When Detroit filed for Chapter 9 bankruptcy on July 18, 2013, it delivered a serious message to the rest of Americans – “we are in trouble.” It is regarded as the largest municipal bankruptcy filing in U.S. history in both debt ($18–20 billion) and population. Other American cities have filed for bankruptcy in the last few years (Alabama’s Jefferson County in 2011 and California’s Stockton in 2012), but no city has been as iconic as Detroit.
Detroit has since experienced a mass exodus of people and businesses. In 1950, Detroit’s population was 1.8 million. Today, it’s just slightly over 700,000, and still steadily declining. Since its bankruptcy, the city of Detroit has been painted as an apocalypse like a scene from I Am Legend. There are parts of the city that have been riddled with abandon buildings, run-down housing, and boarded-up windows. The city leads America in reported violet, murder and man slaughter related crimes. Many of the once model homes in the boroughs just outside the heart of the city have been abandoned and in some cases completely destroyed.
City services have diminished and are barely maintained. About 40 percent of the city’s lights are not on, and services such as police and fire safety are running on dangerously strained levels. City workers and former workers face the threat of losing their pensions and health coverage. Even the local churches have been challenged by the insurmountable debt.
The story is bleak, but what’s more concerning is how America has already forgotten about Detroit, the same city that once spearheaded the industrialization of the automotive for the entire country. Detroit’s success was built by automotive companies in the early 20th century. In a period of 50 years, the city became world renowned for building cars. By the time 1950 rolled around, the buzz around Motor City started to fade and unfortunately a majority of the city’s population was dependent on the automotive industry.
Independence and a steady decline had painful consequences for the city of Detroit. The decline in Detroit’s industry was primarily caused by three critical factors that not many Detroiters expected: complacent and demanding workers, technology, and changing global markets.
One of the most controversial factors was complacent and demanding workers. During good times, the demand for workers increased, as did their wages and benefits. The influx of workers prompted the formation of unions to protect worker interests and rights. Eventually, union demands became an obstacle or an excuse, and automotive companies bailed for more favorable labor markets. Local American technicians were earning approximately $30 per hour and automotive companies complained that their hourly wagers actually totalled $70 per hour when they added health and pension benefits.
Pressure from union workers and foreign markets caused automotive companies to rely on innovation. Within a short few years, more automotive companies developed new technologies that allowed them to make cars without relying on teams of people. These new technologies replaced much of what people did with new sophisticated robots. The result was faster and cheaper production of cars but the consequence was more people out of work. By 2008, 40% of men in Detroit started the year without a job.
The automotive global landscape was also changing. New foreign policy and the popularization of Japanese cars led to new players in the North American car market. The intense competition drove automotive companies to seek cost-saving alternatives such as new plants in cheaper areas around the world – a necessary evil for many of America’s top brands. The upside to manufacturing outside the US for local American companies was that they can extend their sales market beyond US borders. This strategy helped American companies stay afloat but gave them very little choice on what to do with Detroit. It was ultimately left behind.
Detroit is now at a crossroad. It can continue to falter or rise to the occasion. Like many underdog stories, this would be an inspiring one for all Americans. But the challenge is so difficult, it will require more than just a few investments or new government officials. There are giant hurdles ahead and Detroiters should not look back for fear they will the same mistake – the time for change is now. Here are five ways Detroit can return to American civic glory.
Tell Good Stories
Since 2008 American media has painted Detroit with a miserable brush. It’s time for Detroiters to share their success stories. Buried deep past high unemployment, dangerously high crime rates, and boarded windows has to be a couple of stories worth sharing. Perception is everything for foreign investment and other opportunity. Detroit cannot afford another “bad” story nor can they leave the perception of their city in the hands of government officials. It’s time for Detroiters to promote the successes of Detroit, even the small ones.
Detroit is located in the North American sweet spot. It’s close enough to water but also far enough into the northern center of America to have an influence between East, Central, and Northern states. It’s also very close to Canada and one of Canada’s largest cities – Toronto. Its location was critical during its heydays, and there’s no reason that that factor can’t be in play again. No matter what industry prevails in Detroit, it will one way or another benefit from its location.
Stay Young And Safe
The cancer for Detroit has been the exodus of youth. The only youth who are sticking around Detroit these days are doing so because they have no choice. They do not have money or education and often find themselves mixed in with violent gangs. Detroit has the highest murder rate in America.
Young Detroiters are taking the first chance they get to escape. Detroiters have to give today’s youth a reason to stay, and unreliable factory work is not the answer. When Detroit learns what drives today’s youth, then its workforce will flourish with energy and purpose. Get people off the streets and put them in the right type of work – something that inspires them.
Is it time to go green? Not sure, but it’s definitely time to walk away from the name “Motor City.” The perception of being an “automotive production town” needs to be washed away for good. There are new technologies and new types of work that can drive the economy. It doesn’t have to be just cars. Cars are getting cheaper and there is more competition than ever.
Getting back into the automotive industry today would be deadly for Detroiters. If Detroiters can remove the label, their city might be more welcoming to opportunities outside the automotive industry. Emerging industries such as energy and green related products or services are attractive to many developing cities. What’s more important, is that Detroit develops industries, not just one, but multiple so as to avoid the type of dependence that hurt them from 1950 to 2013.
It’s a great time to shake it up – not just people but process. There’s no better time than the present to completely overhaul how the municipal government runs the city of Detroit. Perhaps a new government structure is in order. The municipal government of Detroit has been front and center on all matters related to bankruptcy and fraud.
Kwame Kilpatrick, the city’s former Mayor, was sentenced to 28 years in federal prison for a racketeering conspiracy involving extortion, bribery, and fraud. Kilpatrick and friend Bobby Ferguson conspired to the power and authority of Kwame Kilpatrick’s office as mayor of Detroit to extort municipal contractors by coercing them to include Ferguson’s company. As a result, Ferguson earned approximately $73 million in revenues from municipal contracts. The money was split amongst co-conspirators, including Mayor Kilpatrick.
The scandal was just the first blow to Detroit and although a new government is in place, there’s a belief that the same old policy and process won’t help bolster Detroit progress.