The Decline and Fall of Detroit

The bankruptcy filing and underlying train wreck of the once prosperous city of Detroit carries so much symbolic and practical baggage as to be beyond the scope of a single post. So rather than attempt to do a deep dive, particularly since the media and various experts are still weighing in, I thought I’d offer some high level observations and let readers provide more information, observations, and links.

The wreck that Detroit has become was long in the making. Even when I was a kid living in the Upper Peninsula of Michigan in the early 1970s, Detroit was in bad shape. Like many major cities, it had an advanced case of white flight. The inner metro area was seen as dangerous, decaying, and probably beyond rescuing. But it was hardly the only major city to be under stress then New York teetered on the verge of default during the 1970s recession. While the Big Apple restructured its finances, the fight over the city’s budget was an early taste of the thinking that would become more entrenched in the Reagan era: the financial markets would have a major say over what solutions were up for consideration.

Dan Hopkins at the Monkey Cage flags Thomas’ Sugrue’s pathbreaking work, The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit, as the key reference in understanding what went wrong with Detroit and other major cities. In an interview in the Globe and Mail, Sugrue sketches the major factors in Motown’s decline:

What are the most important factors that contributed to Detroit’s current mess?

The first is long-term disinvestment from the city, meaning the flight of capital and jobs from Detroit beginning in the 1950s. It is employers and employees that provide the bulk of the funds for a city’s tax base. Secondly, intense hostility between the city and the rest of the state, which has a very strong racial dimension. Detroit has a long and painful history of racial conflict in local and state politics. That has contributed to the third major factor: the collapse of state and federal support for the city, which was crucial to its survival – and indeed to other cities’ survival – for a lot of the difficult times from the 1950s on forward. As a quick aside, when New York went through its fiscal crisis in the 1970s, it was bailed out by the federal government. There’s no bailout in place for Detroit today.

Who’s to blame here?

There is policy and political blame aplenty to go around. That is, officials in Detroit kept a large city government that was not proportionate to the city’s shrinking population in place. The state cut funding for infrastructure, education and transit. And the federal government steadily withdrew urban support beginning in the 1980s. The folk wisdom in Detroit is, ‘Oh, it’s mismanagement in city hall that caused the city’s problems.’ City hall is a player for sure, but the causes of this were far deeper. It had to do with macroeconomic and macro-political problems that were well beyond the boundaries of the city.

Sugrue also stresses that Detroit was a one-industry city. And as much as the entire Midwest has been hit hard by America’s industrial decline, Detroit rose further and fell harder. Grosse Point was once one of the wealthiest communities in the US. Well paid auto company jobs lifted all boats in the surrounding area. Yet by the 1970s, the auto industry was becoming the symbol of sclerotic American management. The auto industry fought more stringent pollution and fuel efficiency standards. Their political victories accelerated their decline, as carmakers in countries that adopted tougher rules (and had higher fuel costs) made lighter, cleaner, lower cost cars for their home market, and those cars took share in international markets, and increasingly in the US, from the heavy, bulky American models.

But it wasn’t just the auto industry’s famed “what is good for General Motors is good for America” attitude that contributed to their decline. Big auto companies were increasingly just plain poorly managed. I recall when I was in business school (late 1970s), there was a great deal of soul-searching in the business media regarding the decline of American manufacturing. The two most commonly cited factors: Germans and Japanese had newer factories, which gave them a cost advantage, and they were much better at managing factory workers. The proof of the latter came through Nummi factory, a joint venture between GM and Toyota, which was launched in 1984 using a factory that GM had shuttered in 1982. From Wikipedia:

GM saw the joint venture as an opportunity to learn about lean manufacturing from the Japanese company, while Toyota gained its first manufacturing base in North America and a chance to implement its production system in an American labor environment…

The choice of the Fremont plant and its workers was unusual. At the time of its closure, the Fremont employees were “considered the worst workforce in the automobile industry in the United States”, according to the United Auto Workers. Employees drank alcohol on the job, were frequently absent (enough so that the production line couldn’t be started), and even committed petty acts of sabotage such as putting “Coke bottles inside the door panels, so they’d rattle and annoy the customer.” In spite of the history and reputation, when NUMMI reopened the factory for production in 1984, most of the troublesome GM workforce was rehired, with some sent to Japan to learn the Toyota Production System. Workers who made the transition identified the emphasis on quality and teamwork by Toyota management as what motivated a change in work ethic.

By December 1984, the first car, a yellow Chevrolet Nova rolled off the assembly line. And almost right away, the NUMMI factory was producing cars with as few defects per 100 vehicles as those produced in Japan. But 15 years later, GM had still not been able to implement lean manufacturing in the rest of the United States, though GM managers trained at NUMMI were successful in introducing the approach to its unionized factories in Brazil.

Big Auto played a strong hand in the erosion of industry employment in Michigan, first embracing the use of maquiladoras, plants built initially just over the Mexican border to produce for the US market. The later variant was the Sunbelt strategy of locating non-union plants in the South and getting states and municipalities in bidding wars to see who would provide the juiciest subsidies.

Another development that didn’t help Detroit was the stranglehold that Manuel Moroun obtained over the Ambassador bridge which connects Detroit to Windsor, Canada. It is the biggest single border crossing into America, and handles 25% of merchandise trade between the US and Canada. The owners of the bridge took it public in 1979 and Mouron eventually obtained control. The tolls are set far higher than at other border crossings, discouraging casual crossings between Windsor and Detroit and thus leading them to be less integrated and diverse economically than they would otherwise be (see Jane Jacobs on the importance of diversity for urban vitality).

This is hardly a complete story of why Detroit got to be in such deep trouble. But the critical part to underscore is that its terrible condition was not the result of incompetent and self-serving city leadership (although it’s had a lot of that too) but has much deeper roots.

And rest assured it is in deep trouble, as this Bloomberg clip helps explain:

I don’t have any personal attachment to Detroit, but I lived in another midwestern city, Dayton, which had suffered a large, albeit not as catastrophic, decline. What bothers me is the nagging sense that this wasn’t necessary, that there were paths that would have alleviated the damage. But part of the American history of being a rich country is we’ve always been casual about waste, and that includes being willing to treat cities as disposables.

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  1. Steve Baker

    ‘Roger and Me’ was a very good film, it captured some of what was going on quite well. Drive down 75 today and you’ll see big Casinos rising out of industrial rust. Why do Casinos rise, to strip more from the poor, in destroyed areas? Think Atlantic City, unbelievable slums.

    1. Moneta

      Here in Quebec, Canada, they tried to raise tuition fees on university students and generated a strike.

      The same government decided to refurbish a casino (300M$ I think), a multi-million dollar project. When asked who the target clientele would be, the answer was the 20 year-olds… who have no money???!!!

      So we spend 20 years educating them and keeping them healthy and they we throw them into the lion pit? Go figure.

    2. Lorne Beaton

      I live in Windsor, Canada, and we are partly to blame for the casinos coming to Detroit. In 1990, the left-wing New Democrats were elected as the governing party in Ontario for the first time ever. They increased social spending just as a recession was coming on, so there was a $9 billion budget hole to fill. To raise revenues, they decided to legalize casino gambling in the province and take a cut of the proceeds. Being within a few hours’ drive of tens of millions of Midwesterners, Windsor was selected for the pilot project. It wasn’t the worst idea: we would hoover money out of the U.S., bring jobs to the city, export the social problems and laugh all the way to the bank.

      Those were fun times — Windsor was being courted by casino developers, and even Donald Trump graced us with his presence for a day or two. The city government actually rose to the occasion and negotiated decent terms for the city. Of course, it takes years to build a proper Vegas-style casino, so they picked a building in downtown Windsor to do a quickie renovation into a temporary casino: the art gallery. The gallery was re-housed in a shopping mall for several years while the permanent casino was built. It’s still there and the slot machines are still jangling. Detroiters saw how much money Casino Windsor (now Caesar’s Windsor) was pulling out of their city and decided they might as well try to keep some of the money and jobs on their side of the border. Dennis Archer, the mayor of Detroit at the time, opposed the move, but he was overridden by a referendum. You’re welcome!

      1. Patricia

        The city voted casinos down, twice, during Coleman Young era. The third time, it passed by a thread. Voila. So we do thank you, but it wasn’t very much your fault.

        By the way, when I see my sissy, we often walk along the riverfront. Beautifully done!

  2. Moneta

    But part of the American history of being a rich country is we’ve always been casual about waste, and that includes being willing to treat cities as disposables.
    That’s one big difference between Canada and the US. Our cities are more concentrated and along the border in warmer areas.. we can’t afford to generate ghost towns. Therefore, burbs and cities are probably safer here. But even then, we’ve managed to let our infra go.

    Calgary has known an oil boom over the last decade, yet the city still looks unattractive. When I commented about this to a cousin who moved there in the mid-90s, he thought it was wonderful… it just showed the money was going in the pockets of the individuals… so they can buy bigger houses that need more energy to maintain and more toys of course.

    1. LifelongLib

      All part of the plan (and not just in Canada). The scuzzier and less-available public spaces and services are, the more private property people need to have decent lives.

  3. from Mexico

    Yves said:

    Big Auto played a strong hand in the erosion of industry employment in Michigan, first embracing the use of maquiladoras, plants built initially just over the Mexican border to produce for the US market.

    I had breakfast Saturday morning with a friend of mine who has some acquaintances who work for one of the Ford plants here in Mexico. I was under the impression that a factory worker for one of these US-owned plants made about 1000 pesos a week, or about $75. But he told me no, they only make 800 pesos a week, or about $60.

    Since 1982, with the imposition of neoliberalism and NAFTA upon Mexico, the purchasing power of the average Mexican worker has fallen by 50%:

    Without the safety valve of 11 to 12 million Mexicans (almost 20% of Mexico’s working-age population) who have fled to the US and who send about $20 billion a year back to family still living in Mexico, plus $50 billion flowing into Mexico each year from the drug trade, I don’t see how Mexico could have kept from exploding long ago.

      1. OpenThePodBayDoorsHAL

        Thank you for trying to keep the TPP in view. This grotesque capitulation to the worst wet dreams of mega-corporations, negotiated completely in secret (unless of course you’re one of those corporations) needs to go down as the biggest sovereignty grab in world history. Countries will be told what wages they can pay, what benefit schemes they can offer, and what internet content they may offer. Corporations can sue countries if they don’t make the profits they expected (!!!). I mean when does this all stop already? When does some brave man or woman stand up somewhere on the planet and say “but have you no decency sir?”

    1. sleepy

      The relationship between Mexican and American elites is “you wash my hands, I wash yours”.

      The US gets cheap labor, access to Mexican resources and markets, and as you say, Mexico gets to send its most impoverished–and potentially most politically dangerous–citizens out of the country.

      1. JEHR

        Sleepy, maybe you meant “or” rather than “and” in connecting the poverty stricken with the potentially most dangerous people. Poverty does not always mean people are dangerous or even potentially dangerous.

        1. sleepy

          What I meant was that the immigration of millions of desperately poor people from Mexico creates a convenient safety valve that reduces pressure on the Mexican state to create a more just economic and social system within Mexico.

          I wasn’t trying to malign the poor at all, just to state that immigration policies allow Mexico to rid itself of millions of citizens who, if they remained in Mexico, could create political problems for the Mexican state.

    2. Odin VonTogan

      In 1982 I had a summer job at an auto-industry plant in a small town in the midwest – moved to Mexico in 1984. That small town is economically obliterated. In 1998 I was an engineer in Detroit suburbs, and that part of ‘Metro Detroit’ is wealthier than most communities in the USA. In 2007 I was working in North Dakota on a natural-gas pipeline construction project. North Dakota is now in economic boom times. Several of my coworkers were from Mexico, and exactly as you say, they sent most of their paychecks back to Mexico for their wife and kids. No economy on the planet ever worked, ever did, or ever will, without jobs using resources and adding value to them. Who is going to spend money in casinos if they don’t have a job to make money from?

  4. F. Beard

    The implicit social contract with our money system is that the banks and so-called creditworthy shall be allowed to steal (via dilution) the population’s purchasing power and invest it for the common good, providing jobs and better goods and services in return. Yes, we have better goods at least (Services maybe another matter) but many of the jobs have been automated away with the worker’s own legally stolen purchasing power.

