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The Real Story of Detroit's Economy -- Good Things Are Really Happening in Motown

Photo Credit: © Vladimir Mucibabic/ Shutterstock.com

As a life-long Detroiter who has lived both in the city and the suburbs, I’ve been fascinated by the media frenzy over Detroit’s bankruptcy. Like most big news topics these days, Detroit has become a screen onto which people project whatever political viewpoint they have.

First off, it’s worth considering why the bankruptcy is getting so much attention. Is there really that much there, there? After all, as with any bankruptcy, isn’t it just an argument among some people about some money (or artworks, real estate and other assets).

In the private sector companies file for bankruptcy every day without making much, if any, news. And why not? Bankruptcy is a tool used by capital to manage failure. Capitalist orthodoxy is that some degree of failure is both inevitable and desirable (it’s called creative destruction). It’s no surprise therefore that capitalism creates procedures to manage it.

At the height of the depression Congress added a new tool, Chapter 9, to the Bankruptcy Code to address financial failure by local governmental bodies. While it’s true that “failed states,” or in this case a failed city government, are different in various ways from a corporation, the basic issues of who owes who how much are the same.

Admittedly municipal bankruptcy is not as common as private sector bankruptcy. (Not yet anyway.) So, up to a point, the “look, look, a man is biting a dog” scenario is justifiably in play. Further, because cities are units of elected governments, there is understandably a different sense of the stakes.

In that context, what the MSM is mostly missing is the extent to which bankruptcy is but the latest incremental step in a long running destruction of democracy for African-Americans. As of this writing more than 55% of Michigan’s African American population lives in communities under some form of Emergency Management. That means state government has already taken away the authority of locally elected officials. Bankruptcy just moves that disenfranchisement to the federal level.

That does make news though because unlike state “emergency manager” laws, Chapter 9 federal bankruptcy puts the banks, bondholders, bond insurers and hedge funds who lent the city money at risk. That is something Michigan Governor Rick Snyder had worked very hard to avoid. Back in June of 2011, he made a pledge to his Wall Street friends. "Detroit's not going into bankruptcy," Snyder told reporters, as he beamed with encouragement from his meetings Monday with three top bond rating agencies in New York.

Predictably, what also excites and dominates MSM coverage is the blame game. The liberals did it or the blacks brought this on themselves, scream the “conservatives.” It’s the racists and the right wing’s fault, say the “liberals.”

The noise can be deafening. What follows is I hope a quieter version of what the “bankruptcy” of Detroit means.

The government is bankrupt. Detroit is not.

There are four economies in play in Detroit. One is the old economy. That means preindustrial and industrial. It’s old money. A lot of it is auto related.

Especially these days, capital is highly mobile and it has virtually no loyalty to any geographic entity. If it’s not bound to a nation, it is surely even less loyal to a city.

Thus the old money led the disinvestment that removed so many of the economic assets that once gave Detroit a version of what passed for prosperity in the mid-twentieth century. Long before Detroit-based capital was relocating to Mexico and China, it was moving from Detroit to its suburbs.

My name for the second Detroit economy is the pizza economy. Others might call it the entertainment economy. As industry was moving out, the pizza economy was moving in, personified by Mike Illitch, patriarch of the family that founded the Little Caesar’s Pizza chain. Illitch bought the Detroit Tigers, the Detroit Red Wings and a premier downtown concert hall, the Fox theatre. Among other things. Most of his properties have received some sort of city, state or federal subsidy. Even now, bankruptcy notwithstanding, he is scheduled to receive $650 million in subsidies from Detroit taxpayers for a new hockey arena.

Three gambling casinos also joined the Detroit entertainment scene. The core idea was that even if you couldn’t persuade white people to live in Detroit you could build an economy around getting them to visit.

Sensing something was happening downtown, FIRE (finance, insurance, real estate) gazillionare Dan Gilbert (Quicken Loans among other assets) more recently jumped into the fray and now owns 19 downtown Detroit properties and is probably buying another one right this minute.

Then comes what we might call the SLOWS BarBQ economy—economy number three. SLOW’s proprietor, Phil Cooley, personifies the urban pioneers who saw opportunity in the ruins of Detroit. So did Jackie Victor and Anne Perrault who founded the socially responsible Avalon Bakery way back in 1997.

