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News Detroit topples into bankruptcy

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  1. Jul 19, 2013 #1

    Astronuc

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    Detroit is facing the largest munipical bankruptcy in US history.

    Detroit files for bankruptcy, setting off battles with creditors, pensions, unions
    http://www.freep.com/article/20130718/NEWS01/307180107/Detroit-files-Chapter-9-bankruptcy-amid-staggering-debts [Broken]

    Billions in Debt, Detroit Tumbles Into Insolvency
    http://www.nytimes.com/2013/07/19/us/detroit-files-for-bankruptcy.html

     
    Last edited by a moderator: May 6, 2017
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  3. Jul 19, 2013 #2

    cobalt124

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    I'm not surprised given the current economic climate. On a much smaller scale, in the U.K., given the current governments policies, the public sector is under pressure and there is talk of smaller local authorities not having the means to provide even basic services they are obliged to by law, and going bankrupt. I have never heard such talk before.

    I heard on the radio that Detroit peaked in the middle of the last century and has been in decline ever since. Shouln't (couldn't) something have been done in all that time?
     
  4. Jul 19, 2013 #3

    Vanadium 50

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    Topples? More like slams into the ground at full speed.

    You can't have growing government and a declining tax base indefinitely. In 1951, there were 1.8M residents of the city, and 1 in 63 worked for the city. Today there are 0.7M residents and 1 in 35 work for the city.
     
  5. Jul 19, 2013 #4
    Detroit has been slowly tumbling for a long time.
     
  6. Jul 19, 2013 #5

    nsaspook

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    http://www.reuters.com/article/2013/03/11/us-usa-crime-kilpatrick-idUSBRE92A0HV20130311

    You also can't have generations of corruption and graft in local government without it affecting the city in a negative way.
    The people of Detroit voted in crook after crook, so while I feel for the hardworking souls who will lose money in this crash they are also responsible for it's destruction.
     
  7. Jul 19, 2013 #6
    Perfect example of a weakness in democracy. When the people don't know what is best for themselves, how can democracy work?
     
  8. Jul 19, 2013 #7

    George Jones

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    Very sad. For many years, I lived couple of kilometres south of Detroit on the Windsor side of the river (left in 1997). Old Tiger Stadium and the Joe Louis Arena were both quite visible on my walk to and from university. I have a very good friend (a dual citizen) who grew up in Windsor, who still lives lives in Windsor, and who works in Detroit. We often went to see films at the Detroit Institute of Arts.
     
  9. Jul 19, 2013 #8

    nsaspook

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    It's just human nature to want to get something for nothing. Democracy does not mean a free lunch. At it's root, responsible and honest government is the responsibility of the voters, if they decide to look the other way to keep the money train running then we as responsible voters need to make an example of them.

    https://www.physicsforums.com/showthread.php?t=339728
     
    Last edited: Jul 19, 2013
  10. Jul 19, 2013 #9

    mheslep

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    To the extent the maxim, 'people know what is best for themselves', is true, I think it holds best locally. I think a big part of Detroit's issues stemmed from interference by people from far away, in particular via the federal government, such as the "Model Cities" program from 1966 which tried to plan a brand new city.
     
  11. Jul 20, 2013 #10

    Vanadium 50

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    It's not clear why pouring money into Detroit by the feds caused its ills. If looking at the 1960's, I would think the more relevant event - or rather, events - were the 1967 riots. That caused demographic shifts that Detroit has never recovered from.
     
  12. Jul 20, 2013 #11

    mheslep

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    Money from afar can and has accomplished good, but it always seems to carry along some risk of dependency, as many have observed.

    The more disconnected the source from the recipient, the more politics plays a role in the selection, the greater the risk of harmful dependency, or so I observe.

    Riots occurred throughout US cities in the 1960's, and some areas have seen industries not just decline but vanish. The interesting question then is why did Detroit suffer the worst riots, why did it not turn a corner economically after down turns as others have?
     
  13. Jul 20, 2013 #12

    mheslep

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  14. Jul 20, 2013 #13

    nsaspook

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    The best solution for Detroit is just to start levelling most of the city, offer the land and recycled construction materials free of charge to anyone who wants to rebuild inside the zone selected to still provide services with maybe a sliding scale for property taxes for the first ten years.

    http://www.time.com/time/magazine/article/0,9171,2030898,00.html
     
  15. Jul 20, 2013 #14

    Vanadium 50

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    Detroit is geographically large. This was the appeal to the middle class; one could live in the city and still have a yard in a quiet neighborhood. After the riots, when the middle class no longer felt safe, they fled to the suburbs. This left Detroit with a large area to maintain, but without the tax base to do it.

    On top of that you had the change in the auto industry. The US auto industry had no serious competition for decades. They made junk, and paid the UAW top dollar to make it, and everyone was happy. This lasted only long enough for competitors to move in. The response of the industry was to pursue more geographically distributed manufacturing.

