Category Archives: Economic Empowerment

Private prisons: How US corporations make money out of locking you up

The Wal-Mart Model: Not Just for Retail, Now It’s for Private Prisons Too!

The nation’s biggest and baddest for-profit prison company suddenly cares about halfway houses – so much so, that they want in on the action.

About a year after acquiring a smaller firm that operates halfway houses and other community corrections facilities, Corrections Corporation of America (CCA) CEO Damon Hininger announceda few weeks ago that “[r]eentry programs and reducing recidivism are 100 percent aligned with our business model.”

Wait, what?

High recidivism rates mean more people behind bars, and CCA depends on more and more incarceration to make its billions. Since when do they actually want people to do well after they get out, instead of being sucked back into the system?

It’s tempting to be hopeful. Is this a long-overdue acknowledgment that it’s morally bankrupt to make money off of imprisoning human beings? Is the nation’s largest for-profit prison company really admitting that mass incarceration has destroyed too many communities and that locking fewer people behind bars is a good thing?

Come on. It’s CCA. We can’t afford to be naïve. The motivation behind this announcement is where it always is for CCA: the bottom line.

If you read Hininger’s speech carefully, he hints at a long-term corporate strategy that could eventually become even more lucrative than CCA’s prison business: The Wal-Martification of reentry.

Currently, post-prison reentry programs, such as halfway houses and day reporting centers, are largely run by local nonprofit organizations or, in some cases, smaller for-profit companies. Hininger notes the small, local nature of reentry services in his speech – and then claims that CCA can use its size and resources to “provide consistency and common standards” in different facilities, rapidly make new arrangements with multiple agencies “on an as-needed basis,” and “scale” (i.e, grow rapidly). These claims – bigger, faster, cheaper – echo those often made by Wal-Mart supporters to explain why the company is superior to local businesses.

CCA’s plan to become the Wal-Mart of reentry may be good for its investors, but it should alarm the rest of us. First, the for-profit prison industry’s history of abuse, neglect, and mismanagement raises serious questions about what kinds of abuses would occur if we hand over control of even more elements of our criminal justice system to CCA and similar profit-driven companies. Second, CCA fights aggressively toshield its operations from public scrutiny – even though incarceration and rehabilitation are some of the government responsibilities where transparency and accountability are most important.

At their best, halfway houses and day reporting centers can provide much-needed support, psychological help, educational services, and substance abuse treatment during a difficult period of transition between full-scale incarceration and post-sentence release to the community. But at their worst, they can fester with violence and sexual abuse as well as fail to address the serious needs of the people in their care. Given CCA’s track record, we should be worried that vital reentry services are under threat.

No matter how much CCA executives protest that reducing recividism is “100 percent aligned” with the company’s business model, an inherent conflict exists between CCA’s duty to enrich its shareholders and this asserted commitment to successful rehabilitation: The company can keep increasing its profits only by ensuring an ever-greater flow of human beings into the criminal justice system. That flow is maintained by the same bad policies that fuel our national mass incarceration epidemic: the War on Drugs, extreme sentencing practices, and systemic failures to address problems like mental illness, substance abuse disorders, and homelessness outside of the criminal justice system.

For the past four decades, our country has relentlessly expanded the size of our criminal justice system, allowing companies like CCA to reap tremendous profits out of human misery. But the ACLU is committed toending this colossal waste of lives and taxpayer dollars – and in the process, defeating CCA’s plan for the Wal-Mart-ification of reentry.

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Owens Jones: The Politics of Hope

Owen Jones, a British columnist, author and political activist speaks at the 2015 FutureFest about how the “Politics of Envy” is being used to redirect the middle class’s anger about the economic climate away from the policymakers and towards the lower class. Jones is a regular columnist for The Guardian and the New Statesman. He is also the author of ‘Chavs’ and ‘The Establishment.’

City on the Brink

Economic and Community Development in Camden, NJ

By V. Michele Farquharson

Today people know Camden, NJ as one of the poorest and most dangerous cities in America. It has a population of 80,000 people with an unemployment rate of 10.1% and for those over the age of 25 only 50% graduated from high school. [1]. Of those who work their median income is $23,421, which puts 36% of Camden residents and 45% of Camden children in poverty. [2]. But how did Camden reach this state? How did decades of disinvestment go unnoticed until “on November 21, 2005, Camden was deemed the most dangerous city in America for the second consecutive year,” with a murder rate “over 10 times the national rate” and a “rate of robbery in 2004 [that] was 30% higher than the #2 city.” [3].

The Beginning

Old Camden’s industrial and commercial sectors survived two World Wars, the Great Depression, and it was not until the 1970s that Camden’s steady decline became a rapid dive. Why then did Camden fall harder than other industrial cities? Disinvestment affected most cities across America, as did white-flight, but why did Camden never resurface? The city began in the mid-1800s with the industrial revolution, and by “1920 Camden’s population exceeded 100,000 for the first time, ranking the city fifty-eighth nationally, just behind New Bedford, Trenton, and Nashville and ahead of Lowell, Wilmington, and Fort Worth.” [4]. Camden continued to grow into a stable city community that supported a diverse mix of immigrants during the years following World War II. Like most cities, Camden struggled with racial as well as gender lines that eventually played a part in Camden’s decline. In the 1950s, the wide variety of ethnic backgrounds contributed to assorted entrepreneurial commercial corridors. While there were separate neighborhoods for the Polish, Italians, Jewish, African-Americans, and Irish Catholics, the center of each of these ethnic groups brought different traditions, food, and business to the city. Each of these ethnic groups drew strength from its particular community centers, usually in the form of a place of worship and what Howard Gillette, Professor of History at Rutgers University and author of Camden After The Fall, calls an “ethnic parish.” [5].

Religious and Ethnic Enclaves

Within ethnic groups, there remained divisions and “although parishioners quickly formed at least ten regional organizations, the church made a point of melding the whole community by recognizing all the special feast days of Italy’s different regions.” [6]. These parades united the Italian neighborhood as a “public display of their solidarity to church, neighborhood, and ethnicity.” [7]. Churches in general promote this type of community activity, but William Simon, Saunders Professor of Law at Stanford University, argues the Roman Catholic Church and certain Black Protestant churches impact their communities more effectively. He points out that “For decades, [the Catholic Church] has supported community organizing and development efforts in low-income areas across the countries,” and “urban black Protestant churches have undertaken major housing, commercial, and health care projects.” [8].

Camden’s industrial and commercial centers survived the war, and yet the ethnic neighborhoods “remained primarily parochial and isolated from other communities. Each unit of the larger urban fabric thus held strongly unto itself, recognizing other units but keeping a distance.” These religious and cultural roots grounded the communities in Camden during the Great Depression and a Second World War. Unfortunately, this sense of community would not last. 9 This division between ethnic communities did not seem damaging at the time because it gave each group a support group particular to its interests. However, these divisions, especially those based on race, prevented the neighborhoods from uniting as the entity – Camden. The voluntary (and in some cases involuntary) separation made Camden a city of enclaves, “a voluntarily developed spatial concentration of a group for purposes of promoting the welfare of its members.” [10]. While the city government ran the city as a whole, these enclaves relied on their local “churches [which] are often the strongest nongovernmental institutions in poor neighborhoods. They are invariably involved in the production of relations of trust and cooperation.” [11]. While an involuntary isolation, such as those seen with racial minorities such as African-Americans are considered ghettos, this initial separation was universal and based more on ethnic background than socioeconomic or racial status.

For ethnic minorities in particular, these churches took the place of City institutions. This lack of political agency for isolated ethnic and racial communities contributes to the development of the Community Economic Development Movement. Despite the developments in the 1970s, such as Community Action Programs and Empowerment Zones, “municipalities were often too centralized and bureaucratic” or “dominated by white political coalitions insensitive to racial minorities,” which prevented them from “deliver[ing] services effectively to poor neighborhoods.” [12].

The ethnic communities formed such strong ties amongst themselves that as each ethnic enclave made a decision to leave or stay in Camden, the majority of the ethnic parish followed. For instance, in 1951 the Federation (Jewish community leaders) wanted to build a new community center outside the city on a suburban site, which caused Jewish community members to be “appalled at the prospect of getting their children to Hebrew School or attending other functions far from their homes.” From the time of Camden’s founding through the 1960s African-Americans were considered second-class citizens, and thus did not receive equal treatment from city institutions. As a city of immigrants, African-Americans were not the only group discriminated against, and ultimately the city was comprised of ethnic neighborhoods that rarely overlapped. [13]. But the Federation could not resist the cheaper larger lot for the community center and the Jewish community soon followed the community center into suburbia during the 1950s marking “the first wave of change that dramatically altered Camden’s social landscape,” leaving only three hundred Jews in Camden by 1972. [14].

The Competition

Moving into the second half of the twentieth century, America’s economy surged and with efficient modes of production communities accumulating wealth moved into suburbia, drawn by the new commercial economic centers, in particular, malls. For Camden, “a central factor in the area’s conversion from country to suburb was the opening of the Cherry Hill Mall in October 1961.” [15].

The mall was so successful that the then Delaware Township changed its name, which is to this day – Cherry Hill. Cherry Hill Mall’s tremendous economic success “came at Camden’s expense, as businesses shut down or changed hands during the 1960s along the city’s historically dominant commercial corridors.” Camden fell to the suburbanization of one of Southern New Jersey’s more expensive neighborhoods, Cherry Hill. The city’s commercial corridors could not keep pace with the new Cherry Hill mall, and the neat row houses and city apartments lost their charm in comparison with the new single-family homes spreading farther and farther outside the city. Cities across the nation lost their appeal to the typical American family. [16].  This economic shift drew out the middle class families not already living in suburbia. Camden never had a major upper class, and without the middle class commercial corridors, and lack of industrial work, the lower classes were left to fill the void. As the working middle class moved up and out of the city, they left behind those that could not afford to move, primarily African-Americans and Latin Americans. Both of these minorities suffered discrimination during Camden’s best days and because of the class and racial lines there was not a strong enough economic base within these two groups to keep the city afloat. Cities across the nation saw their “severe problems beg[i]n to mount only later, when its physical, fiscal, and political growth was choked off by the suburbs, which from then on were able to capture relative prosperity for themselves.” [17]. This lack of economic power intensified with the disinvestment of the city as public and private investors saw the benefit of moving commercial and even industrial sectors into suburban neighborhoods. Without the middle class investors did not look to Camden as a place to set up shops, but went to Cherry Hill where they were guaranteed a customer base. Thus, Camden took a turn for the worse and riots sprang up throughout the city in the 1970s pushing the remaining middle class families out of the city, leaving behind a “neighborhood of transients.” [18].

Redevelopment: Part One

While most Old Camden residents moved to suburbia and never looked back, Al Pierce returned to Camden after World War II to fight for the preservation of the Camden he knew and loved. In the same year as the construction of Cherry Hill Mall, Al Pierce was elected mayor of Camden. His policies included a “comprehensive plan released in 1962 laid out the vision of a revitalized city in the heart of a growing region.” [19]. Pierce recognized the stiff competition with suburban areas and made efforts to create an urban version of the Cherry Hill Mall by starting over in downtown Camden. While Pierce desired redevelopment in Camden, he ignored protests from local businessmen who saw their businesses displaced by his plan. It is this lack of political representation that gives rise to the Community Economic Development Movement, because “bureaucrats have poor incentives and poor information.” [20].

Resistance and Racial Tension

Mayor Pierce pushed forward with a plan that focused only on the economic benefits for private investors, not on providing the necessary resources for the survival of the local population. The 1960s housed the civil rights movement in cities across the nation, and white politicians ran into minority activism, which called for increased equity in city policy. Most redevelopment policies proposed during this time ignored the problems affecting minority populations. Pierce’s plans for redevelopment benefited the white population, and damned the minority population as “three thousand city buildings had been demolished in the previous six years with no low-cost housing to replace them.” [21]. By not including a comprehensive low, or even mixed, income housing plan to make up for this loss, Mayor Pierce began a trend of vacant lots that continues to plague Camden. The Mayor’s plans also included a “Hi-Speed rail line, bypassing Camden’s blighted inner-city neighborhoods, which were becoming more black and Latino.” [22]. The racial tensions continued as the black community developed militant groups that eventually incited “Mayor Pierce and Police Chief Harold Melleby [to file] a civil suit against the Friends of the Black People’s Unity Movement [BPUM] charging it with inciting others to violence and conducting unlawful assemblies.” [23]. Eventually riots ensued during which a white police officer and innocent black female bystander were shot and killed. This incident solidified the line between the African-American activist movements and law enforcement officials.

Alternating between riots and raids, faults were committed on both sides as activists were found with drugs, and officers took advantage of their positions of power to discriminate against African-American citizens. Ultimately, the redevelopment attempts by Pierce’s government failed because they did not recognize “the requirement of community participation” and instead intended “to remove the minority groups from the city through demolition of housing and ultimately to bring back the suburban white population to live in luxury housing.” [24]. Activists continued to protest against Pierce’s redevelopment programs and “the Black People’s Unity Movement, assailed the redevelopment plans as ‘Negro removal.’ In 1970, the Camden County Regional Legal Services aided the BPUM in filing suit against all urban renewal and highway construction projects.” [25]. The activists won the suit and the U.S. District Court ruled “to halt redevelopment in its tracks” until city planners produced “an official plan of action for effectively dealing with Camden’s problems of urban slums and blight.” [26]. Thus, Mayor Pierce’s economic redevelopment plan produced vacant lots, insufficient housing, closed businesses, and a public sentiment that no longer trusted government officials to act in the best interests of the local community. Redevelopment programs like Mayor Pierce’s failed to revitalize cities nation-wide because they focused on bringing the upper class back into the city, and ignored the initial residents within the city limits.