    So is the solution to become Luddites so we can do the work machines can often do better? Or should we void the current social contract (e.g. abolish government deposits insurance, abolish the Fed, abolish sovereign borrowing, bailout the entire population with new fiat, establish a Postal Savings Service, etc) and force, by economic necessity, business to share wealth and power rather than legally steal them?

  5. Danb

    I have a personal attachment to Detroit, having grown up in Highland Park and Hamtramck. There’s nothing to disagree with in Yves’ gloss of the city’s demise, but there is something to add. First, however, I’d stress 1) that as a child I became aware of how deep and perverse the racism was and 2) as I matured I saw how the introduction of the freeways -Detroit has multiple neighborhood wrecking freeways- facilitated white flight and segregation (my black friends never went to the suburbs, and most white suburbanites never went “into the inner city”). In Hamtramck, which had a rigidly defined white core of residents with black living on the city’s periphery, the goal of almost all white kids was to move to the northern suburbs, Sterling Heights or Warren –or to Troy, Bloomfield Hills or Birmingham if you could afford living there and acculturate so as to disguise your Eastern European origins.

    That said, I believe that the fundamental or distal cause of Detroit’s collapse is rather obvious: the city was the epicenter of an economy built upon massive consumption of a finite resource, oil. If we think about peak oil Detroit becomes the leader once again, but in degrowth. Modern societies can no longer function at the level of complexity they once did; we don’t have the net energy inputs to keep it going. This is not to overlook the depredations of neoliberalism and the other related proximate causes of Detroit’s demise. Modern societies are at the limits to growth, in ecological overshoot and undergoing a first phase reaction of economic contraction; disintegration of modern finance, as evidenced by massive corruption and wealth destruction; and political upheaval. In business school jargon, neoliberalism is incapable of recognizing, let alone aligning with, the post-peak oil world.

    1. Susan the other

      The only answer neoliberalism has to their collapsed capitalism is an economy based on casinos. Old fashioned ones, or new-fangled ones called “securitized investments.” It would be a testament to human sanity if Detroit and Michigan and the US Treasury/Fed all got together and turned Detroit into an Italian poem. Turn the devastation of war into a lush paradise. This is possible but not under the old standards of return on investment. Detroit could be a mecca for a new age of self-sustaining cities based on local agriculture and small manufacturing; on low productivity jobs of high social value. With munibonds guaranteed by the Fed. Somebody, quick, let Wolfgang Schaeuble know what is actually possible.

      1. Beppo

        I don’t want to turn people working their asses off to scrape by, keep the lights on, and get enough to eat, into like some blog post, but things are definitely trending in that direction.

  6. run75441

    Hi Yves:

    Great post on the tragedy of Detroit. Let me add a little bit of my manufacturing knowledge to this. You do not need a new factory to compete, what you do need is better throughput. GM, Ford, Chrysler, etc. could have always competed if management chose to do it.

    I worked at Parker Hannifin Fluid Power in Desplaines, IL as the P&IC manager for two manufacturing facilities and nine assembly plants. The comment I always heard from the design engineers was; “we are profitable in spite of ourselves.” The same held true for the automotive companies. They could do whatever they wished to in the past as the demand was always there to make them profitable.

    When I talk of better throughput, it implies faster production with minimum amounts of inventory at each operation, little incremental wait time between operations, and short transit distances between operations. Rearranging a shop floor to maximize the flow and minimize the time spent is critical. You do not need the Toyoda Production System to implement such a process. You just need to understand the process. It was always in front of them except they were profitable in spite of themselves. There was no impetus to do so until it was too late and they lost market share.

    Something many people miss and it is still in practice at the OEMs is the inventory build to so many days of inventory always on hand for sales. It is still around 60 days of forecasted inventory for which there is no immediate demand. If you improve throughput and shorten the amount of time to build a complete auto, then you can change your production plan from building to inventory to building to demand. This drops overall inventory of finished goods dramatically. The EOY sales of autos is a clear indicator of what colors, styles, etc. were not big sellers but were forecasted at a higher level of demand.

    1. Watt4Bob

      Hey Run, good to read your words again!

      Add to the mix, the American market’s love of ostentatious displays of wealth; Chevy Suburbans dolled up to look like Presidential limousines, and you have a depressing picture.

      I saw one of these Big Black Mariahs the other day sporting a ‘I’d Rather be Waterboarding’ bumper-sticker.

      I can think of no group who more loves them some Ayn Rand, than the upper levels of the auto heap.

      They believe Detroit is the result of auto workers pricing themselves out of a job.

      1. run75441

        Hey Watt4Bob:

        I usually post at Angry Bear Blog on assorted things as well as 10 Minute Cup. Yves sometimes posts some interesting things which I like so I stick my two cents in here and there.

        While some of Detroit’s issues were the auto industry, I would suggest much more was due to how the city was segegated from Wayne County and the surrounding counties where the wealthy went to live and the companies moved to. When the NAACP went to court over segregated schools, it won in District and COA and later lost Miliken vs Bradley) in SCOTUS. What that did was further entrench the boundaries of Detroit to what we know today with lower income relegated to Detroit and higher incomes outside of it. The city itself could not annex other land to expand upon its now deteriorating tax base withot state consent. The city and the state have been at opposite ends for a long time.

      2. davidgmills

        How did auto workers price themselves out of a job? The average German auto worker costs the German companies about $60 per hour, yet the German companies are very profitable. These same companies come to the US and pay the US workers $15 -20 per hour to do the exact same work, because they can get away with it here.

        It has nothing to do with worker greed and everything to do with management greed. Why do you resent American workers so much? Resent the management instead.

    2. nonclassical…

      it wasn’t DEtroit process that was detrimental-Japanese car makers simply created a better-more desirable product…

      Honda put over 20% of profit$ back into research and development…while creating new machinery-technology…investment in the future…

  7. F. Beard

    What bothers me is the nagging sense that this wasn’t necessary, that there were paths that would have alleviated the damage. Yves Smith

    “I like to hear all the American (liberal & conservative) excuses about Detroit and the Rust belt: All the normal horse sh**.

    All you have to do is drive across the bridge to Windsor, Canada. The neighborhoods are prosperous. The mills and factories and offices and technology parks are running and producing. The wages are high. The population has been relatively stable for decades. Crime is low. There are grocery stores, public services, health care. Everything works. They didn’t get the old-liberal memo about the inevitable decline of industry. They didn’t get the neo-liberal memo about good middle class jobs. They didn’t know the Republican story that lower wages were required to compete with Asia, apparently. They didn’t know that everyone needed to go back to public university every few years to be re-educated/indoctrinated into the neoliberal mentality to solve the economic maladies that faced them while incurring debt and falling wages. Quite striking really how full of crap all the excuses are when you see how vibrant Detroit could be, SHOULD BE, only two miles away. All the ‘reasons’ and excuses fold back on themselves and the only reason that exists, is poor governance. There is no other satisfactory explanation for the failures on every single front. “ Ryan Harris comment on Mike Norman’s site from

    1. Patricia

      Beard, Harris is dead wrong. First, Windsor has been a struggler—it had a milder version of Detroit’s ills because it was on the edge of the auto industry. It began around a whisky plant and that remains. Also important: it wasn’t ripped apart by racial BS—it is mostly white. But most importantly, it is in Canada which, in spite of Harper’s best efforts, remains yet a civil society and that includes their health care system.

      My sister lives in Windsor and I live here in Detroit. The outrageous tolls over the bridge are the same for the tunnel. Maddy Moroun is a greedy old ass. And other greedy people follow behind him, “Well he’s doing it so…”

      BTW, there are random checks before you get to the formal border crossing, going into Canada, by our lovely NSA.

      Moreover, I am sick/tired of hearing political mismanagement being first mentioned, much less presented as the only cause of Detroit’s condition. When someone opens their mouth thusly, I know three things: he remains stuck in neo-lib goo, he can’t think very well, he doesn’t understand ethics.

      Yes, mismanagement occurred. It is nothing to what occurs in Chicago, though, and that city isn’t in bankruptcy, is it? So look elsewhere. Plus we also had some fine mayors. The problems in Detroit go far beyond the ability of a mayor to either repair/destroy.

      Yves is correct, apply the travesties of decades of “free marketeering” to the stupidity of the inert industry of that era, and the outlines of Detroit are seen. Add in a long-term disconcerting racism (never seen it worse than here) and you have Detroit.

      One small eg: A long time ago, we had a trolley system here. It was dismantled because of the automobile and no good transit system put in its stead because, automobile. The freeways that were ripped through the city were because, automobile. This had nothing to do with the civil society and everything to do with big business.

      Re bankruptcy, we are talking about old people getting their pensions. People who lived/worked in the city were always paid less and had a harder job than in burbs. That the state/fed would not come through for them makes me soooo terribly angry that I could, well, wack this Ryan Harris upside the head. The gall of vast ignorance and lack of humanity! Because of the dumb suburbs, there is even some discussion here that if they want their pensions, these old folks should be forced to move back into the city. Imagine what kind of thought processes one would indulge to think that is ok.

      The remaining people in this city are poor and they cannot carry the legacy burdens; it is so bad that we cannot provide for ourselves what we need. We are saddled with the hulk of a vast old city and no one gives a crap—people just left for the burbs and became ridiculously self-righteous. There is even some discussion among the suburbanites that if these people want their pensions, they should be required to move back into the city. Imagine what kind of thought processes one would indulge to think that is ok!

      When cities separate from their poor areas, they will eventually be done in by them. This is the simple consequences of ethical stupidity. Our country is FILLED with ethical stupidity. Bah

      1. F. Beard

        I think you misunderstand Ryan. He’s not blaming local government; he’s blaming the US Government and I fully concur.

        I’ll go further and say, along with Rodger Malcome Mitchell, that the US Government, being monetarily sovereign, should provide generous pensions for all US citizens, those that need them, that is.

        1. Patricia

          Ok, Beard. I been roaming around the house since I woke this morning, foaming at the mouth. You were unwitting recipient. Arg.

          1. F. Beard

            Nah, twas a natural mistake and I took no offense anyway.

            Here’s another Ryan Harris comment (same link) that is PERFECTLY clear:

            Why did the United States lose the ‘manufacturing base’ but Canada did not?

            It wasn’t an accident.
            It wasn’t the invisible hand.
            It wasn’t productivity.
            It wasn’t inevitable.
            It wasn’t the Unions.
            It wasn’t Asia.
            It wasn’t skin color.
            It wasn’t flight to the southern states.
            It wasn’t debt in Detroit.
            It wasn’t to ‘lower consumer prices’
            It wasn’t because of Walmart
            It wasn’t globalization.

            It never left Canada, they have the same factories producing steel and cars and what not. Canada is productive, they have unions, they have regulation, they compete against Asia, they have black people. They have *gasp* socialized medicine. So all those excuses for reasons why America doesn’t have manufacturing are debunked. Canada maintained those industries despite all those same issues.

            Yes, Detroit had debt that became unmanageable as the city shrank, but the debt did not cause the city to shrink in the first place.

            It was a political decision to remove the manufacturing base.

            Democrats and Republicans decided to shutter industries to pursue fiscal, regulatory, trade and other policy objectives which is fine but don’t attribute it to other factors like skin color or unions or regulations in the south depending on your political party.

            I hate it when politicians won’t admit they designed policies that caused this outcome. They had a choice on which combination of laws and policies to enact and it went horribly wrong for Detroit. Canada went the opposite way and it went swimmingly well.

            Time to own up to the political failure. It is important to examine because it is a failure in Democracy when every level of government didn’t serve the people in an enormous geographic region. What is worse is that they convinced constituents that it will never come back, that people need to move and change, the politics are set in stone. They were never challenged on the fact that it was not market forces or the invisible hand causing it to happen. Ryan Harris

            1. Moneta

              The thing is the US has the reserve currency and Canada is one of its export serfs.

              The problem with the US is that it has never managed to eradicate the Babbitt syndrome.

            2. MaroonBulldog

              “It was a political decision to remove the manufacturing base.” Yes, it was. It absolutely was. The “service economy”: what a stupid program to get behind! Problem is, you can’t feed yourself or clothe yourself or warm yourself by services alone.

              Racine, Wisconsin, where I came from: Great manufacturing base 50 years ago, nothing much left now but S. C. Johnson, turing lake Michigan water and little else into household cleaning products.

