July 19, 2013
By: Kelly Diamond, Publisher
The market, much like gravity, has its laws… and will ultimately have its way. Detroit is no exception.
Propped up by our once successful auto industry, and investor faith in it, the weight of Detroit’s unions and over-extension in public sector employment and benefits proved to be more than cars and good faith capital could support.
I worked in Detroit for nearly 2 years. My client was GMC Truck, and I created media campaigns for about 20 local markets in the Western Region of the United States. When I was there, GM hadn’t yet filed for bankruptcy and the government handout. The “G” still represented “General”… not “Government”.
It wasn’t the fault of Starcom MediaVest that GM failed. We were killing it in market share! Every index indicated that people: 1. Knew about GM, 2. Heard the messages of various deals, and 3. Cars were selling.
So what happened? Well, if the Chevy Volt was any indication, they were selling the car for less than what it cost to build it just so they could compete price wise against other auto makers like Toyota.
Sadly, GM was only a model for the city of Detroit. Not so different from obesity, it takes time to get there. You don’t just wake up one day morbidly obese. A series of choices get you there. Well, Detroit is now getting its proverbial bell rung. The diagnosis: Bankruptcy.
There is a divine element to market forces, however. In some cases, businesses perish. Some due to the outdated nature of their products/services. Others for their mismanagement. The businesses who are sent out to pasture are often replaced with better ones: better service, better management, more efficient model, etc. But sometimes, individuals can swoop in and right the wrongs, thus salvaging the business. Similar to liver cells, it is regenerative. The market heals itself, and this is what Detroit ultimately has to look forward to!
Detroit is bankrupt, on that there is no equivocation. It really doesn’t take a PhD in Economics to figure out the causes which lead this once-great city down a path to bankruptcy. Perhaps no degree in economics is what it takes, because the internet is teaming with “reasons” that look more like Effect than Cause.
People, and their wealth, have been fleeing Detroit in DROVES since the Detroit Riots in the 1970’s. And when the tax base of any city is chopped to a fraction of what it was, basic public services become all but nonexistent: hour long wait for a 9-1-1 response; trash not being collected; half the ambulance fleet in disrepair; abandoned buildings.
The only folks left, are poor, many of whom don’t pay taxes (some can’t, some won’t). Detroit suffers decades of corruption starting with Coleman Young all the way through the most recent mayor, Kwame Kilpatrick, who is currently facing these charges:
- One count of racketeering conspiracy, punishable by up to 20 years in prison;
- Eight counts of extortion, punishable by up to 20 years in prison; $250,000 fine
- Two counts of bribery, punishable by up to 10 years in prison; $250,000 fine
- 13 counts of mail and wire fraud, punishable by up to 20 years in prison; $250,000 fine
- Five counts of filing false tax returns, punishable by up to three years in prison; $100,000 fine
- One count of income tax evasion, punishable by up to five years in prison
Where there is extreme poverty, there is crime. No one is willing to bail out or even lend money to this dilapidated city in free-fall. Detroit has bottomed out. It is right to file bankruptcy and wipe the slate clean. Granted, it won’t be pretty at first, there are some indications of free market healing as well as a wealth of opportunity and potential to make that city great in a relatively short period of time.
I know this sounds either trite or extreme, but look at Somalia! That’s where all libertarians are directed when they clamor for the elimination of a welfare state. The political issues surrounding Somalia are that of battling warlords who seek dominion over the Somali people. The actual Somali society at large, however, is quite peaceful and prosperous without a central government, and has been since 1991. They aren’t lawless, they just operate on customary law rather than political law.
Somalia’s telecommunications are the best in Africa, its herding economy is stronger than that of either of its neighbors, Kenya or Ethiopia, and that since the demise of the central government, the Somali shilling has become far more stable in world currency markets, while exports have quintupled.
Customary law has some cultural influence of course, but by and large this is an example of how a society can rise up out of the ashes of political turmoil either though something as informal as customary law, or in Detroit’s case maybe good ole spontaneous order!
There is a lot of free market activity sprawling in Detroit. They are 100% privately funded (i.e. no government subsidies to a privately held company). Threat Management Center (TMC) is the new private security business. “TMC now has a client base of about 1,000 private residences and over 500 businesses. Thanks to TMC’s efficiency and profitability, they are also able to provide free or incredibly low-cost services to the poor as well,” writes Robert Taylor of Policymic.com. They are far more efficient and effective in their operations, since they do not assume a para-military role in the community as state police do. They only respond to calls, and force and violence are a last resort.
The Detroit Bus Company is the latest in public transportation. They repurposed buses, decorating them with street art and graffiti. They offer wi-fi, and rather than follow one set route, you can just call or text them for pick-up via a live-tracking app. They run on bio-fuels provided by local restaurants.
Busted as the city of Detroit may be, they are still finding the time and resources to quell free-market efforts. The Detroit Enterprise Academy decided to donate bus benches complete with bookshelves and donated books, and Detroit Department of Transportation was quick to deem these contributions as “unapproved”.
