Crossposted from Veris Wealth Partners
More than a decade ago, my colleagues and I at The Democracy Collaborative began using a term for a new kind of economic development – Community Wealth Building. For years, the term was so uncommon that it almost invariably appeared within quotation marks when used.
Today, a Google search identifies 124,000 entries and is growing daily.
In Richmond, VA, the Mayor recently established the first City-government Office of Community Wealth Building. Community wealth initiatives have been launched in cities as different as Cleveland, OH, Washington, DC, Atlanta, GA and Amarillo, TX. Regional Federal Reserve Banks are hosting video webinars and meetings. Even the extractivefracking industry — yes, you read that right — is now working to co-opt the term to improve its image.
So let us pause for a moment to ask: What is community wealth building and why is it important?
My colleague Marjorie Kelly, author of Owning Our Future: The Emerging Ownership Revolution, writes that:
When families possess assets — valuable skills, social networks, a home, some savings, an ownership stake in a business — they enjoy greater resilience, and are better able to withstand occasional shocks like unemployment or illness. They can plan for their future, send a child to college, feel secure in retirement. A job may start or stop. It is assets, of various kinds, that yield greater stability and security. As this is true of families, it is also true of communities. Jobs may be drawn into a community, but then leave without warning. And if attracting jobs means degrading community assets — through pollution, low-wage jobs, or the loss of tax income through excessive tax breaks — a seeming gain can in fact represent a net loss.
If traditional economic development tends to be about attracting industry to a community, building wealth is instead about using under-utilized local assets to make a community more vibrant. It’s about developing assets in such a way that the wealth stays local. And the aim is helping families and communities control their own economic destiny.
This is community wealth building: a fast-growing economic development movement that strengthens our communities through broader democratic ownership and control of business and jobs. It builds on local talents, capacities and institutions, rebuilding capital to strengthen and create locally-owned family and community owned businesses that are anchored in place, that aren’t moving.
The community wealth building field includes a broad range of models and innovations that have been steadily growing power over the past 30 years or more: cooperatives, employee-owned companies, social enterprise, land trusts, family businesses, community development financial institutions and banks, and more. One powerful team of local partners are anchor institutions, like hospitals and universities. They are often the largest economic drivers in their communities. Increasingly they see the synergy between restoring local health and wealth with their success.
These strategies reverse the focus on “chasing companies to relocate to my city.” All too often this includes greater tax breaks and lower wages for companies that may well relocate again for a better offer in another community. Community wealth, on the other hand, is tied to place. The people who own and control the businesses live there.
These structures and models are part of a growing system that aims at improving the ability of communities and individuals to:
- increase asset ownership;
- create anchor jobs locally by broadening ownership over capital;
- help achieve key environmental goals (including decreasing carbon emissions);
- expand the provision of public services by strengthening the municipal tax base; and
- ensure local economic stability.
Significantly strengthening and growing local capital is critical.
- building new, and strengthening existing, community-based financial institutions;
- preventing local financial resources from “leaking out” away;
- leveraging the use of procurement and investment from existing local anchor institutions such as hospitals, universities, foundations, cultural institutions, and city government; and
- finally, working aligned impact investors and financial institutions to grow affordable capital committed to building local wealth.
Veris and other advisors play a critical role in furthering community-based impact investing.
The overall economic impact of place-based, community wealth building strategies is evident. More than 10 million employees own all or part of 10,900 companies through employee stock ownership plans (ESOPS) — firms that employees finance and increasingly own through pension contributions. These ESOPs have generated equity benefits of $870 billion for their employee-owners. Cooperatives, according to a 2009 University of Wisconsin study, now operate 73,000 places of business throughout the United States, own $3 trillion in assets, employ 857,000 people, and generate over $500 billion in revenue for their member-owners. The new “go local/sustainable” business and food movement is exploding.
Political economist and historian Gar Alperovitz, a co-founder of The Democracy Collaborative, often asks audiences this question when he lectures: “If you don’t like state socialism and you don’t like corporate capitalism, what kind of system do you want?” Community wealth building begins to point to some of the essential elements of a more just, equitable and sustainable system.