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#620 - Bridge To The High Road, Part 3, 14-Oct-1998

In his path-breaking paper, BUILDING THE BRIDGE TO THE HIGH ROAD,[1]
Dan Swinney tells two stories that illustrate "the low road of economic
development."

Taylor Forge

In 1975, Swinney was a turret lathe operator for Taylor Forge in
Cicero, Illinois, a suburb on Chicago's west side. Taylor Forge made
large industrial castings and pipe fittings. That year Gulf+Western
(G+W) secured a huge loan from Chase Manhattan Bank and began buying up
successful manufacturing firms, like Taylor Forge, breaking them up,
and selling off the pieces.

G+W had no interest in the companies it purchased, the products they
manufactured, or the communities they supported. Later, a case study at
the Harvard Business School described it this way: G+W's strategy was
to "milk the cash cow," sell off Taylor Forge's assets and use the cash
to acquire companies in more lucrative sectors, such as Paramount
Pictures. G+W began selling off Taylor Forge department by department.
In 1982 G+W cynically told employees they could save their jobs if they
took pay cuts and gave back part of their pensions, which the employees
did. But this turned out to be a trick to see how much G+W could
extract from the employees before closing Taylor Forge for good, which
occurred in 1983.

The city of Cicero lost half its good jobs in the next six years as
"the low road" became the norm and many other viable companies went the
way of Taylor Forge. As a result, the U.S. lost a significant portion
of its productive capacity and speculators like G+W turned enormous
profits. The low road became firmly established as the modern way of
doing business in the U.S., the era of the "casino economy" emerged,
and the pathology of the inner city began to appear.

Stewart Warner

In the early '80s, Stewart Warner, manufacturer of gauges and
automotive instruments, and an economic anchor of Chicago's north side,
began asking its unionized workers for concessions during contract
negotiations. Detailed analysis of the situation revealed that Stewart
Warner's management had lost interest in the firm and was planning to
sell its assets. Dan Swinney's Midwest Center for Labor Research (MCLR)
urged the workers at Stewart Warner to make an offer to buy the
company, but for various reasons this did not happen. Within a year
Stewart Warner was purchased by British Tire and Rubber, a conglomerate
with a habit of buying U.S. companies and closing them or moving them
to the maquiladora zone in Mexico. Sure enough, within 2 years, part of
Stewart Warner's production was moved to Mexico, the Chicago plant was
demolished, and the British firm turned a nice profit by building high-
priced condos on the former factory site.

According to MCLR research, this plant closing cost the community 2500
jobs in related businesses, $10 million annually in federal, state, and
local taxes, and $24 million annually in lost consumer spending.
Furthermore, MCLR's analysis showed that a realistic business plan
could have sustained Stewart Warner as a profitable source of income
and investment for the Chicago economy, but the workers and the
community did not mobilize to keep the firm rooted, so it was lost.

Simultaneously, another problem was brewing. Hundreds of Chicago's
small manufacturing firms faced an uncertain future because their
founders were growing old and had no one to replace themselves. MCLR
studied 800 Chicago manufacturing firms with an owner 55 or older and
found that 40% were in danger of closing because they had no one lined
up to take over. MCLR discovered that these companies could often be
saved with a little effort and creativity.[2] Such firms often present
good opportunities for employee buyouts. Or they may provide an
excellent chance for aspiring local entrepreneurs, who are typically
African Americans or Hispanics previously excluded from this kind of
opportunity.

As speculators created the "casino economy" and sold off many of the
nation's productive assets, those hardest hit were people of color and
women in the central cities. In every serious analysis of these
problems, race remains a key indicator of inequality, discrimination
and oppression.[3] While Republicans and Democrats both sing the
praises of our "Dream Economy," many U.S. inner cities have become
indistinguishable from the poorest parts of the developing world.
Fifty-percent (or greater) unemployment, soaring infant mortality,
hunger and homelessness are characteristic. If there is work to be had,
it pays poverty wages that won't support a family, so people grow
cynical and start seeing the underground economy as the only possible
path to success. Over the past 25 years, life in our central cities has
become distorted by crime, drugs and all the other forms of social
pathology that accompany extreme poverty.[3] The larger society has
responded with a policy of mass incarceration, plus "white flight" to
the suburbs, thus creating all the environmental and social
dislocations known as "sprawl."

As these events have unfolded, it has become clear that many members of
the business class have abandoned the obligations of stewardship of the
economy. For the first 75 years of this century, wealthy industrialists
claimed the exclusive right to make decisions about what products would
be produced from what raw materials, using what processes. They
controlled decisions about management, investment, and production. In
return for this awesome (and largely undisputed) power, they agreed to
share a modicum of the available wealth, thus creating the middle
class.

Most of the time this social contract has worked well enough to avoid
major strife.

But starting in the '70s, it became clear that many of the nation's
business leaders were abandoning the social contract, selling off the
nation's assets, destroying America's productive capacity, abandoning
communities that depended on the jobs.

Now, Dan Swinney says, conditions are ripe for a new paradigm of
economic development --one aimed at ending historical oppressions,
putting democratic control and community well being at the center of
the picture, accepting responsibility for lean, efficient, productive,
profitable, and environmentally sustainable business enterprises,
rebuilding the nation's cities, and thus putting limits on the
environmental desecration and social isolation created by sprawl.
Swinney believes we can attract a majority of Americans to such a
vision because --done right --the vast majority of people will benefit.

The key to success will be ownership, Swinney says (pg. 72). "This is
the critical determinant of how production is organized, the link
between the company and other companies or the community; its patterns
of employment and training, and the level of commitment to affirmative
action and environmental standards."

