Pethokoukis, Economics, U.S. Economy

Must there always be a Detroit?

Image Credit: Shutterstock

Image Credit: Shutterstock

Photo galleries and slideshows showing Detroit’s decay are always great Internet click-bait. (Maybe second only to shots of the soulless Pyongyang.) The pictures look like stills from one of those “Life After People” speculative documentaries. Unfortunately, lots of people still live in the Motor City’s urban ruins, some 700,000 of them, down from a peak of 2 million in the 1950s.

They live in a city with not much to show for its nearly $19 billion in debt, other than the biggest US municipal bankruptcy filing in the country’s history. As Reuters reports, a) the city’s murder rate is at its highest in nearly 40 years, b) only a third of Detroit’s ambulances were in service in the first quarter of 2013, and c) an estimated 5,000 buildings a year intentionally are set on fire.

Yes, Detroit has been atrociously managed, as Edward Glaeser documents in Triumph of the City. Faced with the decline of US auto industry, Mayor Coleman Young, who led the city from 1974 through 1993, decided the city’s salvation was to be found in building things rather than “trying to attract smart, wealthy, entrepreneurial people.” In the 1970s, for instance, Detroit built an expensive new hockey arena for the Detroit Red Wings and then rented it to the team at bargain rates. In the 1980s, it built the People Mover monorail, what Glaeser calls the “single most absurd public transit project in the country.” The $350 million Renaissance Center created millions of square feet of new office space, a complex eventually sold to GM for $100 million.

But fundamentally, Detroit’s demise as an industrial city stems from a failure to adapt — as seen in its preference to invest in things rather than people — as automation allowed automakers to make more cars with fewer workers and globalization brought cutthroat international competition. The story of Detroit is the story of the transformation of global manufacturing, including the auto industry, in a gale of creative destruction. As Enrico Moretti of the University of California, Berkeley and the author of the New Geography of Jobs, said in a recent EconTalk podcast:

Detroit’s local politicians, the unions, and the car executives–they became complacent. And they had their share of responsibility. But the biggest failure of all was the fact that, at the time when it had one of the biggest, most prosperous ecosystems in the world, it failed to reinvent itself and leverage that consistent into something new.

When the demand for workers in the auto industry started collapsing, Detroit failed to find something new. The technological frontier keeps evolving, and there’s no technology that stays on the frontier forever. The secret for a community is to reinvent itself into new things. And I think this might be the most important difference between Detroit and Silicon Valley. Silicon Valley keeps reinventing itself. It used to be mostly hardware and silicon in the 1970s and 1980s. Then it became mostly software. And then it became mostly Internet. And now it’s branching out into new things like nanotech and biotech. Nobody knows whether those technologies will succeed and will create jobs, but this is an ecosystem that keeps following what the frontier of technology is. In contrast, Detroit failed to, and now it’s probably too late, because the ecosystem is not there any more. And so there is little left to be leveraged.

Good luck returning Detroit to what it once was through government-created innovation hubs. “I haven’t found one example of an innovation hub in the US that has been created by deliberate policy that says, ‘We’re going to create an innovation hub here,’” Moretti says. Instead of a top-down effort, better to create the organic conditions that will draw those smart, wealthy, entrepreneurial folks Glaeser writes about — especially immigrants — to Detroit. Maybe turning Detroit into a sort of Hong Kongesque tax haven — one with decent schools and safe streets — to encourage startups and a more diverse economic base than relying on one manufacturing sector. At best it will be a long slog with no guarantee of success, but the odds will be a lot better with policies that invest in people rather than things.

32 thoughts on “Must there always be a Detroit?

  1. The problem with Detroit in one simple phrase – is defined benefit pensions – both private with the auto companies and with public employees.

    And I would posit that now that we know that tying a pension plan to a company rather than the individual is bad policy – we have the same problem with employer-provided healthcare – and it’s time to do with health insurance what we had to do with pensions – make it the responsibility of the individual – and have a mandate to have a minimum pension (social security) and minimal health insurance – Universal or some version of it.

