Academic journal article The Journal of Law in Society

Community Wealth: Creating a New Community Economic Base in Detroit

Academic journal article The Journal of Law in Society

Community Wealth: Creating a New Community Economic Base in Detroit

Article excerpt

The current crisis facing Detroit--including a bankruptcy filing, pension and health benefit cuts for retirees, and even threats of water shut-offs--may be extreme, but it reflects broader challenges confronting many American cities. The American postwar economy--in Detroit, famously led by the "Big Three" auto companies, with unions helping to ensure a modest level of economic equality--is long gone. Some cities, such as New York or Chicago, have been able to reinvent themselves as nodes in a network of "global cities." (1) But many others have not.

For cities not favored by capital investors, like Detroit, the common response has been to use scarce public subsidy dollars--sometimes, as in Detroit, supported by philanthropy--to attract private investment. Thus, even as Detroit faces a bankruptcy filing, public taxpayers in Detroit and the state of Michigan have committed $285 million in state and local public funds to support the development of a new Red Wings hockey arena. (2) This subsidy is seen as good public policy, even though Red Wings owners Marian and Mike Hitch and family have an estimated net worth of $3.7 billion as of June 2014 and presumably are capable of financing the stadium without public subsidy. (3) Dan Gilbert, owner of Quicken Loans, another billionaire who has invested heavily in Detroit, was awarded a more modest, but not insignificant, $47.2 million in state tax credits (over 12 years), as well as additional city subsidies, for relocating Quicken's headquarters to Detroit. (4) Detroit's doling out of subsidies to encourage business relocations and subsidize stadiums is far from unusual. Nationally, state and local tax abatements of this kind now total over $80 billion annually. (5)

Is there an alternative? Yes. One important option available to cities is to foster community wealth building, an asset-based approach that builds upon existing local talents, capacities, facilities, capital, and expenditure flows to develop locally owned--and often community-owned--businesses that are anchored in place and can sustain the local economy for the long haul. These enterprises emphasize building and anchoring local economies in local communities and with the members of those communities. They not only build capital but focus on producing social, economic and public benefits for the community. (6)

Community wealth building focuses on two key strategies. First, it seeks to redirect existing flows of dollars--such as the spending and investment of place-bound public and nonprofit "anchor" institutions like hospitals, universities, local government, museums and foundations--to procure a greater percentage of goods and services from within the community. Some effort in this direction has already been made in Detroit. As of 2012, the "Buy Local" initiative of Wayne State University, Henry Ford Health System, and the Detroit Medical Center has shifted $16.5 million of purchasing by these institutions to local businesses. (7) This shift in purchasing has generated local jobs and reinvestment in the community.

A second, longer-term strategy is to develop actual public, community and employee-owned businesses to meet local needs and thereby develop greater indigenous community economic development capacity. Community wealth building efforts can be found in virtually every region of the country. The range of tools available for this work is vast, including many existing institutions and community enterprises. 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 and resources in ways that create new jobs and anchor jobs in communities. Because such businesses are broadly owned by community members, community wealth building enterprises seek to spur investment and, critically, reinvestment in local economic development over time. …

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