Chapter 17
“The Money Is Right There in the Community Now”
Bypassing Davos Man

Like much of surrounding Lancashire county in northwest England, Preston was nurtured by the industrial revolution. Ships carried cotton from the docks of Liverpool, up the River Ribble to clattering mills that turned it into fabric. By the early twentieth century, some six hundred thousand people were employed by local textile plants. The wealth they produced erected handsome brick homes along tree-lined streets.

In recent decades, as the textile trade shifted to lower-wage countries, factories shuttered and joblessness soared. Storefronts disappeared behind boards. On downtown sidewalks, homeless people sometimes seemed to outnumber shoppers.

Local officials courted investment for a redevelopment scheme centered on a new shopping center. It would replace a central market that had devolved from a community gathering spot to a place best avoided—an area rank with the stench of fish innards, where pickpockets and drunks lurked in the alleyways.

In 2005, the local council signed an agreement with the Grosvenor Group, an international property developer with aristocratic provenance. It managed part of the $13 billion fortune controlled by the Duke of Westminster, Gerald Grosvenor. His holdings were scattered across sixty countries, from the posh London neighborhood of Mayfar to Tokyo’s Roppongi district. Now, Grosvenor would turn Preston’s old market into a shopping and entertainment complex.

But when the global financial crisis arrived, Grosvenor cut and ran, leaving Preston reeling, just as austerity assailed local coffers.

“It was horrific,” said Matthew Brown, the leader of the Preston Council. “We were totally constrained in our ability to help people.”

Brown concluded that placing faith in international developers had been an error, tethering the city’s prospects to the whims of money managers with no emotional connection to the community. What Preston needed was a plan that did not depend on outsiders.

One night in March 2012, Brown went to a local pub with Neil McInroy, who headed a research institution called the Center for Local Economic Strategies, based less than an hour away in Manchester. The institute was focused on so-called community wealth building, designing ways to keep wages, tax revenues, and savings cycling through local economies. Over beers, the two men sketched out an alternative.

The plan they produced centered on local government entities transacting as much as possible with businesses in the area. When the school district needed a contractor to supply meals, it would award its business to a local company rather than a national giant. The contractor that got the work could in turn purchase meat and produce from nearby farmers. Spending would stay in Preston, to be distributed as paychecks for people who would shop in surrounding businesses, rather than filtering out to companies controlled by faraway shareholders.

What became known as the Preston model was an antidote to austerity. It did not depend upon the outcome of a national election or the assent of Davos Man. It simply required coordination among entities that were already invested in the local community.

When, in the sober light of day, Brown presented this idea to his peers on the Preston council, some concluded that he had enjoyed one pint too many. It sounded like hippie claptrap. But as austerity tore at the fabric of life, basic assumptions about governance came up for reconsideration. The traditional way of running things had produced poverty and despair, making unorthodox approaches warranted.

“There was a culture shift where they looked at these ideas in a new way,” Brown told me as we sat in another neighborhood pub. “We’re trying to find alternatives to the capitalist model.”

Brown took the lead in organizing local institutions. The Preston government, the council for surrounding Lancashire county, the local police department, the housing authority, and a pair of nearby colleges all agreed to transact as much as possible with local businesses.

Before the scheme was unleashed, these so-called anchor institutions were directing only 5 percent of their spending within Preston and 39 percent within Lancashire county. Five years later1, those numbers had swelled to 18 percent and 78 percent respectively.

The Preston model did not operate with force of law. It functioned as a social compact forged among local institutions, an understanding that they needed to consider more than the bottom line when they spent money. It was something like stakeholder capitalism run by people who actually answered to stakeholders—not through nebulous pledges like the Davos Manifesto, but via democratic elections.

The Lancashire police department had been decimated by austerity, with its ranks plunging to 2,200 from more than 3,000 a decade earlier. When the department took bids for the construction of a new police headquarters in Blackpool—a beach town known for carnival rides and alarming rates of crime—it stipulated that it would prioritize “social values.” Bidders would be favored if they were local, if they hired young apprentices to boost skills, and if they recognized trade unions. The winning firm was based in Manchester, but was required to spend at least 80 percent of its budget within Blackpool.

“We believe there’s a correlation between deprivation and crime,” the police chief, Clive Grunshaw, told me. “If you can invest in these communities, then clearly they will benefit.”

The site of the aborted shopping mall became a monument to the Preston model. The council renovated the old market, while leaving intact its original nineteenth-century steel columns. The new structure—a glass-fronted, inviting space under a high peaked roof—included a fish counter, a butcher, a pub offering local beers, and coffee outlets.

The council had leaned heavily on local tradespeople, among them John Bridge, a Preston-born architect. He used the experience as a springboard to launch his own practice. He had come to see the community’s deterioration as an inflection point.

“It forced us to start looking inward,” Bridge said. “We have had to think differently.”

 

Among the people who advised Matthew Brown in Preston was an American named Ted Howard. The founder of a nonprofit called the Democracy Collaborative, Howard was a believer in the power of cooperative companies to create jobs at livable pay, even in the face of Davos Man pushing wages lower.

