Detroit and us

Detroit's skyline seen from Windsor, Ontario

[NOTE TO READERS: We will resume the Friday Saloon next week; in the meantime, feel free to hijack this thread if you wish.]

When some of you asked me to write on Detroit, I wasn't sure I could add much to the many stories and columns that have been produced after the city filed for bankruptcy. But many were the proverbial blind men trying to describe an elephant. Something big has happened, but what? How did things get so bad? And is this a foreshadowing of calamities to come? As one reader put it, "The Detroit default woke me up to the impending train wrecks we're facing elsewhere. What happened? Another oversight calamity?"

Back to the elephant, as in, the elephant in the room. No discussion of Detroit can avoid race and the city's toxic racial history. At a little more than 700,000 population, Detroit is the only major city in the nation with a staggering concentration of African-American poverty. It is 83 percent black compared with 14 percent for Michigan. The poverty rate of more than 36 percent is twice the state level. Median household income is 57 percent of the state average. There is no other American city so populous facing such an imbalance.

Detroit has a history of racial strife, and not just the 1967 riot that left 43 dead and 2,000 buildings destroyed.  Thirty-four were killed in the Detroit race riot of 1943. In both instances, federal troops were required to stop the violence. The city was overwhelmingly white in the 1940s and the white majority remained until the early 1970s. But as any Southerner will tell you, racism isn't confined to the South. As Detroit became the center of the auto industry with a massive manufacturing base, the jobs attracted not just blacks from the Mississippi Delta, but poor whites from Appalachia. To this combustible mix was added all sorts of other ethic groups, including a large Polish population. Blacks were often excluded from the best jobs, hurting their ability to amass intergenerational wealth. Redlining in housing and mortgages was rampant. Police brutality against blacks was commonplace. Later, Detroit became a laboratory example of the consequences of highly concentrated poverty and lack of jobs, with high crime, drug abuse and self-destructive social problems.

Unlike Atlanta, Detroit never made a good-for-business compact between the races. This was always a tough town, the assembly line warped some people — "Detroit, where the weak are killed and eaten," was a popular bumper sticker I saw when I was covering the auto industry. It was the city where the NAACP sued to stop de-facto school segregation in the metropolitan area. It won in the federal circuit and lost at the Supreme Court. After that, white flight to the suburbs accelerated, followed by better-off blacks. The city that in 1950 dominated its metropolitan area with more than 1.8 million people, fifth-largest in the nation, bled population, jobs and wealth into sprawling, segregated suburbs. In 2012, the Detroit metropolitan area held 4.2 million people and was the nation's 14th largest metro, just behind metropolitan Phoenix. But the city is the smaller, poorer part. In recent decades, metro Detroit has barely grown in population but sprawl has continued to expand, gutting the city. Detroit represents a massive tragedy of race and class.

The once-grand Michigan Central Station was one of several Detroit railroad stations.

As others have noted, it is cruelly or aptly ironic that the automobile helped destroy Detroit. At one time, the city had an extensive streetcar network, commuter trains and intercity trains. While a higher-speed train corridor is being built up between Detroit and Chicago, the rest was long ago ripped out. The Motor City lived up to its name, with the busy streetcar lines along Woodward Avenue were removed in 1956, replaced by a nearly exclusive reliance on the auto. Freeways proliferated. The bus system, never good, has become much worse as the city's fiscal crisis has worsened. A "people mover" downtown isn't particularly effective. One consequence is that as the city's factories died and most employment centers moved to the suburbs, much of the city's population lacked the ability to reach jobs.

While "Detroit" is a metonym for the American auto industry, General Motors is the only one of the Big Three to be headquartered in the city. Only a handful of major auto plants are inside the city limits, where once there were dozens, supported by hundreds of other manufacturing operations in what would today be called an "ecosystem." It was the birthplace of the modern industrial union movement. This produced a blue-collar middle class, along with wealth for the elite and the city through the first decades of the 20th century. It also led to complacency, as David Halberstam documents in his book, The Reckoning. Even as the auto industry adjusted — and was eventually bailed out by the Obama administration — the city of Detroit felt the worst losses. The metro area remains economically viable and full of pockets of prosperity — including supporting four big-league sports teams. This barely helps the city.  According to the Brookings Institution, Detroit suffers from the worst "job sprawl" in the nation. While unemployment in the metro area is around 9 percent, inside the city limits it is more than 16 percent and barely fell below 15 percent all through the 2000s. Rather like warming temperatures thawing permafrost which in turn releases methane making warming worse, all these factors became a feedback loop dragging Detroit down.

