How to bankruptcy of Detroit affected the city

The bankruptcy of Detroit did not happen overnight. Bankruptcy is touted as a simple solution to the complex problems the city now faces. Whenever one is faced with the promise of a simple solution, it is wise to remember the words of H. L. Mencken, “For every problem there is an answer that is clear, simple and wrong.”

In many ways, the history of Detroit is a metaphor for the history of the U.S. industrial and manufacturing sector and has been repeated by cities throughout the rust belt for many of the same reasons. In fact, there are many cities in the rust belt that are in financial circumstances similar to Detroit and are ripe for the same sort of vulture capitalism.

Detroit was a single-industry, heavy industrial city. The neighborhoods were close-knit communities. Most worked at the same plant. The houses were modest and on tiny lots in order to house as many workers as close to their work as possible. Since everyone worked in the same industry, when the industry prospered, there were jobs for everyone. When the industry went through a downturn, unemployment was high. Even in good times, investment in transportation and other infrastructure was barely adequate to meet demand. In bad times, infrastructure was often neglected.

A comprehensive presentation of the history of industrialization in Detroit and the effects of “white flight,” growing suburbs, decaying and neglected infrastructure and unresolved social issues is presented in the book “Great Rebellion: A Socio-Economic Analysis of the 1967 Detroit Riot” by Kenneth Stahl.

The Great Depression had idled many of Detroit’s factories. With the advent of World War II, the U.S. government took over the factories and all industrial output was dedicated to war machinery. There were jobs for every able-bodied citizen. But this was a time before desegregation and waves of poor southerners and segregationists were dumped into the crowded city alongside blacks and other desperate job seekers. Overcrowding, long work hours, grueling working conditions, inadequate transportation infrastructures and a fractured social system lead to unrest and riots.

The U.S. army was brought in to separate the rioting groups and to build a truce. Unfortunately, no one stepped forward to do the difficult job of addressing the underlying issues which lead up to the riots. The truce was only temporary, as many of those same unresolved problems exploded again in 1967.

In the post war era, there was an economic downturn. While interstate freeway construction was bringing jobs to the rest of the United States, Detroit, whose economy was still tied to automobile manufacturing, was suffering from factory closings as The Big Three began to gobble up or force out their smaller competitors and consolidate their operations.

When the Interstate system came to Detroit, it cut a wide swath through the center of established neighborhoods, carving one city into many smaller units, isolating them from each other and fracturing the existing social network. With the decline of the neighborhood and the decaying, overcrowded housing stock, the freeways made it possible for middle class workers to afford a home in the suburbs and to afford the commute to their job in the city. This movement and the subsequent movement of the retail base drained the city of tax revenue.

The social experiment of “Urban Renewal” put additional strains on the city. Originally touted as a way to save the city, the goal was to raze “blighted” neighborhoods and replace them with modern buildings and revitalize the neighborhoods. The city planners failed to recognize the vibrant communities within the slums and did not engage residents in the vision of renewal. When entire neighborhoods were razed, there was little relocation assistance to residents, leaving many poor, elderly and marginalized people essentially homeless and cut off from their support systems. The promised influx of middle and upper income people to the “renewed” urban neighborhoods never materialized and the city did not capture the revenue they expected.

In order to “solve” Detroit’s problems, Michigan Governor Rick Snyder, using a law he championed after Michigan voters repealed a previous version, appointed a bankruptcy specialist to be the Manager for Detroit. Kevin Orr has the statutory authority to override any decisions made by the duly elected mayor and city council. He can sign contracts, commit money toward a new stadium, sell assets, break labor agreements and override any existing agreements.

Mr. Orr is taking the city of Detroit into federal bankruptcy court instead of partnering with the stakeholders to negotiate deals, collect overdue tax assessments or even put pressure on the state of Michigan to pay Detroit the share of revenue it is due. Bankruptcy generally favors paying the bondholders and bankers ahead of paying pensions and workers. It also could involve the sale of assets.

The city of Benton Harbor, Michigan should provide warning for what is in store for Detroit. Detroit is Benton Harbor on steroids. At risk to the citizens of Detroit are not only the meager pensions of retired police, fire fighters, teachers and other civil servants, but the public library, the art collection housed at the Detroit Institute of Art and all other museum collections with any financial value. In the most immediate danger is Belle Isle Park. This gem is sought after by developers and would not be the first public space which Michigan has sacrificed on the altar of privatization.