Cooley has now added a Detroit business incubator to his restaurant and real estate interests. Avalon recently acquired a huge abandoned factory in the city to service their growing business. There is big buzz about Shinola (manufacturing high end watches and bicycles) in mid-town. Within the last few months Whole Foods and the Meijer superstore chain opened stores in Detroit proper too.

And then there is economy number four—everything else. I’ll have more to say about #4 later. For now I’ll say this. Everyone has some sort of template in his or her mind about how a city is supposed to operate. Detroit hasn’t fit that template for at least 40 years. But as the disinvestment in Detroit stripped its conventional assets—good public schools, effective law enforcement, most of the good union jobs, taxes derived from healthy middle class home values and so on, what was left was a different kind of economy. Economy #4 is driven by the assumption that help is decidedly not on the way.

Hundreds of thousands of people, mostly African-American, still live in Detroit. They do get by. They do constitute an economy. Some have a connection to economies one through three. Many do not. Despite the resourcefulness they repeatedly show, economies 1-3 generally consider them a problem, not an asset.

So now, back to the bankruptcy. What has astounded me again and again in recent years is that every single one of Detroit’s four economies is investing. A lot. Capital of all kinds is pouring into Detroit. A recent issue of Crain’s Detroit Business reports on 24 new businesses that have opened in midtown Detroit in the last year. Scores more have started up in downtown and other neighborhoods too. Foundations, (the “trickle down” creations of economy number one) have spent at least 2 billion dollars in Detroit in recent years. Dan Gilbert keeps closing offices in the suburbs and bringing those jobs to downtown Detroit. In some parts of the city rents are rapidly rising.

If Detroit is so bankrupt and dysfunctional, how can that be?

Government? Apparently, we don’t need no stinkin’ government. Not economy 1. Or 2. Or 3. Or 4. That’s the lesson to be learned from watching what people do as opposed to the hand-wringing things some people say. Want to see a close up of the shared dream of Karl Marx and Grover Norquist? Come to Detroit where the “state” has truly withered away, or been drowned in the bathtub. Take your pick.

Well some of government as we know it anyway—the part where Detroiters had some say in their own destiny. The reality is that Detroit has been “governed” for some time by a dizzying array of state “emergency managers” and other state agency takeovers; private/public partnerships; private services for security, waste management, worker training and many other things formerly done by elected government and regional authorities of various kinds, not to mention many foundation invented organizations. (Detroit Free Press reporter John Gallagher does a good job of describing some of these dynamics in two books, Reimagining Detroit and Revolution Detroit. He also profiles many of the authentic grass roots initiatives underway in the city.)

Illustrating the theory that the exception proves the rule, the sound of wailing recently heard about the possible sale of artworks from the Detroit Institute of Art (DIA) is an example of one Detroit asset suburbanites care about that they did not get around to protecting or relocating.

Does all this rearranging of the chairs mean that Detroit is now the promised land? Of course not—it is anything but. For most residents, life is difficult at best. Exhibit A would be the impact of fourteen years of control of Detroit Public Schools by the state government in Lansing. The results have been disastrous, despite the best efforts of Detroit’s teachers who give new meaning to the term public servants.

The physical devastation of the city is breathtaking. Much of what you have read from self-proclaimed Detroit haters and defenders is accurate. The debt accumulated with the aggressive help of Wall Street over the decades is staggering. Repeated lay-offs of city workers have severely curtailed even basic services.

To be sure, corruption and incompetence from elected officials has played a role. It has made already bad situations even worse than they needed to be. It has diverted needed resources to addressing the corruption instead of dealing with other problems. And it has been like catnip to whites who like to argue that it proves Detroit can’t govern itself.

Imprisoned former Mayor Kwame Kilpatrick provides the best and most well known target of all. But what most whites don’t know or won’t admit is that he was well on his way to being defeated for reelection until a cadre of white businessmen with major interests in the city came up with hundreds of thousands of dollars in 11th hour campaign funds.

None of Detroit’s problems showed up suddenly. Seen from a long term perspective, the bankruptcy filing comes into clearer focus. As with Ronald Reagan’s firing of unionized air traffic controllers (PATCO) or the Supreme Court’s validation of big money control of politics in Citizen’s United, Detroit’s bankruptcy is the effect of democracy’s power already lost—not the cause of it. It is but one more small step in a decades-long process.