Another is decades of malgovernance. Coleman Young, who served as mayor from 1974 to 1994 is widely criticized for alleged corruption and machine politics. Kwame Kilpatrick was convicted of multiple felonies. Detroit and Michigan have a long history of both machine politics and shady dealing. This was the home of the Purple Gang (which established an outpost in Arizona) and a major conduit of illegal whiskey during Prohibition. But when the vast industrial base of Detroit was the colossus of the world and businessmen in the Financial District oversaw ever-increasing wealth, the stakes weren't as high. As Detroit faced its racial, spatial and economic hits, suddenly political leadership really mattered — and often failed. The widespread misuse of eminent domain often transferred land to politically connected fixers but failed to produce meaningful economic development. Ronald Reagan held a highly symbolic Republican National Convention in Detroit in 1980; although Reagan did help the Big Three against Japan, he betrayed promises of urban policies that would help average Detroiters. Federal policy that encouraged freeways and sprawl, that undercut a fair deal for unions and pushed uneven trade deals — this was the worst government malpractice.

As for the details and gamesmanship of Detroit's bankruptcy, Cate Long of Reuters has covered them better than anyone (see here, here and here). But the basics are this: Decades of middle-class and business flight starved the tax base. The liabilities are nothing exotic — no light rail — but ordinary municipal obligations and the pensions and health costs of retirees. The exact numbers are open to debate. Should the city have reduced staff many years earlier? Perhaps. Is it immoral that retirees living on modest means, dependent on solemn promises made by the city, should take a haircut while Wall Street made big money off Detroit's debt — and the bankruptcy lawyers will continue to do so? Undoubtedly. Now there's no easy way out.

The Detroit Financial District from Campus Martius Park.

And yet.

Detroit remains a real city, with architecture, historic districts and cultural assets that no Sun Belt city can ever replicate. A historic reuse movement is at work, companies have moved downtown and some startup entrepreneurs even welcome the bankruptcy. Detroit has given treasures to the world that no Sun Belt city can ever match. The city is hollowed out, but its density is still about twice that of Charlotte, a city of similar population. For all the ruin porn photos, Detroit also contains places that are still loved. Racism and racial dysfunction hurt Detroit badly. But this was also the place where white Mayor Jerry Cavanagh welcomed Martin Luther King Jr. in the fraught year of 1963, marching with him in a jubilant walk before 100,000 up Woodward. It's a complex story. Detroit is not a simple morality tale. It's not good enough to, sotto voce, say "It's just the n*ggers' fault and it could never happen where I live."

What kind of civilization would think that way? America, sadly.

You want lessons? Don't sprawl. That Ponzi scheme will catch up with you. Nurture real universities, constant reinvention and civic decency and opportunity that includes all citizens. Don't assume the "creative destruction" of the supposedly unfettered free market won't destroy your community, too. Or end up at the gates of your gated property (not for nothing do we have a zombie craze). Invest in your city. Beware of scare tactics by the right and some quarters of the media about the gazillions facing us in "unfunded liabilities." There is a gap between public pension promises and assets, but who the hell's fault is that? We're the richest country in the world. Wall Street is gambling with $600 trillion in nominal derivatives. And the retired garbageman is to blame?

What kind of civilization could abandon a great city to ruin, as exemplified by the majestic Michigan Central Station left to rot? Ours, apparently. "The greatest country in the world."

 

Comments

[morecleanair]

At the end of this excellent piece, Jon ends where I began:
"There is a gap between public pension promises and assets, but who the hell's fault is that?"

Yes, WHOSE FAULT, but to what extent are other states quietly hiding or glossing over their pension deficits? Example: it sounds like there's an intelligent discussion taking place in Oregon . . . but with no apparent solution. And will red state legislatures treat public employee retirement with their typical meat-axe mentality?

[Drifter]

Was it the 1970's when New York City flirted with bankruptcy? What a turnaround for the Big Apple.

The Feds would have bailout NYC just like they bailed out Wall Street crooks in 2008. Too bad for Detroit it isn't located on the east coast and loaded with institutions making hefty political payments to Washington politicians.

[Homeless]

No doubt morecleanair red states will try and a few blue states may be forced to reduce promised payments to pensioners.

[eclecticdog]

"...will red state legislatures treat public employee retirement with their typical meat-axe mentality?

Yes.

[Petro]

I'm only as far as "metonym," but this is going well and I just wanted to pause to note my appreciation for another new word... :)

[Dr. John McIntosh]

We went off to graduate school at UM Ann Arbor in 1973 and were warned not to go into Detroit, the number of times which we did I can count on one hand. The annual UM undergraduate architecture field trip was to Toronto, to "see a real city".