As civil unrest continued, the police force became more and more belligerent, especially when dealing with minorities. Despite calls for justice when citizens experienced police brutality, the government refused a public hearing, and defended their police force. On August 19, 1971 Mayor Mario Rodriguez’s inability to communicate and negotiate with the public led to “three nights [of] fires, looting, and destruction of property [that] paralyzed the city.” [27]. The 1970s rolled by and Camden’s government funneled money in from the state to try and save Camden, but without outside investment there was no jolt to the economic system to push it into any kind of growth pattern. Despite the prevalence of vacant lots in Camden during this time, no city programs focused on externalities. This is surprising considering that “the value of your house depends more on what your neighbors do with their property, how they behave, and who they are than on any decision you make.” [28].

The Importance of Community Involvement

By 1980, the suburbanites who left Camden in the sixties no longer felt an obligation to give because the redevelopment they thought they were investing in for the past ten years was nowhere to be found. This opinion predominated in suburban areas surrounding most major cities, but it is unfounded considering the failure of redevelopment programs before the 1980s had more to do with a lack of coordination than any wastefulness on the part of urban residents. While the government recognized the need for development, it focused on appealing to a group of people no longer invested in the city. Mayor Pierce’s plans for a mall and new commercial district aimed at bringing white suburbanites back into the city – “the plan ignored the realities of economic decline, suburban white flight, and the prevailing disinvestment on the part of banks and other lending institutions.” [29].

Camden’s political leaders found that no private investors wanted to invest in a city with so much civil unrest, and no local business center (Mayor Pierce’s redevelopment plan drove local businesses away and failed to bring other investments in). As Camden’s economic situation continued to decline politicians looked to the state’s coffers to pay their debt, and “embraced an offer of $3.4 million in state funds in return for giving up valuable land on the North Camden waterfront for a new state prison.” The inability of the government in the 1960s to effectively integrate the remaining communities, and adhere to their needs destroyed the relationship between the public and the government for the next thirty years. The politicians of the 1980s did not learn from Mayor Pierce’s mistake and continued to focus their development attention on outside investors rather than their citizens and constituents. Minority populations across the nation felt the strain of racism in politics. Despite BPUM’s success at halting Mayor Pierce’s redevelopment plan, there was no action to replace it with a more equitable plan. Those involved in the community activist quarter were sequestered from local politics, and thus decades went by with continual flawed redevelopment. [30]. This was the first of many detrimental projects that took up prime real estate property on Camden’s prime waterfront and residential properties. The sewage treatment plant built in 1987 “replaced 46 local treatment plants shut down when suburban residents articulated concerns about the degraded environmental quality in their own communities.” [31]. The solid waste facility accompanied the sewage treatment plant in 1989, jeopardizing the health and overall quality of life in Camden. Camden’s poor minority population suffered at the hands of “environmental racism … that those at the bottom end of the social scale, living in the poorest and especially the darkest skinned neighborhoods and rural zones, share space with dirt and disease at the bottom end of the environment scale.” [32]. Not only were the suburban powers unconcerned with Camden’s development, they valued the lives of Camden citizens less than their own.

Camden suffers because the suburban powers view the city as “a local failure of physical and human resources” [33] rather than as a victim of inequality. The plants forced on Camden “can be construed as largely suburban-generated problems insofar as suburbanites consume more, demand more and more spread-out facilities … Indeed, such problems are frequently viewed a products of dense urbanization, as if the green and apparently clean suburbs somehow lived on their own.” [34]. While the state’s investments kept Camden from disintegrating, the cost did not fall on Camden’s politicians but on its citizens in the form of ever declining public health and a permanent blight on the small amount of land investors might be interested in. During this period, the community’s voices were not organized and could not be heard over Camden’s political machine. The surrounding wealthy counties’ residents dictated what happened to Camden. This trend continued across the United States due to the inequalities in the “distributive effects of postwar urban development.” [35]. The federal policy changed as of “January, 1973, [when] President Nixon suspended all federal housing and redevelopment assistance programs. This action virtually killed all new assisted housing projects.” [36].

The Community Economic Development Movement

With a lack of federal support for assistance programs, Camden’s attempts at redevelopment failed, and the community lacked the organization to change the political leadership. The Community Economic Development (CED) Movement came about in response to cities such as Camden going through failed redevelopment programs like the ones implemented by Mayor Pierce. The CED “movement has been fueled by trends toward decentralizing public administration, … channeling the development of local markets along socially desirable paths, … [and] by changes in the contours of urban politics, especially new strategies by neighborhood activists.” [37]. The goals of the CED movement are threefold: to develop housing, work and business opportunities; to establish non-profit leadership within the community; and to ensure that community leadership are accountable to the community’s residents. [38]. On all three of these factors, Camden’s initial redevelopment programs failed because they focused on business investment from external private businesses and developers; ignored the non-profit leadership within the community; and agreed to development projects that put the community in harms way. The CED movement addresses the failures of previous redevelopment programs, and works to build institutions geared towards community action apart from government and privatized institutions. By making the community an independent agent, it redistributes political and economic power more equitably.

Ensuring Benefits for the Community

The CED movement produces better redevelopment plans because it remedies the coordination failures with real estate development and financial investments. Previous redevelopment plans, such as Mayor Pierce’s, “come at the expense of the initial residents of the community being developed … [and] citizen-participation goals were never realized.” [39]. The racial segregation and inequalities influenced the first attempts at redevelopment so that “municipalities were dominated by white political coalitions insensitive to racial minorities.” [40]. One of the CED movement’s primary goals is to ensure the initial community is the beneficiary of economic development. The movement benefits the community in four primary ways: through residents, synergy with local institutions, mitigating “negative environmental externalities,” and “reinforces … a stable, independent community structure.” [41].

CED Institutions

In addition to ensuring the community is the beneficiary of economic development, the CED movement provides guidelines for developing effective, community-friendly institutions. The two most common forms of CED Institutions are Community Based Organizations (CBOs) and Community Development Corporations (CDCs). Both types must adhere to the three characteristics of CED Institutions: relational density and synergy, maintain a geographic focus, and ensure face-to-face encounters with the local community. [42]. Relational density and synergy implies internalizing community activism and ensuring community agency and strengthening political and economic relationships within the geographic focus. CDCs and CBOs are essentially “forms and structures to facilitate the kinds of collective activities [the CED movement] promotes.” [43].

Community Based Organizations

Community Based Organizations wield six tools to help with local development. These tools include: financial assistance, technical assistance, and tax concessions, provision of public goods, procurement preference, and land-use permission. [44]. CBOs have access to resources not normally available to the average community member or small business. As an intermediary institution these organizations can provide “financing [for] housing, job, and business development in low-income areas through community-based organizations. Assistance to CBOs and by CBOs to others can take the forms of grants, equity investments, loans, and loan guarantees.” [45]. Financial assistance can also be in the form of certain tangible property, the most common one being land. City land redevelopment can be the gateway into combining public and private interests. Most “urban municipalities often have title to a good deal of land in low-income neighborhoods that has reverted to them because of defaulted tax payments or was acquired for public facilities that are no longer in use.” [46]. CBOs help connect the municipality with private investors and community leaders to ensure they develop the land with community interest in mind. In addition to private investment, city owned land, as well as charitable donations; prove useful for housing and public facility projects.

Community Based Organizations also provide technical assistance in the form of training to help reinforce community businesses by providing training for local entrepreneurs, job-readiness preparation, as well as various forms of community planning and organizing. Technical assistance provides the CED movement its primary tool by forging opportunities for extensive human capital development. Most resident-leaders in these communities are inexperienced and “they, as well as active rank-and-file members, should be trained in the fundamentals of an organization’s structure, procedures, and finance and in the nature of its projects.” [47]. The resources covered in financial and technical assistance provided by CBOs help community leaders navigate the tax concessions granted to Empowerment Zone programs, incentivizing donations from private investors with subsidies as well as procurement preference. The final tool, land-use permission “is the most extensive power of economic regulation that local government has.” [48]. Community Development Corporations With effective training and guidance CBOs can partner with local government in order to pursue the redevelopment programs most beneficial to the local residents. Community Based Organizations help lay the foundations for the emergence of Community Development Corporations (CDCs). CDCs are formalized institutions with a “standard legal form,” which ensures the CDC demonstrate “development [of] some geographically bounded community of disproportionately low-income people … it must be charitable … have a governing board that includes representatives of the beneficiary community; and its membership must be open to the beneficiary community.” [49].

Redevelopment: Part Two

These CDCs are classified as 501(c)(3)s and maintain that status only by fulfilling the above mentioned requirements. The legal structuring of CDCs helps protect community interest by requiring direct community interaction with the governing board of these corporations. Private investors will fill the void if local community members do not take charge of what happens to their own neighborhoods. The institutions emerging from the CED movement are not perfect but they do help diminish the political and economic inequalities of lowerincome urban communities. For the initial local communities to benefit from redevelopment programs, the public-private partnerships provided through the development of CDCs must take root. The 1990s brought on another attempt at redevelopment, but once again political machinations got in the way of the public benefit. Mayor Pierce set the tone for redevelopment programs under future administrations, resulting in the state takeover of the parking authority, the housing authority, “a 300-page audit that accused city government of mishandling its finances,” and “as of the summer of 1997, urban redevelopment in Camden was at a standstill both within and outside the Empowerment Zone.” [50]. Camden’s political organization lacked leadership and the initiative necessary to bring back a city. The few redevelopment programs such as Empowerment Zones and Community Action Programs that emerged in the time after Mayor Pierce were the result of Federal programs in addition to initiatives from the Department of Housing and Urban Development. While the past fifty years demonstrates failed attempts at redevelopment on the part of politicians it does not mean they are not necessary for effective development. The role of government should be to balance the three branches necessary for effective redevelopment: public, private, and community participation.

Community Organizing—Camden Churches Organized for People

Camden Churches Organized for People (CCOP) is a non-profit that focuses on training local residents to be effective community organizers and leaders. While not associated with any particular faith, CCOP works with churches in pursuit of “a fundamental orientation that social change, as compared to social services, is necessary to address the causes of problems faced by individuals and families.” [51]. Working close within the community CCOP aims to make Camden’s communities agents of their own economic development. In order to increase the community’s intentional exercise of power it is necessary “that citizens come together collectively through formal organizations; this perspective views voluntary, non-economic organizations successful only to the degree that they develop relationships among members within a community.” [52].

Using the resources available to them as a non-profit, as well as partnering with public and private powers within the city, CCOP proved a linkage between vacant lots and violent crime. This connection “proved remarkably effective for discussion and policy change … [and] what developed from this process became formally known as the Camden On behalf of the community, the CCOP focused on demonstrating an exercise of power in Camden. Community Housing Campaign.” [53]. The collective political action resulted from “hundreds of one-on-one conversations held, in the collaboration conducted with the university-based research centre and in the dozens of research meetings arranged with public officials and experts.” [54].

Cooper’s Ferry Development Association

The key part in CCOPs success lies in their ability to include the community in every step of the process. In 1985, Camden saw the emergence of its first public-private partnership in the form of Cooper’s Ferry Development Association (CFDA). Cooper’s Ferry managed $55 million to develop and revitalize Camden’s waterfront property, which it did and continues to do today. Unfortunately, the driving force behind CFDA was the same as Mayor Pierce’s from 1965. The target audience of the development projects reached beyond Camden’s borders, and despite “qualified success … its economic impact on Camden has been slight.” [55].  In this situation the political leaders got two parts of the equation right – there was public and private participation in the project, but a major piece was still missing— community input. Without a community-based direction, projects such as the Aquarium, Campbell’s Field (Minor League Baseball Stadium), and Susquehanna Bank Convention Center lose their impact. The community ends up resenting these new developments because they do not impact their lives.

While the CFDA’s initial projects did not receive the desired community acceptance, the benefits should not be overlooked. First, the Waterfront Development plan took the place of a 65-acre landfill that required extensive environmental treatments that the government would not have been able to provide. Thus, the institutional hybridization of CFDA (public and private investors) enables it to achieve much more than the government alone. Second, CFDA has taken on citywide redevelopment efforts that extend to neighborhoods such as Cramer Hill and Waterfront South. This diversification of development projects will hopefully improve the relationship with the community. Something the CFDA lacks in its projects is a face-to-face encounter with community members, but this is on the mend. A group of their interns in the summer of 2010 went door to door in Cramer Hill passing out flyers for events, and making the non-profit’s presence known in the community. For so long residents of Camden lacked advocacy in redevelopment programs, that they lack trust, and no longer participate in community movements. For example, in the 2009 elections “only 20.7% of eligible voters cast a ballot, representing 23.5% of the registered voting population.” [56].

Camden possessed the pieces for redevelopment for almost twenty years, and yet progresses slowly. Previous projects aimed at revitalization, but “this focus on projects has produced endless conflict as proponents for various developments fight for their piece of the action, with no one, including city government, coordinating the process with a comprehensive plan to fit all the pieces together.” Part of redevelopment is not only the roles of these public-private institutions, and the government, but on the community to participate when opportunities exist. As the trend of community agency and representation in municipal governance changes, hopefully voter participation will increase and there will be more community involvement. [57]. The lack of political leadership and of an efficient and effective plan to replenish the foundation of Camden’s local community has hurt Camden more than the economic shift to suburbia. Other industrial cities succeeded because they developed an economic sector or middle to upper class residential area that offsets the poorer areas. Because of Camden’s size and socioeconomic homogeneity the development process requires cooperation between the government, public, private, nonprofit, and community sectors.

Greater Camden Partnership

In 2001 a non-profit organization called the Greater Camden Partnership took on the role of coordinator in the process of Camden’s redevelopment. The governing board of the Greater Camden Partnership (GCP) consists of representatives from almost every major anchor institution in Camden. These institutions include the colleges and universities, law enforcement, hospitals, the Salvation Army, and other non-profit leaders, just to name a few. While such a large board of directors can be daunting to an organization, it enables the GCP to serve the city as the coordinating body to connect the dots between the various project proposals throughout Camden. This role as coordinator is essential to effective redevelopment projects. Simon argues that the failure of past redevelopment efforts were the result of coordination failures. In 2010 GCP finished its first year under the leadership of its new CEO, Davie Foster. Under his leadership the GCP “focused on a single goal— revitalizing Camden by leveraging the economic development potential of the city’s anchor institutions.” [58].

