QED

The Grim Lesson of Detroit’s Decline

Up until two weeks ago, the good people of the urban planning professions were worrying out loud about the future of cities, their dense inner cores, possible decentralisation and a great upheaval in work and travel. To begin with we had a virulent virus that raised the prospect of a constant state of incubation, lockdowns and enforced de-densification. I’ve argued that the virus may burn itself out and that it is not as deadly amongst the wider population as first thought. It kills the old and infirm.

If this is so, it seems to me that we shall end up with high density city centres with perhaps some less activity due to working from home, that people with families and early retirees will move to country towns and rural areas near railway stations, and that some city centre employers will decamp to peri-urban locations where their employees can easily travel to work by car. Cities — and here I mean smaller cities than London! — that double down on cars will lose employers and see vacancies rising. We’ll see expanded towns and villages, wholly new settlements at a modest scale and re-locations beyond existing travel to work areas. If you’re only going into the city once or twice a month, you can endure a longer journey. People will work from roomier homes with gardens, go into a local business hub once a week or so and travel into the city every once and a while.

Then we all realised that the lockdowns themselves were likely to cause serious economic upheaval and damage. This is most stark in sectors where human contact is essential – hospitality, tourism, entertainment, the arts – but also for office workers who cannot work from home. Unemployment and underemployment have risen dramatically, so that governments are having to support people who have lost their jobs and businesses who have no business. It is important that we understand that, just as in 2008, this severe recession has been caused by political decision-making, it is exogenous to the economy and the business cycle. Although growth has been sluggish since 2009 in the UK, the EU and Australia, there was a functioning economy in most countries and rapid growth in some. In a country like Australia, export earnings remained high, and the struggling sectors were labour-intensive services. This was due to a combination of high wage rates, penalty rates, electricity prices and ever more compliance costs.

I am fully expecting that about a fifth of restaurants, bars and cafes will simply decide not to reopen. Our profession seems not to fully comprehend the implications of this or the causes. Many call for ‘investment’ in large public works, at great expense and debt, believing that a Keynesian stimulus is the silver bullet. This is unlikely in my view as these projects are slow to deliver, go over time and over-budget. They rack up large debts over many years, even decades. (Australia has been unable to pay down government debt amassed in 2008-2013). Large public works benefit mainly the construction industry, but this can be achieved in other ways, if indeed the construction industry — notoriously cyclical — is collapsing. I’d argue that some, much more modest, projects could be developed at the local level.

But the main priority is to get the private sector back on its feet, investing, opening new businesses, creating jobs and prosperity. This is the only way to create wealth and to raise taxes to support welfare. The way to do this is for governments to get out of the way and allow businesses to do what they do best. Corporation and payroll taxes should be slashed, GST and VAT halved and returned to being sales taxes on consumers (and not a tax on businesses inter-trading), wage rates should be allowed to find their market level, penalty rates should be abolished. Saving, investment and work should be rewarded. This is precisely the policy mix that generated the West German economic miracle -Wirstschaftswunder – from 1948 [1], with a supporting role by the Marshall Fund [2]. I am confident that a private sector led recovery would be strong and rapid.

But then two weeks ago we had the disgraceful killing of George Floyd in Minneapolis, and protests that quickly descended into violent mayhem, rioting, looting, murder and arson. This has spread across 50 and more cities of the USA and as far as London and Sydney. The degrees of violence and criminal behaviour vary city to city, but in some places it is acutely worrying, threatening a break-down in the rule of law. Here we have the place of all demons, or Pandemonium as described in Milton’s Paradise Lost. The people who govern Minneapolis, Chicago, Baltimore and New York should address the situation they are presiding over and if need be reform their police forces and governance generally.

