The Shrinking of Detroit
"The problem is that economic growth in the US over the past several decades has largely been driven by urban development (for which read: suburban sprawl)"
Detroit is a nightmare, and I don't think there are many people who fully understand just how bad it is out here unless you live around here.
There are basically three pockets of Detroit that you can walk around on-foot. Take a ride on "The People Mover" (a very poorly thought out monorail) and you'll run through areas of Downtown that are good and areas of Downtown that look like they were used for bombing practice. Venture beyond Downtown, and you understand why some property in Detroit is selling for $1 and why that's highway robbery.
I used to do contract work for several companies. One of our companies was a charter school just on the edge of the border of Detroit. You'd take Mound Rd. to get there. Mound is a mile south of Van Dyke, which starts in the heart of Downtown and ends in farm country. The progression was clear...the closer you got to the edge of Detroit the more things started looking like a third world country.
It's subtle at first: recognizable brand names start to become very sparse. Then occupied buildings in places other than intersections vanish. The intersections are littered with Check Cashing Liqour/General stores. Those are replaced in kind by the same but with bars on the windows and graffiti everywhere and eventually even those are gone replaced by what was once a Liquor store but is now a square of abandoned cement.
My parents and my wife's parents all lived in Detroit when they were young, as did all of their friends. They got out when crime went up. With the plummeting price of housing, even those who were once way too poor to live outside The City are getting out. Crime has increased in the area I live, but violent crime is still rare. Those who can find a way out, get out.
The city's decline won't stop. The burbs have created "The City" experience with great restaurants, great entertainment venues, great shopping and safe living.
Most of Detroit's Mayors were of the quality of Kwame Kilpatrick (other than Dennis Archer). The people of the city resent the folks who left, and folks running for mayor or city counsel do best if they blame Detroit's problems on the suburbs.
The comments point out a couple problems with the analysis, notably that it's comparing Detroit to some of the densest urban cores in the country rather than another sprawling suburb-city.
I'm really curious if the same thing will happen to San Jose in 50 years time. Like Detroit, San Jose is a monoculture, with an economy based upon American competitive advantage in one particular industry. And San Jose already has a population density lower than Detroit: 940,000 people on 178 square miles. When the software industry gets off-shored to other companies and large Silicon Valley dinosaurs can't compete anymore, will we see pieces about urban decay in San Jose, with the crime, falling home values, and urban prairie that results?
BTW, does anyone else hear Dire Straits' Telegraph Road in their head whenever they read a piece about the decline and fall of Detroit?
I once read a plan for the revitalising of Detroit rather than the demolition. The plan involved turning Detroit into a free trade zone, along the lines of Hong Kong. There would be a low flat tax rate of 15% on company and personal earnings, no import/export duties, no welfare programs or government assistance, including being exempt from all Federal taxes, interventions and benefits. Basically set up a border around the city and let people do whatever they want. The idea was that within 10 years, it would again be a growing and dynamic economy as people would be attracted to the region to escape growing Federal intervention.
While I don't think the idea would ever fly, and I'm not sure it could work, it's definitely an idea to make you think - perhaps the answer is less intervention, not more.
The rust belt cities have been the victims of two great forces, one internal, one external.
The internal force is the incompetence of democratic city governance. Detroit had utterly incompetent elected leaders who in the 1960's and 70's allowed rioters to loot and burn large swaths of the city. Homicide rates rose by an order of magnitude. If you look at homicide rates in Europe, you have to back to the 12th century to find homicide rates as high as those in modern Detroit. Order and security are base requirements for economically productive societies. When the violence came, industries and productive residents fled. This process happened in major cities across the country: St. Louis, New Haven, Cleveland, Baltimore, etc.
Unfortunately, in a democracy the quality of government is proportionate to the human capital of the voting population. Now that the human capital has left, effective governance is even more unlikely. Thus the prospects for Detroit look grim indeed. The only hope is to put the city into receievership and grant a competent executive the authority to clean up the city (perhaps this would be a good job for General Petraeus).
The second factor is the American seinorage empire. Since the end of Bretton Woods in 1971 the primary export of the United States has been its own currency. China, Japan, Korea, etc, ship cars and steel to the United States. The U.S. ships back freighters full of dollars in return. As a result of China and Japan buying the currency, the exchange rate is artificially low. That makes it very hard for domestic manufacturers to compete with the Asian producers. What should have happened is that as American industries failed, we would have less exports which would weaken the dollar, making foreign products more expensive, thus increasing the profits of domestic manufacturers and stopping the cycle of decay. Instead, China and Japan continued to ship us cheap goods, and in return bought treasuries and financial products from Wall St. This greatly enriched the U.S. government and Wall St., but screwed over domestic manufacturers. The result was a growth in "service jobs" which were essentially jobs feeding off of the ever growing Washington bureaucracy. The United States is playing the role of 16th Century Spain. It exports a currency in return for foreign goods, while the domestic industries die.
The final blow to Detroit has been dealt by monetary incompetence on the part of Washington. The U.S. is currently experiencing a monetary contraction. Monetary contractions should never happen with competent economic stewardship. The government can always simply renominate the currency and avoid the problem. When a monetary contraction does occur, people dramatically cut spending on durable goods. Thus again, Detroit is punished for events completely outside of its own control.
One of the things not mentioned by the article is that the city of Detroit has an income tax on people working in the city, unlike virtually all of the surrounding cities. This is symptomatic of a wider dynamic, in which it actually costs more for companies and employees to work in the city of Detroit itself than in the surrounding areas. It isn't the cause of the decline, but it certainly doesn't help.