    And, as mentioned before, Detroit had essentially a one-party government that ended up sending many of its senior members to prison. While this was not the primary cause of the problem, it sure didn't help.
     
  16. Jul 21, 2013 #15

    verty

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    I think something like this happens in every older city. Buildings get run down over time or become unfashionable in the older parts of the city, lower class residents move in displacing the middle class residents, crime goes up, eventually businesses leave or they reduce to banks and government offices because no one wants to travel to the city center, shopping complexes in the suburbs are used instead.

    What (I think) usually happens is a property developer buys a swath of older properties for very little money and eventually cleans up a number of streets by bulldozing and rebuilding.

    I'm not saying something this slow or progessive happened in Detroit but for whatever reason, no one has bought up the land to rebuild.
     
  17. Jul 21, 2013 #16

    Vanadium 50

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    Detroit is geographically large - it's called "8 mile road" for a reason. If it were to have the population density of, say, Chicago's north side (Lakeview), it would need five times as many people as it has today - and be roughly twice as populous as it was at its peak. A sprinkling of development isn't going to make the difference in Detroit than it would in a geographically smaller city, like Boston.

    Suppose you live in Sterling Heights. You have a decent house, with a hefty but survivable mortgage. Why would you move to Detroit? Sure, you could get a less expensive house, but you probably won't feel safe, not with the highest murder rate (and highest violent crime rate) among US cities with at least a half-million people. Nor with an average 911 response time of nearly an hour.

    You probably also won't feel welcomed. There has been a lot of opposition to "gentrification" - what you describe in your second paragraph.

    So sure, you can save some money. But is it worth it? The answer, as measured by the behavior of 3 million people who live in suburban Detroit, is "no".
     
  18. Jul 21, 2013 #17

    Vanadium 50

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    One other thing: 8 of Metro Detroit's top 10 companies by size are either automotive, automotive spin-offs, or automotive suplliers. If you look at the rankings by employment. in the Top 25, 21 are automotive, governmental or local health care. The other 4 are DTE Energy, HP Enterprise Services, Comercia Bank, and Quicken Loans, employing a total of under 30,000 people. That's 1% of the Metro Detroit population.
     
  19. Jul 21, 2013 #18

    Borg

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    I grew up in the Detroit suburbs and worked for GM in the early 80's. I agree with Vanadium on the causes. The heavy dependance on the auto industry is the main culprit.

    One thing that I would add - When I worked there, I watched the unions demand contracts with more and more money and benefits with zero concern for job security. The same lack of foresight when into voting during the elections. Not until the Japanese companies started taking bigger slices of the pie did anyone have any concern about job security. The initial union response (encouraged by the auto manufactures) was to launch PR campaigns against owning foreign cars. Driving a foreign car to work at a GM plant meant that you would probably have your tires flattened when you came out (if you were lucky). I think that I still have an old bumper sticker somewhere that reads "Toyota, Nissan, Honda - And Pearl Harbor!". That attitude hasn't changed much over the years even though foreign auto manufacturers employ many American workers.
     
    Last edited: Jul 21, 2013
  20. Jul 29, 2013 #19

    mheslep

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    Given the counter examples of other cities with formerly dominant industries, I think it more likely the dispersal of the auto industry was a mechanism in the Detroit collapse, not a fundamental cause. See for example, Pittsburgh, Pa and the US steel industry, or the textile industry that dominated New England towns. These areas have seen reversals for a time, but not utter collapse and $500 homes.

    Industry success appear to be most always connected, to some degree, to the actions of the local government. Tax rates, education of the work force, quality of services and crime rate - all these in turn feedback on the industry inclination to stay put or move to Missouri, Tennessee, Kentucky. In these areas Detroit's government under the twenty years of Major Coleman Young was highly competitive with ... the more corrupt third world governments.
     
    Last edited: Jul 29, 2013
  21. Jul 30, 2013 #20

    Hepth

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    But other industrial cities didn't have the population that Detroit had. Pitt had about 680k at its peak in the 50s, while Detroit was at 1.9 million. Now Detroit is at 700k, and Pitt is near 300k.
    I'm not saying that something couldn't have been done, but the infrastructure that was put in place to service those 2 million was expensive and covered a huge area (140 mi^2), Pitt (60 mi^2). As the population dwindled, the density remained more or less evenly distributed. Sure, people moved outward, but theres not many areas that are completely deserted.

    That means police, fire, utilities, roads, etc; things that have a direct financial dependence on distance covered rather than population, increased in cost per person. I feel like THIS had a large hand in the failure of the city. They couldn't keep up, raised taxes, pushed more people out, businesses left, so less workers needed. Then they began tax breaks for businesses to bring them in, which increased residential taxes to compensate pushing more people out.

    Maybe something could have been done, but I feel like that would have required a systematic rezoning of the city, abandoning complete areas in order to focus on others. And of course no one would ever allow that. The city just can't support itself, and its been digging a large hole of debt as it waits for a turnaround.
     
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