And yes, race does have everything to do with it. There are three counties that make up the political economy of Southeast Michigan. Wayne County encompasses Detroit but also includes large suburbs such as Dearborn, Livonia (the most segregated city of more than 200,000 residents in the entire country) and most of the affluent Grosse Pointes. Oakland County immediately north of Detroit is the 4th most affluent county of its size in the United States. Nearby Macomb County is predominately working class and the “birthplace” of “Reagan Democrats”.

Much of the Detroit punditry one reads or hears conveniently ignores race altogether, concentrating instead on the decline of the domestic auto industry or macro economic trends. Usually when race is included on a list of “causes for Detroit’s decline,” it is described with weasel words such as “racial tensions” or “the racial divide.” Nonsense. What it was and what it remains, is white racism pure and simple. Bloviators love to talk about the “unsustainable legacy” costs of pensions for city workers. They never talk about the “legacy” costs of racism.

By 1980, African Americans out numbered whites within the city limits of Detroit. Yes, capital started leaving Detroit in the 1940’s. But the population disinvestment is just as important. Make no mistake about it. The extreme segregation that has long characterized Southeast Michigan was anything but accidental.

For decades, it was the policy of the Federal Housing Administration to deny loans to African Americans trying to buy houses in the suburbs. To this day, if you buy a suburban house that hasn’t changed hands in a long time, the deed may well contain a “restrictive covenant” that explicitly prohibits the sale of the house to Negroes.

That’s not all. Twenty-three out of twenty-three attempts to create a tri-county transportation authority to improve region-wide public transit went down to defeat in the white controlled state legislature. So, not only was it impossible for African Americans to buy homes near where the jobs were moving, it was difficult to get to suburban jobs that came along with suburban growth.

And just to add insult to injury, the financial institutions that wouldn’t lend money to African Americans to move out of the city wouldn’t lend it for home improvement in the city either. But they would charge more, far more, for home and car insurance. For those too young to remember, that practice was called redlining. It’s still prevalent today.

One dramatic example of the cost of racism born by Detroit is this: Detroit has an income tax on those who work within the city limits. The two-tier tax is lower for those who work in the city but live in the suburbs. In enacting the tax, the state legislature required employers based in the city to collect the tax via payroll deduction as they do with federal and other taxes. Suburban based employers are not required by the law to collect the tax. Most of them don’t. The revenue lost to Detroit per year is estimated to be as much as $142 million.

Zooming out our historical lens even further, we see the unbroken pattern of white supremacy even more clearly. The counterrevolution to the civil war was the Jim Crow system. The counterrevolution to the end of Jim Crow is mass incarceration and other components of the institutionalized racism that perpetuate and in some ways intensify white privilege today. Detroit’s history as the national leader in residential segregation and all that flows from it definitely underpins today’s Detroit crisis and that of Flint, Pontiac, Benton Harbor and Muskegon as well.

While observers sometimes notice that a majority of predominately African American cities in Michigan are under some form of emergency management. The question they don’t ask is, why are there predominately African American cities in the first place?

The beauty of this “willful ignorance” for many whites is that as the quality of life declined in Detroit, the decline itself became the moral justification for whites for the inequality itself. It’s an old story. Slave society did the very same thing. Slaves were routinely portrayed as lazy and shiftless. To put the meme in contemporary terms, the slaves were demonized as the takers and the slave owners were the makers.

If you want to see how this dynamic plays out today, just read the abusive and sickening comments following any news story local, or national, about Detroit’s troubles. For that matter just read the Detroit News—the “official” newspaper of white flight. Back in the day it was editorial policy of the News to publish a front page story every day about a crime committed by an African-American.

Recently Detroit News Editor Nolan Finley, who has built his career on being the most steadfast and flamboyant carrier of the “white man’s burden,” published a much hyped editorial titled “Can Detroit Govern itself?” You can guess how he answered his own question.

And his coded speech is unmistakable. Everyone knows that what Finley really means is can African Americans govern themselves? To which my answer is absolutely, if you and your one-percent pals were capable of allowing such a thing. A step in the right direction would be for the News to publish a reflective piece on how its coverage of the city and its hate filled comments section helps perpetuate racism and segregation

The thing about residential segregation is that it changes not just economics, but politics as well. As Detroit became more predominantly African-American, its influence, especially in state government declined. Among other things, that made gerrymandering easier, contributing to the control of all three branches of government by right-wing Republicans.

