After an historic bankruptcy filing, the tale of Detroit's "revival" dominated national headlines. But, with a emerging financial crisis caused by a massive global pandemic, will the investments seen in "the good years" last when the city's bills come due?
The city of Detroit, like more than two thousand cities across the country, faces one of the most challenging era's in it's recent history as a result of the global Covid pandemic. Some of the issues that plague the city however like disinvestment in social programs, population decline, budget problems, etc. aren't new or unique to the city, but their origins can be traced back to a uniquely tumultuous time in the city's past. Detroit's historic bankruptcy was declared just six years ago in 2014 when the city government hit it's lowest point and officially couldn't pay any of it's debts anymore. Well, the bankruptcy was actually one of the two "lowest points" ever reached by the city. The other historic chapter in our long saga of sorrow, which was just as, if not far more important to the current state of the city of the city was the race riots of 1967.
Now, it's more or less common knowledge to say that Detroit declined drastically after the riots ripped through the city in '67, caused by Black dissatisfaction with racist and unfair work practices & social conditions. Well, that's what the mainstream story is which was spun over the decades in the aftermath of the riots at least. Contrary to popular belief, Detroit began losing businesses and population to the suburbs way before the riots happened (the earliest evidence of this was found in a comprehensive study which was traced traced all the way back to the late 1920's a hundred years ago). But, since the sheer fallout of the riots was so disastrous for city, it went down in history as the spark that triggered a multi-generational exodus from the city to the suburbs, that hasn't been reversed ever since, and kick-started the rapid process of social disintegration of what used to be one of the nation's most prestigious cities. An interesting question comes to mind when thinking of the city's troubled situation though: How, or, why has the city not been able to "bounce back" or at least recover somewhat from the events that happened a little over half a century ago? Well, besides the obvious answers like the fact that suburban business elites were unwilling to reinvest into central cities like Detroit which caused community decline through financial disinvestment and population flight out of the city. On top of a lack of political willpower from city, state, and federal politicians to enact radical policies that would revive Detroit's fortunes and combat the city's legacy of systematic racism. The main reason why the city hasn't been able to get back on it's feet in a meaningful way for all of this time is because the institutions that the city is forced to abide by according to Michigan's constitution, and made worse by the bankruptcy filing in 2014, makes Detroit's ability to get creative with coming up with ways to raise new revenues or cover shortfalls in the budget impossible. In plain English: Detroit is legally prevented by law from doing things like asking wealthy land owners to pay more money in property taxes, so the city and county looks for ways to finesse poor homeowners for their money instead. This situation created a negative feedback loop where, less people living in the city means that slashing essential services and social programs for the rest of the residents who stay is necessary to balance the budget. Those funding cuts mean that the people who remain have to deal services that are worse than the year before and still get worse the longer they stay, which drives those people to move out, and the cycle continues to repeat itself. This phenomenon caused the city to go into bankruptcy back in 2014, and continues to be the cause of many of the problems that the city faces today.
It feels as if the political and business elites who have positions of power in the city and surrounding area don't really seem to understand this. Or the fact that just because Detroit was thrown into the national spotlight by declaring the largest municipal bankruptcy in American history, a situation like that will never happen again. apparently. The sad fact of the matter is that it seems increasingly likely that our current situation puts us on the path towards a second bankruptcy more and more by the day. What's important to note is that the conditions established after the city exited bankruptcy status in 2014 is partially to blame for this mess. To condense as much of the tribulations that lead to the bankruptcy: the main factors that contributed towards the city of Detroit filing for bankruptcy in 2014 are: 1, the city's legal obligations to former employees and civil servants to cover healthcare and their retirement benefits (known as "pensions" in financial circles) and, 2, the money borrowed from financial institutions such as banks and hedge funds that the city was forced to use in order to cover both basic expenses and pay those pension (a.k.a "bonds" which are basically loans accumulated by cities). These two financial responsibilities will come to haunt the city in 2024 just as they did in 2014 when, because of the legal documents that the city's government was forced to agree upon in bankruptcy court, leaders in Detroit will have to make yearly payments of $167 million, plus interest for twenty years as well as make yearly payments of up to $101 million to $117 Million dollars on the city's debts. What makes this situation even worse is the fact that the city's budget relies on already shaky revenue streams, those revenue streams been decimated by the pandemic, with lower levels of property taxes and casino revenues, the city of Detroit is currently projecting a $350 Million hole in it's budget that the mayor looks to plug by diverting money from the city's "rainy day fund" to cover operating expenses, the fund is supposed to cover the city's pension payments (this sounds familiar doesn't it?). The rest of the budget deficit will be covered by cutting city jobs and funding for services according to Detroit mayor Mike Duggan.. Not only that, Mayor Duggan seems intent on not helping this situation at all with his recent, and extremely controversial blight bond being approved by Detroit city council to go to a public vote this November which is estimated to cost the city $500 Million over thirty years when including interest. Stevie Wonder could see how this shit is going to end..
