The Real Story of Detroit's Collapse: Banks Count, People Don't
As a Detroit Native, I do not know many people who are more devout Detroit Red Wing fans than I am. Yet when I read David Sirota’s words in the article... ["Don't Buy the Right-Wing Myth About Detroit"] it gave me pause.
“How could Michigan officials possibly talk about cutting the average $19,000-a-year pension benefit for municipal workers while reaffirming their pledge of $283 million in taxpayer money to a professional hockey stadium?
As I nearly swallowed my wing-wheeled puck, I recognized that the conversation about Detroit and its bankruptcy is down and dirty, gritty, mean, political economy. It is a conversation about values. Unconscious values about what is right and wrong. The revealed values of the United States of America. It is about who is a member of our society, who we rescue, and who we can sacrifice and make into a scapegoat. It’s resolution will be about power.
This is the country that bails out it banks and lets the reckless financiers get mega bonuses within a year, but which now threatens to cut the payout on the pensions of retired municipal workers making $19,000 per year. Did they do something wrong? No, but they may not be powerful enough to defend their economic rights in opposition to corporate welfare and sophisticated bond speculators, as Sirota suggests. Fairness plays little role. This is the logic of collective action as Mancur Olson once described it. This is the law of the financial jungle.
Sirota explains clearly the tradeoffs between corporate tax cuts, corporate subsidies, revenue shortfalls, bondholders rights, and debt restructuring, all in the context of a national policy of free trade with China, NAFTA, and other national decisions that focused the burden on Michigan and its largest city. Sirota shows us the conversation we should be having around what is really happening in that forsaken place that is demonized by much of America for its unions and the aura of race.
Gil Scott Heron once wrote a song entitled, “We Almost Lost Detroit.” This time we did lose it, and it is the culmination of unnecessary losses. This entire process was not inevitable, as German car companies and their locales have shown in recent years. This is our own American face showing itself in the mirror. Sometimes the destruction is not very creative. It’s just ugly. And good local hockey arenas will not make the ugliness go away.
Robert Johnson is the Director of the Institute for New Economic Thinking (INET). Johnson served as Chief Economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire (D. Wisconsin). Before this, he was Senior Economist of the US Senate Budget Committee under the leadership of Chairman Pete Domenici (R. New Mexico).