          2. The Black Swan

            I am very interested in learning about Detroit from people living in the city as research for a novel. My hope is to travel to the city sometime at the end of the summer and would like to connect with some locals while I am there. If you would at all be interested in helping me or just talking to me, you can click my name and go to my blog and contact me there.

            The Black Swan

              1. The Black Swan


                I didn’t want to post my email, but well… I am very interested in what is going on with Detroit, so here goes…


                I hope to hear from you soon.

                The Black Swan

      2. brian

        “It is nothing to what occurs in Chicago, though, and that city isn’t in bankruptcy”


        Looking at the figures I don’t see how Chicago is solvent. They certainly cannot afford to pay for all the pensions they promised.

        If you put off paying for pensions until ‘later’, eventually you will owe too much. It is just math. Nowhere in the western world were people forced to save an adequate amount for their pensions during the 60s,70s,80s,90s.

        Detroit had the most severe population decline and is the canary in the coal mine.

        1. nonclassical


          when profit$ were running wild, corps refused to conduct raises, agreeing rather, to retirement benefits…which some of us knew would end being blamed for “disaster capitalism”, as we knew our 70’s-80’s “Chicago Boys”=Milton Friedman South-Central America history…

      3. Klassy!

        Yes, you are so correct about the “political mismanagement” angle. There are plenty of cities doing fine (well, comparatively so. Nobody is really doing “fine” in 2013)that have problems with mismanagement or corruption.
        Ann Arbor is doing fine. Is this because of good management or just maybe, perhaps they have a huge research university?

  8. Jim Haygood

    ‘The [Ambassador Bridge] tolls are set far higher than at other border crossings, discouraging casual crossings between Windsor and Detroit and thus leading them to be less integrated and diverse economically than they would otherwise be.’

    Wikipedia says that the current toll rate for cars is a swingeing $4.75 (CAD or USD).

    One’s heart bleeds. On three major NYC-NJ crossings managed by the Port Authority of NY & NJ, the one-way (eastbound only) toll is $13.00 (thirteen) dollars.

    These tolls are a huge cash cow for the Port Authority, which uses them to subsidize other activities that it conducts in its designated bistate region.

    Jane Jacobs was surely right about the damage done by erecting economic barriers which artificially balkanize what should be an integrated metro economy.

    Anyone up for a class action suit against the Port Authority, to demolish its unconstitutional interference with interstate commerce?

    1. MaroonBulldog

      It all depends on what you’re comparing it to: $4.75 could seem like a lot for a bridge toll when you might be able cross the whole state of Ohio for less–I don’t know for sure; I haven’t driven the Ohio tollway for 8 years, but thelast time I did, the toll was less than it costs to cross a brige here in the San Francisco Bay Area. But then again, you only half to pay the toll here when you’re driving toward the City.

  9. patrick k

    As some one who lived there at the very end of its golden age, 1966-73, the transformation was very rapid after the riots in 1967. My neighbourhood around the University of Detroit was primarily white along with upper middle class blacks. One way or another, everyone seemed to be connected to the auto industry. Working the summer shift paid for my college. By 1973, I kid you not, I was the only remaining white person living on my street with the ground floor unit of my two story brownstone boarded up. The riots released a crime wave that is hard to conceive of. Of the forty or so homes that constituted our block club all but mine were broken into multiple times within three years. (you had to climb a tree to reach my back porch) Virtually everyone moved out–black and white. Those that stayed got armed. You could not walk into a corner store south of six mile without seeing the store owner with a pistol tucked into his belt. Shootings were everywhere. The final straw for the whole city was the collapse of the auto industry. Mayor Coleman Young, with his perceived race baiting ways, was the official undertaker starting in 1974. He presided for 20 years!

    But no worries. With Detroit at almost 90% black they will be bailed out. I expect Sharpton and his cronies to relocate there soon. There will be a lot of huffing and puffing but they are getting the money.

    1. patrick k

      For the hell of it I just spent time on goggle maps, street view, to see what has become of the old neighborhood. I’m shocked. It is way nicer now than it was in 1973. Within a couple of blocks there are no bars on the windows, new cars up and down the streets, lawns etc. North of six mile on Fairfield it looks as rich as it did 40 years ago.

      They are giving these houses away!

      1. Montanamaven

        Gorgeous! What a pleasant place to live. Very “Leave It to Beaver”. I went to U of Michigan in the 1970s and never ventured into Detroit as it was considered too dangerous.

      2. Binky Bear

        After all the race baiting and whinging it was the fact that PatrickK left that made the neighborhood better?


        1. Brian M

          I honestly think the 1920s was the high point of American residential design…house design, subdivision layout, etc. Has never been matched or exceeded.

          Leave it to Beaver was too 1950s. And I say that liking…in isolation…mid century modern design!

          1. MaroonBulldog

            Fifties houses were all made out of ticky-tacky and they all looked all the same… Pete Seeger.

            1. Bruno Marr

              Actually, 50’s houses (pOst-war) were better built than homes today. They used better quality materials (lumber, lath & plater, hardwood floors) and many still stand today. Building codes and design improvements (better insulation, double-pane windows) make the modern house more livable/efficient, but sheetrock walls, nylon carpets, particle-board siding don’t weather well.

      3. casino implosion

        “Giving them away” is pretty close to accurate. I have friends that bought a quite nice house there for 15k and got the large, empty lot next to their property from the city for 500$. Two thirds of the lots in their block are vacant, no structures remaining, just like a grassy park.

        1. steve from virginia

          There are good neighborhoods then there is the rest of Detroit:

          Detroit events tend to be taken out of context which is a mistake. Detroit = Greece … Detroit = the other PIIGS. Detroit = Yemen, Libya, Syria … Detroitization is underway in China, etc. Costs matter: 100 years of compounding exponential costs and destruction of irreplaceable capital have ruined us. We have run out of ways to manage these costs which is what ‘Bankruptcy’ actually represents! After Detroit comes 100+ other US cities. Our precious capital-wasting enterprises such as autos and freeways have stranded themselves by way of their use. Meanwhile, our managers are working overtime to keep wasting alive … which threatens to make the entire country into Detroit.

          There is no conventional way to ‘fix’ any of this, rather there are hard choices that need to be made. Getting rid of the cars before they get rid of us is the first choice. If we don’t make the choice it will be made for us by the force of events … underway in Detroit right now.

          1. Yonatan

            “The there is the rest of Detroit”

            One building – ‘Word of Life Temple of Deliverance – Jesus Saves’

            I guess they are still waiting for him to turn up. It may be some time.

  10. JoeShump

    Hi Yves – Interesting to hear you mention having spent time in Dayton. Being from that area I always tell people the city never made it out of the Bush I recession. I live in Columbus now and it’s amazing how a difference of 60 miles can feel like two different countries. C-bus is young and vibrant (dare I say it has an Australian feel?) while Dayton wallows in a state of perpetual decay. I had always passed off Dayton’s issues as stemming from poor management but after reading this post I’m curious to see what other macro effects may be in play.

    Interesting piece to get me thinking – thanks!

      1. JoeShump

        Wow – cool read thanks.

        Interesting…I hadn’t thought about the word when I used it — I just used ‘vibrant’ to denote the presence of livable wage-paying jobs and a younger population. The article seemingly referred to ‘vibrancy’ as to what I would consider different facets of hipsterdom – which is fine, i just dont participate much in the ‘scene’ anymore :)

        1. Klassy!

          Thanks for reading! I really didn’t take it as a discussion of hipsterdom– more about how cities are in this race for “vibrancy”. Artists add vibrancy! And vibrancy (and a healthy dose of subsidies) lures businesses. But of course convincing businesses to relocate means another city is going to be a loser.
          And there has been this whole story built up that just about all young people want to get to these vibrant cities. But some people want to stay put. But they can’t.
          Is Youngstown or Lorain or Akron really going to save itself by making itself vibrant? is the problem that they don’t have enough young college educated people versed in digital media? A steel mill might have had 15- 20K workers. What can replace that amount of jobs? God, the stuff they throw at businesses that might, if they so inclined in carrying out their end of the bargain, create 32 jobs– at half the pay a steel worker was making in the 80’s and no benefits!

  11. mike jones

    It is all about the Central planning organism. The federal reserve bank and the control the political elite have over it. Many serving self rightiously on the board. The dollar destroys those who who use it through a Central bank organization specifically set up for only a few to prosper from its rules by controlling individuals money and corporate institutional funds.
    Those Corporations to big to fail are in reality already in failed state, having to rely on the federal reserve to corrupt the process of elimination in favor of the private and free enterprise market of which today’s generation believes to be the basis of all fault for those belonging to the poorer side of financial freedom.

  12. theblame "E"

    The American auto industry has treated its workforce like they had bought and paid for human-beings, whose worth was measured in zeros. American premier and high tech firms, like GE, practiced employee relations just like the American auto industry. Look at “Neutron” Jack Welch who got his nickname from the practice of getting rid of workers so fast that only the buildings remain. Now, look at Detroit. A country that has been run by scumbags and people wonder why the place looks like a dump? And still the “powers that be” refuse to change. Detroit is the future for all of America.

  13. Tokai Tuna

    Weren’t the 80s wonderful? Full scale war on working stiffs. Another aspect of better Japanese cars was the superior treatment of their auto workers. Taboo to propagandize that fact during Raygun’s destruction. The image of a drunk slob applying weld is still so strong that the rights workers have lost over the years (and every year!) doesn’t even register with the vulcans. Yet they expect mortgage payments, and print that the public didn’t handle money properly. What a disgusting heartless wrath. We badly need sit down strikes at Walmart, Starbucks, Fast Food Inc, and in their gated communities. (Mother F-ers)

    1. readerOfTeaLeaves

      Wal-Mart and Starbuck’s are quite different cultures.

      Wal-Mart is the largest private employer in about 25 of the 50 United States. The average wage is said to be $8.81 — and if that’s ‘average’, then at least half the employees make less than that amount per hour.

      85% of the items in a given Wal-Mart megastore (sans groceries) are said to have been produced outside the USA. (American companies outsourcing, and getting benefits in the federal tax code for doing so.) Most employees are P/T, so that Wal-Mart offloads its medical costs onto the rest of us. How many Wal-Mart employees would be able to afford a new car on their income? Probably very few, if any.

      Starbuck’s, meanwhile, provides medical coverage to anyone working over 20 hours/week (or the last that I checked, they did). IIRC, Howard Schultz did not own 48% of Starbucks’; in addition, the foods they sell are providing jobs for US workers. Most of whom can probably afford to buy a car.

      The problems in Detroit are like most big cities — if you look at the US population statistics, you’ll see at least 10 states with smaller populations than Houston, or LA, or NYC. Yet each of those small states has 2 Senators. Do you honestly think that urban issues are high on their agenda?

      As the US has become more urbanized, our political institutions remained largely rural. This has increasingly become a source of yet more institutional dysfunction. Detroit is merely one more sad symptom.

    2. John

      I heard Mark Levine the hate monger ranting that the Left was going to outlaw gated communities. I kid you not.

      He lives in one btw. And he carries heat. He knows that his hate that he spews 3 hours every day have made him a lot of enemies.

  14. Mike Dolinski

    The View From Dayton:

    Yves, not quite sure when you left but things have changed quite a lot. McCalls Printing and the Nibco Foundry closed in the 80’s, and in 2009 (!!) were slated for demo. Here in the Midwest part of our charm apparently is how we don’t rush into anything too quickly. We are actually doing a very ok job of turning an industrial “mighty midget” of 230,000 into a “diverse livable service based” town of 155,000. Current city efforts are actually somewhat overcoming the
    natural enormous institutional inertia, but socio/cultural inertia remains, although it is highly correlated with age.

    Nothing new there? Well how about this then: As my nomination for the perfect metaphor for the age, we are now having a 125 million dollar “gaming attraction” built on the footprint of the former Delphi plant on Needmore Road. Wonderful! More part time/temp positions sans career path.

    Back when I was in grade school, you know back when Trajan was popular, it was put quite openly that part of the reason corporations existed, functionally, was to strengthen the related cities through taxation. Frankly, a return to 50’s/60’s levels of corporate taxation is a huge part of any realistic solution, and there is no chance of this occurring at this time.

