United States: Is There Hope for Detroit?

The city of Detroit, the birthplace of the automotive industry and largest city in Michigan, has declared bankruptcy, bogged down with $18 billion worth of debt, depleted state coffers and a declining population.

This decision caused a political and social earthquake, despite that decades of fiscal mismanagement by municipalities had made the outcome foreseeable to all.

Almost half of the city’s debt is from paying for retirees’ pension plans and health insurance, which potentially makes both current and former city employees the major losers in the administrative restructuring of Detroit.

This debt removal will also affect entities that have purchased city-issued bonds, although many of them are legally insured and will not incur losses. Labor unions suspect the city’s motive is to get from the bankruptcy what they would not get from negotiations.

Various factors, but mainly the declining population and thus declining tax base, are responsible for Detroit becoming insolvent.

In the 1950s, the city of Detroit had a population of roughly 2 million; now it is down to only 700,000. This [population decrease] means the city takes in much less income from taxes. The automotive industry crisis has affected the city as well.

By the end of the 1960s, the automotive companies began to open plants in other cities. This [move] catalyzed a drop in property values and income taxes. A large portion of the middle class and many businesses have fled Detroit, taking their tax revenues with them.

E.J Rodriguez of Jot Down Cultural Magazine points out that in its heyday Detroit was a Mecca of employment, one of the easiest places to settle down. It was proud of its nickname: “the Motor City.” Its immense automotive industry turned it into a flourishing and densely populated metropolis in which there was work, money, businesses and profit. Between 1900 and 1930, endless amounts of work attracted a six-fold population increase.

Its peak wasn’t just industrial; Detroit’s name came to be one that resonated way beyond its borders. The city succeeded in projecting to the outside world its own distinct culture. For example, during the 1960s, Detroit achieved universal fame due to the success of Motown Records, which was to Detroit what the Beatles were to Liverpool.

The 1990s and the turn of the century brought a total collapse for Detroit. The last great, remaining factories also left in search of employees who would work as much or more than union employees, but for much less money. The licensing requirements for new companies were below minimum. Even Motown, the [cultural] symbol of the city, chose to relocate to Los Angeles.

The black population in downtown Detroit was not alone in suffering from unemployment; the whites from the greater metropolitan area suffered as well (as Michael Moore documented in his film about the collapse of his hometown Flint, Mich.).

The global financial crisis of 2008 accelerated the mass exodus of inhabitants, leaving Detroit bled dry. Since the year 2000, more than 200,000 people have left Detroit’s urban center. Very often it’s the poorest of the poor who stay, resulting in per capita income crashing even harder and thus extinguishing the ability of City Hall to collect revenues.

The city has found itself with severe budgetary deficits and has taken extreme measures: going as far as withholding electricity, water and garbage collections from entire neighborhoods and, in certain cases, even suspending police and emergency coverage, all because there simply isn’t enough money to maintain them.

In recent months, the city has depended on state-backed bonds to pay the salaries of its 10,000 employees.

Since the beginning of the 1990s the center of Detroit already appeared desolate. Today it’s even worse. Entire areas of the city seem dead. Others are agonizing. Others survive.

It is estimated that approximately one-third of the city’s territory is in ruin or abandoned. The authorities themselves have decided to raze buildings that have remained empty to avoid having to maintain them.

The case of Detroit makes evident that urban development is closely linked to rapid changes in the production cycle in the global age of “free trade.” One of the questions being asked is whether, as the federal government bailed out General Motors in 2009, there is a similar plan for Detroit? There is no evidence that there will be. Nothing justifies such an action. Is there hope for Detroit? The prevailing response is that Detroit alone must climb out of the hole that it created.