Showing posts with label Detroit bankruptcy. Show all posts
Showing posts with label Detroit bankruptcy. Show all posts

Friday, July 19, 2013

Be Careful What You Wish For

When a corporation files for bankruptcy, it's the culmination of a series of unfortunate events that was likely caused by some sort of government over regulation. When a city like Detroit files for bankruptcy, it's a "win" for the Right and their minions in the blogsphere. Why? Well, it goes something like this.

Detroit is a city that has largely employed liberal polices.
Detroit has just gone bankrupt.
Employing liberal policies means every city every where will go bankrupt.

Indeed, the very definition of a logical fallacy. This is all they have. By this logic, San Francisco should be in deep, deep shit. The opposite, of course, is true. The city attracts the 4th most foreign tourists of any city in the world, ranking 35th out of 100 worldwide. Juxtaposed with the millions brought in by tourism are the 30 international financial institutions, seven Fortune 500 companies, and a large support infrastructure of professional services—including law, public relations, architecture and design. Liberal policies there certainly are not affecting that city in an adverse way. Or New York, for that matter. We don't see Wall Street relocating to a red state any time soon, right?

Once you get past the adolescent game of "See? I told you!!" it's easy to see that Detroit has gone bankrupt for a number of reasons, none of which have to do with liberal policies. The city's woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers started building suburbs that lured away workers and businesses. Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn't control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city. Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.

Add in the usual amount of corruption that goes on in big cities and it's easy to see how Detroit has fallen so far. Cory Williams over at AP has an interesting piece told from the perspective a primary source. The over riding diagnosis is severe mismanagement of public funds and a decided lack of even basic fundamental services. Of course, it's much more than that.

Detroit is a metaphor for globalization. It represents how the spread of free market capitalism around the world ended up eroding it here at home. It was the epicenter of the Golden Age of American Manufacturing at the heart of the Rust Belt. The various factors above brought about its fall and the main lesson to heed from this devolution is that if we want the world to be a democratic place rooted in free markets and liberal economic theory in practice, we must be careful what we wish for.

Because we got it.