    This reminds me of my other favorite ax that feels like it needs some time on the wheel. While I completely understand how work is not precisely an ecstatic experience, it seems unreasonable to me that people are expected to cede ever increasing percentages of their waking life to the designs of others who do not permit sufficient reward or satisfaction. Thus, as a consumer you are locked ever deeper into a cycle of tolerating necessary annoyance, and that if you are lucky. I mean, has any economist ever looked at the profit generated through uncompensated overtime, that is built into organizational culture? Honestly, can even top managers be unanimous in supporting this policy?

  15. Dan Kervick

    Yves mentions Detroit’s long history of racial division and inequality, a precursor to capital flight, population decline and political abandonment.

    Later in the piece, she cites the Wikipedia piece on Detroit:

    Workers who made the transition identified the emphasis on quality and teamwork by Toyota management as what motivated a change in work ethic.

    These two aspects of the story are connected. Detroit should be a wakeup call for all of us, because it represents America’s future. It is a microcosm of the failed American model. Americans believe that if everyone looks out for himself and herself, and takes care of number one, everything else will work out. You don’t have to build a society; build teamwork; build solidarity; promote equality. Everyone should just concentrate on getting theirs, and the invisible hand will take care of it. You can have cities divided racially, economically and socially in perpetuity; workplaces divided between privileged executives and peon workers; systems of hierarchy, domination and subordination; a society organized around the code of the jungle and the exaltation of ruthlessness and alpha winners.

    If you’re white and still middle class, you might think you don’t have to care about Detroit, because you can be one of fliers. You can find some community that still works, and bunker down there, right? Dream on. A country can endure a Detroit of two, perhaps, but as it destroys the industrial and social foundation of the whole country piece by piece, there will be nowhere to hide. If we are building a gated America, the vast majority of us are going to end up on the wrong side of the gate.

    I’ve been in a few different corporate settings, and the ones that don’t work are the one’s where the guys at the top are lying, greedy SOBs. They always think they are so clever and canny, making the “tough decisions” with their hard guy outlook on life. But they destroy productivity, trust and teamwork and spread dysfunction wherever they go.

    1. Susan the other

      About the phrase that most of us will be on “the wrong side of the gate”, akin to being on the wrong side of the track in the 20s and 30s – I think I see it differently. I think the 1% is now on the wrong side of the gate. And the thought makes me smile. Also, please define productivity as you are using it here, because I always am enlightened by your comments, but your use of “productivity” conflicts with one of the common connotations which is synonymous with “profit.” So I’m against productivity which is dedicated solely to greed. So that’s almost 100% of the ordinary connotation of productivity in my lexicon. I’d like to know how deep into the roots of the human community of cooperation your productivity penetrates? Is it just a superficial Mad Men thing, or is it an organic process?

  16. mike smitka

    As an economist who graduated from Detroit Public Schools, I’m glad to see you and others citing Sugrue’s work. I was busy with Fulbright & NEH fellowship reviews (I’m a “Japan” person with the auto industry as a later add-on), so was slow off the starting blocks, but will write later today drawing on Chapter 5 in his “Origins” and my own recollections working summers in auto plants in the early 1970s to pay college tuition. Until then, two quick points to think about. This draws in part from Sugrue, rephrasing as an economist.

    One is that Detroit suffered as first mover, with plants that could not be renovated, were sited such that scrap-and-build was out of the question, in large part because they ironically pre-dated limited access highways as a means of moving input and output – parts & workers, finished vehicles. Add the cumulative impact of productivity improvements in manufacturing and Detroit inevitably lost out – fewer jobs in the industry, and geographic forces leading to dispersal of the jobs that remained. New entry (initially imports) accentuated that. But labor is a red herring.

    The second is that a city is a fixed-cost enterprise. News coverage (your Bloomberg clip) notes that as big cities go, Detroit was unusual in its low density – single family and duplex housing, not apartments, which in its heyday made it even better place to live than incomes alone would suggest. Once population started to decline (or more precisely, employment) then cities face a downward spiral, and Detroit’s structure amplified that.

    So thanks for more care than (say) Krugman, who ought to know better than to ignore geography and to use a short time span! Reason won’t affect the vitriol (see comments to WaPo stories) – sure Detroit’s corrupt, but that’s an issue with many local governments (and not just in the US). Labor matters, but direct labor’s less than 10% of manufacturing cost for a volume vehicle; management matters more. Sigh, I too will need to figure out how to divide this across multiple posts. But again, thanks.

    1. Zac

      Nice to see that one of my old W&L profs frequents such an insightful website. Maybe there is hope out there.

    1. Patricia

      The idea of “ruin porn” is fascinating to me. I think it’s a demeaning label and have gotten pushback for my opinion.

      Of course, no one enjoys it when the place one lives (experiences) becomes such a symbol. Photos for such a purpose make one feel exposed and vulnerable. It is felt as voyeuristic. No one comes around for anything else, after all. Plus, no one from the outside can understand/image the actuality of living here, even with best intentions.

      But I look at it in the same way I look at war photos. MSM and gov’t work hard to keep images of our wars out of consciousness. We feel squeamish seeing what/who our gov’t has destroyed/killed with our tax dollars.

      But we need those images. War needs to be made real. Detroit’s photos are also war photos. No one in wars feels ok when their destruction turned into vast consumption but it is a way to help defeat it.


  17. Roaring Mouse

    The lefties always point to Reagan’s ‘free trade’ as the demise of the ‘living wage’. I hold this notion as a contributing factor, but not the root cause. Rather, it is a Federal corporate tax policy that enables companies (including AAPL and GOOG) to pay almost zero US corporate tax. Of course, to get this great deal, a company must manufacture overseas, so good luck American worker! If you own equities, you benefit. If you rely on your labor to make a living and save for retirement, you are SOL. There is still the healthcare industry, as that is more difficult to offshore, but nursing homes in Thailand are coming . . .

  18. Demeter

    I am Detroit born and bred, and I concur with Yves analysis. The State of Michigan sucked the taxes out of Detroit for a century to pay for everything in the state, but now Gov. Snyder declines to give anything back. Instead, the city that made Michigan what it is today is being “disposed of”, turned into a toxic waste site by the Koch Bros.

    It’s uncanny how, after 40+ years of waiting patiently for the federal or state government to come to the aid of the city, the citizens are started a grass-roots Renaissance including their own truck farms, schools, etc., and suddenly everyone wants to strip the city down through the bankruptcy proceedings.

  19. Yancey Ward

    Detroit died because the industry it depended on manufactured shitty cars. And it manufactures shitty cars today, too (at least they still were in 2008- the last model year I have direct experience with).

    I am always deeply amused by people who claim that it is the low mileage behemoths that brought the Big 3 to their knees because that is almost literally the opposite of the truth since they lost money year after year on the high MPG vehicles because they were shitty vehicles too.

    1. Yves Smith Post author

      GM cars are now getting good quality ratings, in fact, some commentators said that Wagoner was treated badly in the auto bailout talks (in that GM had gotten through a considerable turnaround which was not yet reflected in sales due to when the crisis hit).

      I’m not a car person so I can’t say either way, but my mother refuses to trade in her eight year old Buick, she thinks it’s better than any newer cars in her price range, and one of my brothers owns a GM pickup (he lives in the Upper Midwest, where you need a heavy car to contend with snow 5 months a year) and is happy with it.

      1. Yancey Ward

        I don’t care what ratings they get (the 2008 Malibu also got good ratings and the one I get to drive is a piece of shit with something needing fixed about every 3 months)- I look at resale values, and they tell me the Big 3 still suck.

        1. Michael Smitka

          Resale values (“residuals”) reflect the level of leasing rather than quality. In 2008 GM was desperate to generation cash flow (profits don’t matter if you aren’t bankable, and in 2008 no one was getting bank loans). So they poured cars into rental fleets. Of course down the road used car prices then plummeted as vehicles came off-lease.

          The Detroit Three are doing a much better job — and I’m seeing more and more Toyotas on rental lots.

      2. F. Beard

        I’ll forgive American automakers for “planned obsolescence” after I’m dead, if then.

        1. joel hanes

          planned obsolescence

          Some of that can be laid at the feet of the IRS and tax courts. In the 1979 case Thor Power Tools, changed tax regulations destroyed much of the potential profit from the repair parts business — machine manufacturers responded by mostly abandoning the business producing and stockpiling “original” repair parts to support a machine with a long lifetime.

  20. Jeff N

    check out one of my favorite books: “Rivethead” by Ben Hamper, a former GM auto worker. (Ben Hamper is the guy shooting hoop at the mental health clinic in Roger & Me). Hamper currently DJ’s two great radio shows on WNMC college radio, one with funk/soul and the other with classic country.

    Yves – all my life, I’ve tagged along with my parents to northern WI, about 30 miles from the Upper Penninsula of MI. I know the area well. Not sure I’d want to be up there for the winter though :)

  21. human

    A related aside:

    On my travel this past weekend on I78, through the industrial wasteland of central PA (Allentown, Harrisburg, Bethlehem), I couldn’t help but notice the proliferation of MEGA distribution centers. With the decline of consumer purchasing I can only justify these ginormous construction sites as future additional storage locations for manufacturer sold/consumer unsold production. The game of numbers goes on as TPTB continue to blow bubbles.

    1. Yves Smith Post author

      I’m not from anywhere (we moved frequently) but I lived in Escanaba for a bit over 2 years.

  22. Gerard Pierce

    I never lived in Detroit, or anywhere near there, but in the 60s I purchased a Ford Galaxy. (Power windows were not standard at the time.) When I quickly tried to crank the driver’s window, the rubber wheel came off in my hand and it was a major nuisance trying to get it fixed. As I recall I had to practacally bribe the dealer’s mechanic to get it replaced – and he had to replace the entire crank.

    Sometime in the 90s, a sort-of friend was trying to sell me a Ford escort (or some other cheap Ford) using the warm puppy technique (Here, just take it and drive it until you make up your mind.)

    I gor into the car on the 2nd or 3rd day and needed to quickly roll up the drivers-side window. (No power windows on the cheap models.) I still remember my surprise when I wound up with a plastic wheel in my hand. A wheel identical to the one from my Galaxy 30 years before.

    I remember concluding that Ford hadn’t learned a thing in 30 years, and I went on to buy a Toyota.

    1. Jason L

      The sad part is the escorts were probably one of Ford’s best products, reliability wise, in the 90’s. whenever I see a nineties (esp 90-95) Ford car still on the road it is an escort 80% of the time.

  23. nobody

    “What bothers me is the nagging sense that this wasn’t necessary, that there were paths that would have alleviated the damage.”

    One of those paths might have been a concerted, networked shift to worker-owned enterprises. In this interview, Gar Alperovitz discusses the efforts that were made in Ohio in the 70’s (ultimately sabotaged, if I remember right, by union leadership and elements of the Carter administration), as well as more recent successes in Cleveland. Detroit should have Mondragonized itself.

    See also here:

  24. katiebird

    The Detroit Pension thing makes me sick. Are the retirees really going to lose their pensions? That would be bad enough (horrible) but I’ve heard that they are exempt from Social Security? Is this true?

    And from the language on TV it’s like we’re being set up to assume that all public pensions are going to fail. What a nightmare.

    1. Patricia

      The bankruptcy process will be lengthy with many battles, so we don’t know what will happen re the pensions but it’s a foregone conclusion that they’ll be chopped to one extent or another. There’s just not much of value besides zoo, Belle Isle and art museum.

      From what I understand, it is the firemen who were given a pass on Social Security due to the arrangements of their pension. Not sure about this, but it’s certainly not all the public employees in the city.

    2. Moneta

      Unless the State or Feds bail them out, I don’t see how they can last.

      Like someone else said… it’s the canary in the coal mine.

  25. Brindle

    When did you live in Dayton? and which neighborhood/suburb?
    I use to live in the Dayton metro area.
    Dayton was a big manufacturing city in 50’s and 60’s by the late 70’s-early 80’s the plant closings/shrinkage were very noticeable.

    1. Yves Smith Post author

      We lived in Dayton twice (my father worked for Mead at that point), he had a mid-level and later a senior corporate job, ran some mills in between (briefly in Chillicothe, then Escanaba, in Michigan).

      We first lived in Kettering, about as far south as you could be.

      The second time we lived in Oakwood.