Camden Special Services District

While the GCP does not execute the majority of the development projects in Camden, it helps pave the way to ensure the projects are completed. The GCP also plays an important role as a voice to the community in the development process. While certain projects focus on development projects to attract private investors, the GCP primarily pursues development projects aimed at benefiting Camden residents. The GCP started the Camden Special Services District (CSSD) in 2005, which employs Camden residents to keep the business corridors clean and safe. In addition to providing an increased sense of safety, the CSSD “are supported by voluntary contributions, fees for services, and grants from nearly thirty sources, including the major institutional anchors in the city, local government and private businesses.” [59].

Vacant Lot Stabilization Program

CSSD was so well received among businesses and community members that it was expanded in 2008 to create the Neighborhood Improvement Program. This expansion included a program for removing graffiti citywide. The CSSD now has a website where community members can upload photos of graffiti with its address and CSSD workers will track what tags belong to various gangs, and remove the graffiti within forty-eight hours. This development program demonstrates the CED goals of benefiting the community and using community members as agents for change. The Camden Community Green-Up campaign was the brainchild of the Greater Camden Partnership. The initiative’s goal was to clean and ‘green’ the vacant lots throughout Camden and “deliver to the city and citizens of Camden the benefits of superb vacant lot stabilization.” [60]. Given that 13% of the land in Camden lies vacant, this project was unable to green every lot, but the lots they completed made a sustainable difference in the community. [61]. The Green Up campaign began in September 2009 and lasted for six weeks during which “about 70 lots in the Cooper Plaza/Lanning Square neighborhoods [were] landscaped.” [62]. The project’s goal was not only to change the landscape of Camden’s vacant lots but also to inspire community work amongst local residents. The CEO of GCP was quoted as saying, “if you create a place that looks like it is respected, people will respect it.” [63].

Ray & Joan Kroc Community Center in Cramer Hill

The Green-Up campaign was not a permanent redevelopment fix, but it did temporarily revive the surrounding area by removing some of the blighted areas in Camden. This project represents mass cooperation amongst the major development organizations, anchor institutions, and local government. The primary partner with the Ray and Joan Kroc Foundation is the Salvation Army. This community center “is one of the most ambitious projects in the city’s history,” and “will be built on 24 reclaimed acres of the Harrison Avenue Landfill in the Cramer Hill neighborhood and is slated to open in December 2011.” [64]. This center represents the epitome of a CED project because it is all about providing resources for local residents. The only drawback is its location – Cramer Hill is in the northern tip of Camden City and thus neighborhoods such as Waterfront South, Morgan Village, and Fairview will not have the same access to Salvation Army resources. However, this should not detract from the impact this community center can make. It is designed to have a small grocery store, basketball courts, a place of worship, job training programs, youth programs, and baby-sitting and daycare services. Not only did Camden beat out cities across the nation, it is “one of only eight centers in the Northeast region … [and] is made possible by a $54 million grant from the estate of Mrs. Joan Kroc.”65

The Urban Land Institute – Technical Assistance Program

Acquiring the additional $34 million in funds has been a joint effort between the NJ Department of Environmental Protection, the Camden Redevelopment Agency, the Camden Economic Recovery Board, and the local Camden Salvation Army. While this project is not technically one of GCP’s projects, many of the participants sit on GCP’s board of directors, and thus GCP resources are used to help promote and support the Community Centers’ efforts. The Urban Land Institute is an international non-profit organization whose mission is “to provide leadership in the responsible use of land and in creating and sustaining thriving communities.” [66]. One of ULI’s tools is their Technical Assistance Panels (TAP) that provides advisory assistance to cities who apply and qualify for ULI assistance. Typically, only 2-3 of these panels convenes each year and Camden’s plan for the development of a University District was selected. This means that a team of experts and seasoned professionals in the field of developing University Districts in environments like Camden’s will provide “project analysis sessions, fellows advisory panels, on-site analysis sessions, five-day panels, technical assistance programs, advisory workshops, and special services.” [67]. This TAP is a great tool for putting together a comprehensive redevelopment plan for a University commercial corridor, but does it meet the requirements of the CED movement? While a University District is definitely necessary considering the number of Universities located in Camden, how many permanent residents will this commercial corridor impact? Given that half of the adult population does not graduate high school, it is unlikely many Camden residents will be attending these Universities, but that does not mean the development will not positively impact the lives of Camden residents.

It all depends on the direction this redevelopment initiative takes. If this commercial corridor recruits small businesses from within Camden, and encourages vendors and other opportunities for local business owners to either expand their restaurants to this area or start anew, it could be a great opportunity for Camden residents. On the other hand, if the development project focuses on bringing a mall to Camden with brand name labels it could be detrimental to Camden residents because it would make it nearly impossible for mom-and-pop shops to compete with brand name commercial corridors. Most University Districts do have a more local focus, and the ULI’s goals is to create sustainable communities, lead one to believe this development will be more beneficial to Camden residents, as well as local University students.

Grocery Store & Haddon Avenue Transit Village

There is currently no grocery store within Camden’s city limits, which contributes greatly to the diabetes crisis within the city. Families who cannot drive to Wal-Mart (cheapest and closest shopping center) in Cherry Hill are restricted to shopping at corner stores and bodegas, which are overpriced and lack products with nutritional value. In partnership with “Our Lady of Lourdes Medical Center, the Delaware River Port Authority and Grapevine Development, GCP is working to develop a 15-acre mixed-use transit village on a former industrial strip situated between the Lourdes camps and the Ferry Avenue PATCO station.” [68]. The location of this transit village and grocery store will service primarily the Downtown and Central Business District area. It will also provide the “first new grocery store in more than a generation and will also include 400 units of market rate housing, a new parking garage and both office and retail space.” [69].

Not to detract from the benefit of a transit village and new grocery store, but the location of this development project services only a small proportion of Camden residents, and is geared toward bringing outside investment into the city. Camden’s transportation hub in the Downtown area services over 13 million riders in a given year, the majority of which ride straight through Camden into Philadelphia or Southern New Jersey. Based on the contents and location of this transit village its primary purpose is to coax those 13 million passengers into Camden’s downtown to boost economic growth. While this is great for Camden’s business district, it does not serve residents in neighborhoods South and East of Downtown. If those living in the more residential areas are not included in major redevelopment projects, and if they do not benefit from serious economic investment soon, the redevelopment movement in Camden likely fail due to a lack of support and resistance from those excluded from benefits.

Cooper Medical School of Rowan University

The construction of the new Cooper Medical School of Rowan University will make a great impact in the development of Camden. It may not meet the requirements of the CED movement, but it demonstrates exorbitant faith and investment from major anchor institutions (Cooper University Hospital and Rowan University). Scheduled to open in fall 2012 this development project should benefit the community by increasing medical facilities and medical personnel in the area. Students and Faculty will be encouraged to live in the City, and the Haddon Avenue Transit Station, as well as other luxury housing development projects will appeal to these new Camden residents. Despite the obvious benefits of building a new Medical School, this project does not meet the requirements of the CED movement because it does not serve the initial Camden community. It also focuses development in the most successful areas in Camden rather than some of the more blighted areas.

Conclusions

The redevelopment programs and corporations discussed here represent only a snap shot of the institutions emerging in Camden, NJ. Despite the number of programs and non-profits located in Camden, the level of community resident participation must be higher. For example, the CSSD program sponsored by the GCP benefits business corridors but does not provide services to neighborhoods. The Cooper’s Ferry Development Association pursues a more privatized redevelopment process, and as of March 14, 2011, it merged with the Greater Camden Partnership into one entity. Over the past decade the two organizations partnered on multiple development projects, but most of these projects have focused on bringing outside investment into the city rather than addressing the problems of current residents. While the merger between CFDA and GCP should enable more streamlined development, it leads community members to speculate on who will benefit more from this partnership, private investors or the initial residents of Camden?

In addition to the projects discussed earlier, the fused CFDA and GCP are also sponsoring a Campbell’s Soup international headquarters expansion, a new dorm for Rutgers University, and a Market Street façade renovation and commercial revitalization project. These projects will certainly change the face of Camden, but only the Kroc Community Center and the grocery store provide a direct service to the local community. While these other development projects are certainly beneficial to the city’s reputation, it is important to remember that the ultimate goal should be to elevate the standing of current residents in order to truly be part of the Community Economic Development movement. The Camden Green-Up and the CSSD program, which received universal community support, cost a fraction of these other redevelopment programs. For each dollar spent on projects such as the Medical School, University commercial corridors, and Waterfront Development, some portion should go to continuing vacant lot stabilization programs.

The Camden of the 1950s was segregated into neighborhoods based on race, ethnicity and socio-economic standing, and it has not changed. There are multiple localized community non-profits doing amazing things in their respective neighborhoods, and yet they are unaware of counterparts on the other side of the city. Culinary training programs in North Camden and Parkside should be included in the University development program, because a partnership from graduates of each of these programs could open a bakery or café. In each of these neighborhoods programs are in place to provide financial support, job training, and soft skills development. With proper coordination an over-arching Camden community could finally emerge. The isolation of neighborhoods contributes not only to the difficulty of economic development but to the racial tension and violence that plagues Camden’s streets. If the GCP and CFDA focus only on developing the business districts, this coordination effort falls on community leaders to reach out to one another and cross racial and ethnic lines to keep up with the development of the Downtown commercial corridors.

The past ten years have been instrumental in Camden’s progression, and the next ten are vital to the success of Camden’s redevelopment efforts. One of the major improvements Camden must make is the level of local resident involvement in developing community agency opportunities. This includes going to the polls, attending city council meetings, and pressuring non-profits such as the new CFDA/GCP to include local residents on their Executive Board. Community agents must hold non-profits and CDCs accountable for the distribution of their redevelopment projects’ benefits. It is also the duty of CDCs to work toward furthering coordination efforts within the community. The community accepted the GCP more readily than CFDA because there were more face-to-face encounters with Farquharson 30 members of GCP. The jury is still out on whether the merger between these two organizations will benefit the Community Economic Development Movement in Camden, but given the financial instability of the GCP it was a necessary business move. Either way, both organizations must know that if this merger pulls development projects further into the Central Business District, without providing comparable development projects in other high-need neighborhoods, it will lessen the chance of Camden’s successful redevelopment.

Works Cited

[1]  CamConnect, “An Introduction to Camden,” Camconnect.org, http://www.camconnect.org Camden continued to grow into a stable city community that supported a diverse mix of immigrants during the years following World War II. Like

[2]  Ibid.

[3]  CamConnect, “Most Dangerous City Rankings: Camden Reports 2005,” Camconnect.org, http://www.camconnect.org, p. 2.

[4]  Gillette Jr., Howard, Camden After the Fall: Decline and Renewal in a Post-Industrial City, Philadelphia: University of Pennsylvania Press, 2005, p. 19.

[5]  Ibid, p. 27.

[6]  Ibid, p. 26.

[7]  Ibid.

[8]  Simon, William H, The Community Economic Development Movement, Durham: Duke University Press, 2001, p. 138.

[9]  Gillette, p. 29.

[10] Marcuse, Peter, “The Enclave, The Citadel, and the Ghetto: What has Changed in the PostFordist U.S. City,” Urban Affairs Review, 33.2 (1997): p. 228.

[11] Simon, p. 138.

[12] Ibid, p. 14.

[13] Gillette, p. 46.

[14] Ibid, p. 47.

[15] Ibid, p. 48.

[16] Ibid, p. 49.

[17] Goldsmith, William W. “Is There a Point in the Cycle of Cities at Which Economic Development Is No Longer a Viable Strategy? Or, When Is the Neighborhood Too Far Gone?” Dilemmas of Urban Economic Development: Issues in Theory and Practice. Ed. Richard D. Bingham and Robert Mier. Thousand Oaks: Sage Publications, 1997, p. 307.

[18] Gillette, p. 55.

[19] Ibid. p. 69.

[20] Simon, p. 42.

[21] Gillette, p. 75.

[22] Catlin, Robert A. “Camden, New Jersey: Urban Decay and the Absence of Public-Private Partnerships,” Rebuilding Urban Neighborhoods: Achievements, Opportunities, and Limits, Thousand Oaks, California: 1999, p. 55.

[23] Gillette, p. 81.

[24] Ibid.

[25] Catlin, p. 55.

[26] Gillette, p. 84.

[27] Ibid, p. 86.

[28] Simon, p. 43.

[29] Catlin, p. 55.

[30] Gillette, p. 103.

[31] Catlin, p. 58.

[32] Goldsmith, p. 309.

[33] Ibid, p. 298.

[34] Ibid, p. 308.

[35] Ibid, p. 294.

[36] Catlin, p. 55.

[37] Simon, p. 2. 38 Ibid, p. 3.

[38] Ibid, p. 3.

[39] Ibid, p. 9, 14.

[40] Ibid, p. 14.

[41] Ibid, p. 69, 70, 71, 72.

[42] Ibid, p. 41-42.

[43] Ibid, p. 113.

[44] Ibid, p. 114, 115, 116, 117, 118.

[45] Ibid, p. 114.

[46] Ibid.

[47] Ibid, p. 115.

[48] Ibid, p. 118.

[49] Ibid, p. 119.

[50] Ibid, p. 61.

[51] Speer, Paul, et al. “The Intentional Exercise of Power: Community Organizing in Camden, New Jersey,” Journal of Community & Applied Social Psychology, 13.5 (2003), p. 399.

[52] Ibid.

[53] Ibid, p. 405.

[54] Ibid, p. 406.

[55] Catlin, p. 58.

[56] CamConnect, “Camden Voter Participation in 2009,” Municipal Governance, http://www.camconnect.org.

[57] Ibid, p. 64.