[cal Lash]

Doc, a quote from a friend of mine.
"for some years now i have been trying to explain to people that a culture of fear is what is killing us, not global warming or the terrorists. i am always met with glazed eyes."

But I am glad you heeded your mothers advise.

[Donna Gratehouse]

A couple of summers ago, my boyfriend and I were having dinner with a nice liberal couple from Scottdale (who now live in Santa Cruz, CA). The wife told us about how her dad (an old guy with a big crush on Ayn Rand) was sending her emails about some city in CA where they were having terrible, awful problems meeting the pension obligations engendered by the terrible, awful unions that forced, forced!, that city to fund (what she and her father considered to be) overly generous retirement and health care benefits.

I asked her what she felt should happen to the retirees in that city, having had the promises made to them reneged on. As I recall, her response was something like, "They'll get health care and Social Security. They shouldn't get high class hospital rooms."

[Emil Pulsifer]

Rogue wrote:

"While unemployment in the metro area is around 9 percent, inside the city limits it is more than 16 percent and barely fell below 15 percent all through the 2000s."

Actually, if you look at a graph of the historical unemployment rate for the City of Detroit you find that unemployment was at 10% in January of 1999 and by January of 2000 had decreased to about 5% and stayed under 10% until January 2001. Then it starts climbing up until it plateaus at an average of maybe 14% from 2003 to 2008, after which it climbs sharply.

http://www.google.com/search?q=detroit+unemployment+historical&tbm=isch&tbo=u&source=univ&sa=X&ei=MVn0UbSyNIvS8wTuxoCQAg&ved=0CD8QsAQ&biw=1280&bih=907#facrc=_&imgdii=_&imgrc=IWuMdei399SzfM%3A%3BqHY9afyMNdZdRM%3Bhttp%253A%252F%252F3.bp.blogspot.com%252F_xlGBqqM0muE%252FSxMsmUI81qI%252FAAAAAAAADI4%252FEPayTt8QXCA%252Fs320%252Fdetroitunemploymentrate.PNG%3Bhttp%253A%252F%252Fwww.distressedvolatility.com%252F2009_11_01_archive.html%3B475%3B261

So, the City of Detroit saw some good times in the early 2000s. What happened?

Black flight.

From 2000 to 2010 the White population declined less than 2 percentage points (from 12.26% to 10.61%), or roughly just 45,000.

The Black population in Detroit increased from 1940 through 2000 not only as a percentage but also in absolute numbers: from roughly 145,000 to 775,000. We also see that the Black population held steady from 1990 to 2000.

After 2000, however, what you see is Black flight: the population drops precipitously, from 775,000 to 590,000 in 2010.

http://en.wikipedia.org/wiki/Demographic_history_of_Detroit

Fewer residents equal fewer workers and less taxes paid by residents; it also means less consumer spending which in turn means less business revenue and employment (and sales taxes collected).

By 2000, most White flight had already occurred. Whereas, after 2000, the vast bulk of Black flight occurred. Since this is when Detroit's most recent job losses occurred I have to conclude that racial strife had nothing to do with the city's RECENT economic problems.

[cal lash]

Slow hot humid week end,
Did AZRebel get caught trying to get Snowden in his suitcase.

Regardless of your opinion of the Jewish Princess Ayn Rand U might or maybe might not enjoy John Hodgemans piece in the New Yorker of Shouts and Murmurs called Ask Ayn
Here is a few paragraphs I found amusing.

"I do not approve of the so-called hippies, but I do not approve of any government control over drugs. The government does not have the right to tell any individual what to do with his or her health and life. You probably know that I received a prescription for the stimulant Benzedrine, or “speed.” I can say rationally that it increases my happiness and my productivity. For example, some time ago I went to Studio 54, because I love to dance on speed. I took fifteen speed pills, and I got into a contest with Liza Minnelli over who could roar most like a jaguar. She simply sounded like a stupid lion.

Then the inside of my head began to sound like a jet engine and so I went to the bathroom. I took maybe ten more speed pills and sat in a stall and wrote a new chapter of “Atlas Shrugged.” Perhaps twenty-five thousand words, all on toilet paper. I cannot include these words in a new edition, alas, because I did not write them so much as encode them on the toilet paper by biting it.

As I write this, I am drinking speed, and you cannot stop me. You cannot stop me, America, with your altruism and your Alan Alda and your Fresca cans biting at my skin. I shall speed across this country like a great high-speed train and the U.S. shall be forever changed in my wake.