He and his colleagues had launched a series of cooperatives in the United States, among them a laundry service based in a low-income neighborhood in Cleveland. The company paid wages that were adequate to finance a middle-class standard of living, including health care and profit sharing. It had secured a contract to wash linens for the Cleveland Clinic, gaining this work not through charity, but via a competitive bidding process. As a cooperative, it merely had to break even. Freed from the compulsion to hand dividends to shareholders, it could afford to pay workers enough to cover their expenses while still winning business from rivals.

“The cooperatives have a real social mission, the transformation of the local community,” Howard told me, “but at the end of the day they need to be financially successful.”

Howard’s idea had taken inspiration from the Mondragon Group, a collection of cooperative businesses in the Basque region of Spain that was the workplace for more than seventy thousand people, making it one of the ten largest employers in the country. The group owned one of Spain’s largest grocery chains, a bank, and factories that exported auto parts and other components around the world.

Mondragon was governed by an agreement that the top management salary was limited to six times the wages of the lowest paid worker, as compared to a ratio of more than 300 to 12 among publicly traded companies in the United States. The laborers owned the company as partners, receiving annual shares of profit. If one business hit hard times, partners could find work at the other cooperatives.

After the global financial crisis, as the unemployment rate surged beyond 26 percent in Spain, Mondragon largely avoided job losses. When the original cooperative, a refrigerator maker, collapsed in 2013, it cost the jobs of nearly 1,900 people. But six months later, many had found new positions at partner cooperatives, and the rest had secured early retirement and generous severance packages.

Worldwide, cooperatives already employed more than 280 million people, according to the International Cooperative Alliance. The United States alone held more than thirty thousand cooperatives. They collectively controlled more than $3 trillion in assets3, by one estimate.

Howard was also pursuing another promising idea that had gained traction in the United States—a consortium of forty-five nonprofit and government medical systems that operated more than seven hundred hospitals across the country. As a group, the members of the Healthcare Anchor Network spent more than $50 billion a year while managing $150 billion in assets.

Much like the Preston model, alliance members had promised to direct their spending to generate local jobs. They also pledged to turn some of their reserve funds into so-called impact investments—loans for the purchase of homes to spare low-income people from eviction, seed capital for minority-owned businesses, childcare services for the working poor. By early 2020, members had earmarked more than $300 million.

The model was especially tailored to the conditions that had long plagued American governance: the near impossibility of prying money loose from Congress, except when it involved pork barrel industries like defense, or tax cuts for Davos Man. Rather than trying to persuade Congress to finance expanded social service programs, money could be found to boost low-income communities by redirecting corporate funds that were already being spent.

The reservoir of cash was potentially vast. American hospitals and health care providers collectively expended more than $780 billion a year. They managed investment portfolios stocked with $400 billion, and they employed more than 5.6 million people. Even a slight tweak to how they directed their funds could have enormous consequences.

“Our epiphany is that one answer to the supposed scarcity of funds is that the money is right there in the community now,” Howard told me. “It’s in institutions that are locked in place.”

Health care was especially fertile ground because of the Affordable Care Act, better known as Obamacare. It required that nonprofit hospitals produce annual assessments of their community health needs in the broadest context—including job markets, the availability of affordable housing, public transportation, and parks. They had to propose measures to improve local conditions.

That process was informed by the simple observation that poverty was a killer. People who experienced homelessness were more likely to be readmitted to hospitals after being discharged. Those without jobs did not tend to buy organic fruits and vegetables, and were less likely to shell out for gym memberships, leaving them vulnerable to a range of ailments, from heart disease to diabetes. Growing numbers of people had found themselves scrapping health insurance to finance more pressing needs like repairing cars needed to get to work.

“One in four Americans are having to make a choice between ‘Do I buy milk today?’ or ‘Do I pay my copay to get my prescription?’” said Bechara Choucair, chief community health officer at Kaiser Permanente, a leading member of the network, citing a company survey. “‘Do I pay my rent this month? Or do I pay my deductible to be able to go and get my surgery?’”

As the health care provider for 12 million Americans, Kaiser had bottom-line motivations for participation. If more people were employed in a community, that spelled more potential customers for Kaiser’s services, and lower costs for providing their care.

This was the calculus that informed Kaiser’s planning as it constructed a new medical center in South Central Los Angeles, where the neighborhoods of Baldwin Hills and Crenshaw converged.

The community needed far more than doctor’s offices. Among its 278,000 residents—the vast majority Black or Hispanic—nearly 30 percent were officially poor. Many had not completed high school. Gang violence had long been part of local life. Former prison inmates languished in local housing projects with no means of supporting themselves. Boosting health required tackling problems that went well beyond furnishing X-ray machines and running a pharmacy.

In late 2015, Kaiser held meetings in the local community, seeking to understand the extent of the needs. What people needed most was jobs.

As Kaiser broke ground early the following year, it required that its contractor reserve 30 percent of all jobs for people living within five miles of the site. Initially, the company stumbled in trying to find appropriate candidates. It held a job fair and hardly anyone showed up. Then, the project managers ran into John Harriel, a fixture of the neighborhood known as Big John.