[58] Dave Foster quote in Paul Laskow, “Downtown & Beyond 2010,” Annual Report on the State of Economic Development in the Camden Special Services District, Camden: Greater Camden Partnership, 2010, p. 2.

[59] Laskow, p. 22.

[60] Camden Community GreenUp, “A Green Initiative from Greater Camden Partnership,” http://www.camdengreenup.org, http://www.camdengreenup.org/#main, p. 1.

[61] CamConnect, “Vacancy in Camden,” CamConnect.org, http://www.camconnect.org, p. 7.

[62] Aleardi, Marianne, “The Superstar Rocks Camden: Jon Bon Jovi,” SJ Magazine, 9.10 (2009), p. 5.

[63] Ibid.

[64] Laskow, p. 17.

[65] Ibid.

[66] Urban Land Institute Foundation, “ULI Mission & Principles,” Urban Land Institute, 12 April 2011, Accessed: Web, 12 April 2011.

[67] Urban Land Institute Foundation, “Technical Assistance Panels,” Urban Land Institute, 12 April 2011, Web, Accessed: 12 April 2011.

[68] Greater Camden Partnership, “The Changing Face of Camden,” Greater Camden Partnership, Web, Accessed: 12 April 2011.

[69] Ibid.

Source Material

Aleardi, Marianne. “The Superstar Rocks Camden: Jon Bon Jovi.” SJ Magazine. 9.10 (2009): 1-6. Print.

CamConnect, “Camden Facts.” CamConnect: Change What You Know. Know What To Change. 18 Feb 2011. Web. 18 Feb 2011.

CamConnect, “Vacancy in Camden.” Camden Real Estate & Redevelopment Reports. 2 April 2011. Web. Accessed: 2 April 2011. . CamConnect, “Voter Participation in 2009 Elections.” Municipal Governance. 12 April 2011. Web. Accessed: 12 April 2011.

Catlin, Robert A. “Camden, New Jersey: Urban Decay and the Absence of Public-Private Partnerships.” Rebuilding Urban Neighborhoods: Achievements, Opportunities, and Limits. Ed. W.

Dennis Keating and Norman Krumholz. Thousand Oaks California: Sage Publications, 1999. Print. Goldsmith, William W. “Is There a Point in the Cycle of Cities at Which Economic Development Is No Longer a Viable Strategy? Or, When Is the Neighborhood Too Far Gone?” Dilemmas of Urban Economic Development: Issues in Theory and Practice. Ed. Richard D. Bingham and Robert Mier. Thousand Oaks: Sage Publications, 1997. Print.

Gillette Jr., Howard. Camden After the Fall: Decline and Renewal in a Post-Industrial City. Philadelphia: University of Pennsylvania Press, 2005. Print. Farquharson 32 Greater Camden Partnership. “The Changing Face of Camden.” Greater Camden Partnership. Web. Accessed: 12 April 2011.

Laskow, Paul. “Downtown & Beyond 2010.” Annual Report on the State of Economic Development in the Camden Special Services District. Camden: Greater Camden Partnership, 2010. Print.

Marcuse, Peter, “The Enclave, The Citadel, and the Ghetto: What has Changed in the PostFordist U.S. City,” Urban Affairs Review, 33.2 (1997): 228-264. Print. Simon, William H. The Community Economic Development Movement. Durham: Duke University Press, 2001. Print.

Speer, Paul, Mark Ontkush, Brian Schmitt, Padmasini Raman, and Courtney Jackson, et al. “The Intentional Exercise of Power: Community Organizing in Camden, New Jersey.” Journal of Community & Applied Social Psychology. 13.5 (2003): 399-408. Print.

Urban Land Institute Foundation. “Technical Assistance Panels.” Urban Land Institute. 12 April 2011. Web. Accessed: 12 April 2011.

Urban Land Institute Foundation. “ULI Mission & Principles.” Urban Land Institute. 12 April 2011. Web. Accessed: 12 April 2011, .

Apocalypse, New Jersey: A Dispatch From America’s Most Desperate Town

No jobs, no hope – and surveillance cameras everywhere. The strange, sad story of Camden

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BY December 11, 2013

The first thing you notice about Camden, New Jersey, is that pretty much everyone you talk to has just gotten his or her ass kicked.

Instead of shaking hands, people here are always lifting hats, sleeves, pant legs and shirttails to show you wounds or scars, then pointing in the direction of where the bad thing just happened.

“I been shot six times,” says Raymond, a self-described gangster I meet standing on a downtown corner. He pulls up his pant leg. “The last time I got shot was three years ago, twice in the femur.” He gives an intellectual nod. “The femur, you know, that’s the largest bone in the leg.”

“First they hit me in the head,” says Dwayne “The Wiz” Charbonneau, a junkie who had been robbed the night before. He lifts his wool cap to expose a still-oozing red strawberry and pulls his sweatpants down at the waist, drawing a few passing glances. “After that, they ripped my pockets out. You can see right here. . . .”

Even the cops have their stories: “You can see right here, that’s where he bit me,” says one police officer, lifting his pant leg. “And I’m thinking to myself, ‘I’m going to have to shoot this dog.'”

“I’ve seen people shot and gotten blood on me,” says Thomas Bayard Townsend III, a friendly convicted murderer with a tear tattoo under his eye. “If you turn around here, and your curiosity gets the best of you, it can cost you your life.”

Camden is just across the Delaware River from the brick and polished cobblestone streets of downtown Philadelphia, where oblivious tourists pour in every year, gobbling cheese steaks and gazing at the Liberty Bell, having no idea that they’re a short walk over the Ben Franklin Bridge from a full-blown sovereignty crisis – an un-Fantasy Island of extreme poverty and violence where the police just a few years ago essentially surrendered a city of 77,000.

All over America, communities are failing. Once-mighty Rust Belt capitals that made steel or cars are now wastelands. Elsewhere, struggling white rural America is stocking up on canned goods and embracing the politics of chaos, sending pols to Washington ready to hit the default button and start the whole national experiment all over again.

But in Camden, chaos is already here. In September, its last supermarket closed, and the city has been declared a “food desert” by the USDA. The place is literally dying, its population having plummeted from above 120,000 in the Fifties to less than 80,000 today. Thirty percent of the remaining population is under 18, an astonishing number that’s 10 to 15 percent higher than any other “very challenged” city, to use the police euphemism. Their home is a city with thousands of abandoned houses but no money to demolish them, leaving whole blocks full of Ninth Ward-style wreckage to gather waste and rats.

It’s a major metropolitan area run by armed teenagers with no access to jobs or healthy food, and not long ago, while the rest of America was ranting about debt ceilings and Obamacares, Camden quietly got pushed off the map. That was three years ago, when new governor and presumptive future presidential candidate Chris Christie abruptly cut back on the state subsidies that kept Camden on life support. The move left the city almost completely ungoverned – a graphic preview of what might lie ahead for communities that don’t generate enough of their own tax revenue to keep their lights on. Over three years, fires raged, violent crime spiked and the murder rate soared so high that on a per-capita basis, it “put us somewhere between Honduras and Somalia,” says Police Chief J. Scott Thomson.

“They let us run amok,” says a tat-covered ex-con and addict named Gigi. “It was like fires, and rain, and babies crying, and dogs barking. It was like Armageddon.”

Not long ago, Camden was everything about America that worked. In 1917, a report counted 365 industries in Camden that employed 51,000 people. Famous warships like the Indianapolis were built in Camden’s sprawling shipyards. Campbell’s soup was made here. Victor Talking Machine Company, which later became RCA Victor, made its home in Camden, and the city once produced a good portion of the world’s phonographs; those cool eight-hole pencil sharpeners you might remember from grade school – they were made in Camden too. The first drive-in movie was shown here, in 1933, and one of the country’s first planned communities was built here by the federal government for shipyard workers nearly a century ago.

But then, in a familiar narrative, it all went to hell. RCA, looking, among other things, for an escape from unionized labor, moved many of its Camden jobs to Bloomington, Indiana. New York Shipbuilding closed in the Sixties, taking 7,000 jobs with it. Campbell’s stuck it out until the Nineties, when it closed up its last factory, leaving only its corporate headquarters that today is surrounded by gates high and thick enough to keep out a herd of attacking rhinoceroses.

Once the jobs started to disappear, racial tensions rose. Disturbances broke out in 1969 and 1971, the first in response to a rumor about the beating of a young black girl by police, the second after a Hispanic man named Rafael Gonzales really was beaten by two officers. Authorities filed charges against the two cops in that case, but they initially kept their jobs. The city exploded, with countless fires, three people shot, 87 injured. “Order” was eventually restored, but with the help of an alarmist press, the incidents solidified in the public’s mind the idea that Camden was a seething, busted city, out of control with black anger.

With legal business mostly gone, illegal business took hold. Those hundreds of industries have been replaced by about 175 open-air drug markets, through which some quarter of a billion dollars in dope moves every year. But the total municipal tax revenue for this city was about $24 million a year back in 2011 – an insanely low number. The police force alone in Camden costs more than $65 million a year. If you’re keeping score at home, that’s a little more than $450 a year in local taxes paid per person, if you only count people old enough to file tax returns. That’s less than half of the $923 that the average New Jersey resident spends just in sales taxes every year.

The city for decades hadn’t been able to pay even for its own cops, so it funded most of its operating budget from state subsidies. But once Christie assumed office, he announced that “the taxpayers of New Jersey aren’t going to pay any more for Camden’s excesses.” In a sweeping, statewide budget massacre, he cut municipal state aid by $445 million. The new line was, people who paid the taxes were cutting off the people who didn’t. In other words: your crime, your problem.

The “excesses” Christie was referring to included employment contracts negotiated by the police union. A charitable explanation of the sweet deal Camden gave its cops over the years was that the police union had an unusually strong bargaining position. “Remember, this was the only police force in South Jersey whose members regularly had to risk their lives,” says retired Rutgers-Camden professor Howard Gillette. The less-charitable say these deals were the result of a hey-it-isn’t-our-money-anyway subsidy-mongering. Whatever the cause, until Christie came along, the Camden police had a relatively rich contract, with overtime up the wazoo and paid days off on birthdays. If a cop worked an overnight, he got a 12 percent “shift enhancement” bump, which made sense because of the extreme danger. But an officer who clocked in at noon under the same agreement still got an extra four percent. “Every shift was enhanced,” says a spokesman for the new department.

But a big reason that Christie hit Camden’s police unions so hard was simply that he could. He’d wanted to go after New Jersey urban schools, which he derided as “failure factories.” But a series of state Supreme Court rulings based on a lawsuit originally filed on behalf of students in Camden and three other poor communities in the Eighties – Abbott v. Burke, a landmark case that would mandate roughly equal per-pupil spending levels across New Jersey – made cuts effectively impossible. The courts didn’t offer similar protection to police budgets, though. By New Year’s 2011, the writing was on the wall. After Christie announced his budget plans, panicked city leaders got together, pored over their books and collective-bargaining agreements, and realized the unthinkable was about to happen. Camden, a city that even before any potential curtailing of state subsidies made Detroit or East St. Louis seem like Martha’s Vineyard, was about to see its police force, one of its biggest expenditures, chopped nearly in half.

On January 18th, 2011, the city laid off 168 of its 368 police officers, kicking off a dramatic, years-long, cops-versus-locals, house-to-house battle over a few square miles of North American territory that should have been national news, but has not been, likely because it took place in an isolated black and Hispanic ghost town.

After the 2011 layoffs, police went into almost total retreat. Drug dealers cheerfully gave interviews to local reporters while slinging in broad daylight. Some enterprising locals made up T-shirts celebrating the transfer of power from the cops back to the streets: JANUARY 18, 2011 – it’s our time. A later design aped the logo of rap pioneers Run-DMC, and “Run-CMD” – “CMD” stands both for “Camden” and “Cash, Money, Drugs” – became the unofficial symbol of the unoccupied city, seen in town on everything from T-shirts to a lovingly rendered piece of wall graffiti on crime-ridden Mount Ephraim Avenue.

Cops started calling in sick in record numbers, with absenteeism rates rising as high as 30 percent over the rest of 2011. Burglaries rose by a shocking 65 percent. The next year, 2012, little Camden set a record with 67 homicides, officially making it the most dangerous place in America, with 10 times the per-capita murder rate of cities like New York: Locals complained that policing was completely nonexistent and the cops were “just out here to pick up the bodies.” The carnage left Camden’s crime rate on par with places like Haiti after its 2010 earthquake, and with other infamous Third World hot spots, as police officials later noticed to their dismay when they studied U.N. statistics.

At times in 2011 and 2012, the entire city was patrolled by as few as 12 officers. Police triaged 911 calls like an overworked field hospital, sometimes giving up on property and drug crimes altogether, focusing their limited personnel mainly on gun crimes committed during daylight hours. Heading into 2013, Camden was sliding further and further out of police control. “If Camden was overseas, we’d have sent troops and foreign aid,” says Chuck Wexler of the Police Executive Research Forum, a guy Chief Thomson refers to as his “wartime consigliere.”

Then, this year, after two years of chaos, Christie and local leaders instituted a new reform, breaking the unions of the old municipal police force and reconstituting a new Metro police department under county control. The old city cops were all cut loose and had to reapply for work with the county, under new contracts that tightened up those collective-bargaining “excesses.” The new contracts chopped away at everything from overtime to uniform allowances to severance pay, cutting the average cost per officer from $182,168 under the city force to $99,605 in the county force. As “the transfer” from a municipal police force to a county model went into effect last May, state money began flowing again, albeit more modestly. Christie promised $10 million in funding for the city and the county to help the new cops. Police began building up their numbers to old levels.

Predictably, the new Camden County-run police began to turn crime stats in the right direction with a combination of beefed-up numbers, significant investments in technology, and a cheaper and at least temporarily de-unionized membership. Whether the entire thing was done out of economic necessity or careful political calculation, Christie got what he wanted – county-controlled police forces seemed to be his plan from the start for places like Camden.