    • Universal health care does not provide for the individual to take responsibility. It is a government takeover which is heavily subsidized by the taxpayers and actually provides for redistribution of income. A Socialist idea to be sure. Those who are eager to let the long arm of Nanny State Government take over their lives will regret it.

      • re: ” Universal health care does not provide for the individual to take responsibility. It is a government takeover which is heavily subsidized by the taxpayers and actually provides for redistribution of income. A Socialist idea to be sure. Those who are eager to let the long arm of Nanny State Government take over their lives will regret it.”

        looking at the real world – 200+ countries. Can you name a single country that does it the way you say it should be done?

        Looking at the real world – take a look at how Singapore does UHC. It’s an individual mandate but then the individual has the ability to “shop” for his needs and the health care sector is forced by the govt to provide prices for their services.

        As a result – they pay 1/3 what we do for health care.

  2. Louis C. Miriani (January 1, 1897 – October 18, 1987) served as mayor of Detroit, Michigan (1957–62).

    He was the last Republican mayor of Detroit. The rest is history.

  3. You missed completely the 800-lb gorilla in the room.
    Decades – over a half century – of one-party rule. And that one party – activist liberal Democrats.
    Mix that thoroughly with chronic corruption, cronyism, mismanagement, nepotism, racketeering and voila – the death of a major city.

    • How about the 8-ton gorilla in the room? Whites with kids will not live within miles and miles of the nearest black. Good, safe schools are non-negotiable. Years ago, I gave some standardized tests at Cass Tech. I’ve been in max-security prisons more inviting (maybe safer too). No white parent in his right mind would send his kids there. And none do.

  4. Professor Morreti suffers from the bay Area disease … he sees everything in terms of Silicon Valley …. Well there have been very successful models well before SV was anything except agricultural land…. Think Boston and its environs for example on the way to celebrating 400 years of innovation.

    Boston began with its harbor and fishing and then globally trading [e.g. China Trade] but as it got wealthy and bigger Boston rapidly invested in education. This commitment to the future has provided a persistent supply of people with ideas and opportunities for future growth. For hundreds of years Boston / Cambridge has graduated its own, and also others who have come from all corners of the globe. Still others, the best and brightest, have been educated other places, but come to Boston attracted to the innovation culture.

    Of course, Detroit has a huge and inefficient bureaucracy but so does Bangalore in India.

    Of course Detroit has massively excessive unions and burdensome regulations but so does Germany.

    However, Detroit’s ultimate problem is that when there was a lot of money flowing through the Detroit economy in the 1950′s and 1960′s — the richest per capita in the western world — minimal investment was made in seeding the future. No one built and fostered a great university in Detroit funded with the huge profit of the auto industry. So when the clock ran out on the immediate post WWII auto industry’s dominance of the global automobile economy — -there was nothing to stop the free fall.

    • If Harvard Yard was on Woodward Avenue it would make no difference. Detroit, and other all-black cities are ‘way too dangerous for even stupid kids to risk life and limb for a degree. Because Detroit isn’t a bad neighborhood, as around colleges in Phila, NYC, and Boston — it’s a bad big city. No 3-block run from the subway stop to class; you’re driving through third-world hell for miles. Detroit is sub-Saharan Africa in Michigan. Just as Mexico is anyplace Mexicans live, and skid row is wherever bums flop for the night, so the third world is wherever third-world preople live.

    • The domestic auto industry built a great university, it’s just in Ann Arbor, not Detroit. The graduate school at the University of Michigan and one of the largest libraries in the world on that campus are both named after Horace Rackham, Henry Ford’s lawyer and investor. The state of Michigan has a fine system of public universities with UofM being one of a handful of elite public schools in the country, academically on par with with the finest universities in the country. UofM’s engineering school has had a very close relationship with the auto industry.

      Actually, the auto industry, well, General Motors, started its own engineering and management college called the General Motors Institute, which trained many of GM’s engineers and executives during it’s most successful era. GM no longer supports the school, now named Kettering University after the first head of GM engineering, Charles Kettering, the man who really liberated women by inventing the electric self starter for gasoline automobiles.

