This is a city which has lost two third of its population since 1970, and despite the state of its vacant lots, impoverished populace, and burnt down (or currently burning down) buildings, the fall did not occur due to horrific urban warfare or some drastic ecological calamity. Detroit is a city which has been so thoroughly looted by those in power, that there is nothing left to loot.
Once the most productive city on the planet, its titanic industrial capacity was eroded by protectionism, union pandering, corprocratic favor trading, and unsustainable benefit scheming. As the wealth created by the city was absorbed into the political class, the producers fled for greener pastures and less intrusive government. The Detroit city government now stands with a population base of 700,000 people who receive almost no services from its utterly dysfunctional public sector, and a public debt of $18-$20 billion as it hobbles into bankruptcy.
Looking at the city today, New York Times columnist, Paul Krugman, recently declared:
“Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.”
Is Krugman referring to the same Detroit?
According to Krugman’s tale, Detroit was mostly brought to its impoverished state seemingly at random due to mysterious and malevolent market forces. Apparently markets just move things here and there, and Detroit happened to in the warpath of one of these unfortunate winds as the auto industry was moved overseas and Detroit’s urban population undertook a diaspora. Not once in the article does Krugman even consider a casual connection between state interventions and the worsening trend in Detroit’s economy.
In the 1970s, some of these mysterious forces bestowed Japan with a booming auto industry which threatened Detroit’s economic cornerstone. Rather than compete with the Japanese head on by cutting labor costs or building better cars, the Detroit unions and firms banded together to lobby the federal government for protection which was delivered in the form of import quotas. The now government-backed auto industry continued to make inferior products while Japanese and soon Korean manufacturers undercut American prices on the world market. With no incentive to innovate, the unions continued to demand greater benefits while the firms survived via lobbying and protection.
In 2008, the decay became too apparent to ignore as Chrysler and General Motors, two of the big three American car companies faced and eventually declared bankruptcy. Under union and corporate pressures, the federal government bailed out both firms with a combined cash injection of $14 billion earmarked for factory retooling. Despite the destruction of their employers, union leaders strongly resisted any cuts to their compensation even when the average American auto worker was being paid almost twice the wage of the average Japanese auto worker.
The auto industry’s decline was overseen by a corrupt and completely inept city government which has been dominated by welfare-state progressives for fifty years. The last Republican Mayor was elected in 1957, and three Republicans have been elected to the city council since 1962. As the auto industry cowered away from foreign competition, the local government erected a bloated and utterly inept public service system to compliment some of the highest taxes in the country and a crushing regulatory structure.
Detroit’s tax burden is larger than that of any other city in Michigan, and is the ninth largest of any major city in the country (nominal and actual), despite its crumbling economy, and declining population. The money extracted from the citizenry went towards funding a $327 million budget deficit this year to add on to its staggering $18-20 billion total debt which has been ameliorated by the largest revenue sharing income (tax dollars sapped from the rest of the state) of any municipality in Michigan. The revenue and deficit help to carry well over 12,000 workers (down from 20,000 in 2000) employed by the city; half of the top ten employers in the city are government entities. As the unions and political class tried to squeeze more wealth from the shrinking productive base, the producers fled thus causing a 22% drop in revenue over the decade.
What about the services bought with this bloated municipal monstrosity fueled by a dying industry?
The city’s fire department is well known for simply ignoring fires since its not worth saving abandoned houses; committing acts of arson and vandalism is so popular and ubiquitous that the day before Halloween has been unofficially known as “Devil’s Night” for years as the locals cheerfully burned down empty buildings. Another popular sentiment is that in the case of burglary or some other threat to one’s person, it is better to order a pizza then call the police. The average 911 response time in Detroit is 58 minutes (the national average is 11 minutes), while most pizza delivery men in Detroit will arrive in less than half that time and probably be carrying a gun.
Then there is the Detroit Water and Sewage Department whose union is run by BAMN, or By Any Means Necessary, an explicitly violent and revolutionary socialist group. When the department was examined by an outside consulting firm in 2006, the agency determined that Water and Sewer should cut 80 percent of its employees to combat escalating prices which had doubled over the last decade. One of the proposed cuts was to eliminate the job of “horseshoer,” yet the position exists to this day.
A quick look at a map reveals that Detroit is situated next to one of the largest fresh water reserves on the planet. Yet with nearly 2,000 employees each costing the city an average of $83,000 per year (these figures are from 2006, it has only gotten worse) Detroit has made Milton Friedman’s sarcastic quip metaphorically come true – “if you put the federal government in charge of the Sahara Desert, in five years there’d be a sand shortage of sand.”
Today Detroit stands as a testament to the failure of big government. This article only comments on the tip of the ice berg. Jackpot pension schemes, crazy monorail construction, hockey stadium rejuvenation, criminal politicians, and plenty of other issues can be discussed at length. The city was run by a series of paternalistic and parasitic regimes for decades which rode a once productive sector into poverty.
Krugman’s ignorance of the economic circumstances surrounding Detroit is so great that it is difficult to believe he is being honest. Detroit was not a victim of the free market, it was built by the free market — but torn down by welfarism, interventionism, and cronyism.