In fact, just a few months ago, Christie publicly touted Camden’s new county force as the model he hopes to employ for Trenton, and perhaps some of Jersey’s other crime-sick cities. (For a state with one of the highest median household incomes in America, New Jersey also has four of the country’s biggest urban basket cases in Camden, Trenton, Paterson and Newark.) Local county officials, echoing Christie, called Camden the “police model of the future for New Jersey.”

In recent months, Christie has visited Camden several times, making it plain that he puts the daring 2011 gambit here in his political win column. And not everyone in Camden disagrees. One ex-con I talked to in the city surprised me by saying he liked what Christie had done, and compared Camden’s decades-long consumption of state subsidies to the backward incentive system he’d seen in prison. “In prison, you can lie in your bed all day long and get credit for good time toward release,” he said, shaking his head. “You should have to do something other than lie there.”

No matter what side of the argument you’re on, the upshot of the dramatic change was that Camden would essentially no longer be policing itself, but instead be policed by a force run by its wealthier and whiter neighbors, i.e., the more affluent towns like Cherry Hill and Haddonfield that surround Camden in the county. The reconstituted force included a lot of rehires from the old city force (many of whom had to accept cuts and/or demotions in order to stay employed), but it also attracted a wave of new young hires from across the state, many of them white and from smaller, less adrenaline-filled suburban jurisdictions to the north and east.

And whereas the old city police had a rep for not wanting to get out of the car in certain bad neighborhoods, the new force is beginning to acquire an opposite rep for overzealousness. “These new guys,” complains local junkie Mark Mercado, “not only will they get out of the car, they’ll haul you in just for practice.”

Energized county officials say they have a plan now for retaking Camden’s streets one impenetrable neighborhood at a time, using old-school techniques like foot patrols and simple get-to-know-you community interactions (new officers stop and talk to residents as a matter of strategy and policy). But the plan also involves the use of space-age cameras and military-style surveillance, which ironically will turn this crumbling dead-poor dopescape of barred row homes and deserted factories into a high-end proving ground for futuristic crowd-control technology.

Beginning in 2011, when the city first installed a new $4.5 million command center – it has since been taken over by the county – police here have gained a series of what they call “force multipliers.” One hundred and twenty-one cameras cover virtually every inch of sidewalk here, cameras that can spot a stash in a discarded pack of Newports from blocks away. Police have a giant 30-foot mobile crane called SkyPatrol they can park in a neighborhood and essentially throw a net over six square blocks; the ungainly Japanese-robot-style device can read the heat signature of a dealer with a gun sitting in total darkness. There are 35 microphones planted around the city that can instantly detect the exact location of a gunshot down to a few meters (and just as instantly train cameras on escape routes). Planted on the backs of a fleet of new cruisers are Minority Report-style scanners that read license plates and automatically generate warning letters to send to your mom in the suburbs if you’ve been spotted taking the Volvo registered in her name to score a bag of Black Magic on 7th and Vine.

The streets have noticed the new technology. Dealers and junkies alike have even begun to ascribe to the police powers they don’t actually have. “They have facial-recognition on cars, man,” says Townsend, the homeless ex-con with the murder sheet. “So that when you go by ’em, they see if you are wanted for anything.”

For sure, there’s bitterness on streets in Camden over the fact that the city was essentially abandoned three years ago. But misery loves company, and this is a place where even the police seem shellshocked. Some of them, you get the sense, feel abandoned too – cut off from the rest of America just like everyone else here. Very few of them have the pretend-macho air you get from hotshot cops in other tough cities. Camden police will come straight out and tell you stories about getting their faces kicked in and/or beaten half to death. And they all talk about this place with a kind of awe, often shaking their heads and whispering through the worst stories.

“The kid happened to be on a bike,” begins a 20-year police vet named John Martinez, closing his eyes as he remembers a story from July 2011. He was riding with a rookie partner that day. The city at the time was still in near-total chaos, with drug dealing mostly going unchallenged by the police. But on that hot July afternoon, Martinez spotted a teenager doing a hand-to-hand on Grant Street, shrugged, and decided to pursue anyway.

“[The dealer] saw me walking up to him. I told the rookie to stay in the car, because 90 percent of the time, they run.” The kid started pedaling away. The rookie gave chase in the car, then stopped, jumped out and went after him on foot. Martinez started to follow, but then looked back at the car and realized his newbie partner had left it running.

“I started to run with him,” he said, “but I thought, ‘Yeah, this’ll be gone.'”

By this, Martinez meant the car. Last summer, in fact, a male-female pair of suburban junkies stole a squad car parked right in front of police headquarters, ran over the cop it belonged to (he survived, but his leg was shattered, his career over), tore across the bridge into Philly pursued by a phalanx of Camden cops (“You can imagine the public’s bewilderment, seeing police cars chasing a police car,” recalls Thomson), and crashed in Philly after a long chase – only to flee on foot, double back, and steal another car, this time a Philadelphia police cruiser.

“Junkie Bonnie and Clyde” were eventually caught, but the point is, you can’t leave a car running in Camden, especially a police car. So on that July day, Martinez went back to his cruiser instead of helping out his partner. Eventually, another experienced officer showed up, also toting a rookie partner. The two rookies ended up catching the suspect on foot and were trying to get him cuffed when Martinez started to sense a problem. A crowd of about a hundred formed in the blink of an eye and started pelting the cops with bottles and rocks. Martinez ended up chasing onto a porch a teenager who’d thrown a bottle.

Next thing Martinez knew, he was jumped by “women, older women, men, kids. . . . As soon as I grabbed the kid, everybody started trying to forcibly take him from me. They’re punching me in the back, on the side of the head. . . . ”

In the struggle, Martinez and the kid ended up crashing backward through the porch railing and tumbling to the street, where Martinez suddenly found himself looking up at 100 furious people, with an angry teenager on top of him, reaching for the gun in Martinez’s thigh holster. The three other cops rushed to his aid – the two rookies making another mistake in the process. They’d cuffed the original suspect and put him in the back of the car, but in the rush to save Martinez, they again left the cruiser unlocked. Backup arrived a few moments later, but when Martinez got back to his feet, he realized the crowd had left them all a big surprise.

“We go back to the original police car where that drug-dealing suspect was, and the back door is open and he’s gone,” Martinez recounts. The neighborhood had taken the suspect back, cuffs and all. “But I’ll take that.”

The moral of the story: Arrests in North Camden, the most stricken part of town, sometimes just don’t take. Many cops here have stories about busts that either didn’t happen or almost didn’t happen when the streets made an opposite ruling. “Ninth and Cedar. I remember chasing a guy a block and a half – he had a Tec-9,” says Joe Wysocki, a quiet, soft-spoken 20-year Camden vet. “Handcuffing him, I remember looking up and there were, like, 60 people around me. I threw the guy into the car, jumped in the back seat with him, and [my partner] took off.”

“Telling the prisoner, ‘Move over,'” joked another cop in the room.

“Yeah,” says Wysocki. “Sometimes you just have to scoop and run.”

Nobody in North Camden calls the police. When the county installed the new “ShotSpotter” technology that pinpoints the locations of gunshots, they discovered that 30 percent of all shootings in the city go unreported, many of them from North Camden. “North Camden would generally like to police itself,” says Thomson. “Rather than getting a call of an adult who had assaulted a child, generally you’ll get a call to send an ambulance and a police officer to the corner of 7th and York because there’s a person laying there beaten nearly to death with chains.”

Late October 2013. It’s nearly three years after the layoffs. A trio of squad cars flies through North Camden. Over the police radio, a voice chimes in from the RTOIC, or Real-Time Tactical Operational Intelligence Center, a super-high-tech, Star Trek-ish bridge of giant screen displays back at the metaphorical Green Zone that is police headquarters. There, a team of police analysts monitors the city using six different advanced technologies, watching those 121 camera feeds via 10 42-inch monitors and six different listening stations tracking cruisers by GPS. Somebody back there apparently spotted a drug deal through a camera near where this police convoy is cruising.

“Black male, white shirt, bald head,” the radio crackles. “White shirt, bald head.”

The cars take off like rockets and screech to a halt at exactly that same spot where John Martinez once almost punched his ticket, the 400 block of Grant Street. We’re right in front of that same house. The wooden railing through which Martinez crashed backward two years ago has been replaced by an iron one, and leaning against it is a similar crowd of angry onlookers, glaring at the cops. Around the corner, near the house with the new porch railing, a young black dude in a white shirt stands surrounded by police, trying not to make sudden moves.

About 10 yards off from the “suspect,” barking loudly and standing next to his handler-partner, Sgt. Zack James, is Zero, a black Czech shepherd police dog. Everything connected with crime in Camden breaks some kind of record, and Zero is no exception – he’s dragged down 65 suspects in foot chases, something only one other canine in state-police history has done. Zero is friendly enough in nonworking situations (he even drops to his back and sticks his tongue out to the command “Cute and cuddly!”), but the department’s male cops still cover their balls reflexively, even from great distances, if they see him loose in the parking lot.

Sgt. James, a burly officer who lives and works with Zero full-time, seems like he’s ready to do a Lambeau leap in celebration, if only someone would try to run on his dog and become number 66. But in this case, they’ve got the wrong guy. There’s a brief interrogation, the guy walks away slowly, and dog and humans pile back into their respective cars and screech out at high speeds, disappearing as quickly as they came.

Any reporter who’s been embedded in Iraq or Afghanistan will find these scenes extremely familiar – high-speed engagements backed by top-end surveillance technology, watched by crowds whose reactions range from bemusement to rage to eye-rolling disappointment. In that latter category is Bryan Morton, a fortysomething community leader of sorts who still lives in the North Camden house where he was born. Morton went away in his youth for eight and a half years for armed robbery and drug dealing, got out, went straight, got his college degree, worked for years running local re-entry programs, founded a North Camden Little League, and had things looking up for himself, before he was laid off last May. Fortunately, he’d bought a food cart six years before that, which he left in his backyard as a backup plan; he now drives across town before dawn every day, setting up next to the McDonald’s in Camden’s pinhead-size “downtown.”

Handsome, articulate, charming, Morton had just been robbed the day I met him. The guy he hired to fix up his cart bolted after the last payment, taking big chunks of his cart’s sheet metal with him. There had also been another murder in North Camden the day before, a drug killing a few blocks up from Morton’s house. Asked how bad things have been in North Camden since the 2011 layoffs, he laughs faintly. “Hell, the police gave up on this neighborhood long before that,” he says, hoisting the cart onto his pickup truck’s trailer hitch in the predawn light in front of his house. For years, he says, cops would drive through his block once every half-hour or so, pretending to police the place, but they wouldn’t stop unless they had to.

“We know you’re afraid to get out of the car,” he says. “We know that.”

North Camden is one of a few neighborhoods in the city that still feels less policed than occupied. There’s even an infamous brick housing-project tower here called Northgate 1 where the middle floors carry the nickname “Little Iraq,” for the residents’ reputation for being not quite under government control. In fact, when the state raided the tower to serve warrants a few years back, they were so concerned with ground-level resistance that they invaded from the sky, like soldiers in Afghanistan, rappelling onto the roof by helicopter. The state police believed they’d sent a message, but there are locals who reacted to the Rambo-commando episode with the same you’ve-gotta-be-kidding-me incredulity you see on faces of kids surrounded by multiple squad cars and millions of dollars in technology, busted for loitering or a few lids of weed. “They pussies,” is how one Camdenite put it.

Thomson, the city’s energetic young police chief – he carries an uncanny resemblance to Homeland lead actor Damian Lewis – is trying to provide a counterargument to the alien-occupier vibe. His plan is to stabilize the city with foot patrols one neighborhood at a time. On an October afternoon he drives me through Fairview, that once-dazzling planned city full of brick homes built for New York Shipbuilding workers nearly a century ago.

A little overgrown still, the place now looks, well, nice, with few of the rat-infested vacant homes and factories that dominate much of the rest of the city. Conspicuously, there’s no obvious drug traffic here. “A year ago, this space was controlled by gangsters,” Thomson says proudly. “Now you have kids playing there.”

He nods in the direction of a street corner, where a policeman in a paramilitary-style uniform, all steel-blue with a baseball-style cap, stands on guard. There’s one of these sentries every few hundred feet, each seemingly within eyesight of the other, each standing bolt upright and saluting military-style when the chief drives by. We watch as a few elderly black pedestrians amble by, and if you listen carefully you can catch the street patrolmen diligently offering RoboCop-ian greetings to each one as they pass.

The plan is to deploy more and more of these getting-to-know-you details, moving neighborhood by neighborhood, working their way up to places like North Camden, where the police will eventually answer once and for all the question of whether they will lay it all on the line for America’s most unsafe neighborhood.

Thomson is engaging and smart, and has the infectious enthusiasm of a politician, except that he seems sincere. Driving through Camden, watching these grim scenes of pseudo-occupation that in this part of the world count as progress, my overwhelming feeling was a weird kind of sympathy: None of this shit is on him. In another life, actually, he and someone like Bryan Morton might have been co-workers, or political running mates, since both men – the chief with his foot patrols, Morton with his pan-Camden Little League – say they’re working toward the same thing: trying to create safe places for people to go in a city that historically isn’t terribly safe even across the street from police headquarters.

But Thomson’s optimism is based, again, upon the assumption that if you create enough safe streets and parks in a place like Camden, jobs will return, and things will somehow go back to normal. But what if the jobs stay in China, Mexico, Indonesia? Then the high-tech security efforts in cities like this start to feel like something other than securing a few streets for future employers. Then it’s the best security money can buy, but just for security’s sake, turning a scene like Camden into a very expensive, very dark nihilistic comedy: a perpetual self-occupation. Thomson clearly doesn’t believe this. He has hope – he’s as intensely focused on development gains like the opening of a new $62 million Rutgers-Camden nursing building as he is about locking people up – but even he at times can’t help but sound like a military commander charged with recapturing alien territory.

