What Detroit’s Bankruptcy Teaches America


As has long been expected, the city of Detroit has officially filed for bankruptcy.  While many will point to the sui generis nature of the city as a one-industry town with extreme racial polarization and other unique problems, Detroit’s bankruptcy in fact offers several lessons for other states and municipalities across America.

The Day of Reckoning Can Take Much Longer Than We Think to Come

What’s most surprising about Detroit’s bankruptcy is not that it happened, but how long it took to get there. In authorizing the bankruptcy filing Gov. Rick Snyder talked about “60 years of decline.” He’s not joking. It’s been widely known that Detroit has been in trouble for a very long time.

Time Magazine ran a 1961 story called “Decline in Detroit.”  Jane Jacobs described its lack of vitality in her 1961 classic “The Death and Life of Great American Cities”:

Researchers hunting the secrets of the social structure in a dull-gray district of Detroit came to the unexpected conclusion there was no social structure….Virtually all of Detroit is as weak on vitality and diversity as the Bronx. It is ring superimposed upon ring of gray belts. Even Detroit's downtown itself cannot produce a respectable amount of diversity. It is dispirited and dull, and almost deserted by seven o'clock of an evening….Detroit today is composed of seemingly endless miles of low density failure.

Moving from urban planning to economics. She wrote in 1969’s “The Economy of Cities”:

This was the prosperous and diversifying economy from which the automobile industry emerged two decades later to produce the last of the important Detroit exports and, as it turned out, to bring the city’s economic development to a dead end.

These are both well known, but the record of troubles in Detroit even predates this, going back at least to Life Magazine’s 1942 article “Detroit Is Dynamite” which gave a prescient warning to the city just a year before 1943’s race riot.

For a city as uniquely troubled as Detroit to remain in serious decline for such an extended period of time before going bankrupt is a testament to the sheer resilience of cities. It also suggests that those predicting eminent doom for their own city unless it changes its ways are likely to end up as false prophets.

Indeed, Detroit’s day of reckoning may not even yet be fully given that various challenges to the bankruptcy filing are expected. The fact that Detroit has limped along for so long suggests that cities may be able to survive nearly definitely as “zombie municipalities” similar to zombie banks. Though this may possibly end a Greek style crisis at some point, a very lengthy existence as the undead would seem to be possible.

Decline Poisons Civic Culture and Sunders the Commonwealth

Detroit also illustrates that once decline starts it sets in motion a toxic civic dynamic that makes the tough choices needed to turn things around nearly impossible. Just as growth begets growth, decline begets decline, and part of the reason is social dynamics.

This comes about because in a city in decline – such as in late imperial Rome –people start thinking only about themselves and no longer come to see themselves as part of a greater enterprise or commonwealth. The city and suburbs, blacks and whites, taxpayers and unions no longer see their fortunes as linked. Rather than rising and falling together, it’s every man for himself.

When the pie is growing, it’s easy to come to an agreement over how to divide it because everybody can get a bigger slice at the same time. But when the pie is stagnant or shrinking, zero-sum thinking takes over. To make a sacrifice is seen to in effect allow someone else to profit at your expense. Perhaps these dynamics were present latently before, but tough times bring out the real civic character.

In Detroit’s case everyone from public employee unions who refuse to give up any of their benefits (and will no doubt fight to deny the bankruptcy filing) to suburban towns that would rather pretend the city does not exist have played a role in setting the disaster. With nobody willing to sacrifice for the greater good, prisoner’s dilemma logic results happen. You can see this playing out in nearly any troubled American city. By contrast, it seems to be healthier places like Denver that have managed to build stronger regional civic consensus. It’s simply easier in those places.

Instead, Detroit chased conventional wisdom approaches and fad of the month type endeavors ranging from constructing the fortress-like Renaissance Center to the People Mover to former Gov. Jennifer Granholm’s “Cool Cities” program, none of which did anything but generate hype. What they all had in common is a transfusion of subsidies to the city (and taking on debt) rather than building a consensus around addressing the real issues.