But there is more to this story—way more

Believe it or not, the worst of times is well on its way to becoming something truly inspiring The very isolation of Detroit has created the conditions for economy number 4 to develop a new paradigm of economic activity.

Economy number 4 is a complex, multi-layered thing in its own right. It is single moms stretching dollars from government programs for the poor as creatively and as far as they can. It is back alley auto repair shops and church’s selling dinners on the street. It is off the books home child care. It is what African-Americans have had to do for many generations to make a way out of no way.

It is also scrappers who are repurposing the copper, weathered wood and other valuable products left by the abandonment of homes, stores and factories. So, yes it’s crime too. Crime, after all, is a form of economic activity whether it is Wall Street stealing homes through foreclosure or robbers who target dope-dealers cuz “that’s where the money is.”

Some people look at the physical destruction of Detroit and see only the blight. What I see is amazing resourcefulness on the part of the remaining residents to prevail again and again against overwhelming odds.

Necessity truly is the mother of invention and in that spirit, Detroiters are also developing a remarkable highly intentional economy. That economy includes increasingly sophisticated urban agriculture and a growing network of alternative schools. It is neighborhood based conflict resolution; do-it-yourself solar street lighting; community based manufacturing using the newest fab lab technology and alternative transportation systems. It is new art and new music and new media. It is time-banking, co-ops and other forms of creative finance. It is Skype conferences and face to face meetings with partners all over the world to reimagine work, finance and democracy. It is the creative use of social services and churches to create maker spaces and entrepreneurial opportunities for returning citizens. It is the hard below the radar work of the Detroit Roundtable and others facilitating healing and practical new alliances between the city and the suburbs.

The living, breathing Detroit new economy movement taps into Detroit’s deep political traditions of advocacy for economic and social justice. It is especially dependent on the decades long visionary analysis and activism of the late James Boggs and 98 year old Grace Lee Boggs.

Interestingly enough, the new economy component of Detroit’s fourth economy is itself attracting a significant amount of tourism. Plans are already underway for new B & B’s to house both long and short term visitors. Already people are coming from around the country and the world who want to learn first hand what a fledgling post-capitalist, post industrial, new paradigm economy looks like.

Katrina or Canary? Detroit and the US of A

So, which is it? Is Detroit just a perfect storm of forces that hit a particular place in a particular way such as New Orleans, albeit over a longer time frame? Or is Detroit the canary in the coal mine that is previewing where the whole country and in some ways the whole world is headed?

I have spent a lot of time over the years thinking about that question. Every time I wind up with the same conclusion. Sooner or later, this movie will come to a theatre near you. Either that, or it will open nationwide, that is for the whole country. Dependence on debt, political paralysis that prevents anything being done while the system and its component parts flounder and decay, an obsolete system of organizing work—isn’t that exactly what Detroit has been through over the last 40? Add in accelerating ecological catastrohpe and you can see that one day we will all be able to say Ich bein ein Detroiter.

Lest I be mistaken for a deficit hawk, I don’t care if even a right winger says it, our dependence on debt is unsustainable. As individuals, students especially, as governments and as an economy—we are truly living on borowed money and borrowed time. Just speaking of governments, if the standards invented for emergency managers to take over Detroit or Flint were objectively applied nationwide—thousands of cities, counties and states would qualify.

And guess what, so would the United States itself. Who knows, perhaps one day the UN or China will take over the powers of Congress and the Preident and replace them with an Emergency Manager.

Whatever the ultimate outcome of Detroit’s municipal bankruptcy drama, we can be certain of one thing. It won’t fix any of the underlying problems of systemic racial, political and economic dysfunction.

For that, we will have to rely on ourselves. And more and more, we are doing just that. For those of us who believe the current dominant order is not only not working, but a menace to life on earth, Detroit is exactly where we want to be. We are proud and grateful to be in the place and the time where we get to have a part in making another world happen.

Editorial Notes: Photo credit: View of Detroit skyline via shutterstock. Reproduced at resilience with permission.

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