The culmination of these conditions spell nothing but hell for city residents and people in the surrounding area interested in seeing the city truly revived. However, on the other side of the coin, there is a very small, influential class of monied interests who would use the prospect of a second bankruptcy as a golden business opportunity to fully take control. After all, some of those same bankers, property speculators, and hedge fund managers swooped into the city after the first bankruptcy and forced the city government to give them concessions that favored them at the expense of the city as a whole, they even went so far as to force the city to launch a gigantic fundraiser to save it's art museum since creditors were lobbying the city government to sell off priceless art to cover debt payments. Based on the political leadership in the city right now, it's very likely that we'll see a repeat of this situation sadly. See, because it's not just a couple of greedy capitalist business owners who profit from Detroit being taken advantage of, as it turns out, many self-interested local political figures are just as eager to exploit Detroit's situation to personally profit themselves. Mayor Mike Duggan, not so coincidentally, is one of those very self-interested local politicians (there's a lot wrong with Mayor, Duggan and why he's such a trash ass political opportunist. A full breakdown of who he is is coming in the near future but, I'll only reference the relevant info about him here). Duggan was first elected mayor just as the city of Detroit was put under Emergency Managership by former governor Rick Snyder and he didn't do anything to speak out against the city's lost political and economic independence. In fact, he actively allied himself with the very same business interests that exploited Detroit, signing off and openly advocating policy deals such as "tax incentives" (tax breaks that last from 15-30 years) for large companies that transfer wealth from the poor and gives their money to wealthy companies. I mean, even Steven Rhodes, the judge who presided over the city's case in bankruptcy court was granted a role by Rick Snyder as temporary head of DPS to help assist charter schools to further privatize the city's education system.
Detroit's government is far from the only one that's been subject to these blatantly ideologically motivated political changes. While it's not very well known to the American public, the type of policies that business-friendly administrations both in the city and around the world implement on unwilling citizen subjects falls directly under one word: austerity, or, policies that governments use to reduce debt by cutting spending and raising taxes. It's use as a political tool is usually favored by extremely conservative and pro-capitalist politicians and economists. Some of the most notable examples of this economic "shock doctrine" come from Puerto Rico and the island nation of Greece which share a lot of similarities in their debt crises with the city of Detroit. In Greece's case, just a year after the city of Detroit declared bankruptcy, the Greek government was forced to take out "the largest loan in human history" by it's supposed European "allies" and their creditors in the finance industry in order to correct their "over-spending problem", which, according to former finance minister Yanis Varoufakis and all other serious economists, is nothing more than a bullshit claim that was also attributed to the government of Detroit. They forced the Greek government to slash spending on social programs so drastically that it actually forced the country to go into an economic depression and brain drain that it hasn't recovered from to this day. This same scenario is playing out in slow motion in Detroit.
All of this information might make the situation seem extremely bleak & overwhelming, and it really is for the most part. But, even in these dire situations, we have clues around to let us know what needs to be done in order to avoid a social and economic catastrophe from falling on a city with so much potential. In this case, the clues we have to learn from comes from the example of Greece mentioned earlier. Varoufakis was literally told to his face by his fellow European economists point-blank that the platform his government was put into office by the Greek people to implement (mainly, rejecting their creditors demands of cutting social spending) was impossible because he shouldn't be able to change economic agreements set in place by past governments. Basically telling the finance minister that the country's elections were pointless in the face of it's debt crisis. I guarantee you that Detroit's creditors feel the exact same way about us and our debts. I know this is the case, because Paul Krugman, Nobel Prize-winning economist, MIT & Princeton professor, and New York Times columnist wrote an article titled "Detroit, the New Greece" about the city's bankruptcy and comparing it to the Greek's troubles saying:
"The important thing is to not 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 story of 'fiscal irresponsibility' or 'greedy public employees', it isn't."
So, if there are all these common traits between Detroit and Greece, why don't the people of Detroit have a replay of the Greek vote if, or, when another bankruptcy comes? The vote in question was a simple yes-or-no referendum on whether or not the government should give into the creditor's demands. In an incredible act of courage, the Greek people overwhelmingly said no, which was a result that shocked the European political establishment. Given the conditions that countless thousands of people in the city of Detroit live in, and how much worse their conditions will be if more austerity happens, I have no doubt in my mind that the people of the city of Detroit would rally together to send the same message to our establishment if we were given the chance to.Links & Sources:
2. Passages from: Doxiadis, Constantinos "Emergence and Growth of an Urban Region: The Developing Urban Detroit Area volume 3" results of study not digitized. Amazon link
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