Yes, I am both a speedboat and a speed train, and I will mix metaphors if I wish and bend language to my own reality like rails of garbage steel. Because Ronald Reagan has deposed Jimmy Carter, and I predict that by 2013 my influence will be profound, and a new generation of leaders will hallow my name, and devotion to self-interest and capitalism and the free market will not be the exception but the rule, and these leaders will naturally share my disapproval of religion, my support of abortion rights, and my love of Godiva chocolates. I have to stop writing now, because I have chewed through my typewriter.

Talk to you next week, readers of “Parade,” and remember to send me your favorite ways to spice up Hamburger Helper. I asked you that three weeks ago. ♦"

[AzReb, R. Perez]

One box any type Hamburger Helper

One pound ground chicken or ground turkey.

Four chopped jalapeno peppers.

Cook as directed on box.

Eat with 3 to 6 Corona beers. (lime optional)

Good to be back home.

[Petro]

Emil:

By 2000, most White flight had already occurred. Whereas, after 2000, the vast bulk of Black flight occurred. Since this is when Detroit's most recent job losses occurred I have to conclude that racial strife had nothing to do with the city's RECENT economic problems.

But perhaps everything to do with the recent and controversial responses to those problems. There is a barely concealed patronizing racism in the way in which the city's management was sneered at by surrounding communities, and the resultant anti-democratic "emergency manager" business.

While the loss of property, business and income tax revenue would have staggered any city, there was an underlying attitude that somehow it could've been "handled" better.

I gathered this impression while corresponding with a friend in the area, who shared with me hers and others' reactions to the unfolding drama. It was a hot topic on their local talk radio, and their Facebook page was alive with commentary. Sorry I can't provide more definitive links at the moment (I didn't engage myself, playfully irritating my friend by telling her I didn't get involved in "provincial" politics. :) Truth is, the subject was a little too hot for me.)

[terese dudas]

Bottom line - the antics of Coleman & Kilpatric, together, drove the final nails into Detroit's coffin. Once the white & black tax payers fled the city, municipal obligations could not be met as their absence destroyed the city's credibility.

See the recovery of Pittsburgh for a contrasting scenario.

[cal Lash]

Blade Detroit
grow trees
will be ahead of NY city when it goes under 8 feet of water and returns to the swamp it used to be.

[Rogue Columnist]

The other thing that happened since 2000 is China in the WTO, playing by its own rules. Among the big losers were the manufacturers in Detroit.

[Rogue Columnist]

An interesting site:

http://detroit1701.org/

[Suzanne]

Thanks for the article, Cal. That was a funny read. I’d say Ayn sounds like Rush Limbaugh. (I could not recall Limbaugh’s name today, so I Googled “right wing pundit on drugs”. His name came up first.)

[Emil Pulsifer]

Rogue wrote:

"The other thing that happened since 2000 is China in the WTO, playing by its own rules. Among the big losers were the manufacturers in Detroit."

Yes, when I suggested "Black flight" (during the 2000-2010 decade) as the reason for Detroit's most recent problems, that begs the question, why did they leave?

There is no doubt in my mind that a decline in auto manufacturing jobs (which includes both vehicles and parts manufacturing) meant that large numbers of Detroit workers (nine-tenths of whom were Black) lost their jobs and migrated in search of replacement income.

From 1998 through 2000 both vehicle and automotive-parts manufacturing employment were increasing in Michigan, Ohio and Indiana as a whole; from 2000 on, both forms of manufacturing employment declined precipitately. See Figure 3:

http://www.ibrc.indiana.edu/ibr/2010/spring/article2.html

The same article notes that from 2000 to 2006 automotive-parts imports boomed (i.e., foreign manufacture replacing domestic sources); that many Midwest manufacturers moved to the Southeast where wages were 23 percent lower; and that per worker output grew 29% over the same period, meaning (I infer) that automation (robots) replaced a number of jobs.

So, a combination of U.S. "trade normalization" with China resulting in outsourcing of jobs; domestic shifting of such jobs from the Midwest to the Southeast (also cost driven); and loss of jobs to automation as robotics expanded and became more sophisticated.

Another major factor (arguably) is the loss of domestic market share to Japanese brands during the 2000s. U.S. market share declined from 82% in 2002 to 73% in 2009. However, from 2002 to 2006 U.S. manufacturers' market share declined only 2 percentage points (from 82% to 80%).

http://www2.briefing.com/Marketing/includes/state-of-the-us-motor-vehicle-industry-2012.pdf

(See graphs, page 4.)

