This paper reflects a personal learning curve on the strategic questions we all face. The personal story is important to expose the origins of the ideas as well as to suggest a practical application. My story is not unique. It shares elements woven deeply into a fabric of formative experience of millions of people--the 1960s.
I was raised by parents immersed in the best of professional legacy of the New Deal. They were social workers in executive positions in the federal government, committed Christians, liberal democrats, and committed to equality and internationalism. Following a happy and non-descript childhood in Northern Virginia, I went to Alma College in Michigan on my way to becoming a veterinarian. In March of 1965, when I was 20, a friend of mine had been encouraged by SNCC (the Student Non-Violent Coordinating Committee) to organize a solidarity demonstration in support of the civil rights movement in Selma. We planned a 50 mile march to Lansing, Michigan to present a petition that polarized the campus. It resulted in a cross burning, fights between black and white students, and a mass meeting of 200 in preparation for the march. The next morning, 50 of us started out, only to be hit by a blizzard and finally turned around by the State Police.
My curiosity and values had been challenged and changed. I took a summer job in Atlanta and immediately sought out the SNCC office, offering my talents as an envelope stuffer and stamp licker. Volunteering as a chauffeur for a couple of veteran organizers led me to work in a school desegregation project in DeKalb County, Ga. A summer of community organizing followed, with a typical experience in a southern jail. Absorbing the intensity of that rural community was a turning point in my life.
I transferred in 1965 to the University of Wisconsin and into the history department. Madison was one of the key centers for the anti-Vietnam War and student movements that became the center of my life for the next four years. I left Madison in 1968, moving to the industrial community of North Chicago, Illinois where I continued my organizing work among young people and sailors at the Great Lake Training Center. Here I started what would be a 15-year period of factory jobs: making paint, making envelopes, assembling autos, in a bakery, on electronics assembly lines, and as a janitor. I operated a slitter to cut gaskets, operated centerless grinders cutting parts for appliances, and finally settled into a 7-year job as a turret lathe operator.
I moved to Chicago in 1970. I led a failed, three-year organizing drive to bring the United Electrical Workers Union (UE) into Sunbeam. I was fired. Following a two-year job at another plant, I was hired at Taylor Forge, a subsidiary of Gulf +Western in Cicero, an industrial suburb on Chicago's West Side. This was 1975. Taylor Forge made big pipe, fittings, and flanges for the Alaska pipeline and big utility companies. I hired in as an apprentice engine lathe operator and became a turret lathe operator for most of my eight years at Taylor Forge. I led the successful organizing drive to bring in the Steelworkers Union, and served as Vice President of USWA Local 8787. Unknown to me at that time, G+W was at the cutting edge of new corporate strategies that were emerging with force in the American economy of the late 1970s. With a huge loan from Chase Manhattan Bank, G+W purchased a number of manufacturing companies, including Taylor Forge, with the intent of "milking the cashcow," as it was described in a Harvard Business School case study. G+W had no long-term strategy for the particular companies (or the products or the workers) it had purchased except to pull out cash and value and to use the money to finance acquisitions in other, more lucrative sectors, like entertainment--e.g., Paramount Pictures. The short-term objective was the only concern. It was like buying a car and never changing the oil.
G+W began to close Taylor Forge department by department, never telling us what the strategy was. To make matters worse, the executives suggested at the end that if we gave up part of our wages and pensions, we might be able to save our jobs--testing our level of fear to see how much they could squeeze out of us before they closed the doors. This was 1982, when hundreds of companies were closing in Chicago and thousands were losing their jobs.
With the growing number of plant closings, it was difficult to mobilize people. Campaigns against company demands were lost more frequently than they were won. Companies asked for concessions in wages, benefits, and working conditions, threatening to close unless they were granted, and union locals and their members capitulated--legitimately afraid of losing their jobs and risking their future. The same kind of fear among union members exists today.
I couldn't win my members' support just by complaining how greedy management was. I needed to prove that the union's position would not wreck the company or force a closing. I needed essentially to have my own business plan for the company that could prove that our demands for wages and benefits could be supported and that the company could make a reasonable profit. I didn't have the plan, nor did the Steelworkers have a strategy, so Taylor Forge closed, and I lost my job in 1983.
G+W shareholders made a ton of money and the corporation continued to expand. Cicero--the town that had been home to Taylor Forge for several decades--was to lose 50% of its job base in the next six years as other companies, also, closed.
I founded the Midwest Center for Labor Research (which became the Center for Labor & Community Research) in 1982 along with other local leaders in the Steelworkers Union and several community organizers and supportive academics, to provide the kind of research and analysis that I had needed at Taylor Forge, and for unions, communities and others concerned about saving jobs and stabilizing our economy. CLCR made several key plans:
We were uncertain about our future strategies and how we could respond to the economic transition unfolding in front of us. We began by looking at hundreds of companies in Chicago that had closed or were in danger of closing. Chicago lost 3,000 of 7,000 companies in the 1980s and 150,000 basic manufacturing jobs, so we had a lot at which to look.
