Death of Detroit thread...

Dead Money

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Sadly, over time, we may see this play out in other cities, hopefully not.

What went wrong with Detroit?

Here are some different views

Detroit?s death by democracy


By George F. Will, Published: July 31 E-mail
DETROIT

In 1860, an uneasy Charles Darwin confided in a letter to a friend: ?I had no intention to write atheistically? but ?I cannot persuade myself that a beneficent and omnipotent God would have designedly created the Ichneumonidae with the express intention of their feeding within the living bodies of caterpillars.? What appalled him had fascinated entomologist William Kirby (1759-1850): The ichneumon fly inserts an egg in a caterpillar, and the larva hatched from the egg, he said, ?gnaws the inside of the caterpillar, and though at last it has devoured almost every part of it except the skin and intestines, carefully all this time avoids injuring the vital organs, as if aware that its own existence depends on that of the insect on which it preys!?

George Will
Will writes a twice-a-week column on politics and domestic and foreign affairs.






Government employees? unions living parasitically on Detroit have been less aware than ichneumon larvae. About them, and their collaborators in the political class, the question is: What. Were. They. Thinking? Well, how did Bernie Madoff or the Enron executives convince themselves their houses of cards would never collapse?

Here, where cattle could graze in vast swaths of this depopulated city, democracy ratified a double delusion: Magic would rescue the city (consult the Bible, the bit about the multiplication of the loaves and fishes), or Washington would deem Detroit, as it recently did some banks and two of the three Detroit-based automobile companies, ?too big to fail.? But Detroit failed long ago. And not even Washington, whose recklessness is almost limitless, is oblivious to the minefield of moral hazard it would stride into if it rescued this city and, then inevitably, others that are buckling beneath the weight of their cumulative follies. It is axiomatic: When there is no penalty for failure, failures proliferate.

This bedraggled city?s decay poses no theological conundrum of the sort that troubled Darwin, but it does pose worrisome questions about the viability of democracy in jurisdictions where big government and its unionized employees collaborate in pillaging taxpayers. Self-government has failed in what once was America?s fourth-*largest city and now is smaller than Charlotte.

Detroit, which boomed during World War II when industrial America was ?the arsenal of democracy,? died of democracy. Today, among the exculpatory alibis invoked to deflect blame from the political class and the docile voters who empowered it, is the myth that Detroit is simply a victim of ?de-industrialization.? In 1950, however, Detroit and Chicago were comparable ? except Detroit was probably wealthier, as measured by per capita income. Chicago, too, lost manufacturing jobs, to the American South, to south of the border, to South Korea and elsewhere. But Chicago discerned the future and diversified. It is grimly ironic that Chicago?s iconic street is Michigan Avenue.

Detroit?s population, which is 62 percent smaller than in 1950, has contracted less than the United Auto Workers membership, which once was 1.5 million and now is around 390,000. Auto industry executives, who often were invertebrate mediocrities, continually bought labor peace by mortgaging their companies? futures in surrenders to union demands. Then city officials gave their employees ? who have 47 unions, including one for crossing guards ? pay scales comparable to those of autoworkers. Thus did private-sector decadence drive public-sector dysfunction ? government negotiating with government-employees? unions that are government organized as an interest group to lobby itself to do what it wants to do: Grow.

Steven Rattner, who administered the bailout of part of the Detroit-based portion of America?s automobile industry, says, ?Apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit?s problems than were the victims of Hurricane Sandy for theirs.? Congress, he says, should bail out Detroit because ?America is just as much about aiding those less fortunate as it is about personal responsibility.?

There you have today?s liberalism: Human agency, hence responsibility, is denied. Apart from the pesky matter of ?voting in elections? ? apart from decades of voting to empower incompetents, scoundrels and criminals, and to mandate unionized rapacity ? no one is responsible for anything. Popular sovereignty is a chimera because impersonal forces akin to hurricanes are sovereign.

The restoration of America?s vitality depends on, among many other things, avoiding the bottomless sinkhole that would be created by the federal government rescuing one-party cities, and one-party states such as Illinois, from the consequences of unchecked power. The consequences of such power ? incompetence, magical thinking, cynicism and sometimes criminality ? are written in Detroit?s ruins.
 
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Dead Money

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Bankrupt Detroit needs to reinvent itself


By Robert J. Samuelson, Published: July 28
If nothing else, Detroit?s bankruptcy marks the symbolic closure of an era when heavy industry dominated the U.S. economy and, through its factories, the United States dominated the world. We think of our time as a period of wrenching change, but it?s not in the same league as the tumultuous transformations of the late 19th and early 20th centuries. In those turbulent decades, the country went from a predominantly rural society of farmers and small businesses to an urban nation of massive enterprises and crowded cities.

In 1870, three-quarters of the population was rural; by 1910, that was barely half. In 1870, there were no cities with more than 1 million people and only two with more than 500,000. By 1910, there were three with more than a million and five between 500,000 and 1 million. The rush to industrialize catapulted Chicago, Cleveland, Buffalo, Pittsburgh and St. Louis into major economic centers as the nation became dotted with steel mills and industrial plants. Detroit was a relative latecomer, emerging as the carmaking hub between 1900 and 1930. Its population exploded from 286,000 to almost 1.6 millionduring that time.








The great irony of Detroit?s bankruptcy is that it seems to suggest the obsolescence of central cities when just the opposite is true. As economist Edward Glaeser of Harvard University notes, many cities have undergone a renaissance: Boston, New York, Philadelphia, Seattle, San Francisco and others. All have stubborn concentrations of poverty, but many have benefited from gentrification and stronger job markets. High energy costs, a backlash against commuting, lower crime and cities? vibrancy have renewed their appeal.

In the countless Detroit postmortems, 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.

In the 1950s and ?60s, most Americans ? not just people in Michigan ? took the dominance of the Big Three for granted. General Motors, Ford and Chrysler commanded about 90 percent of the vehicle market. Who could challenge them? The result was a plausible and self-serving business model: high wages, generous fringe benefits, job security (with supplementary unemployment benefits to cover workers during temporary layoffs). The compact generally bought labor peace between the companies and the United Auto Workers. Given their market power, automakers could pass most costs on to consumers.

But what made short-term sense spelled long-term suicide ? for companies, workers, Detroit and Michigan. High costs, shoddy quality and mediocre management made the companies vulnerable to foreign competition from imports and nonunionized plants, generally in the South. Employment eroded. Worse, the auto industry?s model shaped the state?s labor market and policies. By 1978, average hourly earnings in Michigan were 32 percent higher than the national average. Michigan had an anti-business reputation. This frustrated the state in its efforts to diversify its economic base.

?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 postwar 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.

In New York, successive mayors were ?determined to make the city as attractive as possible to employers,? writes Glaeser in his book ?Triumph of the City.? In Seattle, about half the adults are college graduates, creating a favorable climate for start-up companies. Meanwhile, ?Detroit had stifled the diversity and competition that encourage growth,? writes Glaeser. Mayor Young favored new construction projects, he adds; these provided short-term jobs without improving the city?s economic base.

Can Detroit reinvent itself? It?s now caught in a vicious cycle. Dismal city services deter growth. The crime rate is five times the national average. In 2011, Detroit had 344 murders; Cleveland had only 74 and Pittsburgh, 44. But the city can?t raise already-high taxes without also threatening growth. By reducing debt and pension payments ? though hurting creditors and retirees ? bankruptcy might break this cycle. But there?s no quick fix. What Detroit teaches is that those who deny economic change often become its victims.
 
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