  5. Democrats destroyed Detroit. They destroyed what brought the wealth in the first place.

    Real wealth is created by creating real wealth.

    It’s simply idiotic to think social media is going to generate wide ranging wealth beyond certain specialized areas.

  6. Lots of things brought Detroit to its low economic and social station, and its inevitable bankruptcy.

    The one-party rule of, first the 1950′s-60′s white liberal Democrat “fixers” who thought that they could maintain or improve the city with the typical failed social engineering projects (urban renewal, etc.) that were so near and dear to them, and then the black activist socialist/communist/corrupt crypto-capitalist kleptocrat variety of Democrat politicians, has failed the city completely. That said, the intervening great Riot of 1967 was an event much more potent to the city’s health than most outsiders really understand. When people literally saw tanks rolling down their residential streets, saw the automatic weapon firefights, snipers shooting police and firefighters from rooftops, and the great firestorm burning great swaths of the city set by the sea of young black disaffected street hustlers, revolutionaries, and even politically naïve looters, a trend was set in motion that became unstoppable. At the same time that developers were buying up farmland in exurbia and creating the shopping malls and housing developments that would eventually ring the city with a donut of middle class suburban towns, anyone with the financial resources – middle class blacks and, especially, whites made to purposely feel unwelcome by the rioters and black political class, simply sold their Detroit homes at whatever price they could and moved out. At first a trickle, it became a mass exodus to the suburbs that eventually emptied the city of its most capable tax base.

    After the 1967 Riot, a succession of black politcos, starting with Mayor Coleman Young – a personally charming disaster of a mayor, who once proudly urged that all the rest of the remaining white people in Detroit move out (“North of 8 Mile Road”) of the city if they didn’t like what he was doing, insured that Detroit would stay predominantly black, poor and solidly Democrat. Young and his successors thought that they could maintain the city as their private political domain as long as a pliant federal government could be coerced into maintaining the city in the style to which it hoped to become accustomed. But, one can’t rebuild a once great city and economy based on government cheese and a few long suffering civic minded business people. This fantasy could not and did not, of course, hold.

    Beyond this awful social, racial, and economic debacle, the decline of the domestic automobile makers, along with ever greater worker productivity forcing an ever-shrinking work force, literal public union control of the ever-pliant City Council, and an electorate more and more susceptible to irrelevant and destructive rationalizations for the city’s financial plight, all conspired to doom the city to the near-oblivion that the world sees today.

    Just as a side note, the presence of a great learning institution or two could not halt the path the city has taken. In fact, within a half hour drive is one of the greatest universities in the world, the University of Michigan, along with many, many other colleges and universities as well. This alone means nothing as the vast majority of young men and women graduating from these schools want nothing more than to avoid Detroit like the plague.

    It wasn’t the lack of innovative thinking at a place of learning – or wise city fathers racking their brains to “reinvent” the city – that doomed Detroit, it was series of incredibly bad social and political choices made by the politicians and citizens of the city itself.

    I’m not optimistic about Detroit, but I, perhaps foolishly, remain dimly hopeful that the citizens of Detroit will sometime try to take back their destiny by throwing off their racialist and socialist fantasies and relying on themselves to rebuild this broken city.

  7. Detroit has not been run by “activist liberal” Democrats. People who insist on ruining thoughtful discussion with national political cheerleading are just the worst. You don’t actually have any idea what you’re talking about.

    • John,

      Technically what you say is true: elected officials in Detroit do not run on a party ticket. But in practical terms Detroit has been run almost exclusively by politicians with strong ties to the Democratic Party since the mid 1960s at least. I am a native Detroiter (grew up by 8 Mile and Lahser) who has been watching politics must of my life and I know of only one exception to that rule. (One-term councilman Keith Butler, who was allied with the GOP.) Can you or anyone else come up with a second?

    • No. YOU have no idea what you are talking about. Res ipsa loquitur. The thing speaks for itself. In other words you only have to LOOK at Detroit to see what happened. This was no Republican outcome. This was liberal/progressive/left wing democrat policies. And to suggest otherwise indicates only one of two things:

      you are credulous to the point of blithering;
      you are deceitful beyond redemption.