“What you lose in one month, it takes five or six months to get back,” he says, referring to the footing the police lost after the layoffs. “After what we went through, that’s five to seven years we don’t have.”

Early afternoon, I’m parked near a little stretch of grass and chain-link in the shadow of the “Little Iraq” Northgate 1 tower. I’m riding with Kevin Lutz, a one-time homicide detective from the old municipal police days who’s just become a sergeant in the new force. Lutz doesn’t have any issues with getting out of any cars. In fact, he seems to get along with most everyone, even the local crew chiefs. We passed one earlier, a ripped character with a shaved head and a bushy Sunni beard who, word is, someone from another block had incompetently tried to assassinate the day before.

“Hey, what’s up?” Lutz asks him. “How’s your health?”

“I’m all right, man, I’m all right,” the guy says, waving.

Lutz smiles and drives on. “He took one right in the chest yesterday, center mass,” he says. “It was just buckshot, though. But check him out, walking around the next day, like it’s nothing.”

Later, we’re near the towers. Lutz spots a white girl sitting on a brick wall ringing the Northgate 1 parking lot, wobbling, then suddenly falling backward over onto her head. He drives over and the girl, obviously a junkie, gets up and is walking around, disoriented. She starts spinning an impossible-to-follow tale about her friend being attacked in adjacent Northgate Park, a story that within minutes changes to a new story about that same friend just heading toward Northgate Park to get some chicken. The constant in the story is that she needs to get to Northgate Park. There’s nowhere to get chicken in Northgate Park, but you can get all the dope you want.

“Hey, go home,” says Lutz. “OK? There’s nothing good in that direction. We both know what’s going on.”

“But I’ve got to find my friend!” the girl screams.

“Go home,” Lutz repeats, driving off.

She starts in the right direction, back toward Philly, but in the rearview mirror Lutz sees her doing a 180 and heading back to Northgate. He casually turns around. About 85 percent of the heroin customers in this city are like this: young, white and from the suburbs. At all hours of the day, you can see junkies plodding across the Ben Franklin Bridge, usually carrying a knapsack that contains a set of works and, very often, a “Homeless and Hungry” sign they’ve just used to panhandle in Philly. The ones who don’t come on foot come by car, at all hours of the day, and they come in such huge numbers that police say they couldn’t deal with them all if they had a force of 5,000.

This is another potential hole in the policing plan: The fact that broken suburbs – full of increasingly un- or underemployed young people – send a seemingly limitless supply of customers for Camden’s drug trade. The typical profile is a suburban kid who tore an ACL or got in a car accident back in high school, got an Oxy prescription, and within a few years ended up here. This city, incidentally, has a reputation for having the best dope on the East Coast, which partly explains the daily influx of white junkies (“Dope,” jokes Morton, “is a Caucasian drug”). In fact, when Camden made the papers a few years back after a batch of Fentanyl-laced heroin caused a series of fatalities here, it attracted dope fiends from hundreds of miles away. “People were like, ‘Wow, I’ve gotta try that,'” says Adrian, a recovering addict from nearby Logan Township who used to come in from the suburbs to score every day and is now here to visit a nearby methadone clinic. “Yeah,” says her friend Adam, another suburban white methadone commuter. “If someone dies at a dope set, that’s where you want to get your dope.”

While I was talking to Adam and Adrian in the city’s lone McDonald’s, an ambulance showed up – somebody OD’d in the parking lot. Adrian craned her head and nodded, watching the paramedics. She says she and Adam often sit at the city transportation center in the mornings and watch the steady flow of fights and drug-induced seizures.

“The thing about Camden is, when you come back here, you can always say, ‘At least my life is better than what I thought,'” says Adrian. Two minutes later, she’s in full McNod, head all the way back, eyes completely closed, zoned out from a methadone dose she got at a nearby clinic.

A decade or so ago, you wouldn’t have seen white people just hanging out in downtown Camden. Now they’re here by the hundreds every day. “There wasn’t no white people up in this motherfucker,” says Raymond, the self-described gangster who was shot six times. Now, he says, the city is full of white kids on dope. “The last few years, it’s like an epidemic surge,” he says.

That’s the crazy thing about this city. The Camden story was originally a controversial political effort to isolate urban crime and slash municipal spending by moving political power out of dying nonwhite cities. And they do it, this radical restructuring backed by the best in Baghdad-style security technology, and for a second or two it looks like it’s working – only the whole thing might be rendered moot in the end by the collapse of the rest of America. All over the country, we’ve been so busy arguing over who’s productive and who isn’t that we might not be noticing that the whole ship is going down. There’s no lesson in any of it, just a giant mess that still isn’t cleaned up.

Back in Northgate with Sgt. Lutz, we’ve circled around now, and Lutz shouts at the girl, who’s made it all the way to the park.

“Hey, I told you to go home!” he shouts.

“But I need to get some fucking chicken!” she shouts back.

Lutz laughs, shakes his head, drives off, nodding toward Northgate Park.

“Best chicken in Camden,” he says.

This story is from the December 19th, 2013 – January 2nd, 2014 issue of Rolling Stone.

From The Archives Issue 1198: December 19, 2013

Read more: http://www.rollingstone.com/culture/news/apocalypse-new-jersey-a-dispatch-from-americas-most-desperate-town-20131211#ixzz3mgb9fNZz
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The Poet of Poverty (2010)

The following video excerpts are from the 2010 documentary film Poet of Poverty. This unique documentary investigates how a city like Camden, NJ, which is annually ranked among the poorest and most dangerous cities in America, can come into existence in one of the wealthiest nations in the world. The film is based on the letters of Father Michael Doyle, a local parish priest, which are narrated by Martin Sheen.

“I Feel Safe Here”

The film’s opening segment was written in the aftermath of the terrorist attacks of Sept. 11, 2001, and accompanies the image of a child walking past boarded-up buildings and trash-filled streets on his way to school.

“A seventh grade boy in Sacred Heart School made this comment after the frightening destruction of the twin towers in New York that killed 2,700 people. ‘I feel safe here,’ he said. It was an amazing statement because most people are shocked in their shoes and scared to death. ‘You’re not afraid,’ he was asked. ‘No,’ he said. ‘I’m not afraid because if the terrorists fly over Camden, they’ll think they have done it already.’”

“Hope in Camden”

This second two minute segment, entitled “Hope in Camden”, features Martin Sheen narrating the poem The Dolphins Danced on Arlington to the visual of impoverished children in Camden at play in a makeshift pool built from a discarded hot tub and their imagination. The poem reads:

“One day God sent a message from of all places Arlington Street, and it brightened up the doorway of my mind. On Arlington, in the awful heat, on that Godforsaken street without light or life, ugly, urban decay at levels straining the imagination, seven children were splashing in cascading water like shining wet dolphins in the sun. Somehow, they had hauled a discarded hot tub from Adventure Spas on Chelton Avenue, opened a fire hydrant and the powerful pressure sent the water upward on an old sheet of plywood into the tub and sent the children into ecstasies of delight in spite of all the awful misery around them…Nothing could daunt the wild surge of their young lives and hopes. What is it about hope? Does its real inspiration only rise out of the tragic emptiness to take its pure and unsupported stand against all odds?”

Fair Use Notice

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Diego Rivera

Diego Rivera (1186-1957) is considered one of the greatest Mexican painters of the twentieth century. Among his many artistic contributions, Rivera is credited with the reintroduction of fresco painting and his works helped establish the Mexican Mural Movement. Between 1922 and 1953, Rivera painted murals in Mexico City, Chapingo, Cuernavaca, San Francisco, Detroit, and New York City. Rivera’s political views and tempestuous romance with the painter Frieda Kahlo were a continuous source of public intrigue.  Continue reading Diego Rivera

Dream of a Sunday Afternoon in Alameda Central Park

Artist: Diego Rivera

Medium: Fresco mural located in Mexico City

Date: c. 1947

In Dream of a Sunday Afternoon in Alameda Central Park, hundreds of characters from Mexico’s history gather for a stroll through Mexico City’s largest park. The mural is a surrealist scene, complete with historical personages, which portrays 400 years of Mexican history. Read from left to right, the mural chronologically progresses from the conquest and colonization of Mexico (left), to the Mexican Revolution (center) through to the modern era (right). Prominent figures represented in the mural include: Hernán Cortés, the Spanish conqueror who initiated the fall of the Aztec Empire; Sor Juana, a seventeenth-century nun and one of Mexico’s most notable writers; Porfirio Díaz, whose dictatorship at the turn of the twentieth century inspired the Mexican Revolution; and President Benito Juárez, who restored the republic after French occupation.

The center scene of the mural has been described as a snapshot of bourgeois life in 1895 Mexico — refined ladies and gentlemen promenade in their Sunday best, under the watchful eye of Porfirio Díaz in his plumed military garb. One gets a sense of the inequality which stirred Mexican commoners to overthrow the dictatator Porfirio Díaz and establish their independence.

The centerpeice of the mural is a self portrait of Rivera, standing with his wife, artist Frida Kahlo, printmaker and draughtsman, José Guadalupe Posada, and Posada’s Catrina Skeleton character. Catrina was a slang term in early Twentieth Century Mexico, to describe an elegant, upper-class Mexican woman who dressed in European fashion.

Posada’s depiction of La Catrina as a skeleton was understood to be a critique of the Mexican elite. Rivera adorns La Calavera Catrina with an elaborate boa necklace, representative of the feathered Mesoamerican serpent god Quetzalcóatl.

José Guadalupe Posada, La Calavera Catrina, etching, 34.5 x 23 cm, c. 1913

More often than not history is written by the victor and thus reflects an incomplete story. Dream of a Sunday Afternoon in Alameda Central Park is the antithesis of this: Rivera gives voice to the the forgotten indigenous population normally edited from the historical record by telling their story through his grand narrative. The artist reminds the viewer that the struggles and glory of four centuries of Mexican history are due to the participation of Mexicans from all strata of society.

Essay by Doris Maria-Reina Bravo

(Edited by Lawrence Christopher Skufca)

Employee Ownership: A More Equitable Approach to Capitalism?

The unequal distribution of wealth is a problem which has perplexed politicians and civic leaders for time immemorial. Thomas Jefferson first posited on the feasibility of an equal distribution of wealth through a progressive tax system and the abolition of inherited wealth in his Notes on the State of Virginia. Theodore Roosevelt fought against the anti-competitive industrial practices of the “Robber Barons” through anti-trust legislation. And Franklin D. Roosevelt’s response to mass poverty and unemployment was the National Labor Relations Act and Keynesian Economics. Many modern critics of predatory capitalism have addressed the growing inequity between the working class and the privileged class, yet few have offered workable solutions. The purpose of this analysis is to determine whether employee ownership is a viable solution in addressing the problem of growing wealth disparity in the United States.

Government subsidies and social welfare programs have become the accepted method of redistributing wealth and sustaining low income families. However, there has been much criticism about the long term viability of government intervention in the economy, due to the burden it places on the most productive citizens and its interference with free market operations. Profit sharing seems to be a practical alternative. It retains the possibility of redistributing wealth without assaulting the American bastions of private property and free enterprise. According to the National Center for Employee Ownership (NCEO) “Broad-based stock-option plans are important to study because of their possible role in aligning worker and shareholder interests, encouraging job creation in knowledge-related industries, helping corporations cope with tight labor markets, and involving more citizens in sharing the fruits of capitalism” (Blasi, et al 2002:3).

While many finely crafted arguments have been made about the equity of our capitalist system, it has been rightly criticized for its lack of economic equality. As the argument goes, greater financial rewards for entrepreneurs are justified by the greater financial risk of capital investment. I must disagree. Employees have an active interest in the financial success of any enterprise on which they rely on to make a living. The individual shares a financial risk with his employer by choosing to participate in the profit seeking partnership. While ownership has economic mechanisms to adjust for lower demand in product, such as layoffs or reduced wages, an employee has no such security in maintaining his interest. The result is inherently inequitable. As political economist, Louis O. Kelso points out:

An economy which makes it easier for John Paul Getty to get a third billion dollars than it does for two-thirds of the families in the country to get $500 ahead of their debts is buying a lot of hogwash about the value of John Paul Getty. The aggregate motivation in the millions of individuals that is destroyed and frustrated by such an insane arrangement is infinitely more productive than anything that one individual could contribute, irrespective of what that may be. (as quoted in Gates 1998:50)

The object of this paper is to investigate several theoretical models and the available statistical data in an attempt to compare the economic justice of profit sharing corporations versus the traditional entrepreneurial model of defining labor as an input. Kruse (2002:1), a professor of the School of Management and Labor Relations at Rutgers University, estimates that there were over 70 empirical studies between 1977 and 2002 which studied the effects of Employee ownership. Much of the literature has dealt with (a) employee attitudes and behavior (Coyle- Shapiro, et al, 2002); (b) firm performance (Fitzroy and Kraft 1987; Kruse 1992; Blasi et al, 2002); (c) employment stability, growth, and firm survival (Meade 1972; Weitzman 1985; Blanchflower and Oswald 1987; Gates 1998); (d) employee wealth and wages (Gates 1998; Blasi et al, 2002; Kruse 2002); (e) and the theoretical function of employee ownership (Meade 1972; Weitzman 1985; Blanchflower and Oswald 1987; Coyle-Shapiro et al 2002). The case studies and statistical analysis provide useful data in testing the plausibility of various economic and social theories which can be applied to measure the economic justice of employee ownership as compared to traditional profit seeking entities. While theories on how profit sharing affects corporate performance and employer/employee relationships have been plentiful, studies on its potential to affect economic equality have been lacking.

Employee Ownership: ESOPs and Profit Sharing Plans

The National Center for Employee Ownership reports that in 1996 more than ten thousand American corporations had Employee Stock Option Plans (ESOPs) and similar broad based ownership plans covering almost 9 million employees (Gates 1998:2). By 2002, employer participation had more than doubled, while employee coverage had almost tripled. As of 2002, $330 billion, or 19.8%, of the total $1.7 trillion of assets in employee contribution plans was invested in employee stock (Kruse 2002:3).