But other activity is stirring! A bankrupt government means a limited government by default. So while they may find the bandwidth to stop bus bench donations, there are, “food rebels, running local community gardens, an alternative to Big Agriculture and government-subsidized factory farms. Private parking garages are popping up. Detroit residents are using Lockean homesteading principles to repurpose land amongst the rubble of the Fed-induced housing bubble. Community events like Biergartens and large, civic dining gatherings (with no permits or licenses!) are being organized privately. Even Detroit’s artists are beginning to reflect this anarchic, peaceful movement in their artwork.”
Bankruptcy is the inevitable outcome of political gaming. It is also the vulnerable spot of any government. There used to be might to back the edicts of Detroit’s government. Now, they can’t afford to enforce their own nonsense, thus rendering themselves rather irrelevant. Before a new city government can be formulated, there will already be a peaceful order. If the remaining citizens of that area know what’s good for them, they will resist a new government. They will defend the locals who didn’t abandon their community, but instead, resuscitated it with new life.
Detroit was bankrupted because of green tecnologies ,coperate gred in oil sales, it is same as a war zone the zion jewish bankers see it a threat to profits.?the zion jews are muslims decendants , revelation 2v9 say there making out there jews but are not ., ,china military is owned by the muslim comunity , Obama is muslim , rothchild resides in china , , the USA has been sold to china as ASIA bought up all the bonds , pluss USA owes ASIA 7 destroyer ship of gold it took from japan after 2nd world war. china has many citys built in USA Detroit is there headquaters it will be demolished and rebuilt as its location is prime realestate…
the zion jews own all media out lets in USA in western countries, all finances in western countries and politics in western countries, it opporates out of rome under the UN it used to be called league of nations .
jews say any one not a jew is a animal ,evil,no spiritual good , but thats the fake JEWS in occupied israel ?REV 2v9
conect the dots
Detroit was bankrupted by deliberate racists policies meant to drive out white wealth. Sometimes it’s really just that simple.
Dear Kelly,
With “friends” like Joe, I feel lighthearted, calm and serene.
When you mention Detroit’s bankruptcy was caused by “deliberate racist policies”, I wonder where you got that information. I think it would be educational, if not important, to check for books written on the subject or question journalists or historians to find out how a city like Detroit imploded. I think this information could be used for other cities in the US as a model NOT to follow.
Thomas Sowell gives some insights on this:
http://www.humanevents.com/2011/03/29/voting-with-their-feet/
Walter E. Williams also has some information on this:
http://www.ocregister.com/articles/detroit-381186-blacks-black.html
http://news.investors.com/ibd-editorials-perspective/121812-637538-detroit-collapse-was-due-to-race-based-politics.htm?p=full
There were also federal policies which played a hand in the overall collapse of our manufacturing industry here in the U.S.:
http://www.policymic.com/articles/45563/detroit-bankrupt-to-see-detroit-s-decline-look-at-40-years-of-federal-policy
Here is the helpful information you requested. I hope it helps you better understand the timeline of Detroit’s demise.
Thank you for the info. Will check it out and come back to you.
Nice job, it’s a fantastic post. The details is good to find out!
Pingback: Detroit: Why Pay for Nothing?
Hi Kelly,
As I read the last paragraph of your text, let me tell you I have my doubts on the people’s ability to resist a new government. After all, they are the ones who voted for mister Kilpatrick. Also for all these dunderheads before him that have brought down this city.
What never ceases to amaze me is when a community, on its knees, looks up and wants to go forward, no matter what. The different initiatives brought by the people are small and may seem childish but they give a strong message: we are here and we intend to stay here.
The problem is, will they be able to move forward, even though they don’t have the means to do so ? What Detroit needs is an honest administration and also a goal, a dream. For a long time, it was known as “Motown”. After the GM debacle in 2008, the city fathers should have thought long and hard on how things were going, business wise. I think they’re still thinking about it…
Is there a potential for business development in Detroit ? In my mind, yes. How should they go about ? Your guest is as good as mine…
What do you mean “they don’t have the means to do so”? What means are you talking about?
If private citizens and private entities come in to fill the void and needs of the community at an affordable rate, why do you need a government? They don’t need stolen money to get good services. They don’t need some benevolent politician with a dream. They need individuals who are willing to invest in a city with boundless potential to earn and build. That is what is happening now. I do believe that if left alone, Detroit could become totally self-sufficient. There will be private trash service. There will be mechanics willing to work on the ambulances which should be privately owned and operated anyway.
Bankruptcy of government = opportunity for the private citizen. Money folks THINK is going to necessary services aren’t. They are going to pensions of useless bureaucrats and servicing the interest on debt decades in the making. Let the citizens of Detroit keep their money and spend it on the services THEY need. Let those services be offered by private companies.
I really wish people would just let this experiment in free markets play out. It will either prove us libertarians wrong, or prove us right. If it’s the former then swoop in with the brown boots. If it’s the latter then leave Detroit alone!
I agree with you that private citizens/entities would be able to fill the void left by the city. But who would be able to pay for it ? For all intents and purposes, the people of Detroit are poor. How can you have free market when you have no customers?
