Detroit: How to Drive Forward

Hopes Unfulfilled

From setting foot in the Detroit airport, one would never know that one had just arrived in the largest bankrupt city in American history.  The floors are well-waxed, airport workers stand conversant even late at night, and a terminal map boasts an impressive array of restaurants, bars, and shops that even includes upscale suit merchant Brooks Brothers.  In one terminal, LCD screens advertise national accolades awarded to an airport concessions management team; in the other is a high speed train that shuttles passengers down the one mile length of the concourse.  Even after most shops have closed for the day, the airport seems bright, lively, almost exuberant.

Nothing looks amiss here. (Photo from www.flickriver.com)

Yet that very exuberance may explain at least a part of Detroit’s current woes.  This is a city built on automobile manufacturing in a state that has seen 350,000 manufacturing jobs leave since 2000 alone.[1]  Given that Detroit’s population has fallen to just 700,000 from a peak of 1.8 million, this drop is devastating.  And yet, projects such as the two new airport terminals, completed in 2002 and 2008 with respective price tags of $1.2 billion and $431 million dollars, have proceeded apace.[2]  While the airport itself has paid dividends (it ranks among the top 50 airports in the world by passenger traffic according to Airport Councils International), such ambitious public works projects added to the debt of a tremendously indebted city.  As such, they were predicated upon hope that the city could begin a renaissance, which thus far, it has not.

The problems Detroit presently faces are numerous and varied.  Last year, the murder rate rose back above its level as of 1970, when Detroit was known as “the murder capital of the US.”[3]  Some experts estimate that once those who have stopped looking for work (or never looked in the first place) have been taken into account, unemployment may be above 20%.[4]  Police, fire, and emergency services already struggle to serve sprawling but depopulated neighborhoods, and now parts of these departments face 10% pay cuts in the immediate future.[5]  This past week, one write-in candidate for a mayoral election to be held this August found his car stolen.

All this, of course, is compounded by Detroit’s recent declaration of bankruptcy.  Ever since emergency manager Kevyn Orr took over the city’s financial situation and filed for bankruptcy, the city has been engaged in battles with creditors, city employees, retirees, and all other stakeholders in the city itself to determine who can be paid what and from what funds.  Much and more has been written about the financial details of this bankruptcy, but the more important question of where Detroit is headed next still remains.

 

What Must Stay, Where to Go

 

That being said, the two problems are inextricably linked as any plausible future for Detroit must deal with the depopulation problem that has blighted the city both financially and socioculturally.  In order for this to happen, Detroit will need to balance between selling enough assets to pay creditors and keeping the very things that will make Detroit a desirable place to live in the future.  Everything from the Joe Louis Arena (home of the immensely successful Detroit Red Wings) to the Detroit Zoo to Belle Isle, a park in the Detroit River, could theoretically be on the auction block. [6] Detroit would do well to keep as many of those assets that will attract residents as possible; in the ideal world, privatizing an airport or the water department would be far better than allowing the Detroit Institute of Arts’s valuable collection of van Goghs, Degas, and so on to leave the city.  Hopefully, Detroit’s creditors will work with the city such that it doesn’t need to add a cultural bankruptcy to its current financial one, perhaps even taking a large stake in the city’s future in exchange for a portion of the debt that can’t realistically be paid back.

All this, though, is merely figuring out how severe an injury Detroit will have to suffer in the short term.  Far more important is figuring out how to stop the bleeding and move Detroit back towards prosperity.  One would think that natural economic forces would solve this problem to some extent.  As Detroit has declined, so have its property prices; real estate website realtor.com lists a few homes in Detroit with prices as low as $70, and a few properties have even become notoriously listed as $1 homes.  This has already caused some families and businesses to relocate, hoping to take advantage of the cheap prices and prosper as the city finds a new way forward.  Quicken Loans, an online mortgage lender, is now headquartered in a large office building in downtown Detroit.  Indeed, the city’s center seems to be doing well, with young graduates from the suburbs attracted to an area far cheaper than most major cities yet more exciting than neighboring towns.[7]

On sale for only a dollar.
On sale for only a dollar. (Photo from www.dailycaller.com)

 

