Saturday, July 20, 2013

Juan Cole — Detroit's Collapse Reveals the Awful Dystopia that the United States Is Becoming

The big question is whether Detroit’s bankruptcy and likely further decline is a fluke or whether it tells us something about the dystopia that the United States is becoming. It seems to me that the city’s problems are the difficulties of the country as a whole, especially the issues of deindustrialization, robotification, structural unemployment, the rise of the 1% in gated communities, and the racial divide. The mayor has called on families living in the largely depopulated west of the city to come in toward the center, so that they can be taken care of. It struck me as post-apocalyptic. Sometimes the abandoned neighborhoods accidentally catch fire, and 30 buildings will abruptly go up in smoke.
Detroit's Collapse Reveals the Awful Dystopia that the United States Is Becoming
Juan Cole | Informed Comment | Professor of History, University of Michigan


Roger Erickson said...

maybe a banking license should require a prior stay in ex-Detroit suburbs ... as a prerequisite?

Jonf said...

A BIG may help. But people have been improving productivity since they discovered the wheel. What Detroit needs is jobs. They also need a state and federal government to invest in the city. Does anyone find it odd that we bail out Wall Street and GM but we can't do anything for Detroit?

Unknown said...

The banks are the cause. Otherwise, big corporations would have to "share" with their workers or at least pay positive real rates for their savings.

Asset-backed money is a great invention but it can issued as either debt or shares. Why then does the government privilege the former and tax the later? Hmmm?

Malmo's Ghost said...


I find it more than odd. I might be alone here but Detroit should get a bailout. Period. Actually the whole damn country needs an MMT crafted bailout.

Tom Hickey said...

GM and Chrysler got bailed to avoid bankruptcy. The insolvent TBTFs got bailed instead of being put into resolution.

Detroit? Facing liquidation, including pensions.

Unknown said...

Actually the whole damn country needs an MMT crafted bailout. Malmo's Ghost

Yep. At least to the extent that deposits are not 100% backed by reserves, the banks have cheated the entire US population.


1) Forbid further credit creation, at least temporarily.

2) Distribute new fiat equally to the entire US population, including non-debtors, until all deposits ARE 100% backed by reserves. Meter the distribution to just replace existing credit as it is repaid for no net change in total purchasing power.

Of course we need fundamental reform wrt money creation too.

The Rombach Report said...

Bailout Detroit by making it an enterprise zone. Declare a full 100%, 10 year tax holiday for businesses and individuals in Detroit.

Unknown said...

Always with the tax cuts, eh RR?

What about the purchasing power dilution tax the banks and the so-called creditworthy levy on their neighbors via bank loans?

Shouldn't the so-called credit-worthy pay for the government-privileged banking cartel that benefits them (at least during the booms)?

A said...
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The Rombach Report said...

"Always with the tax cuts, eh RR?"

And why not? Mosler says the U.S. economy needs a bigger deficit which could be achieved by way of more government spending or more tax cuts... depending on your politics. Well, what is the best way to allocate capital? Have a relatively small number of bureaucratic central planners spend it or have a 150 million or so tax paying members of the workforce spend/invest it? I reckon the best bang for the buck would come from taxpayers having the extra money in their pocket, but I suspect that most participants here think the bigger bang for the buck would come from more government spending owing to better multipliers. Call me a skeptic, but I guess that's what makes a market.

Unknown said...

Well, what is the best way to allocate capital? RR

Give it back to the people it was stolen form. Universal restitution checks with new fiat require no increase in the size of government.

Or should we cut taxes on the counterfeiting cartel too?

The Rombach Report said...

"Universal restitution checks with new fiat require no increase in the size of government.

Or should we cut taxes on the counterfeiting cartel too?"

I see your point and I don't think there is so much difference between our positions. Maybe some form of compromise in the middle? I would like to see a fundamental reform of the tax code that is also a tax cut. Preparing one's tax return should be simple enough for a 12 year old to do it on a 3 X 5 card or at least on a page or two. I kind of like this version...

Unknown said...

Taxes could be made simpler still by making them unavoidable - such as a Federal monopoly on large scale power generation and distribution and/or land taxes.

I'm in favor of private currencies but since they make tax cheating possible, we need to find ways to make that difficult or impossible. Federal monopolies on key industrial necessities such as power are one way to do that.

Ryan Harris said...

I like to hear all the American (liberal & conservative) excuses about Detroit and the Rust belt: All the normal horse sh**.