An ESOP is a financial incentive offered by companies which grants workers shares of stock, usually tied into a 401(k) or similar type of pension plan. “In the United States, the main vehicle for employee ownership is the [ESOP] which was first given recognition and preferred tax treatment as a form of pension plan in a 1974 ERISA law” Kruse (2002:2). According to the U.S. Department of Labor (2001) report on federal form 5500 data for all large pension plans, there were approximately 18.8 million U.S. employees participating in large ESOPs.

A profit sharing plan is another type of financial inducement offered by employers, which rewards employees with shares of stock or cash payouts based on quarterly, or annual, earnings. According to the U.S Department of labor (2002), there are an additional 8.4 million U.S. employees enrolled in profit sharing plans.

The steady growth of employee ownership plans in the past two decades has been attributed to several causes: (1) Government tax incentives offered to employers (Gates 1998); (2) employee retention (Blasi et al 2002; Kruse 2002); (3) employee/employer response to hostile takeover attempts (Gates 1998); (4) enhanced employee/employer relations (Coyle- Shapiro, et al, 2002); (5) higher productivity (Blasi et al 2002; Kruse 2002); and (6) to avoid bankruptcy (Gates 1998).

Employee ownership is not without risk. The financial wellbeing of workers and managers is intrinsically tied to company performance. However, it is a shared risk, one that would exist if a non profit sharing organization suffered financial hardship as well. “While detractors worry that employees ‘will put all their eggs in one basket,’ supporters worry that employees have neither eggs nor a basket” (Gates 1998:62).

The greater danger, exemplified by the recent Enron scandal, seems to lie in the potential for mismanagement of pension funds. In the case of Enron, corporate executives deceived employees about company performance. The problem was exacerbated when pension fund managers, even after becoming aware of the firm’s financial problems, continued to limit option purchases to Enron stock. As Enron’s mismanagement came to light, high level executives dumped their shares, causing stock prices to plummet, while simultaneously freezing the sale of employee shares. Many employees lost their retirement funds as stock depreciated from $80 per share to $12 per share between February and November of 2001 (Appleby 2002). The Enron debacle has led to calls for closer scrutiny of stock-based pension funds and greater accountability for pension fund managers.

Kruse (2002:9) advised Congress that employees should be advised that investments in substantial amounts of employer stock are “not the basis for sound investment” and that employees should be have better access to internal data on company performance. The hazard of fund mismanagement increases where employees have limited knowledge or understanding on the financial health of the company. Kruse (2002:9) conjectured that mechanisms such as the attendance of “employee monitors” at board meetings would help to hold board members and trustees more accountable to employees.

Hypothesis

My hypothesis is that employee ownership effects greater economic justice. In attempting to prove my hypothesis I will need to examine a series of factors that affect causality: 1.) whether profit sharing organizations are more productive/profitable than traditional firms; 2.) whether higher productivity/profitability increases the earning potential and job stability of employees; 3.) whether profit sharing affects a redistribution of profits at a micro level; 4.) whether the anticipated advantages of profit sharing acts in accordance with market mechanisms to ensure that companies adopt the profit sharing model in an effort to remain competitive; and, finally; 5.) whether the increase in firms adopting employee ownership practices will be significant enough to spread wealth redistribution to a macro level; reducing the overall growth rate of economic disparity and unemployment, if not stabilizing it.

The potential of profit sharing to affect economic justice is attractive in that it requires no considerable restructuring of our current economic system; it is a phenomenon that already operates freely within the parameters of capitalism, while placing no restrictive limitations on the market. “The idea of employee ownership has attracted support across the political spectrum, often being seen as a form of economic democracy that complements our political democracy” (Kruse 2002:1). Employee ownership also presents a challenge to the notion that economic equity and equality are separate concepts that can only exist on a continuum (Sodaro 2004:168).

Methodological Approach

This study will employ an examination of the written record to compile empirical data about profit sharing entities. The information will be used to appraise the predictive value of the various theories put forth regarding employee ownership. My research will be aimed at verification or falsification of the theoretical models by comparing them to the available data. I will be compiling no new figures, but simply utilizing existing data already produced by researchers interested in employee ownership. I am certain this knowledge will be useful in creating a new theory about the potential for greater economic justice that exists in employee ownership.

I will attempt to extract the applicable information from the studies on employee ownership between 1975 and 2006 to create a quasi- running record for the last thirty years. Problems with continuity will arise, as there are time gaps between the studies. However, it should present us with a better picture of the interaction between firms and profit sharing over a significant period in time, proving useful in projecting future trends and developments.

To control for the effects of differing economic attitudes in different political systems, the aggregate data has been limited to include only the study of U.S. Companies. I will report the methodological approach and controls used by the researchers when available, and will limit my use of case studies to provide context for some of the aggregate data.

One weakness to this type of research is that I will need to rely on the validity and reliability of past studies, rather than confirm the data myself. This, however, is an unavoidable risk caused by my temporal and financial restraints. Another drawback is that many of my conclusions must be limited to logical inferences as much of the data has been compiled at random, to fit the need of the individual research projects. The inconsistent levels of measurement and differing subject matter pose difficulties in composing a parsimonious theory. Much of the data, fortunately, overlaps and allows for general inferences to be made about the behavior of profit sharing entities. There is a specific pattern which evolves.

While much of the aggregate data measures different attributes of profit sharing over different periods of time, they all uniformly measure the results of the same independent variable, employee ownership, upon a common dependent variable, corporate behavior. I believe that the variety of research culminates into a more comprehensive understanding of the general effects of employee ownership.

Operational Definitions

Employee ownership is a broad term used to cover a range of employee participation plans that offer stock options as a form of employee compensation. These plans include ESOPs and profit sharing plans as defined earlier in the paper, and cooperatives which are a more democratic means of profit sharing by giving all employees a stake in ownership and a voice in decision making through voting shares.

The concept of economic justice is simply defined as fair and equitable business practices that result in a greater equality between the employer and the employee’s interests. This study will attempt to measure four aspects of economic justice: (1) job stability, (2) wage and income increase, (3) redistribution of wealth, and (4) employer/employee conflict. This is by no means an exhaustive list of qualities that can be attributed to economic justice; nonetheless, they are characteristics which can be reasonably measured using the available aggregate data and case studies.

Other related economic factors that will be gauged are productivity, efficiency, and firm survival, which I believe are closely linked to profitability and employee retention. This data will be used to make certain assumptions regarding the abstract measurement of job stability.

Effects on Productivity and Efficiency

Some of the theoretical gains attributed to profit-sharing are higher productivity (Blanchflower, Oswald 1987; Kruse, 1992; Meade 1972; Weitzman 1985), higher profitability (Weitzman 1985), higher real wages (Weitzman 1985: 948-9), and lower unemployment (Weitzman 1985: 950). Weitzman (1985: 948-949), a pioneer in the development of profit sharing theory, postulated that a profit sharing entity operates at “full employment,” and was better suited to handle disequilibrium: “not only is aggregate output and employment higher in a profit-sharing economy than a wage economy after a contractionary shock to a long-run equilibrium state, but so is each employed worker’s real pay.” According to Weitzman, “resources are always fully utilized in a share system,” and as a result:

A wage economy behaves in the short run as if aggregate supply were elastic at fixed prevailing prices (the as if Keynesian case). A profit-sharing economy behaves in the short run as if aggregate supply were inelastic at the full-employment level (the as if classical case) … The share economy behaves essentially like a classical macroeconomy, even while the classical preconditions are not being met. And the wage system, of course, behaves like the Keynesian macroeconomy that it is … Output in a profit-sharing economy automatically self-regulates at the full employment level, independent of government policy, or lack of … (Weitzman 1985: 949-950)

Weitzman (1985: 937) also argued that an additional benefit to profit sharing was that it “possesses natural immunity to stagflation.”

How do the theories hold up in actual practice? The report on Public Companies with Broad-Based Stock Options: Corporate Performance from 1992-1997 provides us with a useful empirical study in which to examine the claims, as this study uses the most extensive dataset yet available on broad-based stock option plans in U.S. companies (Blasi, et al 2002). The researchers compared the performance of 490 profit-sharing companies against that of companies without broad-based stock option plans (Blasi, et al 2002). According to the report “All data on company performance was taken from Standard and Poor’s Compustat data of public information on public corporations which is available at Rutgers University” (Blasi, et al 2002: 26). The data was compiled by researchers at Rutgers University, who according to the report were not compensated by the NCEO, nor by any of its consulting organizations: “The agreement was that the Rutgers University team would work independently in arriving at and publishing our results and make them available in a final report to the organizations that facilitated the initial survey” (Blasi, et al 2002: 26). The performance criteria used were productivity, annual and cumulative total shareholder return over the period between 1992 and 1997, Tobin’s q return on assets, and fixed wage compensation per employee.

Blasi, et al. (2002: 4), used the definition of a broad-based stock-option plan provided by Weeden, Carbury, and Rodrick (1998: 185) as one “where the majority of full-time employees of a corporation actually receive (rather than are merely eligible for) stock options over a reasonable period of time.” They narrowed the definition further by using the standard that a “broad-based” company is one which “includes a majority of non-management employees” (Blasi, et al 2002: 4). The companies in the survey “distributed an average of 45% of recent stock option grants to non-management employees” (Blasi, et al 2002: 2).

The report made some interesting observations. It argued that “there is unambiguous evidence that broad-based stock option companies had statistically significant higher productivity levels and annual growth rates” compared to traditional wage-paying companies in general, as well as among their corporate peers (Blasi, et al 2002: 2). Next, the “actual average and median cumulative shareholder return” for all groups of profit-sharing companies exceeded that of their entrepreneurial counterparts between 1992 and 1997. An additional measure of market value, the Tobins q, reveals that the levels of Tobin’s q of profit sharing companies tend to exceed the Tobin’s q of waged based employers:

The available evidence suggests that the levels of return on assets of broad-based stock option companies may be significantly higher than that of the non-broad-based stock option companies, although there is inconclusive evidence regarding annual growth rates in return and some mixed evidence of this effect remains. Our interpretation of these findings is that the performance of the firms using broad-based stocks, appears to equal or exceed the dilution that these plans would have initially caused. (Blasi, et al 2002: 2-3)

Finally, they found that profit-sharing companies did not substitute the stock options for wage cuts and found support “that broad-based stock option payments during the period studied may have significantly contributed to unmeasured and hidden wage inflation” (Blasi, et al 2002:3). This means an increase in real wages for the employees, as stock options supplemented their normal wages, rather than replacing them.

The NCEO report does much to affirm many of the conjectural benefits attributed to profit sharing, as well as to validate the claims made by some of the corporations who offer broad-based stock options. Alan S. Binder (1990:3) questions whether incentives such as profit sharing programs boost production because employees exert more effort, or because “they simply attract the most productive workers to jobs where high productivity is rewarded.” He argues that the empirical data simply shows that productivity does increase, without satisfactorily answering why:

From society’s point of view, the source of the productivity gain is crucial. If profit sharing simply shifts workers from one company to another, society neither gains nor loses. But if profit sharing actually raises the productivity of individual workers, society reaps an important benefit. (Binder 1990:4).

Employee/Employer Relations

So why is profit sharing successful? According to Coyle- Shapiro, et al (2002), “the success of profit sharing can … be explained as an application of principal-agent theory (Eisenhardt, 1988, 1989) since it is a performance based form of compensation that serves to better align the interests of employees, managers, and shareholders.” They also believe that a company’s willingness to share profits with the employees who help to earn them invokes trust in management, and nurtures organizational commitment (Coyle- Shapiro, et al, 2002:434). As a result, companies find themselves better situated to retain their high skilled employees.

Kruse (2002:3) found that “most studies” found “higher organizational commitment” under employee ownership, while studies on “job satisfaction, motivation, and other behavior” were less conclusive. However, “it is rare to find worse attitudes and behavior under employee ownership,” in fact, the only study that did report negative findings was “an ESOP where the union had lost a bitter strike the year before” (Kruse 2002:3).

Kruse (2002:3) also discovered that “improved attitudes” were generally related to the “status of being an employee owner” rather than “the size of one’s ownership stake.” Kruse (2002:3) found that “employees generally like the idea of employee ownership.” He cites a 1994 EBRI/Gallup poll which found that employees preferred a stake in company ownership over higher immediate take home pay, and that 80% of those surveyed believed that “employers should be allowed to contribute company stock to fund retirement plans” (Kruse 2002:3).

It is not a novel idea that increased incentives lead to higher productivity. Most companies motivate employees through rewarding relative performance with promotions and raises. However, it is hard to link the effort of a single individual to overall company performance and “exclusive reliance on individual incentives under uncertainty is also likely to engender counterproductive rivalry rather than efficient cooperation and mutual assistance in team work” (Fitzroy and Kraft 1987:25). This type of reward system can result in decreasing productivity. Fitzroy and Kraft (1987:26) point out: “If workers believe that most of the gains from increased productivity will be appropriated by owners or managers, their best collusive strategy is to maintain their nonpecuniary benefits through limiting efforts.” Discouraged workers seek to decrease their workload by maintaining minimum expectations, whereas economic rewards tied to company performance should provide an enhanced motivation to perform at maximum effectiveness. The firm seeks a “cooperative solution” by offering a “contractual share of the surplus” and by providing a “substantial marginal return to increasing effort and efficiency” (Fitzroy and Kraft 1987:25).

Profit sharing also encourages employees to reduce costs. United Airlines, which is 55% employee owned, has become the most profitable airline in the United States. Innovations soon emerged from a newly collaborative workforce. A task force of ramp workers, pilots, and managers devised a way to use electricity instead of jet fuel while planes sit at the gate, saving $20 million a year…another task force urged more flexibility for in-flight personnel to swap assignments, resulting in another $20 million saved. (Gates 1998:50). The CEO of Continental (2007), another employee owned airline, also attributes his company’s increased profits to an “ability to significantly out-perform our competitors by working together as a team.”