      Ironically, my mother had spent most of her childhood in Dayton (her father had moved a fair bit during the Depression, he managed amusement parks because he had some engineering training, he’d gone to college on a football scholarship but got thrown out because he played baseball professionally during the summer which was considered a violation of his amateur status. He played baseball professionally for a few years in the minor leagues and had been signed by the Red Sox but was cleated his last season in the minors and that ended his sports career). He then worked for a company that made roller coasters, he was sent around to repair them, and eventually got a job as a manager because he could keep the equipment running (which was the most demanding skill requirement). My mother graduated from Roosevelt High School which was then the best in the state. So she got lucky, since that enabled her to go to Ohio State.

  26. kevinearick

    A Queen & Her Eunuchs

    Hitler was a mamas boy mama’s boy, with upside down priorities, attention deficit looking for a fight, and he found it. Love is war. Don’t go looking for it and it will come to you. Prepare, while everyone else plays their cards.

    Of course the Queen granted entitlement to the public-minded homosexuals, a share of your unborn’s future income pulled forward with credit. She needs the money to keep the old empire circulating. And how do you suppose they are going to provide for the confidence game? Only your own can throw you under the bus, and homosexual assets are all current; they do nothing to support the assumption of ongoing concern.

    War comes when no more fools can be squeezed to keep leverage growing in the ponzi. Empire conditions, regulation, simply wires the middle class back into the outliers on its back end, to distill and tax producers from the front end with consumer peer pressure, to extend its term. Need oxygen? Add a self-destructive event horizon to the zoo. Homosexuality is not a problem to be solved, or a right to be granted by the public.

    An empire cannot power itself and it always places the cart, legacy real estate, before the horse, future labor productivity, with extortion to bred ignorance, walking backwards on its agreements at every turn. In this iteration, the drug of choice is actuarial empire ensurance, computing fantasy NPV to feed its balance sheet and supply its MAD ATM with digital money. Like any drug, the more it prints, the more it needs, until it kills itself.

    Which came first, the land-grabbing drug purveyors across the ocean or the land-loving, peer pressure risk avoiders in place? Did you study the opium wars in school? How do you think Yale, Harvard and MIT got built? Who endowed the first university and what was the nature of the breeder reactor? Yes, you are going to get an occasional FDR or JFK, but they were inherently corrupt. What is the impetus, intent, of regulation under central control?

    There is nothing new about land grabbing drug runners espousing divine providence while they steal everything they can get their hands on. Actuarial empire ensurance is simply a soft derivative of naval power employed by Bank, to addict the unborn to the empire and extend its life, such that it is. The Fed bets on speculators to be speculate, not producers to produce, to seize the income of future generations in a positive feedback loop with empire growth. All participants win relative to labor, as measure by real estate, until a generation of kids doesn’t show up to their empire-assigned jobs.

    The last exit is currency, global defense spending on the margin, and your community. All of the empire make-work specialists may be replaced by a handful of generalists to re-boot the system, depending upon desired gravity. WWIII will exist for those who show up, those who chose ignorance. Leave it to Silicon Valley to promise energy in a box, and Japan to fund it. Only an empire lives of, by and for a box.

    A corporate ponzi career – public, private or non-profit, cannot propel you forward because you are only as successful as those around you choose you to be, those willing to discount the empire on your behalf. Let the corporation think one thing, and do another. Step across empire time to establish your priority circuit on the stones provided. Funny, how the empire solution is always a black box that blows up in its face, creating the wave. The atom is not a static battery; the electrons may temporarily serve as protons or neutrons.

    The easiest way to deal with the lazy corporate risk avoiders, aside from joining them, is to let them steal from you, because the boundary of central control is finite, encapsulated by a false assumption of false assumptions. The empire is not all powerful, and the empire majority is not the majority, except within the event horizons so differentiated. Peer pressure and fascist corruption are two sides of the same coin. Once tipped, reversion is automatic. Just recycle.

    Take your kid to work for a week and ensure freedom of action, and then ask for feedback. Kids have the advantage of seeing the opportunity cost of corporate control to your personal life. That’s why my dad, and all my moms and dads, did with me on the naval bases, which is why I can do what I do as a consultant and why I know more about the US Navy than anyone else on this planet.

    I am the most hunted dead-beat-dad, yet I have provided all my children with the opportunity to prosper, just not the way the majority wanted or its leaders demanded, who built their infrastructure on top of a foundation built by me and mine. An empire is a corporation of corporations, embezzling is its way of life, and it is built to fail, as an example. Right your wrongs, go bankrupt, start over, and you will be far ahead of the game.

    Let the self-absorbed crackheads suffering from divisional myopia have their something-for-nothing fantasy and get on with your life. War is for old men. If the empire does not dismantle Family Law, there will be war among the old empires. If there is war, labor will explicitly void its at-will agreement with capital in the form of the US Constitution and Family Law will be dismantled. In any case, the new workweek will be 24 hours, entitlement benefits will be replaced by unquantifiable community quality-of-life benefits, and wage/rent will provide the feedback signal. Take care of your own health, your own family and your own community, and everything else will take care of itself.

    Empire gravity is just an arbitrary frame of reference, installed to suit a purpose. We are retiring this empire. What you do with the parts is up to you. Detroit is just the beginning. SFBayRE continues to escalate, the churches continue to employ tax liens, tax exempt, and first responders continue to receive free mortgages, to seize property. Don’t raise a flag and expect a happy outcome.

    Let me get this right. You want me to dig you a ditch, which nature is sure to flood. How deep do you want to go?

    So, I walk up the Noyo public access steps and rest at the top. A eunuch on the bridge overpass, in his dominatrix’s tow, immediately yells down threatening to call the police and charge me with loitering if I do not move along. After my little break, I move on to meet someone at the county offices. I sit by a tree and a security guard immediately runs over and asks me to identify myself. It’s always a verbal assault under color of law with intent to incite.

    We have been mapping this behavior for quite some time. We also discussed the Queens holdings, Irving blah blah blah, in Canada under Harper when we employed that currency. I don’t have to do anything; these idiots are going to blow up my bridge for me. Keep your distance, and watch the empire collapse on your breaks. Because they have been trained from birth to think that their queens own the oxygen you breathe is no reason to destroy your self.

    You are worthy of God’s love or you wouldn’t be here. That’s a given. You don’t have anything to prove to the morons that want to surround you. Drop the weight you are carrying for the purpose on their shoulders and they will drown.

  27. allcoppedout

    I’m not sure Yves’ commentary is right, partly because I first heard it when I went to business school to do a PhD in the early 80’s. I don’t disagree anything in particular, but rather suspect the whole basis on which we produce. UK heavy industry went the same was as Detroit and we were heavily into new management and competitive techniques. ‘Thatcherism’ in the sense of hard hat managers (often ex-pat) and competition in free trade can probably be placed in the mid-60’s, long before the poorly manufactured Iron Lady herself. One could probably track back to the Scottish Enclosures to get a hang of the treatment of workers and such as the Domesday Book.

    The model economies for falling Britain to follow were the USA, then Germany, then Japan. We were taught highly defective stuff like quality circles and continuous improvement along with rejection of things like works councils and trade union reform (rather than abolition). We already had our own versions – like Action Learning – but these were inferior local products. Popular company doctor programmes all amounted to ‘get out of manufacturing’ advice with some variations on the kwality theme.

    Meanwhile, competition was often highly subsidised in all manner of means. If we go back to Dundee (and Alloa where I was born) in about 1880 there was a thriving jute industry. You can still find the machines in what is now Bangladesh, exported with the jobs at around this time. You will also find that the money from production quickly flees once profits shrink because of competition. Some poor back, broken and hunched picking seaweed from a Scottish beach, seaweed going to make gunpowder in Napoleon’s wars, does not get investment in something more sensible, just the satisfaction of knowing the absentee landlord is happy, gambling in London.

    One expects the money from broken backs in Detroit has gone the same way as that from coalfields in Newcastle – to form what we once called merchant banks (Johnson Mathey in this case). Mexican wages say it all Mexico. Business schools spin yarns based on competition and I suspect this is the problem. Nothing works once this poison is present and we lose focus on reasonable equality. All e can hope for in Detroit is that withdrawal of pensions creates some grey panthers for constitution change.

  28. Phoenix Woman

    Grosse Pointe is still a rich community.

    Oakland County, right next door to Detroit, is one of the ten richest counties in America.

    The white elites set up a property tax system designed to do exactly what it’s done: hollow out Detroit while the elites profit and blame blacks and liberals for the resulting mess.

    Big Auto is a lot more sound than Big Money yet Big Money gets free passes.

    1. MLS

      “he white elites set up a property tax system designed to do exactly what it’s done: hollow out Detroit while the elites profit”

      I’m curious what you mean by this, can you elaborate? How did the suburbs of Detroit set up a property tax system in their own area that hollowed out the city? I’m not seeing the connection.

  29. Steve Lawton

    Freeways. They built too many freeways. Freeways enabled the decanting of wealth and investment away from the central core, enabled the managers to wall themselves off from society, and created unproductive maintenance obligations.

  30. MLS

    One important additional factor in Detroit’s decline is the impact of WWII. During the war the city basically stopped producing cars to ramp up production of munitions while other war-related industries popped up in the region. People poured into the area in search of jobs, but the lack of adequare housing forced development farther and farther away from city center. Freeways were built in part to support those war industries and the population surge, and raw materials like steel and rubber were diverted from other city infrastructure (like the trolley system) to the war effort. Post-war, there was a shortage of raw materials for the auto industry (which eventually corrected) and an infrastructure that continued to support urban sprawl rather than more condensed urban living. With pent-up demand for freeways, roads, and automobiles (all inextricably linked) thanks to the massive increase in population and a decimated industrial base in much of the rest of the world, Detroit thrived, as did many other industrial cities through the late 1950s.

    Yes there were issues with corruption and race and the dependency on a single industry, and mismanaged auto companies and public unions that wouldn’t acknowledge that the city around them was shrinking in the 70s, 80s and 90s, but there’s no single cause for Detroit’s demise, it was the unique combination of these factors that sealed their fate.

    1. Honey

      You have picked up a great point. I completely agree with you. I Hope our Detroit will be soon out of bankruptcy.

      1. MLS

        Sadly, I doubt that will be the case (I am from the area, so I’ve followed this situation closely for years). My guess is this will be locked up in courts for years as pensioners fight to keep benefits and the city fights to discharge them. The pensioners argue that the state Constitution protects their pension, but the city argues (probably correctly) that Federal bankruptcy law trumps state law. Nonetheless, it appears headed for a long fight. Unfortunately, the city just doesn’t have enough in the way of assets to sell or tax base from which to extract revenue to result in a quick resolution to any funding shortfall. What ultimately likely needs to happen is to condense the city’s residents into about one-third their current square area. Unfortunately, people don’t take too kindly to being forcibly removed from their homes.

        Maybe this is what the eminent domain ruling was all about…

  31. Hugh

    Detroit is a casualty of the looting and de-industrialization of kleptocracy exacerbated by the divisions of class war (white vs. black, middle class vs. lower class, state vs. city).

    As Mike Dolinski says above think if corporate tax rates had been kept high. It wouldn’t just improve the tax base for the community. High tax rates existed within a larger regulatory structure of corporations in general. This may not have forced corporations into behaving wisely but it did manage to limit the damage they could do. When the 70s oil shocks hit, the auto industry was driven by a complacent corporate culture based on gas guzzlers and built-in obsolence/poor quality or as run75441 says above, they were making money inspite of themselves so why change anything? It was precisely at this point where an industrial policy and greater regulation would have been useful to force the auto industry into adapting and to begin the process of breaking our addiction to oil that deregulation and anti-unionism, shortly to be joined by “free trade” took off.

    These and other policies had the effect of downsizing and restructuring the auto industry but in a manner that totally disregarded the needs and concerns of workers and their communities. This is not surprising. In economics there is no pain. There is no agency, just actors making decisions based on utility and self-interest. All the pain receptors are removed. Things just happen. Processes play out. The great con in economics is that an economy is a social activity whose only reason for being is the social purposes it accomplishes, but in economics all the social purposes have been excised or expressed as the summation of all the purposes of the individual actors.

    Circumstances change, but think about how Detroit might have been if we had had an economics guided by social purpose rather than the neoliberal kleptocratic economics we, in fact, have.

