Detroit collapsing


The best commentaries on the Detroit bankruptcy I have read are a Forbes article entitled “The Unions Didn’t Bankrupt Detroit, But Great American Cars Did” and a Robert Samuelson column for Real Clear Politics entitled “Reinventing Detroit”.

Both make the point that the chief cause of Detroit’s collapse is the region (not just the city) not moving away from the economy of the past for way too long. That its over reliance on the auto industry –– and particularly auto factories –– dooms the region to slow economic growth. And slow economic growth makes almost inevitable financial woes not just for the industry but also for local governments particularly those where the poorest in the region are concentrated.

This analysis is that the fundamental challenge for the city and region is economic, not political. Yes corruption, mismanagement, legacy costs, state budget cuts, white flight, etc. contributed to the bankruptcy. But at its core the region and city are not going to have prosperous citizens and local governments, schools, etc. until and unless metro Detroit becomes a competitive 21st Century economy rather than relying (more like wishing and hoping) on the old auto factory economy that made us one of the most prosperous places in the last century.

Forbes writes: “Put simply, Michigan and its city most known for the rise of the automobile clung to a business – car manufacturing – that was long ago rendered yesterday’s commercial news. And just as Silicon Valley would be destitute too if its companies used limited U.S. labor to manufacture computers that anyone can make, Detroit is bankrupt because its biggest employers still manufacture – as opposed to simply design – cars that anyone can make. The mainstream punditry will talk about unions, crime and high taxes as the causes of Detroit’s bankruptcy, but the real answer is rooted in something far more basic: cars are easy to make, and Detroit’s biggest employers make cars. Detroit will revitalize itself once its biggest employers migrate toward that which isn’t so simple.”

Samuelson writes: “In the countless Detroit post-mortems, many potential villains have emerged: the ineffectiveness of Coleman Young, mayor from 1974 to 1994; white flight (from 1970 to 2008, the white portion of the city’s population fell from 56 percent to 11 percent); costly government workers’ pensions. But at bottom, Detroit’s failure resulted from its success. It became a prisoner of its dependence on the auto industry. … But what made short-term sense spelled long-term suicide — for companies, workers, Detroit and Michigan.”

Samuelson goes on the explore the way out. Once again its primarily economic, not political. He interviews Edward Glaeser, the author of the terrific Triumph of the City. Samuelson continues:

“What cities do is transfer information,” says Glaeser. They’re incubators for new ideas and industries. This describes the Detroit of the early 1900s, when dozens of car companies formed annually (peak year: 1907 at 82). Though it doesn’t mirror post-war Detroit, it does suggest what the city and state need to become. They aren’t alone in suffering economic dislocation. In 1971, two Seattle realtors posted this funny-dreary billboard: “Will the last person leaving SEATTLE — Turn out the lights.” Employment at Boeing had plunged from 100,800 in 1967 to 38,690. In the late 1960s and early 1970s, New York City lost more than 300,000 manufacturing jobs, led by the garment industry, reports Glaeser. But the losses weren’t fatal. The Seattle area now has Microsoft, Amazon and Starbucks; New York has recovered, led in part by a resurgent (and maligned) financial industry.

Samuelson concludes: “What Detroit teaches is that those who deny economic change often become its victims.

 


Lou Glazer

About Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.