But that is not really the point I wish to make. For it seems to me that riots and looting come along every ten years or so but that acute crowd violence seems to occur every 30-50 years or so. There is the startling example of the Boston Police Strike of 1919, where as well as looting and arson, women were raped in the streets. More recently, there were the Rodney King riots in Los Angeles in 1992. Back in 1968 there were riots in Washington D. C. and Chicago and Paris. In 1967, there were riots in Detroit, and these had a profound and lasting effect on a city with a single industry economy. Just a few years earlier, Detroit’s new mayor had released a film showing a modern, confident Detroit that was bidding to host the Olympic Games. Detroit was eliminated in the first round.

To be true, Detroit’s economic decline began in the 1950s, at a time when most other cities were enjoying growth. The big three automobile manufacturers – Ford, GM, Chrysler – pulled out of the city and relocated to surrounding suburban areas – between 1945 and 1957 some 25 new suburban plants were opened. The companies at the time cited militant unions, government corruption, high taxation and the need to automate production lines, and easy access to interstate freeways. [3]. Unfortunately, this process of decanting investment and jobs out of Detroit continued in the 1960s as production was moved to the South, Canada and Mexico. The few remaining automotive plants were closed and Detroit was abandoned to its fate.

The impact rippled through the city’s economy, leading to the closure of local and neighbourhood businesses. The old car factories were simply left to fall into disrepair. The city’s landscape was one of empty factories, vacant plots, abandoned houses and boarded up shops. From a peak of 1.85 million inhabitants in 1950, Detroit’s population fell by 600,000 by 1980; by 2010 it had fallen to just over 700,000. By 2010, Detroit had at least 70,000 abandoned buildings, 30,000 empty houses and 90,000 vacant lots. This decline accelerated from the 1980s when Detroit gained the reputation as the most violent city in US. Most of the people who left in the 1970s were white.

The riots of 1967 were in part a symptom of Detroit’s economic decline, but also a trigger for more disinvestment and out-migration. Over a period of five days, forty-three people died, of whom 33 were black and 10 white, and 467 were injured. In those five days 2,509 stores were looted or burned, 388 families were rendered homeless or displaced, and 412 buildings were burned or damaged enough to be demolished. Dollar losses from arson and looting ranged from $40 million to $80 million [4]. After the riots, thousands of small businesses closed permanently or relocated to safer neighborhoods.

The impact on Detroit’s already stagnant economy was drastic. Here is Coleman Young, Detroit’s first black major reflecting back in 1994 [5]:

The heaviest casualty, however, was the city. Detroit’s losses went a hell of a lot deeper than the immediate toll of lives and buildings. The riot put Detroit on the fast track to economic desolation, mugging the city and making off with incalculable value in jobs, earnings taxes, corporate taxes, retail dollars, sales taxes, mortgages, interest, property taxes, development dollars, investment dollars, tourism dollars, and plain damn money. The money was carried out in the pockets of the businesses and the people who fled as fast as they could. The white exodus from Detroit had been prodigiously steady prior to the riot, totally twenty-two thousand in 1966, but afterward, it was frantic. In 1967, with less than half the year remaining after the summer explosion, the outward population migration reached sixty-seven thousand. In 1968 the figure hit eighty-thousand, followed by forty-six thousand in 1969.

A process of cumulative decline kicked in and is still ongoing. As Thomas Sewell [6]notes:

It was the riot which marked the beginning of the decline of Detroit to its current state of despair. Detroit’s population today is only half of what it once was, and its most productive people have been the ones who fled.

The lesson here is that once a city loses businesses and jobs, once its economy collapses and once its reputation is for violence, murder, looting and rioting, it cannot be put back together again.

Instead, what Detroit got was another spate of rioting and arson, this time in 1989/1990. Detroit citizens went on a rampage called “Devil’s Night” (around Halloween), a once light-hearted tradition of minor vandalism, such as soaping windows, By the late 1980s it had become, said Mayor Young, “a vision from hell.” The arson primarily took place in the inner city, but surrounding suburbs were affected as well [7]. The crimes became increasingly destructive throughout this period. The authorities responded by razing thousands of abandoned houses, buildings that were, in many cases, used to sell drugs. Five thousand of these buildings were razed in 1989–90 alone.