    1. Cynthia

      Detroit is good news for the top 300 wealthiest Americans. Off-shoring and automation are eliminating thousands of full-time jobs each year in the US. The Federal Reserve is accelerating America’s declining standard of living, leaving millions of Americans with part-time meaningless jobs. The top 300 Americans control the FED and become richer as society drifts into social unrest. It will get worse as US jobs continue to move offshore and automation continues to replace America’s workforce, leaving more and more Americans hopeless.

  32. Lyle

    Actually the first flight from Detroit was by Ford in building the Rouge plant which is in Dearborn. The old Ford Plant on Piquette Avenue in Detroit was built in 1904, and predates the electric motors in manufacturing, as it was a 3 story building. In 1915 Ford bought the land in Dearborn for the Rouge plant, and moved manufacturing there by the 1920s. If you look at pictures of the old Packard Plant you will see it was a multi-story affair, and again was obselete when it closed due to design changes. Recall that when GM wanted to build a new plant in Hamtramick it hit a lot of opposition, because the plants footprint was much larger than the one it replaced, necessitating the destruction of the surrounding community. There was a lot of opposition to this. From a companies point of view vacant rural land does not create the same set of issues. I think GMs experience with Poletown (where the new plant was placed) taught a lot of companies that it was to much trouble to get a large footprint for a new plant in the city the rural areas where much better.(they had to use eminent domain to get the land)

    1. bert

      If you count the Rouge as the first flight, what about Highland Park? Ford left Piquette for Highland Park before there was a Rouge.

      1. Lyle

        If Highland Park was an edge city, then the thesis of assembling a large enough block to put ones factory on seems to hold. I suspect that even in 1915 it was much easier to find a 1000 acre block was much easier in the country. Here we come to an interesting quandry, to bring industry in you need large blocks of land for them to locate on (if you are talking manufacturing), and in existing cities large blocks of land can not be assembled without eminent domain to get the recalcatrant to move. How does one balance the issue, perhaps by saying in a case where the ultimate usage would be a private company you pay 150% of fair market value not 100%.

    2. Michael Smitka

      You can add that many of the auto plants that were inside the city were run by companies that failed such as Studebaker, ditto parts suppliers though that would be much harder to track. Those plants remained empty, and empty plants generate no jobs and no tax revenue. In the 1950s new plants were built with railroads and regional dispersion in mind, as the interstate highway and then fleets of Class 8 trucks were in the future. So the geography of the industry was shifting away from Detroit long before Japanese transplants arrived on the scene. Since overall demand exploded the metro Detroit area didn’t initially decline, but it did in relative terms, and the jobs were remote from Detroit, especially if you had the wrong skin color.

  33. masaccio

    One possible solution is a revamping of the government of Detroit by combining city and county. The first example of this I know of is King County Seattle, where it has worked really well.

    Nashville, TN, did the same thing. Davidson County is merged with Nashville, with some minor race-based exceptions. It is divided into two segments, the Urban Services District and the General Services District, which have different property taxes and different levels of service. The latter is the more rural part of the county, with lower levels of service.

    That might work pretty well in Detroit-Wayne County, by picking up the white flight areas and then using a lower level of tax/services in the areas of town where no one lives or the density is too low for urban services to be effective.

    1. jfleni

      You forgot Jacksonville-Duvall County Florida (the largest municipal area in the US, which has been merged now for about twenty years or more, and mostly with very good results.

      There are places in gigantic Jax where the city center skyscrapers are substantially over the horizon.

    2. Lyle

      But the issue is that combining with Wayne county would not do the deal you need Oakland, Macomb, and Washtenaw counties at a minimum, possibly including Livingstone, and other Counties as well. I don’t think that short of New York City, such a combination has happened in the US definitly not recently, the examples cited involve a city and its surrounding county. But Detroit is not surrounded by Wayne County, as Oakland and Macomb, sit north of 8 mile (the city bountry on the north for most of its length). The real money is in Oakland county. Wayne county has been managed nearly as badly as the City of Detroit, but since it does not provide police or fire, the main service it provides is road maint, and of course the courts and jail.

  34. TC

    OMG, this one is so simple…

    First, a quote from FDR’s 1944 State of the Union address:

    “One of the great American industrialists of our day—a man who has rendered yeoman service to his country in this crisis—recently emphasized the grave dangers of “rightist reaction” in this Nation. All clear-thinking businessmen share his concern. Indeed, if such reaction should develop—if history were to repeat itself and we were to return to the so-called “normalcy” of the 1920’s—then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home.”

    Michigan Governor Snyder is the very face of fascism against which FDR warned. That said, let’s look toward the Fed and its claim that, its policies do not favor Wall Street over Main Street. We have a special Maiden Lane I and II window bailing out AIG, so if Fed Chairman Confetti wishes to honor his claim made before the House Financial Services Committee last week professing no Wall Street favoritism at the Fed, then he will move as rapidly as he did in ’08 to save AIG and open a “Detroit window” (and as well atone for the Fed’s delay to date in opening a “Harrisburg” and “Stockton” window). There, problem solved, at least for the moment. Per the more vexing, longer-term problem of an under-capitalized, under-invested physical economy and what to do with industrial capacity no longer needed for auto production, picture the “Hamiltonian Credit Window” at the Fed, along with a Congress, state legislatures and municipalities organizing investment in physical economy worthy the 21st century (HINT: windmills and solar panels ain’t gonna cut the mustard if elevating a republic claiming to recognize all mankind’s unalienable right to life, liberty and happiness is on the agenda).

  35. clarence swinney

    Many still call Carter a Do Nothing Presdient-fact check-
    His last budget proposed a “real” 5% increase for five years.
    Reagan told aides “I will not let Carter be known as the Defense president”
    He proposed a 13% “real” increase.
    His last four budgets cut spending in real dollars
    He cut the number of troops in his last term.
    Carter Tax increase?
    Carter left Reagan a 575 B budget.
    Reagan increased it by 80% for all time record
    Carter left Reagan a Debt under 1000B
    Reagan increased it by 187%
    Reagan had 137 members of his administration charged with crimes.
    That is more than all presidents since 1900 to 1981.

    1. Hugh

      The construction of the current kleptocracy dates back to Carter’s deregulatory, anti-union, anti-worker policies. As I have written in the past:

      “Paul Volcker, Carter’s choice of Fed chairman but re-appointed by Reagan, began to raise interest rates to burn inflation out of the economy. In 1981 in the first months of the Reagan Presidency, he raised the federal funds rate to 20%, meaning that the prime rate was higher, and the rate that everyone else was being charged was even higher than that. It was really with Volcker that the Fed’s obsession with treating wage increases as inherently inflationary and to be combatted via higher interest rates began. As a result, coming out of the recession wages were flat and remained flat for the next 30 years. Also under Carter, you had the deregulation of the airlines and trucking. It was called deregulation of the industries but it led to the weakening of labor working in them and labor power more generally.

      1978 Airline Deregulation Act deregulating the airlines
      1978 Civil Service Reform Act set up the Federal Labor Relations Authority to oversee collective bargaining with federal workers. It was this entity which Reagan used to decertify Patco in 1981
      1980 The Depository Institutions Deregulation and Monetary Control Act repealed usury limits on what banks could charge in interest
      Motor Carrier Act of 1980: deregulated trucking”

  36. sleeper

    There is an important facet being missed –

    It works this way- To maxmize compensation U.S. companies are in an eternal struggle to balance expenses and profits.

    The tuning key is the “give back” by which expenses are tuned.

    Tax give backs as profit and this mess would end quickly.

  37. Ray Phenicie

    Doing my usual amateur scholarly thing here:

    Are Ghettos Good or Bad

    “Spatial separation of racial and ethnic groups may theoretically have positive or negative effects on the economic performance of those groups. We examine the effects of segregation on outcomes for blacks in schooling, employment, and single parenthood. We find that blacks in more segregated areas have significantly worse outcomes than blacks in less segregated areas. We control for the endogeneity of location choice using instruments based on political factors, topographical features, and residence before adulthood. A one standard deviation decrease in segregation would eliminate one-third of the black-white differences in most of our outcomes.”

    People choose freely where they will live in this country. Or do they? I have always been struck, after living in suburban Detroit since 1972, how so many of the Detroit suburbs remained largly exclusionary and segregationist, demographically speaking. Southfield, where I live, is a perfect example, as the black population increased from the 1980’s, the white population has decreased dramatically. Much has been made of this phenomena and some lawsuits brought by the NAACP on behalf of rejected tenets (sorry no link, just my fragile memory here) in the early 1990’s revealed that landlords around the area were consistently excluding blacks. The trick was worked by a simple “oh, we filled all of those vacancies;” when the prospective tenants showed up and obviously revealed themselves as being black. The lawsuit centered around a set up ( someone else at the attorney’s office called within minutes and was told by the same person that apartments were available) -this was worked on a couple of landlords and their ruse was exposed. Court dates ad fines ensued and seemingly the practice was stopped and slowly suburban Detroit has taken on a more diverse face-or so it seems to me. Again, just some casual observances here.

    This shows to me, based on my very limited research ( I have seen many articles like the one above), that a lack of cultural diversity is always bad for urban areas. One can think of Harlem’s Cotton Club and its surrounding milieu which was very diverse at one time-say in the 1920’s – and the Club, ironically, owned by avowed racist segregationists, was the launch pad for many an esteemed artist of black cultural origins.

    Some history here: ‘Arc of Justice, A saga of race, Civil Rights and murder in the Jazz Age’ by Kevin Boyle recounts the personal history of one Ossian Sweet and his attempt to establish a residency (he was a medically trained physician) in Detroit. Unfortunately for him, he crossed a line when he moved into a segregated neighborhood, crowds of neighborhood folks started gathering around the Sweet home site and after several weeks of hostilities-finally resulting in stones being hurled through the windows by angry mobsters-Sweet or someone in the home fired a gun into the crowd resulting in the death of a vigilante and Sweet found himself convicted of murder several weeks later. During the whole time, the crowds gathered in front of the Sweet home with little discouragement from Detroit Police

    What happened to Sweet was not an isolated incident; in Detroit the city neighborhoods were and still are (extending the concept to the suburbs) surrounded by invisible barriers of color. When those barriers were broken in the past, violence ensued. In the last quarter of the century the flurry of ‘For Sale’ signs was the result; I saw this happen in the late 1990’s when I lived in Farmington Hills. One can only imagine the Sweet saga repeated dozens of times in the 1920’s and 30’s to realize this area is deeply steeped in racial bitterness which I think is a whole magnitude greater than in other cities. Detroit erupted in violence (ostensibly about jobs in war time factories) in 1943. The Wikipedia article on this is really very good and needs to be read in its entirety; no other American city during that decade, was shut down by the National Guard entering the city. By 1967, when Detroit emerged from five days of deadly and damaging violence, the city was moribund. Flight, on the part of all ethnic groups, became a pandemic resulting in a city that was devoid of all diversity. Those who remained behind maybe chose to do so or felt that the surrounding area offered little to them or simply did not have the financial means. One advantage of living in a heavily damaged area is that of the cost of rent; almost all of the housing units in Detroit are lower cost than the surrounding area, the exceptions being the tonier high rent districts which only serve to prove the point.
    This littel essay is not scientific, I grant, just some casual observations but overall I would say that we need to list the chronic problems of Detroit in this order realizing that there are some cross linkages between cause and effect:
    1. Racism in the city neighborhoods and surrounding suburbs that is worse than other parts of the country.
    2. Lack of engagement in the care of the city by state and national officials. The Detroit area suburbs lobby long and hard for their munificent government funding and have had the backing a Federal policy which funded new housing while specifically excluding (neighborhood grants notwithstanding) already existing housing. Older suburbs like Southfield and Ferndale are now sliding the same direction as Detroit.
    3. A nation of people who purposefully neglect their cities-hitching up the wagon and moving one’s belongings into the sunset has been a long American tradition. Now, we can move back into the empty lots of our decayed cities.

    1. Snaggle Tooth

      …and HSBC was laundering the drug money that in part keeps the drugs a’flowin into the ghetto. I wonder if Detroit is one of those cities where the cops fire on unarmed young black kids from time to time like in Chicago, L.A. and Philly?

