For Detroit, a Crisis of Bad Decisions and Crossed Fingers

Mar. 11, 2013

Is it that simple? Is Detroit’s decay really just a matter of bad management and industrial decline? Today’s New York Times explains Detroit’s recent fiscal crisis as a result of decades of corrupt, incompetent leadership and disappearing industrial jobs that produced huge debts the city simply cannot pay.

According to the Times, the primary cause of Detroit’s bankruptcy was mismanagement. Detroit’s last Mayor, Kwame Kilpatrick is headed back to jail after recently being convicted on a number of corruption charges. It wasn’t only corruption, however: the city keeps its records on index cards, is unable to manage its police force, and used questionable accounting to hide its growing debt. The article argues the other cause of the crisis is large structural changes to the U.S. economy: good union jobs left when the auto industry left, shrinking the city’s tax base.

This is an attractive explanation of Detroit’s decline, but it misses some parts of the story that are likely important. One argument is that purposefully racist federal housing policies and a local government legal structure facilitated white flight to rich suburbs like Grosse Pointe, which is separated from Detroit-proper by a moat and a road, but is a “world away” in terms of income and opportunity. Grosse Point has thrived over the last 50 years, while Detroit has floundered. A second argument is that unions themselves facilitated decline—industry invested heavily in labor-saving capital or simply fled the state because of Detroit’s notoriously militant labor unions—when jobs left, revenue fell, and debt grew. This second argument does not explain the vast Grosse Pointe/Detroit differences, however.

Although racism, zoning, and union militancy complicate the Times’ story of Detroit, Michigan Governor Rick Synder seems to be betting that the simple answer—better management—is the best answer, and he’s appointed an Emergency Manager to take over the city. We’ll see.



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