#1 Paul Krugman: Detroit, the New Greece
07-21-2013, 11:09 PM
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- Jun 2008
Detroit, the New Greece
When Detroit declared bankruptcy, or at least tried to — the legal situation has gotten complicated — I know that I wasn’t the only economist to have a sinking feeling about the likely impact on our policy discourse. Was it going to be Greece all over again?
Clearly, some people would like to see that happen. So let’s get this conversation headed in the right direction, before it’s too late.
O.K., what am I talking about? As you may recall, a few years ago Greece plunged into fiscal crisis. This was a bad thing but should have had limited effects on the rest of the world; the Greek economy is, after all, quite small (actually, about one and a half times as big as the economy of metropolitan Detroit). Unfortunately, many politicians and policy makers used the Greek crisis to hijack the debate, changing the subject from job creation to fiscal rectitude.
Now, the truth was that Greece was a very special case, holding few if any lessons for wider economic policy — and even in Greece, budget deficits were only one piece of the problem. Nonetheless, for a while policy discourse across the Western world was completely “Hellenized” — everyone was Greece, or was about to turn into Greece. And this intellectual wrong turn did huge damage to prospects for economic recovery.
So now the deficit scolds have a new case to misinterpret. Never mind the repeated failure of the predicted U.S. fiscal crisis to materialize, the sharp fall in predicted U.S. debt levels and the way much of the research the scolds used to justify their scolding has been discredited; let’s obsess about municipal budgets and public pension obligations!
Or, actually, let’s not.
Are Detroit’s woes the leading edge of a national public pensions crisis? No. State and local pensions are indeed underfunded, with experts at Boston College putting the total shortfall at $1 trillion. But many governments are taking steps to address the shortfall. These steps aren’t yet sufficient; the Boston College estimates suggest that overall pension contributions this year will be about $25 billion less than they should be. But in a $16 trillion economy, that’s just not a big deal — and even if you make more pessimistic assumptions, as some but not all accountants say you should, it still isn’t a big deal.
So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.
What? Market forces have victims? Of course they do. After all, free-market enthusiasts love to quote Joseph Schumpeter about the inevitability of “creative destruction” — but they and their audiences invariably picture themselves as being the creative destroyers, not the creatively destroyed. Well, guess what: Someone always ends up being the modern equivalent of a buggy-whip producer, and it might be you.
Sometimes the losers from economic change are individuals whose skills have become redundant; sometimes they’re companies, serving a market niche that no longer exists; and sometimes they’re whole cities that lose their place in the economic ecosystem. Decline happens.
True, in Detroit’s case matters seem to have been made worse by political and social dysfunction. One consequence of this dysfunction has been a severe case of “job sprawl” within the metropolitan area, with jobs fleeing the urban core even when employment in greater Detroit was still rising, and even as other cities were seeing something of a city-center revival. Fewer than a quarter of the jobs on offer in the Detroit metropolitan area lie within 10 miles of the traditional central business district; in greater Pittsburgh, another former industrial giant whose glory days have passed, the corresponding figure is more than 50 percent. And the relative vitality of Pittsburgh’s core may explain why the former steel capital is showing signs of a renaissance, while Detroit just keeps sinking.
So by all means let’s have a serious discussion about how cities can best manage the transition when their traditional sources of competitive advantage go away. And let’s also have a serious discussion about our obligations, as a nation, to those of our fellow citizens who have the bad luck of finding themselves living and working in the wrong place at the wrong time — because, as I said, decline happens, and some regional economies will end up shrinking, perhaps drastically, no matter what we do.
The important thing is not to let the discussion get hijacked, Greek-style. There are influential people out there who would like you to believe that Detroit’s demise is fundamentally a tale of fiscal irresponsibility and/or greedy public employees. It isn’t. For the most part, it’s just one of those things that happens now and then in an ever-changing economy.
07-21-2013, 11:21 PM
I'm not buying it, Detroit was on the decline when the economy was booming, Detroit is not merely a victim of an ever changing economy.
Detroit is the victim of being it's own self contained little welfare/union state on steroids, all you have to do is look at and listen to the city council to see how and why their government is a failure, they could have dried out random homeless people and put them in office and they would be more articulate and intelligent.
Detroit is how modern progressivism works after they have killed free enterprise and run out of other peoples money.How is obama working out for you?
07-21-2013, 11:36 PM
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- Jun 2008
Some people think Detroit's demise is the fault of white people for leaving the city:
‘White flight’ and Detroit’s decline
...To understand that the decline and bankruptcy represent so much more than dollars and cents requires a step back to a time that many would prefer to forget but remains unforgettable.
In the late 1960s,racial tensions engulfed parts of our country, at the cost of lost lives and abject destruction. Such was the case in Detroit during the summer of 1967, when one of the worst race riots our country had seen took place. Mayor Coleman Young, Detroit’s first black mayor, wrote, “The heaviest casualty, however, was the city.”
The term “white flight” has become less common in recent years because its huge waves appeared to have stopped as tensions eased. Younger generations may not even know the meaning of the term. But those who lived during that era remember the phrase well. It harks to the tumultuous period of riots, fights for civil rights and not-so-civil disobedience, when white people living in racially diverse communities began to sell or walk away from their homes. Their moves were often born out of fear and sometimes outright racial prejudiceas they watched their cities fall apart. As white people left their neighborhoods, minorities moved in. The words I remember hearing as a young woman to describe this societal phenomenon were, “The neighborhood has changed.” The implication was that the area had gone from white to black.
While the suburbs began to draw people out of our cities in the 1950s, Detroit’s neighborhoods and their demographics changed drastically and quickly after the 1967 riots. White residents fled by the thousands, affecting municipal infrastructures, tax bases and jobs. It set the stage for similar urban race-related exoduses around the country.
My home town of Gary, Ind.,was another thriving, though smaller, urban area before the late ’60s. Its eclectic mix of race and religion worked as a cohesive unit — until it didn’t any longer. After the Detroit riots and despite electing the second black mayor of a major urban city in 1967, nothing seemed to be able to stem the tide of white families moving out of the area. White flight threw Gary and its neighboring towns into an unstoppable tailspin. Today it stands as a city destroyed, left in large part to fall into ruin without the capacity to successfully rebuild.
White flight took hold and left a lasting imprint. The strength and importance of diversely populated business and housing centers declined. Racial divide has created too many broken-down ghost towns, devoid of the quality of life they once had. Some held on for a while but could not withstand the devastating economic conditions of recent years.
It’s not just the economic issues of Detroit’s bankruptcy that need to serve as a lesson but also the impact of dysfunctional urban race relations. The real challenge now for the once-great city of Detroit is to view its fallen stature as a great opportunity to rebuild communities by creating new and positive examples of recovery. Detroit has an opportunity to revisit the racial problems of the past and to build a strong foundation of fiscal responsibility as well as business and civic partnerships that cross the racial boundaries that have become one of the city’s most destructive elements. That would be the true victory. It won’t be easy to undo 46-plus years of decline, anger, fear and prejudice. But cities have to learn to embrace and thrive under racial diversity in order to survive.
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- Jun 2008
07-22-2013, 12:10 AMWe're from Philadelphia, We Fight- Chip Kelly
07-22-2013, 12:28 AM
Just asking...is there some reason why blacks can't rebuild a city like Detroit after the white flight?
Four boxes keep us free: the soap box, the ballot box, the jury box, and the cartridge box.
THIS POST WILL BE MONITORED BY THE NSA
07-22-2013, 05:38 AMWe have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge or gallantry would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution is designed only for a moral and religious people. It is wholly inadequate for any other.In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.
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