Captain Rick: Detroit was once the 4th largest city in America and ‘motor capitol’ of the world. Decades of internal destruction caused a mass exodus of people, reducing its population to 18th place. Its automotive manufacturing plants have been shut down or relocated. What went so wrong?
I conducted in-depth research on this important event. I have compiled the following report to accurately present the ‘Rise and Fall of Detroit’ and what went so wrong. I conclude with sobering concerns for all Americans, especially those who have the responsibility of managing our cities and states…many of which are on the same course as Detroit.
The above photo of the GM building in downtown Detroit was taken with a telephoto lens looking southeast from Bush and Watson Streets, about 1.5 miles to its northwest. The large area around this boarded up house contains similar houses and open area where old houses have been removed.
The Rise and Fall of Detroit
Ford Motor Company ignited the rise in 1903
In 1903 Ford founded the Ford Motor Company. Ford’s manufacturing—and those of automotive pioneers William C. Durant, the Dodge brothers, Packard, and Walter Chrysler—reinforced Detroit’s status as the world’s automotive capital.
Labor Unions took control with strikes for increased wages, benefits, pensions
With the factories came high-profile labor unions such as the American Federation of Labor & the United Auto Workers which initiated strikes & other tactics in support of such things as the 8-hour day/40-hour work week, healthcare benefits, pensions, increased wages & improved working conditions. The labor activism during those years increased influence of union leaders in the city such as Jimmy Hoffa of the Teamsters and Walter Reuther of the autoworkers.
Mergers helped companies expand elsewhere, while causing the disappearance of plants in Detroit … often to escape the profit robbing effects of labor unions
Mergers in the 1950s, especially in the automobile sector increased oligopoly in the American auto industry. Detroit auto manufacturers such as Packard & Hudson merged into other companies and eventually disappeared. Plants in Detroit, with heavy union control, were closed as new plants were built elsewhere in less union-friendly locations. Behind the scenes, it can be said that labor unions played the first major role in the fall of Detroit.
Detroit became America’s fourth largest city as companies looked to reduce labor costs by importing cheap labor from the South
Tens of thousands flocked to Detroit with the hope of better pay and benefits, particularly black workers from the Southern United States. It resulted in Detroit rocketing to become the fourth largest city in the United States with blacks as its majority residents.
Racial tension took hold to begin the Fall of Detroit
Social tensions rose with the rapid pace of growth. On January 20, 1942, with a cross burning nearby, 1,200 racist whites tried to prevent black families from moving into a new housing development in an all-white area of the city. Later in June 1943, Packard Motor Car Company promoted three blacks to work next to whites in their assembly lines. In response, 25,000 whites walked off the job. The Detroit Race Riot of 1943 occurred 3 weeks after the Packard Motor Car incident. Over the course of three days, 34 people were killed. Of them, 25 were African–American, and approximately 600 were injured.
In June 1963, Rev. Martin Luther King, Jr. gave a major speech in Detroit that foreshadowed his "I Have a Dream" speech in Washington, D.C. two months later. During the African-American Civil Rights Movement of the 1950s and 1960s, Detroit witnessed growing confrontations between the police and inner city black youth, culminating in the Twelfth Street riot in July 1967. Governor George W. Romney ordered the Michigan National Guard into Detroit, and President Johnson sent in U.S. Army troops. The result was 43 dead, 467 injured, over 7,200 arrests, and more than 2,000 buildings destroyed. Thousands of small businesses closed permanently or relocated to safer neighborhoods, and the affected district lay in ruins for decades.
On August 18, 1970, the NAACP filed suit against Michigan state officials, including Governor William Milliken. The original trial began on April 6, 1971, and lasted for 41 days. The NAACP argued that although schools were not officially segregated, the city of Detroit and its surrounding counties had enacted policies to maintain racial segregation in schools.
District Judge Steven J. Roth held all levels of government accountable for the segregation. The Sixth Circuit Court affirmed some of the decision, withholding judgment on the relationship of housing inequality with education. The Court specified that it was the state’s responsibility to integrate across the segregated metropolitan area.
U.S. Supreme Court was most responsible for massive exodus from Detroit
The Governor and other accused officials appealed to the Supreme Court, which took up the case on February 27, 1974. The subsequent Milliken v. Bradley decision would come to have enormous national impact. According to Gary Orfield and Susan E. Eaton in their 1996 book Dismantling Desegregation, the “Supreme Court’s failure to examine the housing underpinnings of metropolitan segregation” in Milliken made desegregation “almost impossible” in northern metropolitan areas. “Suburbs were protected from desegregation by the courts ignoring the origin of their racially segregated housing patterns.” “Milliken was perhaps the greatest missed opportunity of that period,” said Myron Orfield, professor of law and director of the Institute on Metropolitan Opportunity at the University of Minnesota, “Had that gone the other way, it would have opened the door to fixing nearly all of Detroit’s current problems.” John Mogk, a professor of law and an expert in urban planning at Wayne State University in Detroit says “Everybody thinks that it was the riots [in 1967] that caused the white families to leave. Some people were leaving at that time but, really, it was after Milliken that you saw mass flight to the suburbs. If the case had gone the other way, it is likely that Detroit would not have experienced the steep decline in its tax base that has occurred since then."
The Fall of Detroit
Long a major population center and major engine of worldwide automobile manufacturing, Detroit has gone through a continuing economic decline over the past 60 years.
