing out around the nation, emblematic of the new players and approaches of community wealth building. These stories matter, because they tell us that—in the interstices of the economic challenges visited upon so many American cities—promising alternatives are emerging. These stories are like seeds of nourishment sprouting on vacant land. They tell us that across the United States, in more places than most would imagine, a new kind of economy is beginning to appear. It's an economy that, because of its fundamental design, tends naturally to create inclusion and prosperity for many, not simply for the few.
The design challenge before us
We see this new kind of economy in the story of Christina, who can more easily make a decent living cleaning houses. The reason is that, as a worker-owner, she's in control of her economic fate. Concern for her well-being is designed into the purpose and ownership of a worker-owned cooperative.
We see it in the story of the residents living in the Dudley Street community land trust. These low-income families are able to enjoy safe, attractive homes in a once-blighted neighborhood, because creat ing such an environment for them is the aim of a community land trust. It places ownership of land in community hands, and ownership of homes in family hands. Keeping homes affordable in perpetuity is built into its ownership design.
We see this new economy being supported by economic development in the pioneering experiments of Portland, New York, and Boston, where the prosperity of once-marginalized individuals and families is at the core of new strategies.
These approaches show us that there are pathways that can take us beyond the economic hardship facing so many Americans. Those hardships are indeed substantial, and have been getting worse. An August 2015 study by The Century Foundation reported that—after a dramatic decline in concentrated poverty between 1990 and 2000—poverty has since reconcentrated. Nationwide, the number of people living in high-poverty ghettos and slums has nearly doubled since 2000.
More broadly, the last three decades have seen wages essentially stagnate for the bottom 80 percent of Americans, even as the income of the top 1 percent has more than doubled. Today, close to half of all children up to the age of five live in low-income families. And African-Americans and Latinos are more than twice as likely to live in poverty as non-Latino whites. This picture becomes more troubling when one realizes that most babies born in the U.S. today are children of color. We are only three decades away from becoming a nation where the majority will be people of color. Youth, of all ethnicities and races, are also struggling—with too many facing a future of poor employment prospects, or for many, no jobs at all.
The American economy is failing the majority of its people. This trend threatens to worsen, unless we can answer the design challenge before us. Can we find ways to include those now excluded from economic well-being? Can we design an economic system—beginning at the local level—that builds the wealth and prosperity of everyone?
The answers are beginning to appear in cities nationwide—in the tools and approaches of community wealth building, as they are wielded by cutting edge city economic development professionals. This work is only beginning to be widely recognized as a cohesive field. Yet as this report shows, it is in fact a coherent, systemic approach to economic development—one that embodies a powerful set of common drivers, and offers a broad set of powerful strategies.
The drivers of community wealth building
Among the drivers of building community wealth is broad-based local ownership—as seen, for example, in cooperative development as a way to create jobs for those with barriers to employment. Beyond New York, we see this at work in Cleveland, where The Democracy Collaborative, in partnership with the Ohio Employee Ownership Center and others, worked with The Cleveland Foundation to help launch the Evergreen Cooperatives, which aim to draw in people of color from the inner city as worker-owners. The Evergreen Cooperatives were, in critical early stages, aided by financing approved by the City of Cleveland through Tracey Nichols, the director of economic development. Inspired in part by Cleveland, city government support for cooperative development is rapidly expanding. Cities such as Rochester, New York, and Richmond, Virginia, are aiming to create networks of worker-owned enterprises. Other cities, such as Austin, Texas; Madison, Wisconsin; and Richmond, California, are building technical assistance ecosystems to support cooperative development.
Another form of community-based ownership is municipal ownership, as in Austin, where the city-owned Austin Energy has contributed tens of millions to the general fund. The city is now launching the city- owned [re]Manufacturing Hub, where companies will transform recyclable materials into new products.