The opposite also seems to hold true. There is evidence that with declining incentives comes decreased employee cooperation. Home Depot was a model for employee ownership in the 1990’s; their employee stock option plan led to greater levels of cooperation which manifested itself by increased customer service. However, in a recent move to expand contractor business, Home Depot has cut costs by replacing full-time employees, eligible for profit sharing, with part-time employees. According to Business Week (2006) part- time workers make up 40% of store staff and customer satisfaction has dropped significantly. As a result, profits have taken a hit; “share price has dropped 24% during the biggest home improvement boom in history” (Business Week 2006).

Labor Relations

Another theoretical benefit of employee ownership is the reduction of employee/employer conflict in the form of strikes and work stoppages. Labor unions have sought employee ownership plans as part of collective bargaining agreements. In the 1980’s, labor unions representing airline, automotive, and steelworkers negotiated for employee ownership stakes as a form of wage concession.

Kruse (2002:5) reports that “there is no of decreased desire for union representation in employee ownership firms.” He attributes his conclusion to survey results (Kruse 1991) and the existence of “occasional strikes in employee ownership firms” (Kruse 2002:5). This sends a warning signal that workers are not fully confident with the promised prosperity of stock option plans. Worker uneasiness may be the result of their mistrust in corporate willingness to remain committed to employee interests in the absence of union representation.

Wage Increases and Wealth Distribution

Blasi et al. (2002:3) discovered in their analysis of 490 broad based stock option companies that companies did not compensate for enacting stock option plans by lowering employee wages, but rather that stocks supplemented employee income. In addition, the companies that adopted employee ownership practices were those that already tended to offer higher compensation packages; however, “companies did not continue to increase wages beyond their earlier edge” (Blasi et al. 2002:3). This was confirmed by Kruse (2002:8) in his report to a congressional committee: “Company stock appears to come on top of, and not in place of, other compensation.” Blasi et al. (2002:49) also found that employees in firms with “broad based” employee ownership, on an average, earned 8% more than the employees of comparable public companies.

Blasi et al. (2003:41) estimated that broad based stock companies “statistically significantly surpassed” the average returns of their non-employee owned competitors during every year of the five year study; The cumulative average share holder return between January 1992 and December 1997 of broad based stock companies was 303.2% compared to the 193.1% combined average for overall company returns. This means that employee owned stock was more valuable than that of traditional firms, creating another advantage for stock options to help employees increase overall wealth.

There are a few instances where employees made wage concessions in exchange for ownership interest. There were the smaller technological startups which paid low starting wages and offered stock options instead, as well as cases where unionized employees conceded to lower wages as a part of company restructuring package, as with United Airlines. Nevertheless, Kruse (2002:8) reports that “among nearly 1,000 publics firms that developed employee ownership stakes of 4% or greater over the 1980’s … there were only 40 reports of wage and benefit restructuring linked to employee ownership.” That equates to a modest four percent. Nonetheless, even in these rare cases employees tend to have higher earnings then their non profit sharing peers.

This translates into a redistribution of profits at the organizational level, which should eventually spread to the macro level:

Stock options represent one of the fastest growing components in employee equity participation. A 1997 study by William Mercer consultants found that 30 percent of the largest U.S. companies now have broad-based stock option programs covering more than half their employees… (Gates 1998:61).

Firm Survival

The survival of any financial enterprise is significantly affected by its efficiency and its ability to compete. Economic security, in turn, promotes employment stability and continuing profits. These are key factors of success whether a firm adopts employee ownership practices or not. However, studies have shown that employee ownership is related to greater employment stability, “which does not come at the expense of lower efficiency” (Kruse 2002:7).

Weitzman (1985:950) conjectured that a profit sharing entity always seeks to operate at full employment, being that the advantage of increased production outweighs the shared cost of added labor. Theoretically, a profit sharing entity meets lowered demand by increasing production, by which it then attains market equilibrium by creating a surplus and reducing price to increase demand. A profit sharing entity has a built in advantage with its flexibility of wages that results in full term employment during short term contractions in the economy, rather than a reduction in labor (Weitzman 1985:950).

While the only evidence he offers is an abstract economic proof, Weitzman’s prediction seems to be confirmed by the aggregate data: “A study of U.S. plywood cooperatives in the pacific northwest found that these cooperatives tended to adjust pay rather than employment as demand changed, and these firms had higher average productivity levels than conventional plywood firms” (Kruse 2002:7). Three studies comparing firms before and after the adoption of ESOPs found that firms experienced faster employment growth after adopting employee ownership practices; these included companies that had greater employee involvement in decision making (Quarry and Rosen 1993; Winther and Marens 1997); and a study of Ohio ESOPs which outgrew their competitors (Logue and Yates 2001).

Chelius and Smith (1990:263) found marginal support that profit-sharing firms faced with decreased demand “reduced employment less than did firms without profit sharing” and that workers with profit sharing, in general, “have greater job security” during economic downturns. Another study which tracked U.S. public companies from 1983-1995 found that firms with “substantial employee ownership stakes” had a 20% greater chance of survival (Blair et al. 2000 as quoted in Kruse 2002:7). Meanwhile, in a study of 1,382 U.S companies, Kruse (1991:451) found that “profit sharing firms have greater employment stability” than their traditional competitors, “specifically within manufacturing firms.” In addition, the NCEO (2007:7) reports “a 1995 study by Michael Conte at the University of Baltimore found that during the 1980’s, fewer than one out of 100 ESOPs were terminated because of the bankruptcy of the plan sponsor.”

Growth in Employee Ownership

The NCEO (2007) estimates that company participation in ESOP’s and equivalent plans has grown from 1,600 to 9,650 companies since 1975. In the same thirty year period, the number of employee participants has grown from 250,000 to 10,500,000 (NCEO 2007). ESOP plan assets have also significantly jumped from an estimated $133 Billion in 1975 to $675 Billion in 2006. The word seems to be getting out.

This growth in employee ownership is an encouraging sign. In order for the benefits of employee ownership to significantly affect wealth distribution, we hypothesized that it would need to offer a competitive advantage to businesses. This would lead to an increasing number of firms adopting employee ownership plans to remain competitive, eventually affecting the redistribution of wealth at a macro level.

The evidence that this is taking place seems to be positive, yet it is difficult to predict for how long this upward trend will continue. There is simply not enough data to confidently assert that a growth in employee ownership is the result of in company productivity. The attractiveness of ESOP’s could be the result of Government tax incentives created by the 1975 ERISA laws. Adding to the dilemma is the fact that the numbers have been tracked sporadically throughout this time span making it difficult to determine which periods exhibited the most growth.

It is also not certain whether companies are committed to employee ownership for the long term, or if they are simply using it as a short term fix to lure potential employees and/or increase productivity. Not all companies who have adopted profit sharing have continued down that road.

Interesting Observations

The investigation logically culminates into the practical implications of profit sharing procedures in regards to public policy. If the disadvantages of incorporating profit sharing strategies outweigh the perceived advantages to most companies, then there will be little or no effect on economic well being in the long term. However, a thirty year trend has shown significant rise in the adoption by U.S. firms of employee ownership solutions.

There is substantial evidence that employee ownership increases the productivity and profitability of firms. This seems to promote firm stability through greater fiscal viability, and employee retention. There is also marginal evidence that employee ownership results in higher levels of employment and job security, even when firms are faced with decreased demand.

Employee ownership seems to increase employee income, by supplementing, rather than replacing fixed wages. This translates into an increase in real wages for employees, and the possibility for a redistribution of wealth at an organizational level. For those who choose stock over cash payouts, even minimal company ownership affects a raise in take home pay among workers.

The largest gains, however, are dependent on employees taking advantage of the long term maturation of their stocks. If they tend to cash out their stock options early, employee ownership will fail to result in an exponential growth of wealth for the lowest income bracket. Higher salaried employees have the luxury of more disposable income, making it easier for them to allow their stock to attain maximum value through price growth and stock splits.

There is also evidence that workplace satisfaction increases when workers experience an increased sense of value and organizational justice within a firm: “…when profit sharing is perceived as both, an opportunity for individual input to the organization’s success and a reflection of the organizations desire to treat employees fairly, higher levels of commitment follow” (Coyle- Shapiro, et al, 2002:434). This seems to reduce labor disputes and creates a common enterprise among employees and shareholders in pursuing the financial success of a company.

While profit sharing does exhibit some signs of economic justice by a fairer distribution of rewards, higher real wages, increased job security, and improved employee/employer relations, the question of whether it can affect the redistribution of wealth at a macro level and decrease the national growth of income disparity is a question which remains unanswered. A change in employee income needs to be complimented by a change in saving habits to realize the full promise of employee ownership. Nevertheless, the potential for the redistribution of profits to increase the standard of living for many lower income Americans does seem promising: “the fact remains that broad based ownership is preferable to its alternative” (Gates 1998:67).

Problems Encountered During Research

My Hypothesis that employee ownership effects greater economic justice by measuring (1) job stability, (2) wage and income increase, (3) redistribution of wealth, and (4) employer/employee conflict remains unproven with the current available data. Valid research is limited by the amount, the content, and the usefulness of the current statistical data.

The majority of the statistics concerning employee ownership have been compiled by the National Center for Employee Ownership, in Oakland, California. Their information is limited to the research provided by economic scholars interested in the effects of employee ownership on firm productivity and profitability. While this information is useful, it sheds little light on the impact of stock option plans upon individual income.

Missing from the research is data on employee salaries, employee investment, and employee satisfaction that is vital to the confirmation of my hypothesis. I believe the assumptions are still testable with the collection of relevant data. Without the requisite salary information, I am limited to further articulation of my general theory and recommendations for future research.

Employee Ownership’s Potential for Effecting Economic Justice

If profit sharing organizations tend to be more productive/profitable than traditional firms, this should give them a competitive advantage. Higher profitability makes the firm more attractive for shareholder investment, the lifeblood of a successful corporation. This allows for an increase in capital, which further strengthens the fiscal viability of the firm.

Another significant factor is the effect of higher profitability on employee confidence. Faith in an employer’s stock should foster employee investment, distributing a greater share of ownership among the workforce. The greater the amount of employee owned stock, the greater the potential for a redistribution of wealth at an organizational level.

Increased profitability also allows for higher wages. A company’s increased profits allow it to maintain a competitive pay scale, encouraging employee stock purchases. The more disposable income an employee has, the more he can invest. If an individual’s wage barely meets their living expenses, then employee stock options are simply a token gesture. However, an increase in take home pay should encourage saving and investment.

A competitive pay scale, coupled with an employee stock option plan, also affects a firm’s ability to sustain its workforce. Higher wages and profit sharing incentives make a company more attractive to higher skilled employees in the labor pool. It also aids in the retention of current employees. A sense of economic fair play in the workplace should also cultivate employee loyalty. This should have a positive financial impact on a firm by reducing the costs of recruiting and training.

The advantages that profit sharing bestows upon employees and employers should stimulate additional firms to adopt this business model to remain competitive in the marketplace. Heightened employee cooperation, increased productivity, higher profits and greater shareholder returns are attractive incentives for corporations to incorporate stock option plans. Likewise, the promise of higher salaries, greater wealth accumulation, increased job stability, and enhanced job satisfaction are appealing to employees. The exponential growth of employee ownership would confer these benefits on a large scale basis.

Future Research

          New data must be accumulated before any significant correlations between employee ownership and economic justice can be drawn. I believe that the most important areas of research are the effects of stock option plans on employee income, investment, and job satisfaction. These measurements will allow for further research into the potential for wealth redistribution.

The most cost effective way to obtain this information would be to survey the 1,092 businesses that participated in the Blasi, et al (2002) study. The businesses have been selected to reflect similar businesses in different fields of industry, thus controlling for many outside variables. It also gives an adequate sample of 490 employee owned business; roughly half the population size. Furthermore, the researchers were able to identify when these companies adopted employee ownership practices, making it easier to apply the pretest/posttest method by reviewing salary information before and after 1992.

Anonymous salary information should be obtained for the years 1991 (1 year prior to the implementation of their stock option plans) through 2001. This gives us a substantial 10 year period in which to study the fiscal activity. This data should be entered into the Statistical Program for the Social Sciences (SPSS), or a comparable program, to determine whether there is a significant statistical relationship between employee ownership and salary distribution. Wage increases and stock option purchases should also be measured for.

The data on employee income should be requested through the board of trustees, trying to impress upon them the important implications of this study. The researcher should compile salary figures without names to protect the privacy of the individual employees. During the request process, board members should be surveyed on the question of why their company chose to adopt a stock option plan. This information is useful in determining what factors influenced their decision. I would ask the open ended question verbatim, also using an attitudinal scale to measure the influence of tax incentives, employee cooperation, and wage concessions upon their decision.

An alternative would be a poll of the workers requesting salary information. This would be a much less reliable determinant, as it would be affected by an employee’s ability to produce accurate salary figures. An attitudinal scale to assess job satisfaction could also be included in the poll. This would prove useful in determining what influence employer ownership has on attitudes. Board members and laborers may differ in their outlook towards cooperation.

Conclusion

I believe that the study of employee ownership’s ability to effect economic justice is an important focus of future research. The prospect of continuing economic growth depends on a more equitable distribution of wealth. The increasing economic disparity between our wealthiest and poorest citizens has a negative impact upon our society. The economic effects are work stoppages, increased absenteeism, lower productivity, and higher unemployment rates due to worker discouragement. The societal effects are an increase in entitlement spending, a rise in crime rates, and an escalation of tensions between the socioeconomic classes.

A legitimate economic hope is a powerful medicine for an ailing culture. The enduring economic prosperity of America depends on our ability to heal the social ills created by a widening economic gap. History has shown that working class frustrations usually manifest themselves in the form of violent civil conflict. Employee ownership is a potential cure.

By Lawrence Christopher Skufca (2007)

Some Rights Reserved 

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