Greed: The Story of Detroit's Downfall

A city that once was a symbol of the greatness of American industry is now considered by many to symbolize the bankruptcy of neoliberalism.

Detroit flourished as long as the state financially supported the car lobby without wanting much in return, although many warned about severe tension that sooner or later would lead to disaster. It is no coincidence that the riots that broke out there in 1943 and 1967 were only matched by those in Los Angeles in 1992 in terms of violence and destruction. Likewise, downtown Detroit resembles a post-nuclear Ukrainian city, Pripyat. However, there public funds were used to build, among other things, a passenger rail system — the latest rail route was opened this year— which, like a museum or water park, has improved the standard of living and helped solve social problems.

A Visionless City

In 1950, there were 300,000 jobs in the automotive industry in Detroit. In 2011, there were only 27,000. At the moment, there are only two automotive factories in the city, so it is no wonder that taxes cannot cover current city expenditures — the police and fire departments are gradually being dissolved and half of the streetlights don’t work. As a result, the murder rate per capita is 11 times higher than in New York, which in the ’70s was a symbol of the downfall of great cities.

However, the biggest disaster is yet to come, as half of the $18 billion debt is owed to pension funds. The court has not yet approved to declare the city bankrupt because it would ruin the lives of thousands of people.

It is not money that is Detroit’s biggest problem. The problem is the lack of vision for development, which stems from the fact that the city is being deprived of social foundations. How else would you describe a recent idea to close half of the local schools and crowd students into 60-person classrooms? As if things weren’t bad enough, the level of education among the inhabitants is disastrous; 47 percent of them are functionally illiterate, so the city lacks the experts able to develop a recovery plan other than that based on hackneyed neoliberal ideas: reduce the costs, make people clench their teeth and they will find a way to survive.

Escaping the 8 Mile District

This is not going to happen mainly because Detroit inhabitants do not know how to cooperate, and the city has been fraught with segregation and racism. And both white and African-Americans bear responsibility for that. James Michael Curley, Mayor of Detroit in the early twentieth century, favored the Irish.* Coleman Young, the first black mayor — elected six years after the riots of 1967 — favored his own people; two Harvard economists, Edward Glaeser and Andrei Shleifer, proved this. They stated that Young made cuts in public services for the middle class and raised their taxes. As a result of his governance, the African-American population increased from 44 to 76 percent, and the white middle class fled the city.

Despite the rise in crime, Young decreased the number of police and bulldozed 1,500 houses inhabited mostly by Polish immigrants, trying to make room for a General Motors factory. He traveled by a bulletproof limousine and a jet if he had to leave Detroit. His arbitrariness was facilitated by the fact that Detroit councilors were elected to represent the whole city, not just the districts. As a result, the community could not know if they performed their duties.

The city also lacked a coherent urban policy. Properties in Detroit resemble Polish suburbs of the ’90s : no trees, ordinary small houses with no real amenities. The residents of such places do not strongly identify with them. The center was abandoned because trade and services moved outside the “8 mile,” just like the middle class.

Paul Krugman, one of the most prominent American economists, points out in his column in The New York Times that a comparable city, such as Pittsburgh, has about half of its workplaces within 10 miles from the center of the agglomeration, while Detroit has only a quarter. As a result, Pittsburgh bounced back while Detroit hit the bottom.

Gordon Gekko Was Wrong

The dominance of automobiles made it even more difficult to develop downtown, which by its nature is hard to reach by car. Road construction incurs high fixed costs — not coincidentally among bankrupt governments is California, the most motorized state with the longest, but worst, road in the United States. The car lobby replaced trolleys with buses, which are more expensive and inefficient in the long run. The same happened in Los Angeles, which induced many residents to buy a car and move out to the suburbs where there are more parking lots.

Detroit is a symbol of the many American cities that throughout the 20th century evaded problems rather than solved them. Instead of strengthening security, you can offer residents an escape from ruined districts, and instead of developing public education you can suggest sending children to private schools. Instead of uniting feuding groups, you can favor one or another. Instead of building an attractive city center for inhabitants, agree to build another mall in the suburbs. Finally, instead of developing public transport, you can persuade people to buy cars.

It’s just that sooner or later such a policy leads to ruined cities and bankrupt pension funds. For the short-sighted, greed doesn’t develop — it destroys. It destroyed Gordon Gekko from the movie “Wall Street,” who believed in it blindly, and buried Detroit, which once was the capital of the American automotive industry.

*Editor’s note: James Michael Curley was the mayor of Boston in the first half of the 20th century, and was well known for corruption.