  38. allcoppedout

    I met some Americans in Vigo (Spain) in the late 90’s who were heavily into urban-manufacturing renewal by trying to write business plans to keep businesses open in worker-management hands. They were from Chicago and Detroit. The basic idea was to prevent businesses being run as cash cows (that old BCG thing on portfolio management) with the money disappearing into Wall Street ventures. Part of the problem was seen as the sons and daughters of the factory owners going to business schools, rather than into business in the communities that gave them the advantage,
    The rich leave everywhere, from Somalis paid to enter Western higher education by village whip-rounds, those bright enough to say farewell to the working-class and on. What we have long needed to do is change our attitude towards work and what we do it for. Detroit has 47% functional illiteracy. If we had any decency we’d take them in as refugees and find education and job opportunities for them on projects such as building renewable energy plants designed to produce what we currently get from fossil fuels … but we have economics instead. Frack me, one might say. There is no hope for new manufacturing jobs without new ideas of what to manufacture and how to share. Detroit’s near 300,000 manufacturing jobs in 1960 could be done now by 40,000. The city is doomed. In older times the denizens would trek off to steal from the hinterland.

  39. LillithMc

    The country yawned when pilots, both working and retired, were tossed onto a government agency after losing their pensions and getting 30 cents on the dollar. Now pots of pension money for government workers in Detroit is a target. Michigan has used the “emergency manager” law to sell assets while shutting down elected representatives. In Pontiac the Silver Dome was sold for $500,000 to a casino in Canada with the “emergency manager” set to run it. After bad publicity the deal may have collapsed. Throwing Detroit’s pension money into the bankruptcy pot needs public attention. It may be the tip of the ice berg. All public systems are targeted for privatization that would include taking pension money. Usually that means the fat cats gain more fat. In Michigan “emergency managers” have meant that half of the black population have no local elected representatives.
    We can do better.

    1. Snaggle Tooth

      Hudson writes about things like Detroit. All the earmarks of robber barrons and looting.

  40. Ray Phenicie

    Some random thoughts:

    The bad management found in the auto industry was part of a pandemic across American society; industrial leaders too often (one thinks of today’s financial sector) viewed themselves as elites who were beyond criticism from those around them. They relied on economic sophistry to allude to a knowledge of the priesthood that only heard what was supportive of their already marginalized role in leading the industrial sector backwards. The example about failing on the clean engine design is something one could say, carry over into the electric power industry that wanted nuclear power plants and chose very bad design at that.

    More information is needed on the purposeful neglect of the city’s plight by the folks in the state legislature in Lansing. Some of this neglect was benign- ‘if we ignore what we are choosing not to educate ourselves about, it will go away.’ Other facets of the legislative neglect were very purposeful and if not openly stated were of the school of thought that if the forces of evolution did not give one the ability to survive than best to let that population die off. Sort of like Scrooge’s statement about reducing the surplus population.

  41. Beppo

    It’s very telling that whenever a city is criticized for some vision of endless corruption, it’s a black majority city. The amount of shady shit done under Bloomberg alone dwarfs every single under the table envelop of cash in every Black majority city in the same time period.

    Bribery scandals happen in black majority cities for two main reasons, one, their officials are less talented in their corruption than their white counterparts, and two, they’re heavily targeted by states attorneys and the FBI because of white officials with burning grudges against them.

  42. washunate

    Great article and discussion.

    If the focus is narrowly why the city of Detroit filed bankruptcy, it’s pretty clear it’s because spending exceeded revenue. Sometimes we shouldn’t over think individual problems, and local leaders absolutely have significant responsibility for this.

    That local mismanagement then feeds into the bigger picture of the collapse of the Left or the Democratic Party or liberalism or whatever we want to call it. In the absence of opposition to wealth inequality, the concentration of wealth and power has reached such staggering levels that it is destroying our society. Some of our once great cities, like Detroit and St Louis, were just a little ahead of the curve in the white flight and financial difficulties and two tiered justice system and abandoned urban property and exurban freeway sprawl and WWII military buildup/influence and urban/rural Dem/Rep gerrymandering splits and so forth. This can be seen pretty easily by comparing the city of Detroit and the region of Detroit. The region of Detroit is wealthy enough to support an MLB franchise, NFL franchise, NBA franchise, and NHL franchise. The region of Detroit is one of the most populous CSA/MSAs in the country. Oakland county is one of the wealthiest counties in the country. Three of the five largest employers in Oakland county are hospital chains. Etc.

    Simply put, more than four out of five residents of Detroit (region) don’t live in Detroit (city).

    This is what the drug war, the national security state, hospital franchise/drug dealer cartels, wage stagflation (stagnant wages/rising prices), deferred infrastructure maintenance and investment, over-reliance on cars, the politics of personality, tax cuts solve everything, voter disenfranchisement, and other such policies cause – massive, destabilizing inequality.

    The trust and credibility of our institutions is collapsing precisely because of millions of individual decisions over the years that have amounted to promises that can’t be kept and malinvestment and squandering of resources on a colossal scale. The city of Detroit appropriated about $500 million last year for police and fire protection – and that amount underfunded the pension promises. In what world is this sustainable? For people unfamiliar with real estate development tax credits (new markets, LIHTC, TIF, property tax abatements, etc.) I highly encourage a little of the Google.

  43. allcoppedout

    All of Japan and the UK is, in a sense, Detroit. The lean manufacturing, flexible firm model is a disaster. The contradiction is that we should approve of efficiency in the workplace, but it is obvious this leads to more and more different work needed to take up the unemployment – much as the massive exodus from the land. I think we have a dead business model being put forward as the answer. It’s a bit like one team in a competition getting so good none of the others can get near it.

  44. Malmo

    All government pensions are in jeopardy now. The neoliberals will see it too completion throughout the US. This is thier gold standard case to set precedent. If it does go down this way then I hope we end up with the mother of all socialist revolutions. Weeping and gnashing of teeth is just around the corner for sure. Makes me sick. At least we’ll hopefully have the MMT minimum wage jobs guarantee to rally around after the carnage hits.

    1. CJ

      A pension is nothing but a promise, and I think it’s fairly clear that we are in the age of broken promises.

      This perspective is well-represented in my Gen-X cohort. Many of us are cynical precisely because we know we’re being lied to, and that when the time comes for these supposed benefits, we’ll be told all the money is gone.

      1. washunate

        Yeah, this point is so critical. Underfunded promises are one of the huge issues today because there seem to be a lot of Baby Boomer generation folks who still largely believe what the nice folks in suits have said over the years on the Tee Vee. WMD! Terrorist! Ownership Society! Just Say No!


        Those of us who are younger have already experienced the lying in personal, concrete ways, so in some ways that renders us more resilient as things continue to get worse, because at least we’re not shattering so many illusions at once. People under about 40 in this country, broadly speaking, have never even been promised a pension – that’s the whole point of 401(k)s and IRAs and 403(b)s and so forth (if you even make enough money to have any extra). The AARP started going by its acronym because most of its members are still working – not exactly an association of retired persons.

        It’s really sad, though, that you have people who worked for decades thinking they were making one thing while in reality a smaller figure was actually set aside for them. But that’s what happens when no one wonders why there are so many full prisons and empty properties, so much puffery yet so little progress. Chickens and roosting and all that.

        1. CJ

          “Those of us who are younger have already experienced the lying in personal, concrete ways”

          I could not possibly agree more. I have seen it and experienced it.

          I personally saw the end of my defined-benefit pension. Happened in 1993 at General Instrument Corp, and everyone got shunted into 401k’s, which I avoided from day one. It was all the rage of the time; huge propaganda campaign to convince workers that putting their wealth in the stock market would lead to massive gains.

          I think I can predict with near 100% certainty how this will end.

  45. Observer

    Detroit was always a one-industry town, and as went the American auto industry, so went Detroit. There has also always been somewhat of a criminal influence, and race and class struggles. Early on, brewing was big industry and saloons were a major political force. Prohibition ended that and rum-running became its second biggest industry in 1925, with 85% of illegal liquor entering the US over the Detroit River. Before prohibition, Detroit had 1500 bars; afterward, it had 5,000 blind pigs (illegal underground saloons). That culture continued for decades; it was responsible for sparking the infamous race riots of 1967, which started after police raided a blind pig illegally selling liquor after 2 AM on a Sunday.

    In the 1920s and 1930s the auto industry was growing and it already had a history of Pinkerton-style clashes with workers who were just beginning to organize. In 1932, 3,000 people protested at Ford’s River Rouge plant and the company’s Security Chief, Harry Bennett, had his staff fire into the crowd, killing 4. Jimmy Hoffa rose from the Detroit labor movement of that era to become President of the Teamster’s Union, infamous for its mob connections and illicit worker pension fund investments.

    Detroit’s geography was influenced by its resident auto industry and the auto industry was influenced by the war. It pulled out its street cars in favor of roads and highways and installed the country’s first “freeway,” the Davison, in 1941. The city’s first housing project was built in 1942 for black workers in the war plants, but the projects were built in a predominantly white neighborhood and it sparked a riot. By 1943, 255,000 workers had migrated to Detroit from the south, both black and white, to work in the plants. One hot summer Sunday, 100,000 people crowded to Belle Isle Park on the Detroit river for relief, and rumors that a black woman and her baby had been thrown off the bridge to the island sparked a riot. The rumor wasn’t true, but 34 people died and 1,800 were arrested.

    The city’s population peaked just after the war in the early 1950s. It was a port on a major river and it had manufacturing jobs: Buroughs made office machines there, Wonderbread was there, and of course, the auto manufacturers with all their supporting industries, like Fischer auto body. But the wartime plants closed, the Packard Motor Company closed in 1956, and the auto industry and its suppliers began moving to facilities in the suburbs where taxes where cheap. The city lost 134,000 manufacturing jobs between 1947 and 1963 and 25% of its population between 1955 and 1960. Mayor Albert Cobo tried to revitalize the already dying downtown by installing a new expressway system, but the new expressways just made it easier for people to commute to jobs in the suburbs.

    Smaller businesses left the city after the riots in 1967 and both black and white middle class workers followed the businesses and jobs out of town. In 1970, in response to a segregation charge by the NAACP against the city’s school system, a cross-district busing program was proposed to integrate the schools. But the US Supreme Court struck down the plan before it went into effect. Since my neighborhood was already integrated, it wouldn’t have mattered anyway. But the fight over busing went on until 1975, and families left because of it.

    By the 1980s, auto industry workers were taking early retirement plans. The Dodge Main plant in Hamtramack closed in 1980 and GM closed its Detroit Assembly plant in 1987. There were nearly 10,000 vacant single family homes and 3,400 vacant businesses by 1989, all of which represented lost tax revenue for the city. Displaced auto workers were offered job retraining, but the new skills had to be applied in new industries, and the city hadn’t managed to attract any.

    Detroit never made it out of the recession of the 1980s. After the auto companies abandoned it, nothing took their place. It had 1.8 million people in 1950 and was down to just over 700,000 in 2012. Between 2007 and 2012, the city closed 125 of its schools. It covers 140 square miles and there are neighborhoods where abandoned houses have been knocked down and nothing but overgrown streets and sidewalks remain. Mayor Bing floated a plan to relocate people from sparsely populated areas into more populated areas of the city to reduce the area over which it has to provide city services, but the plan met with too much resistance. Detroit was always a Democratic stronghold in a mostly rural Republican state, making for contentious relations between the two governments, so it gets no sympathy from the state. Its Democratic politicians once had influence at the federal level during Lyndon Johnson’s administration, but that disappeared during the Reagan and Bush years. Detroit is an orphan with nobody to help it out, and there isn’t a precedent for it to follow to dig out of its doldrums.

  46. Paul Tioxon

    Saying that Detroit was a one industry town and lost jobs to the suburbs is like saying Poland lost its right to govern to Germany. The deliberate movement of factories away from densely populated and well established unionized employees was a major fight within the NLRB during the JFK administration directly connected to the auto industry. The social and political capital of the organized citizenry for more than a generation was an obstacle to be over come by corporate America, which it succeeded in doing.

    The following excerpt from a labor history by William Domhoff tells the story of JFK’s newly appointed NLRB members tipped the majority in favor of the Democrats, who proceeded to push for greater worker rights.

