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Building an Alternative

As resistance has grown to the widening gulf between the top 1 percent and the rest of the population, more Americans have looked to community wealth building as the place to begin developing an alternative. The central idea is simple: people join together through some form of public, community, or employee-owned business to meet local needs and thereby regain a measure of local economic democracy and control. Community wealth building institutions include community development corporations, community development financial institutions, social enterprises, community land trusts, employee-owned enterprises, and cooperatives.

All of these institutions pool capital in ways that build wealth, create livingwage jobs, and anchor those jobs in communities. The efforts also provide a new approach to challenging corporate power—a strategy that changes who owns, controls, and benefits from the underlying economic wealth of the system. It displaces private capital by developing community ownership of business. Profits flow to workers, consumers, or the community, rather than to outside investors.

Nonprofit social enterprise is a community wealth building strategy through which nonprofits secure resources to pursue their missions when government support is inadequate. In San Francisco, for example, a group known as REDF (formerly the Roberts Enterprise Development Fund) has helped boost the business activity of 50 social enterprises that have employed 6,500 people and earned revenues of more than $115 million. Three-fourths (77 percent) of social enterprise employees interviewed two years after first being hired were still working. Average wages increased by 31 percent and monthly incomes by 90 percent.

In Grayland, Washington, Coastal Community Action—a nonprofit agency that operates a range of housing, food, healthcare, and employment programs—has built a six-megawatt wind farm that sells energy to the electrical grid, generating enough power to satisfy the energy needs of more than 1,500 households. The nonprofit estimates that its ownership of the

$14 million project generates $720,000 in unrestricted income each year, enabling it to increase service delivery options, lessen its local dependence on outside funding, and meet more of its community's needs.

In Seattle, Pioneer Human Services offers drugand alcohol-free housing, employment, job training, counseling, and education to recovering alcoholics and drug addicts. Founded in 1963, it employs 1,000 people and finances 99 percent of its $70 million budget through fees for services and earnings generated in the manufacture, distribution, and sale of products. Businesses include retail cafés, sheet metal fabrication, aerospace precision machining (the group is a contractor for Boeing), wholesale food distribution, and contract packaging. Not only do these enterprises build community wealth and finance social services, but the businesses themselves are central to Pioneer's mission of helping people on the margins of society stay out of prison and off the streets, enabling Pioneer to employ more than 700 men and women drawn from the ex-offender, homeless, and drugrecovery populations that it serves.

Community development corporations (CDCs), formed initially in the 1960s in a crucible of urban riots and rural neglect, now are community wealth builders across the United States. CDCs can be found in virtually every major city. A Massachusetts study found that between 2003 and 2012, Massachusetts-based CDCs created or preserved more than 13,000 homes and 22,000 jobs, and generated $2.7 billion in economic investment. A 2010 national study found that, over the previous two decades, CDCs produced more than 1.6 million units of affordable housing nationwide.

Community development financial institutions (CDFIs), first given federal recognition in the 1990s, aim to build wealth in low-income communities by providing financing where conventional lenders fear to tread. Even in the face of a weak economy, assets in U.S. community investing institutions have soared from $25.8 billion in 2007 to $61.4 billion in 2012. Community land trusts provide still another powerful illustration of community wealth building. Beginning in the 1960s and 1970s, pioneers like Bob Swann in western Massachusetts and Charles Sherrod in Georgia struggled against huge odds to develop modest land trust efforts, often also involving other concerns, such as respect for environmentally sound land use practices and rural community development. Today, hundreds exist; in Irvine, California, the city's strategic plan calls for 5,000 units of housing to be developed using land trust strategies.

Trusts of this kind keep the ownership of land underlying housing in nonprofit or public ownership. Appreciation in land values is split between the homeowner and the trust, thereby avoiding gentrification. A study of a community land trust in Burlington, Vermont—the nation's largest—found that during its first two decades, 61.9 percent of residents who sold their land trust home after an average residency of six years were able to take on traditional homeownership. Meanwhile, the increased equity that the trust retains enables it to continue providing affordable housing to future generations. In a down market, community land trusts are even more important, as they can keep people in their homes. A 2011 study found that at the end of 2010, land trust homeowners were 10 times less likely to be in foreclosure proceedings (0.46 percent of all units) than conventional homeowners (4.6 percent).

Employee ownership is yet another powerful community wealth building strategy. The National Center on Employee Ownership estimates that in 2009, there were 9,800 companies owned in whole or part by workers through their pension contributions, a form of ownership known as an employee stock ownership plan (ESOP). As of 2009, 10.3 million Americans were employee-owners of companies owned in whole or part by ESOPs, with net assets of $869 billion. The average employee-owner had an ownership stake of over $84,000.

Employee ownership has powerful economic stabilizing effects: between 2000 and 2008, while the number of manufacturing jobs fell 29 percent in the state of Ohio, employee-owned manufacturing jobs declined only 1 percent. Across the United States in 2010, 12.1 percent of all workers were laid off in the previous 12 months; by contrast, only 2.6 percent of workers who were employee-owners lost their jobs. In addition, employees at ESOP companies have, on average, 2.5 times more retirement benefits than employees at comparable companies that are not employee owned. Depending on the industry, wages are 5–12 percent higher than those at jobs in comparable non-employee-owned companies. Productivity at employee-owned companies is also higher (which is why ESOP companies can provide higher wages and better benefits). On average, productivity increases 4–5 percent in the year after an ESOP is adopted; over a given 10-year period, ESOPs have 25 percent faster job growth than comparable non-ESOP companies.

Artist's rendering of a net-zero, mixed-income development of 11 homes, 2 rental units, and an office/resource center built by Lopez Community Land Trust, Lopez Island, WA.

Perhaps the most visible form of community wealth building is the cooperative. More than 130 million Americans are currently members of a co-op or credit union. Because many Americans own shares in more than one co-op or credit union, the total number of co-op memberships in the United States exceeds 350 million. A 2009 University of Wisconsin study found that nearly 30,000 cooperatives in the United States account for more than $3 trillion in assets, $514 billion in total annual revenue, and 856,000 jobs.

In Oberlin, Ohio, what David Orr calls an “integrated or full-spectrum sustainability” approach drawing on such efforts aims to build a sustainable economy, become climate-positive, restore a robust local farm economy supplying up to 70 percent of the city's food, educate at all levels for sustainability, and help catalyze similar efforts across the United States at larger scales.

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