America Doesn’t Learn Lessons From the Past

The last thing Detroit teaches us is that America too often doesn’t learn from its mistakes. Detroit’s troubles have been evident for quite some time, yet it’s hard to see that many other post industrial cities have managed to carve out a different path. Rather, they pretended that Detroit’s civic was somehow unique due to its auto industry dependence – and managed to ignore other failed cities as well – while embarking on the same turnaround strategy via conventional wisdom and silver bullets.

They have even managed to ignore failures much closer to home. Booming new suburbs can look just 5-10 miles down the road to see yesterday’s hot spot now turned into a festering mess of dead and dying malls, declining schools, increasing poverty, and falling home prices. Yet most of them are simply replicating the same pattern that is destined to fail financially over the long term in any region without either severe building restrictions or very high population growth.

Sadly, none of these augur favorably for change. Detroit may continue to garner special international attention as a train wreck people can’t stop watching, but less spectacular slow motion civic failures seem likely to remain commonplace unless somebody finds a way to overcome these forces.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.

Photo by Kate Sumbler.

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Civic Failures

Detroit is just one example of over-specialization. Some cities have successfully reinvented themselves while others, like Detroit, clearly have not. But that is really beside the point, especially when you think about the the commonalities of civic failure throughout the country.

The problem is that local and regional government in the United States is teed up for a "zero sum" game just like the hopeless situation Detroit faced. I am convinced of this and Detroit is just the first bit of evidence that we're uncovering.

When you have as many political districts and local municipalities as the U.S. does, places like Detroit are inevitable. The competition between and among cities and political and metropolitan regions within the United States for investment, talent, federal funding, and wealth exhibits the same intensity as private industry competing within the same market.

Part of the problem is that the two playing fields (public and private) are becoming one. When the ballfield is overcrowded and you're not sure who is on what team; when most of the roster is redundant; and when there isn't enough action to keep everyone focused on winning the game - you get a bad news bears kind of situation. (apologies for the childish analogy)

We have too many people on the same team fighting for a spot on the roster. Pick the best players and get to work. Detroit wouldn't have made the cut 30 years ago by any objective measure, we need to stop dumping money into places where the benefits could easily be yielded by a better player (city)

Over-specialisation bad. Inter-jurisdictional competition good.

I agree that Detroit is an example of over-specialisation in a local economy. But I disagree that this is a significant problem US-wide. The US has numerous cities with a wide variety of economic activities. The more the market freedom, the less exposed to the Detroit syndrome a local economy is.

I also disagree that inter-jurisdictional competition is a bad thing. This is one of the USA's strengths, not a disadvantage.

The alternative, seen in effect in many other countries, is a stultifying oligopoly of local governments staffed by bureaucrats who all pursue the same groupthink, primarily based on motivations that are antagonistic to economic growth, the private sector, and economic productivity.

It seems incredible to claim this, but all decisions taken at the bureaucratic level, and all recommendations to politicians, are never based on the wider interest. They are always based on the interests of the bureaucracy itself. Its job security, pay and perks and promotion and growth in staff numbers.

Inter-jurisdictional competition of the US kind, where it is possible to incorporate new municipalities, is the only proven way to keep this effect in check. I would rate it as one of the main reasons the US economy is so productive.

I would also argue that the opposite effect and the stultifying, obstructionist groupthink in local policy in the UK, is a major reason why the UK economy is so LOW in productivity.

Learning from the past--and the present

A few things can be said with reasonable certainty: 1) The voters and other powers in the failed and failing cities support their corrupt governments and will not, in the foreseeable future, replace them with functional ones. If city voters do rebel, it will be in favor of something far worse than we have yet seen in the U.S. 2) Any organized solution, regional or otherwise, will fail if those corrupt governments have a say in it. 3) In a shakey economic and social environment, attempts to solve the problems of the failed cities at the expense of the viable suburbs (either through transfer of income to the cities, or transfer of urban problems to the suburbs) risks destroying the suburbs and cannot promise to benefit the cities as long as those cities are run by anything like their current governments.

The attempt to use talk of unitary "metropolitan areas" to ignore the numerous and fundamental differences between the core cities and their viable suburbs can have no purpose except to ensure that the corrupt core-city governments are included in any "solution".