Population Decline from ‘White Flight’ … Detroit reached its population peak of 1.8 million people in the 1950 census and ranked as America’s fourth largest city. Massive ‘white flight’ to the suburbs and other cities took place following the 1974 Milliken case. As of the 2010 census Detroit has lost 60% of its population, falling to 18th place with just over 700,000 residents remaining, of which over 82% are black/African American and 6% Hispanic … a total reversal from 1950 when over 90% were non-Hispanic whites. The city’s tax base eroded along with that population decline. There is no question that ‘white flight’ was the top cause of the fall of Detroit. It in turn led to all of the following problems…
High unemployment … was compounded by white flight and middle-class flight to the suburbs (and in some cases to other states), and the city was left with a reduced tax base, depressed property values, abandoned buildings, abandoned neighborhoods, high crime rates, and a pronounced demographic imbalance.
The unemployment rate, while down from a peak of 27.8% in the summer of 2009 — when General Motors and Chrysler Group were going through their own bankruptcies — is still at 16.3%, nearly twice Michigan’s statewide average.
Loss of Tax Revenue … Most of the auto industry’s Michigan plants moved out of our build in locations outside of Detroit city limits, severely limiting how much tax revenue they contribute to Detroit. General Motors, is the only automaker with headquarters inside of city limits, and Chrysler Group operates just one plant inside the city. Both companies declared bankruptcy and were bailed out at the expense of U.S. tax payers.
More than half of the owners of Detroit’s 305,000 properties failed to pay their 2011 tax bills, exacerbating the city’s financial crisis. According to the Detroit News, 47 percent of the city’s taxable parcels are delinquent on their 2011 tax bills, resulting in about $246 million in taxes and fees going uncollected, nearly half of which was due to Detroit. The review also found 77 blocks in Detroit had only one owner who paid taxes in 2011.
Urban Decay … The ongoing decline has left its mark on the city, most notably in severe urban decay and thousands of empty homes, apartment buildings, and commercial buildings around the city. Some parts of Detroit are sparsely populated resulting in the city having difficulty providing municipal services such as policing, fire protection, schools, trash removal, snow removal, lighting, etc. The city has sought and considered various solutions such as demolition of abandoned homes and buildings, though there are tens of thousands of abandoned structures; removal of street lighting from large portions of the city; and encouraging the small population in certain areas to move to more populated areas of the city as there may not be a quick response for city services such as police in de-populated areas.
Crime … Detroit has the sixth highest total rate of violent crime, five times the national average. At 16.73 per 1,000, it has the highest per capita rate of violent crime among the 25 largest U.S. cities in 2007, those with a population exceeding 200,000.
Nearly two-thirds of all murders in Michigan in 2011 occurred in Detroit. It has been reported that about 65 to 70 percent of homicides in the city are drug related. he police department closes only 8.7% of its criminal cases.
Detroit was rated the most dangerous city in the United States for the 4th year in a row in a 2010 survey by the FBI. It has been reported that 4 of the top 10 most dangerous neighborhoods in the nation reside in Detroit.
Blight: 78,000 blighted buildings either abandoned or ruined.
Lack of Lighting: 30,000 defunct streetlights– about 40% of the 88,000 street lights don’t work.
Response time: Call for a police officer takes 58 minutes to get help — more than five times what it takes elsewhere in the United States. Response times for Emergency Medical Services and the Detroit Fire Department average 15 minutes, which is more than double the 7-minute averages seen in other cities.
Hazardous waste sites: 70 Superfund hazardous waste sites
Parks: Two-thirds of parks closed since 2008, with only 107 remaining open
Aging equipment: Fire stations are old and not adequately maintained. A fleet of city vehicles is aging and poorly maintained. A power grid that is deteriorating. A city-owned power plant that has been idle for two years. 31 sub-stations that need to be decommissioned. Information technology systems in multiple departments that urgently need to be upgraded or replaced.
Detroit Files for Bankruptcy
The situation reached a crisis and almost resulted in the state of Michigan taking over administrative control of the city. The state governor declared a financial emergency in March 2013, appointing Kevyn Orr as emergency manager. On July 18, 2013, Detroit filed for bankruptcy.
Orr said the city had filed for bankruptcy because it would take more than 50 years to pay off the city’s $11.5 billion in unsecured debt while not conducting even the most basic maintenance, such as filling potholes and plowing snow.
Current Fiscal Situation … What is at stake?
Detroit halted payments on about $2 billion in debt last month to preserve its dwindling supply of cash. The city faces total liabilities of about $18 billion.
The reorganization plan argues that the city needs to shed $9.5 billion of its $11.5 billion in unsecured debt in order to be able to pay its bills and make necessary improvements in services. Much of the debt targeted for elimination is related to pension benefits and retiree health care coverage required by union contracts. That would mean that investors and retirees would receive an average of just 17% of what they are owed.
When employees of a bankrupt business lose their promised pensions, the Pension Benefit Guaranty Corp. steps in and provides a minimal level of benefits. But that federal agency doesn’t back pensions in the public sector.
Detroit appears to be the first municipal bankruptcy that has ever involved involuntary cuts to retiree benefits. The possibility exists that U.S. tax payers could get stuck bailing out Detroit to cover its workers pensions, similar to the Obama bailout of two of Detroit’s largest companies…GM and Chrysler. Given the poor state of funding for many public sector pension funds nationwide, its an issue which is likely to end up being addressed by the U.S. Supreme Court.
Bankruptcy could slash pension benefits to city workers and retirees, and leave bond holders with only pennies on the dollar. Investors say the bankruptcy will make it more difficult for cities and towns everywhere to raise the money they need to build bridges, schools and other infrastructure. It will also hurt municipal bonds held by individual investors. There are more than $1 trillion worth of bonds at risk. There is bound to be a ripple effect nationwide.
Many American Cities and States are following in Detroit’s steps
The lucrative pension and benefit plans that cities and states across America have adopted…with a hefty helping hand from the powerful America-destroying unions…are on a rapid course heading for the edge of the real ‘Fiscal Cliff’. None of America’s pension plans are sustainable. It will not be long before they all begin to fiscally implode.
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