Harriel had grown up in the neighborhood and had run with the notorious gang the Bloods, serving five years in prison for dealing drugs. He had used that time to gain his high school equivalency and train to be an electrician, putting him in position to forge a career in the trade when he got out. He had risen to the ranks of supervisor, running teams of dozens of electricians that had erected some of the largest projects on the West Coast, including the Staples Center, home to the Los Angeles Lakers basketball team. He was active with a community organization called 2nd CALL (for Second Chance At Loving Life), which aimed to prepare formerly incarcerated people for careers that would allow them to support families.

Physically imposing and blunt, Harriel was not one for corporate-sponsored happy talk. He was especially distrustful of white outsiders who struck saintly poses as they arrived to rescue his predominantly Black community from whatever affliction was trending. As far back as elementary school, he had drawn discipline for scoffing at the notion of Santa Claus.

“I said, ‘Let me get this straight,’” he told me. “‘There’s this fat white guy riding around in the sky delivering presents down the chimney? I don’t see any chimneys in the projects.’ I said, ‘That’s a lie. You’re telling us a lie.’”

In prison, he had read African American history and chafed at the celebration of Martin Luther King Jr. by the white establishment, especially his famous “I Have a Dream” speech.

“Dreams come to people who sleep,” Harriel said. “They picked the nonviolent guy with a dream.”

When Kaiser approached him to seek help recruiting workers, Harriel initially smelled a publicity stunt. He demanded control over the recruitment of potential workers, having learned that turning former prison inmates into gainfully employed people was both transformational and fraught with perils.

Roughly six hundred thousand people were released from American prisons every year. The unemployment rate among the formerly incarcerated4 reached 27 percent. Harriel looked at that figure as both a warning and an indicator of promise. People fresh from prison were cognizant of the odds against them, which made them eager to work harder. Their paycheck was far more than a way to pay bills; it was their means of preserving their freedom.

But Harriel also understood that the average employer was not eager to hire convicted murderers or drug dealers. They had to be convinced of the merits of the people they were taking on. Those he sent out for jobs had to display the proper attitude and decorum.

“The world is looking at us,” he said. “You’d rather be two hours early than two minutes late.”

To say that Harriel’s organization ran job training seminars was to miss the point. It helped people navigate the pitfalls of life outside prison. It ran courses in anger management and financial literacy, and provided trauma counseling. Harriel counseled Black and Latino former gang members to look their white supervisors in the eye—an action that could provoke violence in prison. He refused to send anyone out for an apprenticeship until they convinced him that they were truly dedicated.

“If someone is screwing around,” he said, “I will be the first to say they should be fired.”

Kaiser put Big John in charge of recruitment. He went into gang communities and knocked on doors. At the next job fair, hundreds of people showed up. Kaiser hired dozens of them, including a man named Charles Slay.

Like Harriel, Slay had grown up in the neighborhood. His mother died when he was only ten. He had been raised by his father, who worked as a mechanic. Money was perpetually tight and good jobs nonexistent. People flipped burgers or bagged groceries, but that was no pathway out of poverty. Slay signed on with an organization that offered a crude form of financial betterment. He joined the Bloods.

By the time he was fourteen, he was robbing stores at gunpoint, and ambushing people on a forlorn patch of dirt in Baldwin Village—the very place where Kaiser would construct its new campus.

By twenty-one, Slay was behind bars for killing a man in a rival gang. He completed his high school equivalency and then studied sociology. “I started thinking about the people that I robbed,” he said. “I started thinking about the magnitude of my actions. How did I go from a little boy that my mother loved to a man willing to take another man’s life? I started thinking about some of the things that I was lacking. I said, ‘If I ever get a chance to get home, I will relish it.’”

The chance came when he was forty-eight. Back on the outside after twenty-seven years in prison, Slay moved in with his aunt. He applied to be a truck driver, but the conditions of his parole barred him from traveling more than fifty miles from home. He took a job unloading ships at a port. It paid $9 an hour with no health care.

Then he met Big John. When Kaiser began constructing its new medical center, Slay was part of the crew, working as an electrician.

“I never in my life used a power tool,” he said. “The only tool I used was a gun. I feel like I’ve been through several lives within my time.”

Slay inhabited a world that was barely connected to the American political process. Normalcy, if that was the nation’s destination, did not include quality jobs in poor, predominantly Black communities.

Approaches like the Preston model and the Healthcare Anchor Network were clever adaptations to a system that was deficient—a meaningful place to start. They would keep what wealth existed inside communities, rather than sending it away to Davos Man. But lifting people out of poverty on a mass scale and restoring middle-class security would require something more comprehensive—a mechanism to transfer wealth from Davos Man to everyone else.

For centuries, social theorists, civil rights leaders, and economists have debated the most effective way to address the reality that some members of society simply lack sustenance. As the pandemic spread, threatening hundreds of millions of people with destitution, that debate took on new urgency.

One intriguing idea that had never seemed entirely practical was suddenly getting a real airing.