I met a group of black people from Detroit, probably in their thirties and forties back in 2005. We shared a bill to give the Sydney Lecture at Sydney Town Hall. I remember being struck by their soft-spoken determination, commitment and hope. They were arguing for property improvements, mixed uses, the arts and culture, small business start-ups and what now is referred to as ‘tactile urbanism’. When the evening was over, we stood together in the middle of an empty hall. No one from Sydney was there to even say thank you – they had all gone to a night noodle market or some such. Even the person who invited us to speak failed to show up. A group of Indigenous Australians came over to chat, and after a few minutes invited us to Redfern for a meal. We parted company later and I’ve kept an eye on Detroit ever since.

By the late 2010s, there was an economic and cultural ‘resurgence’ of Detroit, this being after the city had filed for bankruptcy. Most evident are the improvements in the Midtown Area and the Central Business District, which have attracted a number of investors. This has seen the acquisition and revitalization of a number of historic buildings in the Downtown area, marketed as an attractive site for the investment of technology companies. This hopeful recovery has taken 50 years to get started. But now it may be derailed again.

Once a city loses its economy, once it descends into mob violence, once those who can flee, and once a process of disinvestment takes hold, it takes a very long time for the city even to begin to recover. I fear that this is the prospect facing Detroit once again, and other cities where rioting is occurring. Minneapolis is considering de-funding its police force, perhaps the Boston Police Strike all over again. Chicago Mayor Lori Lightfoot is apparently begging Wallmart and Target not to pull out of Chicago. Amazon has already pulled out of a major development in New York.

While the Covid-19 pandemic is bad enough, it will be under control or burn itself out, hopefully soon. We’ll know either way in three weeks or so. If the virus has waned then there will be no immediate mass evacuation of high density centres, although there probably will be a bulge. To be sure, some people may well opt to leave cities for towns and the country but this should not be a sudden, large-scale exodus. Likewise, now that the end of lockdowns is in sight, and assuming there is no second wave, it ought to be possible to regrow economies quickly as there was no problem with aggregate demand before March, This process can be accelerated by supply side reforms on taxes, regulations and payroll taxes. But the damage from the rioting is much more difficult to calculate and to overcome.

Who will want to invest in cities that have been trashed, looted and burned? Where owners have lost their life savings, where getting insurance will be impossible? Of the three crises, I am least optimistic that the pandemonium and its effects can be redressed speedily.

We may well survive the virus; we must rebuild our economies. Whether we can overcome the damage caused by riots is more difficult.

John Montgomery is the author of  The New Wealth of Cities and Upwave: City Dynamics and the Coming Capitalist Revival

 

References
1. The Wirtschaftswunder was based on classical liberal economics, and promoted growth by encouraging, investment, work and growth. It principally involved cutting taxes and removing regulations on businesses. Government pricing was ended, bringing an end to the black market, and wages were allowed to reach market levels. Overtime was untaxed.
2. The Marshall Plan, also known as the European Recovery Program, was a U.S. program providing aid to Western Europe following the devastation of World War II. It was enacted in 1948 and provided more than $15 billion (about $140 billion at today’s prices). Initially West Germany was excluded from the fund until it was realized the suppression of its economy was holding back the recovery of other European countries. West Germany used the funds to rebuild railways, plants and factories. However the Marshall Plan was not the main force behind the Wirtschaftswunder.
3. Sugrue, Thomas (2004). “From Motor City to Motor Metropolis: How the Automobile Industry Reshaped Urban America”. Automobile in American Life and Society. University of Michigan – Dearborn.
4. “Michigan State Insurance Commission estimate of December, 1967, quoted in the National Advisory Commission on Civil Disorders AKA Kerner Report”. 1968-02-09
5. Young, Coleman. Hard Stuff: The Autobiography of Mayor Coleman Young: p.179.
6. Sowell, Thomas (2011-03-29) Voting With Their Feet, LewRockwell.com
7. The Tragedy of Detroit, Ze’Ev Chafets, New York Times, July 29 1990. His book ‘Devil’s Night’ was published by Random House, New York in October 1990.