[Emil Pulsifer]

P.S. In September, 2012 (took 'em long enough!) the U.S. filed a formal complaint with the World Trade Organization (WTO) accusing China of illegally subsidizing as much as 60% of its auto-parts exports.

http://www.bloomberg.com/news/2012-09-17/u-s-complains-at-wto-over-chinese-aid-on-cars-car-parts.html

But concentrating on direct state subsidies ignores the much more important subsidies giving Chinese-based businesses a huge advantage over U.S. and European businesses; the latter have to adhere to environmental, workplace-safety, and labor rights laws, giving them much higher overhead costs compared to China (which gets to pollute and exploit to its heart's content, having no legal labor unions and being a one-party police-state with no enforceable legal rights outside the whims of national and local Party cadres); to say nothing of the basic difference in standard of living and thus wages and salaries.

ALL of this would be reflected in any legitimate system of international trade so that foreign companies in competition with the U.S. would have to play by the same basic rules or else have the cost of their exports increased by offsetting tariffs. That this is not the case reflects the influence of international corporations over politicians and the political system. Federal laws that require businesses in all U.S. states to adhere to uniform federal environmental, safety and labor requirements, but which allow them to escape these requirements by moving operations abroad, can only have the effect of outsourcing U.S. jobs.

[eclecticdog]

Whenever the WTO rules against the USA, the USA ignores it. I imagine China will do the same.

[Rogue Columnist]

Here are two columns useful for understanding China's affect (and that of some other neo-mercantilists) on trade (and us):

http://prestowitz.foreignpolicy.com/posts/2012/02/17/chinas_not_breaking_the_rules_its_playing_a_different_game

http://prestowitz.foreignpolicy.com/posts/2012/03/12/tennis_vs_football

Now, send me to the spam dungeon...

[Rogue Columnist]

Bad derivatives trades added to Detroit's woes:

http://www.nakedcapitalism.com/2013/07/bad-derivatives-trades-added-to-detroits-woes.html

[100 Octane]

"Detroit has given treasures to the world no Sun Belt city can ever match"...
That's a line I will be using in the future, thank you.
Detroit and its streetcars...

http://www.shorpy.com/node/7136?size=_original#caption

I've been thinking about Detroit as a retirement spot if they can restore police and fire services. Fresh water and cool summers.
Thanks Emil for the great summary. Lots of auto work headed South. Some friends of mine built cars seats for $12 an hour in 1981. The same plant has less than half the employees and new hires start at $9 an hour.

[Emil Pulsifer]

Rogue, here's a revealing excerpt from one of your Prestowitz links:

"In any case, there are a lot fewer clear cut rules than most people think. For example, probably the biggest single factor in the off-shoring of large chunks of U.S. based production and millions of jobs abroad has been the packages of financial investment incentives offered by China and others to global companies to encourage them to relocate production. More jobs have been lost to these packages than to currency manipulation. But you can't complain about rules violations because there are no rules to cover these investment incentives. At the federal level, America doesn't offer such incentives but there is no WTO or IMF or other rule against it. Nor is the United States proposing any rules in this area."

[Emil Pulsifer]

Rogue's "Front Page" links include the following recherche item. I thought I'd post a brief excerpt. From the Yale Journal of International Affairs:

"Abstract—The Pentagon has concluded that the time has come to prepare for war with China, and in a manner well beyond crafting the sort of contingency plans that are expected for wide a range of possible confrontations. It is a momentous conclusion that will shape the United Statesdefense systems, force posture, and overall strategy for dealing with the economically and militarily resurgent China. Thus far, however, the military’s assessment of and preparations for the threat posed by China have not received the high level of review from elected civilian officials that such developments require. The start of a second Obama administration provides an opportunity for civilian authorities to live up to their obligations in this matter and to conduct a proper review of the United StatesChina strategy and the military’s role in it."

http://yalejournal.org/2013/06/12/who-authorized-preparations-for-war-with-china

Somebody seems to be looking ahead at something for some reason...

I wonder if defense budget concerns are relevant? If the U.S. has a new Big Enemy to fight (or, per the Cold War, to prepare to fight so as to be strong enough to discourage a fight) that gives a ready-made rationale for fat Defense Department budgets...

[Emil Pulsifer]

Great line, Rogue:

"Beware of scare tactics by the right and some quarters of the media about the gazillions facing us in "unfunded liabilities." There is a gap between public pension promises and assets, but who the hell's fault is that? We're the richest country in the world. Wall Street is gambling with $600 trillion in nominal derivatives. And the retired garbageman is to blame?"

[Petro]

Billionaire Gets New Sports Arena in Bankrupt Detroit

[Chris Thomas]

Emil:

Once we've eliminated worker rights and environmental laws in the U.S., China's competitive advantage will be eliminated. Problem solved!

[Petro]

The Detroit Bail-In Template: Fleecing Pensioners to Save the Banks