Still, the issues Detroit faces are uncommon ones that will require more than common economic cyclical forces to correct.  Foremost is an over-reliance on the auto industry from which the city has not been able to wean itself during the slow 50 year decline of the Big 3 American automakers.  There are no easy answers as to what industry will get Detroit’s economy moving again, but any solution will require making the city more attractive for companies like Quicken to move in.  This means not only beautifying parts of the city but also restoring public services and making local and state regulations friendlier to business.  These ideas are not new for Detroit.  In one home in Southfield, a suburb, I find an essay written by a high school student suggesting trade liberalization and relaxing of pro-union labor laws to compete with foreign companies.  Though these policies may still be wise today, the essay is dated 1981.

Interestingly, some businesses and private citizens have seen opportunities arise in fixing the problems the city government cannot handle, namely rectifying public services in an efficient manner.  Many of Detroit’s woes stem from a depopulated core to which the city government must provide services at tremendous cost to the public.  A taxpayer base of only 700,000 can’t provide for a city built on 143 square miles for a population 3 times that size.  Individuals such as Andy Didirosi are finding alternate solutions.  Didirosi assembled a fleet of Greyhounds and school buses to start the Detroit Bus Company as a method of effective transportation in the city.  He described himself as “pissed” when a much-anticipated light rail project fell through in Detroit and took it upon himself to fix the problem for some of Detroit’s most widely used routes.[8]  Hopefully others will follow his example and perhaps even provide models for the city government to eventually emulate.

 

Rusty Lights to Guide the Way

A new kind of manufacturing.
A new kind of manufacturing. (Photo from www.businessinsider.com)

            It’s worth noting that many of Detroit’s problems are not unique to Detroit.  Rather, they are common to the several Midwestern cities that in the 20th century developed economies based in manufacturing.  Some of these cities have been able to navigate these problems fairly successfully.  Of particular note is Pittsburgh, which faced similar problems to Detroit, albeit less severe, in the 2000’s as well as the broader trend of declining manufacturing employment for the last 50 years.  Pittsburgh, though, managed to navigate this crisis successfully, turning around the city’s finances and establishing a more diversified economy.  It did this in large part through public measures such as Urban Enterprise Zones in much of the city with fewer regulations, tariffs, and import duties.  Recently, Pittsburgh has been lauded for its livability, even being selected to host the international G-20 summit in 2009.

Detroit’s problems are now much worse that those that Pittsburgh faced a decade ago.  Pittsburgh was never forced to declare bankruptcy and thus sell off many of its cultural assets, and unemployment in Detroit stands much higher than 6.8% high mark set in Pittsburgh in 2003.  Still, stories such as these show that Detroit’s story can become one of resiliency rather than of downward spiral.  Even if the city must get rid of its fancy airport, arenas, or parks, ways forward still exist, and some longtime Detroiters and recent arrivals are already proving resourceful enough to take advantage of them on their own.  Hopefully, the city as a whole, including government, new businesses, nonprofits, and even the much-lambasted auto industry, will be wise enough to follow suit.

 


[1] http://www.huffingtonpost.com/2013/08/02/detroit-jobs-_n_3693303.html?utm_source=concierge&utm_medium=onsite&utm_campaign=sailthru%2Bslider%2B

[2] http://www.nbcnews.com/id/26738174/ns/travel-news/t/detroit-terminal-opening-industry-slump/#.Ufz8dGTwL9U

[3] http://www.economist.com/news/united-states/21582285-americas-biggest-ever-city-bankruptcy-starts-roll-can-motown-be-mended

[4] http://www.huffingtonpost.com/2013/08/02/detroit-jobs-_n_3693303.html?utm_source=concierge&utm_medium=onsite&utm_campaign=sailthru%2Bslider%2B

[5] http://www.freep.com/article/20130731/NEWS01/307310138/

[6] http://blogs.wsj.com/moneybeat/2013/07/19/detroits-assets-what-could-be-sold/

[7] http://www.economist.com/news/united-states/21582286-some-parts-detroit-are-doing-well-buy-sound-gunfire

[8] http://dailycaller.com/2013/07/18/private-citizens-pick-up-the-slack-as-public-services-cut/

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