6 comments
  • Doubting Thomas

    Thank you. A cautionary tale, indeed. If ever someone deserved a statue raised in his honour in every capital city in the western world, it would be Thomas Sowell. His many books will continue to inspire, but his well-earned retirement from public discourse has removed a rare voice of sheer common sense.
    One mundane example of the problems we face is the response I received from an American woman when I had quoted Mr Sowell several times in an on-line discussion on some then fraught political issue. This person, highly educated by current standards, challenged me for quoting Thomas Sowell. Didn’t I understand, she insisted, that Thomas Sowell was not a recognised authority on anything in the United States. I gave up.
    What we are seeing today is the result of that sort of ignorance and perversity that seems to be the universal stock-in-trade of our post-modernist education systems.

  • pgang

    “But then two weeks ago we had the disgraceful killing of George Floyd in Minneapolis”. Please stop it. Please.
    Quadrant should be standing as a bastion against mob justice, speaking up for a man’s right to defend himself before the law.
    Every bloody article you read everywhere instantly convicts a man of murder before his side of the story is told. I’m sick of it – it’s a disgrace.

  • Doubting Thomas

    pgang, I agree. ‘Er Indoors, bless her beautiful heart, is an avid fan of the American TV show “Cops” which has just been discontinued after decades. Whatever the rights or wrongs of police actions in any given case, Cops illustrates just what American police, and our own, are confronted with probably every working day. No doubt the majority of police traffic stops are routine and perfectly peaceful. But a lone police officer on patrol simply can never know whether any given stop will explode into violence. No doubt because they make the best television, stops that turn violent are frequently shown. But the most disturbing feature of most of those incidents is that they were always caused by the person being stopped violently resisting the process, usually because they were carrying drugs.
    My sympathies are entirely with the police in the Floyd incident, and to charge the police with murder is ridiculous unless, of course, the intention is to ensure that no sane jury will convict.

  • wdr

    One major factor in Detroit’s decline was “white flight” (i.e., not simply the depopulation of the city by one and all) to the suburbs, and their replacement by blacks with an astronomical rate of violent crime. Their unparalleled rate of violent crime made living anywhere near a black neighborhood impossible for most whites, including those who were in no sense racists, as did the inevitable decline in standards and safety in the state schools. The same thing happened in other cities in American which went down the plughole in the 1960s and 1970s. As the black crime rate has declined markedly since the 1980s, white flight has been reversed in large part in many cities. These are the facts of life, almost always buried by liberal commentators.

  • Stephen Due

    Nice use of the word ‘pandemonium’.
    It was a favourite with my mother when describing the antics of her sons. She also used to speak of “reading the Riot Act”, unconsciously referencing a British government response to civil unrest in the 18th century, which never seemed to work very well.
    Geelong where I live has suffered the closure of a number of major industrial employers in my time, including the cement works, the Ford Factory, the Alcoa aluminium plant, the International Harvester factory and so on. The city has really only been saved from ‘a fate worse than Detroit’ by becoming a dormitory suburb for Melbourne workers – although some public service offices have been relocated here, and the number of positions for baristas has risen accordingly. Notably absent is the racial unrest highlighted in this article, although the divisive Aboriginal flag is dutifully flown atop the council offices.

  • Lawrie Ayres

    A very thought provoking article. Australia will never fulfil it’s promise until the big cities are abandoned in favour of smaller regional cities and towns. Communication, either electronic or rail/road, ios the key. Parkes in the mid western part of NSW was a hub for the manufacture of white goods until government ineptitude, rising power prices and greedy unions forced all such manufacture to Asia. The Inland Rail could revitalise the area but it will take cheap electricity (and that won’t happen while there are windmills and solar in the system) and the abolishment of the Fair Work Commission and it’s job killing rulings to encourage it to happen. The potential for a resurgence in regional areas is there but governments need to get helpful rather than get in the way.

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