All you have to do is drive across the bridge to Windsor, Canada. The neighborhoods are prosperous. The mills and factories and offices and technology parks are running and producing. The wages are high. The population has been relatively stable for decades. Crime is low. There are grocery stores, public services, health care. Everything works. They didn't get the old-liberal memo about the inevitable decline of industry. They didn't get the neo-liberal memo about good middle class jobs. They didn't know the Republican story that lower wages were required to compete with Asia, apparently. They didn't know that everyone needed to go back to public university every few years to be re-educated/indoctrinated into the neoliberal mentality to solve the economic maladies that faced them while incurring debt and falling wages. Quite striking really how full of crap all the excuses are when you see how vibrant Detroit could be, SHOULD BE, only two miles away. All the 'reasons' and excuses fold back on themselves and the only reason that exists, is poor governance. There is no other satisfactory explanation for the failures on every single front.

Unknown said...

Well said, Ryan Harris!

Tom Hickey said...

You don't have to go to Canada. As Cole points out just drive to the suburbs, which are some of the wealthiest in the country. Detroit became what it did for several reasons, first, white flight, and secondly the collapse of Motor City, when jobs were replaced by automation and robotics, foreign competition took a swath of the market, and the move of factories to the South due to lower wages and less regulation. While management may have been a factor, it had less and less to work with as things deteriorated and more bailed as a result, shrinking the tax base. The result was collapse of a major US city, a catastrophe worse that the destruction of New Orleans.

Unknown said...

and secondly the collapse of Motor City, when jobs were replaced by automation and robotics, Tom Hickey

Yes, decisively tipping the battle between the credit cartel and labor cartels in favor of the former.

Sadly, workers were displaced with their own stolen purchasing power just as farmers were driven off their farms.

Yet some can't think of an ethical way to create money despite Equity being on the same side of the balance sheet as Liabilities.

Ryan Harris said...
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Tom Hickey said...

Ryan, in replying to the comment you removed, that doesn't sound like "bad management" but serious structural problems due to loss of the manufacturing base, it seems. That leaves the state and municipalities strapped by obligations undertaken in better times and more borrowing to stay afloat in the downturn.

Ryan Harris said...

Why did the United States lose the 'manufacturing base' but Canada did not?

It wasn't an accident.
It wasn't the invisible hand.
It wasn't productivity.
It wasn't inevitable.
It wasn't the Unions.
It wasn't Asia.
It wasn't skin color.
It wasn't flight to the southern states.
It wasn't debt in Detroit.
It wasn't to 'lower consumer prices'
It wasn't because of Walmart
It wasn't globalization.

It never left Canada, they have the same factories producing steel and cars and what not. Canada is productive, they have unions, they have regulation, they compete against Asia, they have black people. They have *gasp* socialized medicine. So all those excuses for reasons why America doesn't have manufacturing are debunked. Canada maintained those industries despite all those same issues.

Yes, Detroit had debt that became unmanageable as the city shrank, but the debt did not cause the city to shrink in the first place.

It was a political decision to remove the manufacturing base.

Democrats and Republicans decided to shutter industries to pursue fiscal, regulatory, trade and other policy objectives which is fine but don't attribute it to other factors like skin color or unions or regulations in the south depending on your political party.

I hate it when politicians won't admit they designed policies that caused this outcome. They had a choice on which combination of laws and policies to enact and it went horribly wrong for Detroit. Canada went the opposite way and it went swimmingly well.

Time to own up to the political failure. It is important to examine because it is a failure in Democracy when every level of government didn't serve the people in an enormous geographic region. What is worse is that they convinced constituents that it will never come back, that people need to move and change, the politics are set in stone. They were never challenged on the fact that it was not market forces or the invisible hand causing it to happen.

Tom Hickey said...

Not sure the that blame was totally with government. GM and Chrysler were poorly managed and did poorly. They would have gone under without govt support. The effect of that would have reverberated throughout the economy.

Ford not so much. Better managed.

The federal govt should have stepped in to support state and local govts, but fiscal conservatives were screaming for a pruning back of those govts. To them this is just part of the long-overdue restructuring.

In this view if US worker compensation collapses to be competitive Chinese labor, then manufacturing will return to the US. So no problem that workers have to learn the hard way to accept more competitive compensation in terms of a lower real wage, no benefits and protections, and less of a share in gains from productivity, which by right belong to capital and top management,

Tom Hickey said...

I forgot to add to the above addressed to Ryan, the neoliberals are all routing for state and municipal bankruptcy so that public resources can be privatized.

The stated objective of neoliberals at the federal level is to "drown government the bathtub of deficits that they claim are unaffordable. Part of this strategy is sewing disinformation over "trillions of dollars of unfunded obligations" that are sure to bankruptcy future generations, too.

And Canada, UK, and Oz have their own problems with neoliberal administrations. The UK is faring worst, but the housing bubbles in Canada and Oz haven't imploded yet either.

marris said...

Things in Detroit are quite *bad*, and the leftist political groups in Detroit are as responsible as anyone.

As a non-leftist, it's a bit amusing to see leftists huddle around Detroit, shooing off the privatizers and capitalists. Why not huddle around the *other cities*, let Detroit experiment, and see if things improve? I think there is a deep-seated fear that these neoliberal policies may make things better. And then where would the left be?