Well, in the case of the Threat Control Security Service, he has private customers who do pay him… and afford him the ability to offer free or very inexpensive services to the poor. It looks like that’s what the bus company is trying to do as well, by expanding its service area.
Basically, they are servicing paying customers (perhaps outside Detroit proper) and helping the poor with costs offset by the paying customers? It’s basically charity work, but not depriving the poor of their pride entirely. I know coops generally allow people a HUGE discount or even offer free produce to those who help out… So these things have a way of working out, and I’d be interested to see if it does for Detroit. I feel sorry for the folks in Windsor because they have to look out their window across the river at that dump!
I really like this article. It points to the root of many problems in our overly governed societies. I live in a medium sized city in Australia. I keep reading of horror stories coming from the US about an out of control, morally destitute government, and social decline, especially in places like Detroit. I have spent several years living in the US, and I really came to love the average person you meet in the street, and many parts of the country. I have some wonderful friends living in the US. It saddens and worries me the way the US seems to be heading for a precipice of some kind.
But I see the seeds of the same problems that brought Detroit down at work in Australia too. Dysfunctional government at all levels, local, state, and federal. The rot has set in. The place is run by zombies……. People who suck the life out of their host, and seem to be totally removed from the lives of the people who they are supposed to serve, and who pay their salaries.
For instance, I live in the fastest growing city in Australia, which is surrounded by the second most bio diverse semi tropical rain forest in the country. Throughout the city and its surrounding areas, thousands of beautiful, often old growth trees are removed for development. 90% of these beautiful hardwood trees are wasted. carted off to the dump at ratepayer’s expense to be ground up into nearly worthless mulch, or simply burned.
I operate a portable sawmill, and can turn these logs into beautiful timber on site, even in someone’s backyard. And I will do it for free if I get the timber, or for a fraction of the price of commercial timber if they want it themselves. Every ton of timber I salvage is one ton of timber that doesn’t have to be cut from our native forests. One ton of timber saved that would otherwise be wasted, and about 2 tons of CO2 saved from entering the atmosphere.
I can stop these logs from even entering the waste stream, and save the council untold thousands of dollars, at ZERO cost to them. But our local council will not allow me to salvage this valuable and diminishing resource. They would rather spend hundreds of thousands of dollars carting it off to be burned or mulched for no logical reason when a totally cost free, (From their point of view.) alternative is staring them in the face.
I got a letter from the Director of Engineering services stating that I can never set my mill up on a council controlled site because “You may damage the park with debris in the form of sawdust” Which is the most mind numbingly stupid statement I have ever heard from a supposedly intelligent educated person in my life.
I mean, they wipe out a whole swath of forest to build a new road, and turn the whole place into a moonscape, but my sawdust is going to stuff everything up???????
How can you deal with such utter stupidity??? It is soul destroying to even attempt to have constructive conversations with this organization.
So I think our 3 tiers of government in Australia have the same rot at the core that has brought Detroit down, and is turning the USA into something more fitting to the acronym USSA.
Over governance is the root of the problem. Too many pigs feeding from the tax payer funded trough.
Here are a few quotes that seem to me to get to the root of the problem as I see it.
The “government that governs best,” as Thomas Jefferson put it, “is the one that governs least.”
Government is good at one thing: It knows how to break your legs, hand you a crutch, and say, “See, if it weren’t for the government, you wouldn’t be able to walk.” – Harry Browne
“We have become great because of the lavish use of our resources … But the time has come to inquire seriously what will happen when our forests are gone, when the coal, the iron, the oil and the gas are exhausted.” — Theodore Roosevelt
You cannot strengthen the weak by weakening the strong………Abraham Lincoln
Government does not create wealth, or preserve it, ……………. It only consumes it. ….. Russell Morris.
When you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft then by work, and your laws no longer protect you against them but protect them against you….you may know that your society is doomed” Ayn Rand
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I wish the entrepreneurs that are trying to bring Detroit back from decline the best of luck.
Best Regards,
Russell Morris.
You seem outspoken. So use the resources you have to get people behind the idea. Companies like to pay lip service to causes people like, politicians like to keep their salary. So once you have enough artists showing the grand furniture, guitars, ships and what not the trees could be used for, next to the piles of waste they become, you’ll find the big wigs acting like it was always something they believed in.
Hell, make it a not for profit and you can make a tidy sum while you’re at it.
There is a little movement in Detroit called “Free Detroit”. I’ll be interested to see how that plays out because it’s a LOT more action and a lot less lip-service. The opportunity is there, for those who are willing to put in a little elbow grease, that’s for sure!!!
Just as a P.S. to my earlier posting, what will rise out of Detroit’s ashes is more sanctimonious BS and trash such as Kwame Kilpatrick.
As usual, some self important bureaucrat declares a useful activity as ‘Unapproved’. What a load of BS, its things such as bureaucratic meddling that is causing municipalities to declare bankruptcy. That and of course, your usual suspects of corrupt politicians and law enforcement.
These corrupted entities are acting as if they are above the law and deserve the graft payments they receive. They look at it as more tribute than anything else. Americans for their part, are allowing this to happen with happy complicity.
America long ago lost its hold on sanity.