The prevailing and powerful view then, as now, is that this chain of events and its consequences was painful and destructive in many ways, but inevitable. The logic was, and is, that we live in a new global economy witnessing a fundamental change in the international division of labor. The new role for the United States is as a source of intelligence, information, and finance. The Third World with its low-cost labor will be the center for making things. Then there is this new complex and powerful communication technology.....the new Information Age.....the end of work......the new service economy....and so forth.
The prescription from this logic is that you cannot do anything about these wrenching problems but accept them, so it's best to find a niche that gives you the best chance to survive under the best terms you can get. For the overwhelming majority of the population this means getting by on less, and for the bottom 20% it means getting by on much less. The implications of this thinking resonate in every aspect of cultural, social, and political life.
At CLCR, we were overwhelmed by what we were witnessing, but felt that this notion of inevitability needed to be examined in the context of the specific companies and communities so obviously at risk. Of course, we found a few companies that really needed to close--the equivalents of slide-rule producers. Their products or technology were completely out of date and there was no way they could compete in the new marketplace. The historian Elting Morrison writes about the tendency of organizations and communities to "fight like hell to stay the same" and to deny the kind of destruction that is a precondition for new development. It is a strength of a system to let obsolete things die. When we found companies like that, we told labor and the community the truth, so no one invested in trying to do the impossible.
On the other hand, the overwhelming majority of companies that we examined were not obsolete. They were at risk because of problems that could be solved in the context of our economy under our current system. Some of the problems are simple and require straightforward solutions; others are more complex. I estimate that we could have saved 75% of the jobs and companies lost in the 1980s with some creativity and determination by labor, community, government, and business.
Big Companies--often the economic anchor for a community
Headlines about the crisis in the industrial community focused on the large corporations--the big steel mills, the auto companies, the large manufacturing centers. This was the beginning of a period referred to by some as the "casino economy." Transnational and large corporations began to acquire other companies and frequently pursued short-term, profit-generating strategies that benefitted shareholders, but resulted in moving or closing firms that had been anchors of the local economy and the foundation for local employment. Companies taken over by transnationals eliminated 80,000 jobs in the Chicago area during the 1980's.
As we researched these companies, typically in anticipation of their shutdown, we found troubling patterns. Stewart Warner, an anchor of a northside community in Chicago, is a good example.
Stewart Warner
Workers represented by the United Electrical Workers asked us for assistance when management at Stewart Warner demanded concessions in contract negotiations. A quick investigation showed a far deeper and more serious problem than labor costs. An aging board of directors was paying out 200% of earnings as dividends to shareholders. There was a lot of cash and no long-term debt. There had been a complete deterioration of preventive maintenance and capital improvements in the plant. Production workers saw the competition developing new product lines like digital speedometers while their company continued to produce the same old needle speedometers. The local Crain's Chicago Business said business and investment community gossip had it that the owners had lost interest in maintaining the company and were looking for a way out.
We told the workers that even if they gave up all their wages, they still wouldn't save their jobs unless they addressed the problems in management and the priorities of the owners. The plant was clearly going to be placed on the market, and we advised the union to seek to buy it. We saw this as the best way to save their jobs, as our research had concluded that this company could continue to operate profitably in Chicago. However, the activist local was fearful of such a complicated step and believed that employee ownership would be a "corrupting" practice for workers. Within a year, the company was purchased by BTR Plc, a British conglomerate with a habit of buying US companies and closing them or moving production to the Maquiladora Zones in Mexico.
With the assistance of CLCR, a local entrepreneur, Tim Wright, made a bid on the company, and a coalition of organizations including the union and local political figures fought for a City Council resolution that would use eminent domain to keep the company in local hands. The effort failed. Within a couple of years, part of production was moved to Mexico, the plant was demolished, and the land was sold to a local developer who put high-end condos on the site.
CLCR research found that after two years, this closing had cost the broader community:
The total cost to the public was more than $47 million when a realistic business plan could have sustained the company as a profitable source of income and investment dollars for the Chicago economy.
Gentrification--closing factories and using the space for upscale housing-- cost this local community 40,000 industrial jobs over a 15-year period. CLCR documented a number of closings in the Chicago area and the Midwest that had similar characteristics.
Small companies slipping through the cracks in the market:
Never making it to the headlines was the closing, in the 1980s, of hundreds of small companies, each with a handful of employees. In 1986, Gladys Scott, a resident of the Hyde Park community on Chicago's South Side, called CLCR with alarming information about a printing company--Bankers Print--that had handled her printing needs for more than 16 years. The owner, Carl Wilson, had cancer and no heir to take over the business.
After meeting with Mr. Wilson and talking with the employees, we were able to arrange an employee purchase of the company--a successful conclusion that no one had seen as an alternative. The experience focused our attention on small companies. After all, despite public perception to the contrary, 90% of all manufacturing companies are not big, complex, fully integrated firms. Individually they are insignificant, but in their aggregate they are the bedrock of the manufacturing economy. With 100 employees or fewer, they typically have local markets, adequate technology, and a skilled work force. They are frequently linked to the larger companies who do represent two-thirds of the employees in manufacturing, providing services and materials for production. The health of these small companies is a major variable in the success or failure of the larger companies and the community.
