The following essay from Joseph E. Stiglitz offers much food for thought.
As always, I'd love your reactions. What does Detroit have to teach us all? LJ]
The Wrong Lesson From Detroit’s Bankruptcy
When I was growing up in Gary, Ind., nearly a quarter of American workers were employed in the manufacturing sector. There were plenty of jobs at the time that paid well enough for a single breadwinner, working one job, to fulfill the American dream for his family of four. He could earn a living on the sweat of his brow, afford to send his children to college and even see them rise to the professional class.
Cities like Detroit and Gary thrived on that industry, not just in terms of the wealth that it produced but also in terms of strong communities, healthy tax bases and good infrastructure. From the stable foundation of Gary’s excellent public schools, influenced by the ideas of the progressive reformer John Dewey, I went on to Amherst College and then to M.I.T. for graduate school.
Today, fewer than 8 percent of American workers are employed in manufacturing, and many Rust Belt cities are skeletons. The distressing facts about Detroit are by now almost a cliché: 40 percent of streetlights were not working this spring, tens of thousands of buildings are abandoned, schools have closed and the population declined 25 percent in the last decade alone. The violent crime rate last year was the highest of any big city. In 1950, when Detroit’s population was 1.85 million, there were 296,000 manufacturing jobs in the city; as of 2011, with a population of just over 700,000, there were fewer than 27,000.
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8 comments:
What he said certainly jives with my experiences living in upstate NY the past decade (just recently moved back to TX). We lived outside of Albany, NY's capitol. Albany, like Detroit, struggles with the burden of high infrastructure cost because it is made up of non-taxable state properties, low-income housing, and a poor tax base. High crime, gang violence, and middle-class evacuation has left them in a terrible bind. They aren't Detroit yet, but their situation, I would think, is unsustainable long term.
Many in the suburbs used to live in Albany proper. They still use its roads, work in its office buildings (again, mostly state, so no taxes to city for those buildings), and take advantage of its free museums, hospitals, and parks. What they don't do, what they would never do is merge their cities to spread out the expenses of the infrastructure, etc. and broaden the tax base. But that is what should happen in many of these cities. Too many needlessly separated city govts that would be better off in the big picture through administrative mergers...but I don't hold my breath. Those in positions of power an influence are those who will roadblock such an idea.
I thought the stimulus bill was to repair the infrastructure. Oh wait, it went to the unions to buy votes.
In some ways, Detroit is a victim of its own success. Being on the Great Lakes, it was cheap to get iron and coal from the rest of the Midwest. Same for other raw materials too--just sail them up the St. Lawrence. Then cars got so popular that better road networks were built, and things started in a downward spiral.
Also, I think some of the blame can be laid on the pattern that the UAW followed. Squeeze the manufacturer that could least afford a slowdown or strike, then take that contract to the others. Also, each contract got more compensation, with barely any regard for poor economic conditions. Other unions took up this pattern of ever-better contracts as well. Management could afford the present costs, but underestimated future requirements. See Social Security, which was based on pre-Depression and Baby Boom reproduction and death rates for another example.
Poisonous politics divided the region at Eight Mile Road. The city blamed the suburbs for their troubles, and when you hear, "It's your fault, now give me resources," it's not surprising that the suburbs reject Wayne County.
There are lots of factors that contributed to Detroit's bankruptcy. Throw in betting the proverbial farm on the auto industry, disruptive competition from Japan and other parts of the US, and overly free credit, stir, toss in racial trouble, allow to simmer 40 years, and you get a debacle.
Detroit has been run by Democrat liberals for 60 years. What do you expect ?
Seems it would be best to read the article before commenting.
A declining tax base,increasing compensatory tax rates, declining jobs, and increasing welfare rolls which burdened the taxpayers remaining in Detroit, is a broad statement of the great city's fall. I have read that 45% of Detroit's citizens are illiterate and that probably parallels the welfare rolls percentage
Communist and black mayor Coleman Young is mainly responsible for the death of Detroit. His heir apparent, Barack Husssin Obama, will be responsible for the death of America.
Thoughtful article, and several thoughful comments. I have to agree the author let the big auto labor unions off the hook. They were heavily responsible for making the American auto industry uncompetitve, making demands it could not afford to meet and killing the golden goose. But the points about wider economic causes and the plight of the poor who are left, and that banks should not get paid when they took the risk (isn't risk and reward/failure what capitalism is all about?)all ring true.
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