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Friday, May 31, 2019

Op-Ed: Cleveland Needs New Tools to Close the Racial Wealth Gap

Posted By on Fri, May 31, 2019 at 9:07 AM

  • Courtesy Evergreen Collectives

The City Club recently hosted an event called “Help Wanted: Building Wealth in Minority Communities.” The conversation featured three panelists who work in Cleveland to build wealth in black and brown communities through homeownership, traditional entrepreneurship, and worker ownership.

Although each panelist is a leading practitioner in their field, the conversation fell short of the depth our region needs to truly address the gap between the wealth of white households and black and brown households. What we’ve been doing to address the racial wealth gap isn’t working; we can’t keep doing more of the same and expect a different result. We must enact a broad set of public and private policies, including those to expand worker-ownership and other collective ownership strategies, that will systematically shift how wealth and power are distributed in our region.

The racial wealth gap is staggering. Nationally, the average wealth of white households is nearly seven times that of black households, according to research by the Federal Reserve Bank of Cleveland. Prosperity Now, a DC think tank, found that unless we change course, the wealth gap will stay with us for eight generations.

Local efforts to close the wealth gap have to contend with national headwinds including flat wages, the subprime mortgage crisis of last decade, disproportionate gains of the nearly all-white top 1%, and rising health care and college costs. Each of these trends is racialized, so while they’ve affected non-wealthy households of all races, they’ve landed the hardest on black and brown households.

Panelist Khrystalynn Shefton, Director of Real Estate at Famicos Foundation, acknowledged the structural conditions behind the wealth gap that “have systematically put black and brown people at the back of the line.”

And panelist Michael Jeans of Growth Opportunity Partners, a business lender, denounced ‘bootstrap’ strategies for wealth building. “It’s a bit dismissive to look at the population that’s been on the receiving end of [structural racism] and say, ‘Pull yourself out, earn your way out, educate your way out,’” he said.

This is all spot on. And that the City Club featured panelists with these perspectives – uncommon to hear just a few years ago – shows how far this conversation has advanced recently.

Today, unfortunately, many of Cleveland’s strategies for building wealth make the mistake Jeans warned us about: They place the responsibility to build wealth on people most affected by structural racism.

That’s the case for homeownership and traditional entrepreneurship, which, along with workforce development, have for decades been Cleveland’s primary strategies for wealth building. Our city’s extensive network of community development corporations, business incubators, and workforce development agencies is the manifestation of these strategies. They ask people buying homes and starting businesses and looking for jobs to fix something they didn’t break.

While homeownership, traditional entrepreneurship, and workforce development have their role, there is a host of other viable policies public and private agencies can draw on to start to tackle the racial wealth gap more assertively.

Worker ownership is a good place to start. Since worker ownership is a collective effort, it spreads the risks and benefits more evenly, and it offers a way to build wealth without asking a household to place a huge bet on purchasing the right house to come up with a great business idea on their own. Worker-owned businesses are more profitable and more resilient; workers are more productive and wealthier. And at worker-owned businesses, the average wages of black and brown worker-owners are 30% higher.

Nearly 14 million people in the US work at a company wholly or partially owned by its workers. In Cleveland, Great Lakes Brewing Company is moving to worker ownership, and the Oswald Company and Voss Industry have already done so.

The Evergreen Cooperatives in Cleveland have overcome many of their well-documented challenges, according to panelist John McMicken, Evergreen’s CEO, and today worker-owners are “sharing the profits, they’re building the equity, they’re building their own balance sheet.”

Other collective ownership strategies in addition to ownership can accelerate wealth building. We’re pursuing some at Cleveland Owns, an organization I founded with a group of Clevelanders committed using collective ownership to build a more equitable city. Cleveland Owns is a radical incubator that equips neighbors to own productive assets like community solar arrays that generate profits and clean, renewable energy. We’re also helping smaller local businesses transition to worker-ownership.

We believe ownership conveys power. And we envision a Cleveland owned by its residents, where everyone has the power to demand their fair share of Cleveland’s prosperity.

The City of Cleveland and other local institutions can join Rochester, Madison, New York City and other cities that recognize the promise of collective ownership to address the racial wealth gap. We can follow the lead of Miami and invest our economic development dollars in economic resilience and equity through collective ownership, rather than in race-to-the-bottom incentives to entice businesses to relocate.

Even beyond collective ownership strategies, there are public state and local initiatives that avoid asking the people most impacted by structural racism to bootstrap their way out of it. They must also be part of the conversation.

A systemic problem like the racial wealth gap requires a systemic solution. The standard strategies for wealth building featured at the City Club haven’t gotten us where we need to go — we must explore new solutions that address inequality at its most fundamental level. Cleveland is having a valuable conversation about how we got here. Let’s do the same about where we go next.

Jonathan Welle works at Cleveland Owns, a nonprofit that equips groups to build wealth and power through collective ownership.

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