Detroit, and the Bankruptcy of America’s Social Contract

detroit bankruptOne way to view Detroit’s bankruptcy — the largest bankruptcy of any American city — is as a failure of political negotiations over how financial sacrifices should be divided among the city’s creditors, city workers, and municipal retirees — requiring a court to decide instead. It could also be seen as the inevitable culmination of decades of union agreements offering unaffordable pension and health benefits to city workers.

But there’s a more basic story here, and it’s being replicated across America: Americans are segregating by income more than ever before. Forty years ago, most cities (including Detroit) had a mixture of wealthy, middle-class, and poor residents. Now, each income group tends to live separately, in its own city — with its own tax bases and philanthropies that support, at one extreme, excellent schools, resplendent parks, rapid-response security, efficient transportation, and other first-rate services; or, at the opposite extreme, terrible schools, dilapidated parks, high crime, and third-rate services.

The geo-political divide has become so palpable that being wealthy in America today means not having to come across anyone who isn’t.

Detroit is a devastatingly poor, mostly black, increasingly abandoned island in the midst of a sea of comparative affluence that’s mostly white. Its suburbs are among the richest in the nation. Oakland County, for example, is the fourth wealthiest county in the United States, of counties with a million or more residents. Greater Detroit — which includes the suburbs — is among the nation’s top five financial centers, the top four centers of high-technology employment, and the second-biggest source of engineering and architectural talent.

Not everyone is wealthy, to be sure, but the median household in the region earns close to $50,000 a year, and unemployment is no higher than the nation’s average. The median household in Birmingham, Michigan, just across the border that delineates the city of Detroit, earned more than $94,000 last year; in nearby Bloomfield Hills — still within the Detroit metropolitan area — the median was more than $150,000.

The median household income within the city of Detroit is around $26,000, and unemployment is staggeringly high. One out of three residents is in poverty; more than half of all children in the city are impoverished. Between 2000 and 2010, Detroit lost a quarter of its population as the middle-class and whites fled to the suburbs. That left it with depressed property values, abandoned neighborhoods, empty buildings, lousy schools, high crime, and a dramatically-shrinking tax base. More than half of its parks have closed in the last five years. Forty percent of its streetlights don’t work.

detroit deterioratingIn other words, much in modern America depends on where you draw boundaries, and who’s inside and who’s outside. Who is included in the social contract? If “Detroit” is defined as the larger metropolitan area that includes its suburbs, “Detroit” has enough money to provide all its residents with adequate if not good public services, without falling into bankruptcy. Politically, it would come down to a question of whether the more affluent areas of this “Detroit” were willing to subsidize the poor inner-city through their tax dollars, and help it rebound. That’s an awkward question that the more affluent areas would probably rather not have to face.

In drawing the relevant boundary to include just the poor inner city, and requiring those within that boundary to take care of their compounded problems by themselves, the whiter and more affluent suburbs are off the hook. “Their” city isn’t in trouble. It’s that other one — called “Detroit.”

Robert ReichIt’s roughly analogous to a Wall Street bank drawing a boundary around its bad assets, selling them off at a fire-sale price, and writing off the loss.  Only here we’re dealing with human beings rather than financial capital. And the upcoming fire sale will likely result in even worse municipal services, lousier schools, and more crime for those left behind in the city of Detroit. In an era of widening inequality, this is how wealthier Americans are quietly writing off the poor.

Robert Reich
Robert Reich’s Blog

Republished with the author’s permission.

Monday, 22 July 2013

Published by the LA Progressive on July 23, 2013
Related Posts Plugin for WordPress, Blogger...
About Robert Reich

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.

Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

Comments

  1. JoeWeinstein says:

    So true – and not even real news. Flight of wealth (and feelings of civic responsibility) to the suburbs in all US cities has been promoted at least ever since the 1950s with the rise of the Interstate Highway system. This system’s metro-area freeways enable highflying downtown workers, including captains of industry and commerce and finance, to live in the suburbs. In the older big US cities, this same thing happened even much earlier – ever since the advent of commuter rail lines.

  2. JoeWeinstein says:

    So true – and not even real news. Flight of wealth (and feelings of civic responsibility) to the suburbs in all US cities has been promoted at least ever since the 1950s with the rise of the Interstate Highway system. This system’s metro-area freeways enable highflying downtown workers, including captains of industry and commerce and finance, to live in the suburbs. In the older big US cities, this same thing happened even much earlier – ever since the advent of commuter rail lines.

Trackbacks

  1. [...] Robert Reich points to Detroit as an example of the bankruptcy of America’s social contract. Racial and economic divides have resulted in many urban areas losing their financial base as wealthy whites moved to the suburbs. While Detroit is one of the poorest areas of the country, the Detroit Metro area “is among the nation’s top five financial centers, the top four centers of high-technology employment, and the second-biggest source of engineering and architectural talent.” In Birmingham, Michigan, just across the border from Detroit, $94,000 was the median income last year; and in nearby Bloomfield Hills the median was more than $150,000. In Detroit, 1 out of 3 residents are in poverty, and the median income is $26,000. Writers from New Economic Perspectives point out that the real solution to all the Detroits in the country is for the government to serve as employer of last resort and create a full employment economy. [...]

Speak Your Mind

*

Visit us on Google+