Detroit: A story of Riches, Ruin and Regeneration

Detroit is a city renowned for its industrial heritage. Unrecognisable from its humble beginnings as Fort Pontcharatrain, its geographically significant location on the Detroit River, granted it access to the Great Lakes and oceans beyond. Providing it with the means to kick-start its early development and cement its status as a key port. During the earlier half of 20th century, Detroit’s economy thrived upon the back of America ingenuity, innovation and its entrepreneurial spirit, that manifested itself within the large Multinational Corporations (MNC) that have endured to this day. Manufacturing flourished, so much so Detroit adopted the name ‘Motor City’, as the birthplace of the Ford Model T car and whose MNC’s played a large role in the development of modern mass production.

In its glory years, Detroit became a source of prosperity, providing jobs and at times huge fortune to its occupants. Whilst manufacturing came to dominate as a regional employer, a trend mirrored across many of the rustbelt areas. Sprawling suburbs and opulent lifestyles became commonplace alongside Detroit’s blossoming cultural scene. All the while the city continued to draw immigrants, until its population peaked at 1,849,568 in the 1950’s.

Since then these same suburbs, and by and large huge swathes of the city currently lay in ruin. Unrecognisable from Detroit anterior state, many of its hotels, theatres, office buildings, infrastructure and prominent landmarks such as Michigan Central Station remain in a state of abandonment. In a mass exodus lasting decades, businesses and communities have steadily moved in the opposite direction to earlier immigrants drawn during the city’s hay day. These inhabitants take with them crucial tax contributions and leave behind a demographic shaped by the wake of ‘white flight’ and departing black middle class. Thus the remaining derelict structures have come to symbolise the city’s plight, serving as a reminder of a bygone era as Detroit’s population dwindled below 700,000 at the end of 2013.

So why is it that such an entrepreneurial and once progressive city seems to have been caught standing still in a changing world? Looking back at Detroit history it is relatively straightforward to identify the onset of global competition and the ensuing deindustrialisation across American manufacturing centres, as the principal cause of Detroit’s decline and urban decay. Yet despite many of these rustbelt areas managing to reinvent themselves, through sizable stakes in newer high tech industries (Detroit is not an exception here). Many of these cities, including Pittsburgh and Buffalo remain tainted by its past exploits. The fall out from which appears to repel its inhabitants and put off prospective ones. Detroit is a city that is no longer renowned as a centre for business excellence, but rather one recently highlighted as a creditors nightmare, in its on going bankruptcy.

The Blight Removal Task Force is the most recent coordinated attempt to stem the decay that has tainted the city’s reputation internationally. But currently, high crime, poor education opportunities, job shortages and a declining population with a limited skills base continue to plague the city. These social issues tend to go hand in hand with poverty and continue to fester and serve to the detriment of many. Consequently removing many of the derelict neighbourhoods and properties, as recently described in The Financial Times (2014) is viewed as the first step in Detroit’s recovery.

Apportioning responsibility is challenging. Is it that capitalism is to blame? Or is this alleged cause, which helped to provide the environment for Detroit’s initial economic assent, also the solution to combating its decline? Ultimately this author infers that Detroit’s situation should be viewed holistically. Clearly significant blame should be affixed upon poor governmental decision-making. Decisive and effective policies were sorely required in guiding the city through devastating economic periods, when all to often borrowing was deemed the remedy.

Fundamentally Detroit no longer has any capital and has not for some time. Incompetence surrounding the management of its contracts and financial decision making, ensure that the city remains straddled with massive legacy costs in overly generous pension commitments and huge borrowing costs. Borrowing binges, largely with thanks to the once praised Major Kwame Kilpatrick amongst others, were the answer to budget deficits, funding liabilities and new infrastructure.

As people vacated the city during its decline, taxes were steadily raised, which in turn led to more people leaving, as Detroit became more expensive to live and do business within. In fact the last time revenue exceeded costs was during Major Coleman Young’s administration from 1977 onward, although this too was dependent upon such tax hikes. Unions, health care benefits and bonuses have all played their role. Yet substantial downsizing was needed for decades and although cost cutting was attempted on various occasions, it remained inadequate and Detroit’s seemingly unrelenting decent continued.

Did you know that in Detroit there are more pensioners than there are working employees? In my view, this fact neatly summarises the city’s failure to balance the budget, between its massive debt and comparatively meagre revenue. In a city where it is reported that it takes up to an hour to respond to an emergency call and you are a lucky resident if your neighbourhood is crime free and illuminated at night. Detroit serves as a stark and tragic indication of the gulf between American’s wealthiest 1% and the staggering poverty that coexists today in the world’s largest economy.