Where Does the Profit Go?

Don’t get me wrong.  I’m for responsible capitalism. I don’t find it immoral or even distasteful for someone to make a buck.  It’s a positive system:  You come up with a great idea for a new widget, borrow some money, rent space, employ some people, make and sell a whole bunch of widgets.

Things go well, you’re able to start keeping some of the cash flow.  That’s profit, and even a liberal like me thinks that’s a good thing.

Maybe things go really well.  The business is growing and you realize you could be doing even better in another town.  Maybe that town offers you some tax incentive to move there.  So you do, because, while you’re appreciative of that first community, and you honestly care about the people working for you, you’re doing this to make a profit for yourself, not because you owe people jobs.  You make more money and you keep growing.  And there’s nothing wrong with that.  That’s how the system works (when it works).

If you stick around long enough, maybe  you even go public.  Then the business is responsible for turning a profit for shareholders, many of whom have no interest – and certainly no loyalty – to the city and the people who helped make your business profitable in the first place.

But what if it didn’t have to work that way?

What if the people making the widgets didn’t need to worry about what’s going to happen if you get too big.  What if you were using community money to grow, and didn’t have to worry about meeting the interest payments?  What if the other businesses and organizations in the community who count on the ripples of cash flow your widgets create could count on those widgets being made right there in that town for as long as the widgets are made?

What if delivering a great product, offering stable, living wages and being an honest-to-goodness good corporate citizen were the whole point of the business instead of maximized shareholder profit being the ultimate goal?

There’s a way to make that happen.  It’s not some hippy pipe-dream, it’s really happening across the country.

In Cleveland, Evergreen Cooperatives (fantastic name, no relation) are leading the way with a variety of businesses including a commercial laundry, a solar power installer and an urban hydroponic greenhouse farm:

“The Evergreen Cooperatives of Cleveland, Ohio are pioneering innovative models of job creation, wealth building, and sustainability. Evergreen’s employee-owned, for-profit companies are based locally and hire locally. They create meaningful green jobs and keep precious financial resources within the Greater University Circle neighborhoods. Worker-owners at Evergreen earn a living wage and build equity in the firms as owners of the business.”

Is it just Cleveland?  Has this economic sorcery only struck on the banks of the Cuyahoga?  Of course not.  They’re running cooperative restaurants in Minneapolis.  Health-care cooperatives, where doctors and patients find solutions by working together, in that liberal enclave of Houston.  A community-owned mercantile in Washington.  Even an academy to teach people how to do it in the Bronx.  One of my favorites is a union-owned healthy insurance company in New York.

Make no mistake, these are businesses.  They’re not sitting around in a drum circle staring at their navels, they’re working.  Earning money.  Spending that money in their communities.  Speaking of communities, theirs can count on them for the long haul because they part of the community. They’re paying their people a living wage at a minimum, creating great products and in many cases, if there is a profit … the workers keep it!

Yes, it takes capital to get rolling in these cases, as with any business.  In some examples they’re selling stock to the community.  In some cases they get started with fundraising from local commercial successes who recognize a need.  Some are a product of skillful grant writing, some of forward-thinking local governments.  The key is that once they’re up and running, the model works.

And here’s the thing:  Your community is probably already sinking public money – your money – into private businesses by way of economic development incentives.  Now, there’s nothing wrong with using those incentives to maximize the aforementioned external shareholder profits – as long as the businesses being incentivized stay in your community.  At least occasionally, however, once the incentives dry up, the business picks up stakes and finds another community willing to throw money at it.

Why not insist that at least some of that development incentive money fund great businesses that have no choice but to stick around?  Why not fund employee-owned business that has a personal as well as a cash-money stake in the community that generated the tax dollars for the incentive in the first place?

We’ll explore this topic more in future Sunday editions on Everblog.  In the meantime, learn more here.

As always, thanks for reading.

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