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The Real Story Behind the Decline of Detroit … And Yes, Great Things Are Happening There Too

The media is in a frenzy about Detroit's finances—but there's a lot more going on than just bad news.

Photo Credit: © Vladimir Mucibabic/


As a life-long Detroiter who has lived both in the city and the suburbs, I’ve been fascinated by the media frenzy over Detroit’s bankruptcy.  Like most big news topics these days,  Detroit has become a screen onto which people project whatever political viewpoint they have. 

First off,  it’s worth considering why the bankruptcy is getting so much attention.  Is there really that much there,  there?  After all,  as with any bankruptcy,  isn’t it just an argument among some people about some money (or artworks,  real estate and other assets).   

In the private sector companies file for bankruptcy every day without making much, if any,  news.  And why not?  Bankruptcy is a tool used by capital to manage failure.  Capitalist orthodoxy is that some degree of failure is both inevitable and desirable (it’s called creative destruction).   It’s no surprise therefore that capitalism creates procedures to manage it. 

At the height of the depression Congress added a new tool,  Chapter 9,  to the Bankruptcy Code to address financial failure by local governmental bodies.  While it’s true that “failed states,”  or in this case a failed city government,  are different in various ways from a corporation, the basic issues of who owes who how much are the same. 

Admittedly municipal bankruptcy is not as common as private sector bankruptcy.  (Not yet anyway.)  So,  up to a point,  the “look, look,  a man is biting a dog” scenario is justifiably in play.  Further,  because cities are units of elected governments,  there is understandably a different sense of the stakes. 

In that context,  what the MSM is mostly missing is the extent to which bankruptcy is but the latest incremental step in a long running destruction of democracy for African-Americans.  As of this writing more than 55% of Michigan’s African American population lives in communities under some form of Emergency Management.  That means state government has already taken away the authority of locally elected officials.  Bankruptcy just moves that disenfranchisement to the federal level. 

That does make news though because unlike state “emergency manager” laws,  Chapter 9 federal bankruptcy puts the banks,  bondholders, bond insurers and hedge funds who lent the city money at risk.  That is something Michigan Governor Rick Snyder had worked very hard to avoid.  Back in June of 2011,  he made a pledge to his Wall Street friends.  "Detroit's not going into bankruptcy," Snyder told reporters, as he beamed with encouragement from his meetings Monday with three top bond rating agencies in New York.

Predictably, what also excites and dominates MSM coverage is the blame game.  The liberals did it  or the blacks brought this on themselves,  scream the “conservatives.”  It’s the racists and the right wing’s fault,  say the “liberals.”

The noise can be deafening.  What follows is I hope a quieter version of what the “bankruptcy” of Detroit means. 

The government is bankrupt.  Detroit is not.

There are four economies in play in Detroit.  One is the old economy.  That means preindustrial and industrial.  It’s old money.  A lot of it is auto related. 

Especially these days, capital is highly mobile and it has virtually no loyalty to any geographic entity.  If it’s not bound to a nation,  it is surely even less loyal to a city. 

Thus the old money led the disinvestment that removed so many of the economic assets that once gave Detroit a version of what passed for prosperity in the mid-twentieth century.  Long before Detroit-based capital was relocating to Mexico and China,  it was moving from Detroit to its suburbs. 

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