"We must be prepared to have people with our values and priorities
purchase and develop local industries. This can be accomplished in a
number of ways: employee ownership, community shares in local companies
plus positions on the Board of Directors, and ownership by local
entrepreneurs directly linked to community initiatives and
organizations. In these ways, we can most directly promote development
with new standards and objectives consistent with community needs,"
Swinney says.

"To mobilize the grass-roots support necessary to our vision, the
relationship of an enterprise to the community must change in three
fundamental ways," Swinney says.

"First, we must democratize the workplace itself. This involves seeking
non-discrimination and affirmative action, greater control by working
people over safety and other conditions of work, and greater
participation by employees in matters affecting their lives, which have
traditionally been reserved exclusively for management.

"Second, we must democratize relations among enterprises of the
community. This requires facilitating their cooperation with and
support for each other, and their common support for the community as a
whole.

"Third, we must democratize the relationship of the enterprise to the
community by finding ways for the community to evaluate and monitor a
business's contribution to its overall economic, social, and cultural
growth."

Obviously, none of these three requirements is simple or easy, but all
are consistent with the premise that democracy has become an essential
requirement for any industrialized human culture that hopes to survive
for very long. (See REHW #618.)

Swinney goes on to describe briefly four essential organizations that
will be needed as we make the transition from low road development to
high road development:

1) The ENTERPRISE DEVELOPMENT COMPANY (EDC), a center for the technical
side of development. Such an organization is needed to provide the full
range of services and expertise to acquire, manage, and develop
businesses consistent with the economic and social goals of a broad
coalition. The EDC can function as a clearinghouse for information
about local businesses gathered from a network of sources, including
churches, community organizations, development corporations, city
government, labor (organized and unorganized), and residents.[2]

The EDC will assist a company to develop financial resources through
contacts with individuals, venture funds, banks and grant sources, and
also will provide technical services such as accounting, legal,
marketing, and management assistance. Examples of EDCs are Cooperative
Health Care Associates in the Bronx, N.Y., and the Steel Valley
Authority (SVA) in the Pittsburgh, Pennsylvania area.

2) The LINKED ENTERPRISE NETWORK aims to promote communication among
companies that do similar work, to promote common purchasing and
marketing arrangements, promote worker training and education, and
establish links between businesses and community groups. At its most
ambitious, such a network seeks to tie companies together formally to
pool capital and resources for development, and to create educational,
cultural and research institutions that, together, can provide member
firms with greater economic strength and leadership. Examples include
the Garment Industry Development Corporation in New York City and the
Candy Institute, serving the needs of candy manufacturers in Chicago.

3) The umbrella community organization is harder to define, but
essential. The key to this strategic concept is community control of
the economy. However, as Swinney says, the ability to control is
earned, not declared. At the beginning of such projects, the level of
control is minuscule. Likewise, democracy is created through a process.
A project cannot simply declare that it is "acting on behalf of the
community." Democratic structures must evolve as people take advantage
of opportunities to work together, develop trust, then widen the
circles of inclusion. There is no formula for how such organizations
can be built, Swinney says. Examples operating today include the
Naugatuck Valley Project in western Connecticut, Sustainable Milwaukee,
and the New Chicago Campaign.

4) It's not enough to work out the practical application of this vision
at the company and community level. Comprehensive development policies
must be fought for in all the institutions that help shape public
opinion and are designed to serve the public. The work will almost
always begin in a particular company in a particular community, but
ultimately it must translate into public policy, and government must
become the agent for expanding and promoting the vision.

Swinney says, "People do not organize for change just because they are
oppressed or exploited. They organize FOR something." BUILDING THE
BRIDGE TO THE HIGH ROAD lays out a vision of something we can all be
FOR --a vision of a decent, fair, environmentally sustainable society,
and a commitment to apply this strategic vision AT THE COMPANY LEVEL OF
THE ECONOMY. For most of us, this is new. And important.

Again we urge all our readers, including government officials and
business people, to join Sustainable America, so that, together, we can
build a strong infrastructure for ongoing multi-issue work. Check out
www.sanetwork.org, send E-mail to sustamer@sanetwork.org, or telephone
executive director Elaine Gross in New York City: (212) 239-4221.

--Peter Montague (National Writers Union, UAW Local 1981/AFL-CIO)

=====

[1] Dan Swinney, BUILDING THE BRIDGE TO THE HIGH ROAD (Chicago,
Illinois: Midwest Center for Labor Research, 1998). Available from the
world wide web --www.mclr.com --though you have to download it in 14
sections and reassemble them into one piece. You can also order a paper
copy for $10 from MCLR, Room 10, 3411 W. Diversy, Chicago, IL 60647;
phone (773) 278-5418.

[2] An EARLY WARNING/BUSINESS DEVELOPMENT NETWORKS MANUAL is available
for $50.00 from Midwest Center for Labor Research. See note 1, above.
It can also be ordered via the web: www.mclr.com/publications.html.

[3] William Julius Wilson, THE TRULY DISADVANTAGED: THE INNER CITY, THE
UNDERCLASS, AND PUBLIC POLICY (Chicago: University of Chicago Press,
1990). ISBN 0226901319. And see William Julius Wilson, WHEN WORK
DISAPPEARS: THE WORLD OF THE NEW URBAN POOR (New York: Vintage Books,
1997), ISBN 0679724176.

Descriptor terms: democracy; economy; wealth; poverty; sustainable
america; business development; gulf+western; stewart warner; taylor
forge; community development;