I don't see any outcomes but unpleasant ones. Some, however, look a lot more unpleasant than others. It could be that temporizing with the problem is the safest course after all--keeping things shored up with short-term measures until, hopefully, some larger social or historic forces intervene to solve or supersede the current problems. Sometimes that works, sometimes it leads to an even worse disaster in the end. In any case, there are limits to the ability of the 21st-century U.S. to continue to shore up the cities at the expense of money or social disruption.

Of the other ugly and unpromising possible courses by which we might muddle through, the one that seems to me to best fit the facts, given the relentless incompetence of the governments of the failed cities (incompetence which is deeply entrenched in their societies), would be something along the lines of the Reconstruction regime with which the South was subdued and abused after the Civil War. The very idea reeks of abuse, in fact, but so do all the alternatives. When faced with frightening crises, it is generally essential to recognize unpleasant realities and act accordingly, even though it is also, generally, emotionally repugnant, and often highly inexpedient in the short-term.

Toxic politics and the failure of major cities

Most major cities are basically screwed in the long run. Some are not far behind Detroit when it comes to overspending, over regulation, over taxation, too much debt, local government corruption, high crime rates and lousy public schools. Most mask those problems far better then Detroit. Add one party rule for decades, badly negotiated union contracts and useless and pointless racial landmines, you have a toxic stew that will not solve any major problems in a realistic or even a rational way.

Most cities have tried the same things over and over again and again for the last 80 years. They compound their problems by copying each other with these "solutions". And most of the time they have failed spectacularly.

They are always one new stadium, one convention center, one shopping center, one new major company brought into town or some overpriced thing that will finally "turn the corner".

But it never does, and it never will. It may have a little success at the beginning (think of those closed off shopping streets in the 60's and 70's). The cost to taxpayers (many of which do not live in the city) is huge. For example NJ taxpayers are still paying for the first Giants stadium, which is now razed. They talk about how they are investments "in the future" but yet they never show a return.

The problem is this. The solutions to many of these problems are not very glamorous. There are no groundbreakings, ribbon cuttings, no grand openings, few times to be in front of the news camera to look good in.

They take lots of time, require lots of hard work, don't require huge amounts of single time spending. All things politicians don't want to do because they are hard and they don't get to be in the spotlight. Most major city mayors are tied to union labor, so are any of them going to tell them they have to do far more with far less? Of course not.

Most people will never notice things getting better because they take a long time to improve. It takes time to beat down the crime rate, improve failing schools and make sure trash is picked up in a reasonable amount of time. So they don't get any attention at all. Or worse, the latest trendy solution at huge expense is what is done.

Frankly, most politicians in places like Detroit, Gary, Camden and even cities not quite that bad yet are too invested in the way things are. It's easy to blame the feds in DC, the statehouse, the people in the suburbs (most of whom NEVER lived in the city), and everyone else that really have no say in how a city is run. These politicians could lose their jobs if things actually got better. At least with the way things are, they never lose elections. (why they don't is still a mystery)

So what happens is that cities live off their pasts. Many cities have a lot of "past" to live off of. However, at some point that "past" runs out. Detroit rose fast, so it fell fast too. Its like living off your retirement, you hope you expire before your money runs out. The thing is, a city really can't die. Detroit lived off its retirement money, and its gone. Not only that it borrowed against it. So it owes others money, even though it was given plenty of other taxpayers money over the years.

Once most or all of the taxpayers are gone, you run out of other peoples money fast. Plus people living outside the city are loath to give more money to this sinking ship, and to be honest, they really don't have the money to give, even if there was the will to give it.

I really don't see the small unglamorous things being done even with the bankruptcy. Its not even on those politicians radar. Until they don't believe that every problem can be solved with huge amounts of other peoples money, they will not change. Voters in those places will not hold their feet to the fire on these issues. Those that may have in the past have moved on.

I think major city politicians will learn very little from bankruptcy. They will all see it as a conspiracy against major cities rather then a new beginning. I only hope voters will somehow see that it is. To be honest that doesn't look good either.

Until this toxic political machine is broken in American major cities there will be decline. Whether it is fast or slow depends on the location, but the result is the same. Failure.