On behalf of the Economic Development Commission of Chicago, in a study funded by the MacArthur Foundation, CLCR looked at 800 of these small companies with an owner 55 or older, and found that almost 40% were at risk of closing because of the issue of succession.5 A typically successful white entrepreneur6 would move to the suburbs as his wealth made it possible, and often encouraged by the shift of the community from white to African American or Hispanic. Facing sickness, death, or retirement, he would be unable to find a successor in his family or in management to take over the company, which would be difficult to sell because of its size and location. Typically, the father turns to the son, and doesn't consider the daughter. The son typically would not want to go back into the "ghetto" to run the company. Even if the son had gone to business school, he would want to make money in the "casino economy" by moving stocks and bonds or working as an MBA for a large Fortune 500 corporation.
Virtually everyone we have met in our work has anecdotes like this scenario--a failure of the market that reflects issues of race, class, and available productive capacity. In this scenario, everyone loses unnecessarily.
Yet this problem can be solved with conventional resources and a little creativity and extra effort by those concerned with community development. Small companies with aging owners and no successors can be identified in a number of different ways. They are often good opportunities for employee buyouts, as was the case of Bankers Print. Or they are an excellent opportunity for aspiring local entrepreneurs who are typically African American and Hispanic, heretofore excluded from this kind of opportunity.
Our experience found exactly these kinds of problems behind the statistics of massive de-industrialization in urban and some rural communities. The resulting and explosive growth of poverty in these communities became the material foundation for the pathology that screams at us in our daily news papers, on the television, in our culture, and in our politics. Harvard professor William Julius Wilson drew this connection in his work, The Truly Disadvantaged.7
The founding of CLCR coincided with the movement to elect Harold Washington mayor of the city of Chicago. Some of us were active in the campaign, startled by its success, and pulled into the effort to rebuild the city, guided by a rush of new creativity and willingness to engage new approaches in the field of community development. From City Hall, labor was viewed as an essential component of development, not just a cost or an obstacle. Industrial retention and community involvement in the economy was a goal. As a result, CLCR was hired by the City's Department of Economic Development and introduced to the field of community development--a language and experience new to us from the labor movement.
For six or seven years, CLCR focused principally on the concerns, problems, and solutions of individual firms. We became familiar with the ways that jobs and companies could be saved. We were introduced to simple but critical problems in companies that could be solved if they were identified before they became crises. CLCR developed the basic features of our labor/community-based early warning system that would expand our source of information about individual firms.8 We became familiar with worker and minority ownership, the power of the purchase, the requirements of coalitions and the essentials of campaigns. As we gained confidence in our ability to save companies and jobs, we began to look at the power of this approach in the context of a broader community and in relationship to different aspects of the community economy.
In Chicago, I had been deeply influenced by the work of Dan Luria and Jack Russell, policy analysts who had developed a comprehensive alternative vision for the Detroit economy following the collapse of the auto industry. Their approach had a sophisticated view of the human and physical resources created by the auto industry, and proposed development of these resources with a creative mix of traditional market and non-traditional initiatives.9 Luria was a speaker at one of our conferences on employee ownership. We also learned about innovative international models for development that reflected our commitments to manufacturing, cooperative ownership, and powerful links to the community. These included the Mondragon network in the Basque region of Spain and the flexible manufacturing networks of Northern Italy. These efforts increased the breadth of our vision in looking at our own community.
CLCR came into much closer contact with "community development." I participated in a year-long program with the Development Training Institute that gathered leading theorists as well as technicians in the field and transferred their skills and knowledge to local practitioners like myself. We began to see how leaders actually operated in communities and companies. What we found was disturbing. While we gained respect for many of the individuals and their motivations and found a number of organizations doing very good and creative work, the field seemed to us to be deliberately avoiding obvious opportunities. We saw:
We found some strong leaders, some effective organizations, and some excellent allies. But the weaknesses were widespread and all-pervasive as problems in the community continued to multiply. In 1991, I co-authored a paper, "Towards a New Vision of Community Economic Development," with Miguel Vasquez of the Center for Community Change in Washington, DC, and Howard Engelskirchen of Western State University in Fullerton, California. We advanced this critique of the community development field and outlined a different approach.10 We organized a conference around the paper for some 200 people who were typically practitioners in the field eager for more critical reflection and debate.
Since then we have continued to search out others who share our concerns--organizers, practitioners of various sorts, intellectuals and academics, political and constituency leaders representing diverse social and political interests--people who feel the need to weave their particular agenda and experience into an effective alternative to the traditional development paradigm. We further developed these themes and tensions by taking part in other organizations including the Federation for Industrial Retention and Renewal,11 the Chicago-based Poverty Task Force,12 the Midwest Consortium for Economic Development Alternatives,13 and Sustainable America.14
A much broader range of discussion and work by individuals, organizations, and networks is happening internationally, giving strength to all of those involved. Through CLCR's work with individual companies and communities, and within the various efforts to create a viable organization committed to a new paradigm of development, CLCR has developed what seems to us to be a coherent and effective strategic framework.