Another key driver of building local wealth is the multiplier effect of anchor procurement. Rather than trying to attract companies, this approach keeps dollars spent by cities and large anchor institutions circulating locally. In 2014, the nonprofit World Business Chicago, with support from the mayor's office, launched Chicago Anchors for a Strong Economy (CASE), helping locally owned businesses succeed by connecting with anchor institutions. Similar efforts are underway in Philadelphia, Baltimore, New Orleans, and Cleveland.
Also central to community wealth building is the driver of inclusion, the opening up of economic opportunity and voice to previously excluded social groups. This is at work in strategies like participant-led development—such as Portland's Neighborhood Prosperity Initiative. A related approach is participatory budgeting, where residents help make decisions in economic development— underway in places as diverse as Keene, New Hampshire; Vallejo, California; Chicago; New York; and San Francisco.
"The ultimate aim is creating a new system,
where concern for broad prosperity
is built into the core design."
Another important strategy of inclusion is the participatory process involved in community benefits agreements (CBAs), where local community groups, sometimes with the support of city government, work to create contracts with local developers, requiring them to hire locally, create living wage jobs, or contribute in other ways to community benefit. One example is the CBA in which Boston's Northeastern University committed to purchasing 15 percent of its goods and services from Boston-based, minority- and women-owned businesses.
Creating systems of support for locally and inclusively owned enterprises is still another driver— as seen in incubators and accelerators that support social enterprises, cooperatives, local businesses, or enterprises owned by women and people of color. In Cincinnati, where a police shooting of an unarmed African-American man led to riots a decade ago, the unrest led the mayor and other civic leaders to join together, in work led in large part by The Greater Cincinnati Foundation, to address the underlying economic root causes of the unrest. The result was the launch of a Minority Business Accelerator. It has since created thousands of jobs and become a national model.
Workforce development is another important driver. While traditional training focuses on individual skill building, that approach too often spills trainees into an economy without jobs for them. Community wealth building takes a system approach, closing the loop by linking training to actual employers. While this approach is not new, it is gaining momentum, with more programs today recognizing the need to bring employers to the table. A leading example is the ManufacturingWorks program, a workforce center supported by the City of Chicago, which has connected more than 3,000 job-seekers with high-quality jobs in manufacturing. The program was spearheaded by the Chicagoland Manufacturing Renaissance Council, a collaborative effort led by high road economic development professional Dan Swinney, which also includes unions and a manufacturers association, and is run in partnership with Instituto del Progresso Latino.
The ultimate driving aim of community wealth building is creating a new system—a new normal of political-economic activity, where concern for broad prosperity is built into the core system design. For example, among financial institutions that tend more naturally to deliver local benefit are community development financial institutions (CDFIs), community banks, and city-owned banks. City banks—in the mold of the state-owned Bank of North Dakota, which helped that state fare well in the financial downturn—are well suited to building a system with democratic, local accountability. The city council in Santa Fe, New Mexico is exploring the concept, with other campaigns at earlier stages in Seattle, Philadelphia, Boston, and Washington, D.C.
Common to all these approaches is a commitment to place— which is a foundational driver. Also important is working through collaboration, with many parties at the table, together aiming to create community benefit. Among the many other strategies used toward these ends are deployment of community land trusts and land banks, strategies to expand local impact investment, development of local food systems, and community approaches to climate change mitigation and adaptation.
A powerful alternative to development as usual
The various drivers and strategies of building community wealth are elements of an emerging new framework for inclusive economic development. It's a framework that offers a powerful contrast to the traditional practices that are failing so many communities. While a promising number of economic development professionals are taking up elements of this new framework, traditional approaches still predominate, and are in fact resurgent in many communities. Those traditional approaches rely on a set of drivers that work mostly unconsciously— toward a very different set of outcomes.