    The National Labor Relations Board changes direction

    The new Democratic majority on the labor board then moved quickly to regulate collective bargaining more fully than in the past in order to force resistant corporations to take the process seriously. It began by restricting what employers could say to their employees about joining a union, ruling out any claims that they would go out of business, relocate, or shut down for some period of time. It also ruled that unions had greater latitude in picketing businesses and in passing out information about a company’s anti-union tactics than the Republican-dominated board had allowed. In addition, it made penalties for violations of labor laws somewhat stiffer, although it was hampered in this regard by the refusal of many courts to enforce such orders and by the conservative coalition’s ability to block new labor legislation. The new board majority further aided unions by defining the size of bargaining units in ways that gave labor organizers an advantage. Most critical of all in the eyes of employers, the three Democrats on the board ruled that authorization cards signed by a majority of employees in a company, stating their willingness to join a new union, were sufficient to merit union recognition. This decision made it possible to by-pass the usual procedure of holding a representation election using secret ballots, a procedure the corporations often successfully thwarted by using various means to delay elections for many months.


    But these decisions were nothing to the corporate community compared to National Labor Relations Board rulings in 1963 and 1964 that took the conflict to a new level, which represented a distinctly greater threat to the corporate community. Although the issues were barely worthy of media attention in the context of the rising civil rights movement, they provided new openings for organized labor to take part in management decisions, including such volatile issues as the removal of some in-plant functions to other companies (“outsourcing”), the closure of whole factories, and the movement of factories to new locations. In the eyes of all members of the corporate community, the labor board’s decisions on these issues were a challenge to their “right to manage,” a phrase that had been invoked since the 1940s to indicate that a sacrosanct line had been crossed.


    Corporate leaders were not only upset by a highly unusual board action that put the right to manage at stake. They also worried that the decision would “hamper economic expansion by prohibiting the movement of capital to lower wage areas; prohibiting employers from obtaining the lowest cost of production; preventing the discontinuance of unprofitable lines or products; inhibiting automation, mergers, and consolidations…” (Gross 1995, p. 173). In addition, they thought it would hinder them in meeting the foreign economic competition they had encouraged through their advocacy of lower tariffs in order to create an international economic system that would allow for greater profits and at the same time defend again the expansion of Soviet and Chinese communism: “Employers were particularly interested in becoming more efficient through technological change, ending inflationary contract settlements with unions, and in other ways seeking to overcome the labor cost advantage enjoyed by foreign competitors”.

    See part 5 in particular for above excerpts.

    The litany of bullshit, as to why Detroit and other de-industrialized cities have lost population, jobs, middle-class wages, is placed at the feet of the victims. If the auto industry decided to keep manufacturing inside the city and increase its presence the way the film industry stuck with LA, despite all of its crime, racist police brutality and 2 world class burn the mother fucker down riots, Detroit would not be the picture in the dictionary under bombed back to the stone age.

    The UAW and Walter Reuther backed JFK in the Civil Rights Marches so they would look integrated and had the muscle of a cross cultural political coalition. MLK used to quote Reuther’s speech. From Robert Dallek, “AN UNFINISHED LIFE”, P. 645: JFK “… was genuinely impressed and moved by King’s speech. “I have a dream,” he greeted King at a White House meeting with march organizers that evening. (When King asked if the president had heard Walther Reuther’s excellent speech, which had indirectly chided Kennedy for doing more to defend freedom in Berlin than Birmingham, Kennedy replied, “Oh, I’ve heard him plenty of times.”

    Reuther’s UAW also worded with Caesar Chavez and helped to push the United Farm Workers to prominence. Huelga t-shirts could be seen on the college campuses of Philadelphia as well as on Teamster’s organizers. Reuther, among many, was a target of assassination twice, his arm crippled as the result of one. Detroit, like Haiti, has been subjected to merciless economic warfare unlike any other city. GM and Ford have survived, but the people of Detroit will be reduced to a new category of American dispossession unlike any we have seen. The leadership of Detroit, and I do not mean just elected officials, saw what every big city saw with changes coming in the world after WWII. NYC lost over 1 million people, Philadelphia went from over 2mil to 1.56mil today, both had reversed and recovered some of the loss. But the efforts to diversify, of some industries to stay put and pay their people more money and work for the public interests in many cases to improve the infrastructure for a healthier, better educated and decently housed workforce, deliberately promote the need to remake the city and the lives of its people into a new service economy as factory after factory shut down was absent from Detroit. It was absent from the key power brokers who could have made a difference. The difference they made can be seen in the outcomes of outsourcing, off shoring and exporting jobs and entire industries away from Detroit and away from the USA and its people.

  47. Uncle Bruno

    It’s a feature, not a bug. Let Detroit be a lesson to any other uppity city that doesn’t know its place. Your future is to work for $13/hr with no benefits and no job security and if you complain they will crush you.

  48. CJ

    Thanks to Yves and all the commenters, especially those with a personal connection to the area. I learned a great deal from this thread and filled-in some missing pieces regarding Detroit’s history.

    Although I think it’s interesting – in an academic sort of way – to analyze the particular set of circumstances that led to Detroit’s bankruptcy, the reality is that the city isn’t all that different from many large cities. An extreme example, perhaps, but not different in type.

    Several years back, Meredith Whitney said that many municipalities were essentially broke, but nobody wanted to believe/hear her. It seems to me that this is the beginning of reality intruding on that fantasy.

  49. ep3

    and thanks for not bashing the unions. In the average newspaper you won’t hear anything about what you stated. All you hear is that the unions and the corrupt gov’t brought down the city.
    I always ask the following. In China, at Foxxconn, they employ 400k workers. Those jobs came from somewhere. So imagine if that factory was set up on the ruins of detroit, employing Detroit workers.
    One side note. I never saw Obama step foot in detroit during two campaigns.

  50. evodevo

    If they are like public employees in Ky., you are automatically opted out of SS if you are a member of the state pension fund. My husband had no SS quarters after 27 years as a teacher/psychologist, and had to pick up some part-time work for several years to qualify (using SS to pay for Medicare Part B). So, no, they may not qualify for SS.

  51. Chairman Meow

    black people are the problem, The black civil servants and their children ruined detroit the pensioners should get nothing. They didn’t do their job.they (blacks) have no respect for themselves or their communities, BLACKS HAVE BECOME FERAL or something akin(40% of todays blacks will get a HS diploma, 95% will be unemployed). if they were removed,the financial crisis would be past tense. the rebounding real estate prices would more than fund any debts (100 BILLION IN DETROIT, 75 TRILLION NATIONALLY), blacks are like a cancer to prosperity ) and we must put the indigent ones and their children in Federal Sanctuaries where they can learn basic living skillz and nutrition that come with real education. The sending of indigents to Federal Sanctuaries is inevitable as black people are holding hostage over 75 trillion in real estate alone, not to mention incarceration and welfare. WE MUST DO THIS NOW, WE MUST PLACE THEM IN GUARDED FEDERAL SANCTUARIES,these actions will restore prosperity. And render opportunities for blacks to become employable again, in peace. agree no bailouts but the indigent blacks must be housed in an areas far from other civilized humans. Federal Sanctuaries NOW!

    The government needs to declare Detroit a disaster area and remove the residents to Federal Sanctuaries. An art deco office building worth nothing will be worth millions overnight

  52. rashed

    I love what you guys are usually up too. Such clever
    work and exposure! Keep up the superb works guys I’ve incorporated you guys to my personal blogroll.

  53. Nathanael

    Everyone’s left out the issue of sprawl. Though some people did mention the freeways, and the auto companies moving their factories to the suburbs.

    An auto-dependent city was a recipe for disaster as peak oil and global warming hit, but it was exacerbated by the Alfred Sloan “we don’t have to make a good product, we don’t have to manufacture efficiently, we can advertise” attitude.

  54. Ep3

    Yves, first the new mobile site has been hell on my first gen iPad. it crashes my browser a lot.

    Second, I wanted to thank you for these posts on Detroit. I also wanted to post a michigan resident’s perspective on the decline of Detroit. I have been busy with work so that’s why I am posting a few weeks after this article. Hopefully you can still read my comments.
    What I want to talk here is the issue of white flight and it’s decline on Detroit. I live in the capital city of lansing, where at one time GM was the largest employer in a city with a population of 100k, GM employed 30k. GM now employs 3k in the city, with another 3k in a factory just outside of city limits, for tax purposes. Just a note on the factory outside the city. GM owns hundreds of acres of empty land that were once factories that have since been torn down. Instead of building on that empty land, GM was given tax breaks to take an empty piece of farm land outside any taxing authority to build a new factory. Those empty pieces of land are still empty, basically just parking lots. In your one post it’s mentioned about how white ppl left inner city Detroit for the suburbs. Here in Lansing, as well as flint, the same thing has happened. The downtowns of both cities are abandoned and run down, with very few jobs. Now, for Lansing, we have the state Capitol, which still keeps some middle class incomes flowing thru the inner city. But what we have now are small surrounding towns of middle class mostly white ppl that no longer need to travel to the downtown. Flint is the same way. Lansing has grand ledge to the west, Dewitt north, east Lansing & okemos east, and mason to the south. All have large majorities of white ppl, high property taxes, and their own selection of commerce that keep white ppl from having to travel an extra 10 minutes to the same selection of stores within the city limits, where “poor ppl” shop. You could argue this is due to natural population growth. But the overall population of Lansing has not grown in 10 years, while these areas have. And none of these areas has added solid middle class wages. Adding a subway, McDonald’s, and a Walmart is not job growth. Many residents are transplants of Lansing. They are baby boomers who grew up in the city and when their middle class jobs afforded them the opportunity, they moved.
    It’s just wrong because this white flight is exactly what happened. Why don’t white ppl flee each other? Lansing has a large population of italian immigrants. When they moved here seeking employment, they were welcomed. Yet when blacks folks move to an area looking for opportunity, others flee. then the decline of the city is blamed on them. When they were just left holding the bag.
    I have heard that these cities in the south where Toyota/Nissan/etc have built plants turn very small towns into fast growing cities, with great opportunity. Well, they should look to Michigan to see the aftermath when those factories close. All someone had to do here is open any type of business during our boom years and they could become successful. This created over confident entrepreneurs. Yes they were smart to move to the area. But from there, it was luck, not business savvy that caused their business to grow and reward them. Minorities work hard. It’s just that the cards are purposefully stacked against them.

  55. Sally Edelstein

    Obama may have bailed out the auto industry 4 years ago, reviving a once flourishing industry, but there was a time when Detroit basically bailed out Uncle Sam. During WWII Detroit was the place Americans knew as the “Arsenal of Democracy” with the auto industry’s massive contribution to winning the war, breaking every previous production record, becoming the center of the greatest concentration of applied science and technology.

    Although they had no new cars to sell, the automobile manufacturers continued to publish a profusion of full color ads to let the public know how busy they were supplying essential war materials. To learn more and view some of these vintage ads, visit

  56. Elizabeth

    Wow. I totally expected better from this site, after not checking in on the Detroit debacle for a while. (I’m from the Detroit area, by the way.)

    Did you miss this? It’s a Jefferson County bust-out, just like in Alabama, just like in Greece: Interest-rate swaps. Illegal deals. (There’s an online local newspaper called “Voice of Detroit” that has been reporting on this quite well.)

    This is the big elephant in the room, even if, sure, all those other things are true — sort of, because actually, Detroit isn’t just a one-industry town anymore. Look at the outlying areas and you’ll see a lot of high-tech, finance, things like that. (Some Detroit suburbs are still among the wealthiest per capita in the country.) Even in the city limits — an outpost of Quicken Loans lives there. (Bad example, I know, but it shows that there’s more action on the ground than we’re hearing about.) “Automotive” can be defined quite broadly, because the kinds of heavy — and light — industries that Detroit has don’t just make cars. The fate of the U.S. auto industry itself is a more complex issue than this, too. Foreign automakers have long benefited from subsidies and, ironically, postwar U.S. aid. Not to mention, a little “subsidy” known as universal, state-administered healthcare and better social security systems, exactly the thing that brought General Motors down. GM and Chrysler took blows from the credit markets drying up in 2008, which had nothing to do with their viability as industries.

    Detroit and surrounding areas still have the highest concentration of engineers and skilled industrial workers in the world. The location is superb, with access to transportation by all modes and supplies of raw materials such as iron ore.

    The current quality of product coming out of Detroit rivals that of any international competitors. It actually IS a high-tech industry, in itself, employing many programmers, for instance. Chinese companies are relocating their engineering departments to the Detroit area because of the quality of the engineers there. It’s a big story, locally.

    And yes . . . those problems you speak about. But isn’t it time we called out the financial tomfoolery here? Isn’t that what “Naked Capitalism” is for?

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