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Detroit: Notes from a Neoliberal Laboratory

by Tom Barnes on December 21, 2015
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Detroit has been famous for a long time for all the wrong reasons. Once the fourth great city of American Empire, the city has been wrecked by decades of deindustrialisation, depopulation and racial segregation. By 2013, about 50 percent of the population lived in poverty—an astonishing rise from 14 per cent in 2000. The population has declined from a peak of 1.9 million in the city’s heyday after World War Two to under 690,000 today, a 63 percent drop.

Since 2012, the city has been transformed by a remarkable neoliberal intervention catalysed by the Republican Governor of Michigan, Rick Snyder, placing the city under what the geographer Jamie Peck has called the ‘grip of fiscal technopolitics’. This intervention led to the City of Detroit successfully filing for bankruptcy in 2013 – at $US18 billion, the largest municipal bankruptcy ever – and emerging with a ‘Plan of Adjustment’ a year ago.

From September to November, I was a visiting academic at Wayne State University in Detroit where I interviewed many community and civic leaders as part of a comparative international project on cities and industrial decline. One of the points of this exercise was to draw lessons from the international experience for Australian cities dealing with major manufacturing job losses, especially the regions of Victoria and South Australia faced with the closure of our last domestic motor vehicle assembly operations. The first outcome from this project was a report to the Victorian Parliament, which was launched on 9 December.

Detroit2

Neoliberalism has an old connection to municipal bankruptcies. David Harvey is well known for identifying the 1975 federal bailout of New York City as a key turning point in the rise of the neoliberal era. Detroit’s urban decline has been a gradual process. Arguably the best historical work on postwar Detroit is Tom Sugrue’s Origins of the Urban Crisis, inspired by the sociology of Pierre Bourdieu and Loïc Wacquant, and focused on transformations in the 1950s and 1960s. Sugrue offers three reasons for Detroit’s crisis: first, the hollowing out of the city’s jobs in automotive manufacturing from the early 1950s, with investment shifting first to the suburban fringe outside the city, then to the American South and, from the 1980s onward, to Mexico. Second, racism on the job meant that African American workers bore the brunt of these job losses. Finally, thousands of black families were excluded from the suburbs via a network of real estate agents, mortgage lenders and white neighbourhood associations who insisted on racial segregation. Racism lies at the core of Detroit’s decline: ‘You can’t talk about Detroit without talking about race’, as I was told by one interviewee. As Detroit’s population declined, the black population grew proportionally, from 16 percent in 1950 to 45 per cent in 1970 to 83 percent today.

The administrative basis of city governance has also been hollowed out. As people (especially whites) left and businesses folded, a combination of the city’s collapsing tax base and dysfunctional government led to severe levels of public debt, especially after the mid-2000s. This was made worse by Michigan’s tax structure in which revenue is centrally collected and distributed to cities, making it more beholden to state politics.

While Governor Snyder supported the $80 billion bailout of the US automotive industry, including the Detroit-based General Motors and Chrysler, he has pushed corporate tax cuts, a conservative social agenda and implemented a local version of ‘right to work’ laws—in Michigan, called the Employee Free Choice Act—which is designed to further weaken trade unions. For cities, he has strongly promoted the idea of ‘emergency management’ which gives the State the right to sack elected municipal governments in financial stress and to appoint emergency managers. This proposal was rejected by referendum in 2012 and, remarkably, re-imposed by the Michigan Legislature a few months later. Emergency management has been enforced in several cities including Flint and Pontiac, and has been extended to Detroit’s public school system (where it remains today).

Prior to the declaration of bankruptcy in Detroit, the largest union representing city workers accepted a 10 percent wage cut, a 25 percent reduction in pension benefits and a 20 percent cut in health benefits. The City of Detroit remains the largest single employer in Detroit, with over 11,000 employees in 2013. Despite these concessions to stave off the threat of bankruptcy, the Governor appointed an emergency manager in March 2013 and bankruptcy was declared four months later. Even after emerging from bankruptcy a year ago, the elected government will remain under the gaze of a state-appointed Financial Review Board until 2018 and can only regain full autonomy if it balances its books.

While the City has stuck to this Plan of Adjustment so far, its employees, including bus drivers, office workers and garbage collectors will receive far lower pension payments and will never claw back their lost wages. Even police officers and firefighters, who were spared the wage cuts, have received major cuts to their health benefits.

Today, large parts of Detroit still lack basic services. In many places, residents have to self-organise through ‘block clubs’ to board up abandoned houses or fix overgrown sidewalks. Mayor Mike Duggan has said the city can only provide police, firefighting and garbage pick-up: everything else has to be funded by ‘public private partnerships’, much of which is philanthropy-based. Even in the heart of the city, in Downtown Detroit, street cleaning is now funded by corporate philanthropists rather than government.

detroit_suburbia

One of the logics behind the bankruptcy is that it represents a market signal to attract new commercial and real estate investors looking for a bargain: ‘Once, the bankruptcy was declared, people realised we were at the bottom. The floor couldn’t go any lower’, one real estate development manager told me. Right now, the Greater Downtown area is starting to boom again, due in a large part to huge real estate acquisitions by Dan Gilbert, the owner of the second largest retail mortgage lender in the US (Quicken Loans). In some areas, there are early signs of recovery and even gentrification. However, most parts of the city remain resource-starved with high unemployment, rows of abandoned homes, few grocery stores and dysfunctional public schools.

There is 60 square km of vacant land—nearly twice the land area of the City of Melbourne. The grand plan for urban redevelopment is largely based on a ‘trickle out’ approach in which investment and density is concentrated through the city’s central corridor, with some resources maybe trickling out into poorer neighbourhoods in the future. And financing redevelopment is either reliant on philanthropic investment or on redistribution within the borders of the city, leaving untouched vast sums of wealth in the mostly-white suburbs north of famous Eight Mile Road or to the east in Grosse Point.

As always, the question for political economists is who benefits from what’s happening. So, while it might be possible that this neoliberal intervention—represented by emergency management, the bankruptcy and the Plan of Adjustment—has kick-started a ‘recovery’ of sorts, the development process will continue to be highly unequal in spatial, class and racial terms.

Tom Barnes

Tom Barnes is a postdoctoral research fellow at the newly-established Institute for Religion, Politics and Society at the Australian Catholic University. He did his PhD in Political Economy at the University of Sydney. His new book, Informal Labour in Urban India: Three Cities, Three Journeys, is out with Routledge in early 2015. He blogs at http://tombarnes.info/.

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