  8. If you tax something, you get less of it. High business taxes, high property taxes, etc., drove the most productive people out of the city for the surrounding suburbs. The middle class, black and white, are largely gone, now. And what did they get for all that? A broken infrastructure and debt. Lots of debt. $9 billion of its $11 billion in unsecured debt is owed to pensions and health-benefit plans for the public-sector.

  9. But what are YOU talking about?
    Detroit, California, and the U.S. at-large today are all points along a continuum of liberal governance, an inherently flawed model. It is only a matter of time before these ruinous policies – radically higher government spending, taxation, and regulation – yield similar results and the U.S. becomes California and Caifornia, Detroit.

  10. Excellent post. The problem with Detroit is government, but we need new language to make progress. The old language of Democrat vs. Republican, liberal vs. conservative, etc. isn’t helping us find solutions. I suggest the language of fast vs. slow. We can learn a lot from the slow movement (slow food, slow money, slow living, etc.). Fast government thinks that the answer to every problem is more government. Slow government is the opposite of that.

    For more explanation of slow government see:
    http://bremlang.blogspot.com/2012/07/introduction-to-slow-government.html

    In this explanation, the word SLOW is an acronym and the O stands for “organic” which fits perfectly with this sentence from the post above: “Instead of a top-down effort, better to create the organic conditions that will draw those smart, wealthy, entrepreneurial folks…”

    • re: ” The problem with Detroit is government, but we need new language to make progress. The old language of Democrat vs. Republican, liberal vs. conservative, etc. isn’t helping us find solutions.”

      Exactly!

  11. The ‘enterprise zones’, to the extent they are relevant, are areas or agreements to tax abatements. The idea being that these will expire and the then-functional business will carry on as a taxpaying entity. The greater lesson, that taxes and regulations hamper business formation and expansion, somehow is never applied to the economy or populace at large.

  12. “Must there always be a Detroit?”

    I think there must, because the things that make places NOT Detroit are hard and contrary to human nature. Work, deferred gratification, a culture of trust and law, respect for the property of others, are all elements of human capital, and must be constantly tended and renewed. Racial and union politics are their antithesis.

    Shorter version: don’t do this or here is what will happen.

    • looking at the other side – there are over 300 cities in the US with populations over 100K and overall there are almost 20,000 towns and cities and 99.99% of them have NOT gone bankrupt.

      there are problems -yes. there are problems specifically with defined benefit pension plans – but it’s not cities alone there are more than 5000 companies that have reneged on their pension plans.

  13. I think smarty Pethokoukis hit it on the head again.

    Make Detroit business tax-free for next 30 years. Give a warehouse to any business that will fill it up with workers; also for 30 years.

    Flatten whole sections of town, and sell to farmers—this has already been proposed btw, and some large farms want to buy.

    As for crime?Man, what can I tell you? Really long prison sentences for any violent crime……

  14. Actually if you want to see where Detroit might go in the extreme case you need look no further than Calumet Township ,Mi in the copper country. 100 years ago it had a population of 32,000 and had so much money in the city coffers that it built a fancy opera house. Then the mines closed and the population fell to 7k today.
    Or to take another Mi example, that is likley worse than Detroit in terms of Economy there is Flint, which is experiencing its second crash in History. Flint first was a lumber town, then the lumber played out, GM came there and eventually employed more people in Flint than it employs total today. Then GM cratered. Flint has the same problem of vacant houses and unoccupied land.

    • Indeed. Take a road trip OFF of the interstates to some small towns, especially in the South, and you’ll find hundreds that are essentially zombies after their lone one-town plant closed or the local timber gave out.

      the only folks who live in those places now are the folks that perform govt functions, sheriff, post office, etc and retirees and those who do trades and repair services.

      Their town centers are dozens of boarded up builders with a few reused as a community bld and hair salons, etc.

      It’s also important (I think) to distinguish between Detroit the city and Detroit the financial entity.

      Detroit is not going to shrivel into a ghost town. It’s going to shrink.

      There’s a modern day analog to a city that lost it’s primary industry but did not die – Pittsburg.

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