Traditional economic development is too often captured by the demands of major corporations and site development consultants. The place that drives such players is in reality no place at all, for they embody a worldview of a generic, commodified economy, where firms are objects to be lured from place to place by the $80 billion in incentives given annually by cities, states, and counties. The system that is supported in this way is one of wealth inequality, where most assets are owned by the few. The ownership driver is absentee ownership, with most incentives flowing to corporations owned outside the community. Inclusion is lacking, with benefits flowing to a financial elite—since ownership of publicly traded firms is overwhelmingly concentrated among those in the top 10 percent of society. Inadvertently, but pervasively, incentives tend to neglect local firms, which can too often be driven out of business. Thus traditional approaches operate the multiplier effect in reverse: taxes are extracted from local firms and residents and given to corporations whose ownership is not local, even as local schools and parks suffer cuts in funding. Missing throughout is the driver of collaboration, with little transparency or democratic public input into development decisions.
"The system that is supported by
traditional economic development
is one of wealth inequality,
where most assets
are owned by a financial elite."
In its workforce drivers, traditional economic development focuses on counting the number of jobs created, but too rarely tallies whether these are living wage jobs, or whether they go to those with barriers to employment. Traditional approaches also fail to subtract jobs destroyed when Main Street retailers quietly close their doors—or when firms outsource manufacturing and other work abroad, or move operations out of the community.
The mindset missing in traditional approaches is commitment to place, and a recognition that economic entities can be designed to benefit community. Community wealth begins with a devotion to place, and with a respect for all those who live in a place. It keeps money circulating locally by developing local assets and keeping ownership locally rooted, and, ideally, broadly held. The aim isn't just jobs but good jobs, and where possible an ownership stake—especially for those with barriers to employment, but also for all Americans in need of good jobs.
Community wealth building is a systems approach, with various drivers working together. Locally owned enterprises are linked to large-scale demand through anchor procurement. Institutions like loan funds and accelerators, as well as new positions and departments in city government, help to support locally and inclusively owned firms. Worker and employer needs are matched. In these various drivers and strategies—linked training, anchor demand, support institutions—the emphasis is on creating a system to support a locally rooted economy. The aim is creating the institutions that lead to a new normal of political-economic activity, a new system.
A new community-based economy
The emergence and growth of community wealth building may signal the beginning of a new community-based era for our economy, growing at the local level. This new era finds its impetus in widespread concern about wealth inequality, which is driving the emergence of a new class of forward-thinking mayors and economic development directors, in cities like New York, Seattle, Boston, Cleveland, and elsewhere. This movement is also being driven by a widening set of community-based players.
Traditional economic development has tended to involve two players, the city and the business community, in an arrangement where the city has often been the subordinate partner, subject to the demands of business. Cities themselves have unthinkingly contributed to their own disempowerment in their focus on the "job count," which puts business in the lead, even when the jobs created are of low quality. This balance of power begins to shift, however, when others come to the table demanding accountability, good jobs, and community benefits. The potentially momentous advance of community wealth building is that it brings this "third player"— the combined, collaborative force of anchor institutions, citizen groups, philanthropy, nonprofits, and locally owned businesses—to the table. Much of this work began by pushing back against business, yet today these players are focusing forward, proactively shaping the direction of local economic development.
Because of city vulnerability to capital flight, it was long believed that jobs and wages could be regulated only at the state and federal level. This was the view of the "limited city," where officials at the municipal level could influence business solely by giving subsidies. But potentially, we are on the cusp of a movement away from the limited city—toward a new concept of the empowered city, where city leaders work with a broad polity toward the ideal of an inclusive community where all can prosper.
"A new economy is growing at the local level."
There is no guaranteed road map to the inclusive city. No cities, in their entirety, are there yet. The tools of community wealth building are not yet sufficient to get us there. They have major challenges and limitations. Yet new avenues to advance are opening.
We offer this report in the belief that cities today face a moment of historic opportunity. Cities building community wealth could become the places where we begin to create a profoundly different kind of economy, both inclusive and sustainable. Yet the opportunity of the present time could also be lost. History might veer in far more troubling directions. Ours is a fragile moment.
At this threshold time, this report seeks to describe the system of community wealth building, to showcase its successes, to explore the weaknesses that might keep it marginalized, and to suggest what it would take for it to become the dominant paradigm of economic development in America.