Just days ago Detroit, arguably America's most distressed urban area, made the largest declaration of insolvency by any U.S. municipality ever. Given the city's unique role in American economic and cultural history, many people--from national leaders to concerned citizens--have wondered whether its predicament portends anything larger for the nation as a whole. The answer: It likely does not.
The truth is that the challenges faced by Detroit have been common to the majority of America's biggest cities for the last five decades. Distressingly, though not surprisingly, they just happened to join together with a unique and dogged fury in America's motor city, and the citizens there are paying the price.
Rather than focus on esoteric questions of what Detroit's bankruptcy means for bondholders on Wall Street, urgent energy needs to be devoted to the 700,000 mostly black, mostly poor Americans who remain there with nowhere else to go. This includes the 21,000 city pensioners who receive $19,000 as part of a contract they made with the city decades ago.
Frighteningly, the local economy has cratered to such an extent that less than a million people are left in a city designed to hold three times that many residents. According to the U.S. Census Bureau, Detroit has a poverty rate three times the national average with close to six out of 10 children living in poverty. It takes the Detroit police over an hour to answer a 911 call, one out of three of the city's ambulances are inoperative, and four out of 10 street lights don't work. Detroit is clearly a city flat on its back.
These facts underscore that the scale of Detroit's fiscal woes is breathtaking. The city owes 100,000 creditors over $18.5 billion. In the past five years alone it's wracked up half-a-billion dollars in additional debt.
The core issue is that there's simply not enough people nor economic activity to make the city's debt payments and satisfy its needs. Detroit's population is two-thirds smaller than at its height 60 years ago. And it needs more government than it can pay for. Given the desperate situation, Steve Rattner, who orchestrated the government bailout of the entire auto industry in 2009, has called for a bailout of Detroit's residents.
Though we are all faced with Detroit's pressing emergency, the truth is that the city didn't land here overnight.
Through a combination of an over-reliance on a single, formerly all-powerful industry and two generations of unsteady political leadership, Detroit remained stuck and resistant to change. The Washington Post's Keith Richburg, a Detroit-native, said that the city was "kept alive by pride, a nostalgia for its former glory, and an illusion that revival was just around the corner."
The essential problem is that Detroit has remained the capital of an industry which built America but is now a shadow of its former self: the car industry. And nothing in the city has shown up to replace it. That's because automobiles were so dominant for so long that they crowded out the city's economic imagination.
Let's take a brief step back to see how. Before the car, the U.S. was a nation of small towns and agriculture. But after the introduction of the mass produced automobile by Detroit's Ford, General Motors and eventually Chrysler, the nation quickly became the world's biggest economy.
Detroit's rise followed suit.
For those who've grown up with the American car industry in constant crisis, it's hard to imagine a time when automobiles were the most important and valuable item that America made. However that time wasn't all that long ago. From 1913 until almost 1970, Detroit was the Silicon Valley of the United States.
The U.S. economy, the car industry and the city of Detroit all moved in tandem for a while. Led by the manufacture of automobiles, during the 1950s, half of all economic activity in the world occurred in the United States. During that time, Ford, GM and Chrysler made eight out of 10 cars produced on the planet. The American economic and car industry boom fueled Motown's ascent to the position of country's third largest city, with 2.1 million residents.
Moreover, the industry's commitment to equal pay for people of color created a robust black community in Detroit, so powerful that it transformed global culture through Motown Records with such talent as The Supremes, The Temptations, Stevie Wonder and Marvin Gaye.
Over time, all of this changed, due in part due to policy changes in Washington. The U.S. economy decoupled from Detroit, and the world based on the churning out of goods along an assembly line went away. Manufacturing as a portion of the U.S. economy is now two-thirds smaller than when Detroit was at its height. Outpaced by global competition, the Big Three car makers' percentage of even the U.S. market has fallen by 50 percent since 1950. And Detroit has slid down in the ranking of American cities to be 18th in size.
Yet even with global economic realignment, Detroit's longterm collapse was not preordained.
With better leadership the city could have made the painful transition that so many other cities have made during the global economy's transformation from one based on manufacturing to one based on services and technology. Pittsburgh moved from a one-industry steel town to one now dominated by medical and education services. Minneapolis is now home to leading brands like 3M, Target, and Best Buy. Even hard-hit Indianapolis is making a go at reworking itself from a rustbelt town into a distribution and pharmaceutical hub.
Yet the leadership to make this happen wasn't available to Detroit. As Richburg puts it, "Detroit politics has been wracked by a series of corruption scandals, going back to the [1970s]." Kwame Kilpatrick, who presided over the city at the beginning of its most recent financial crisis in 2008, was convicted of 24 counts of corruption and related crimes.
The bottom line is that history slowly turned against Detroit, and all along the way no one in charge showed up to chart a steady and required change. Regardless, our concerns should now center on the people of Detroit, rather than obsessing over the litany of global challenges, local errors, and flawed leadership that helped shatter the city in the first place.