The End of the Road for Detroit

In the not-so-distant past, Detroit, inextricably linked to the auto industry, was going to pave the way to the future. It was the “Motor City,” the city that transformed the twentieth century by mastering the mass production of the automobile. And it was going to continue that leadership, shaping and forging the twenty-first century.

At the 1939 World’s Fair, visitors mobbed the General Motors pavilion, a display of futuristic cars, highways, and cities. GM promised visitors they were getting a glimpse of the “world of tomorrow.” No one questioned that Detroit could produce anything it set its muscle and steel to accomplish. No one questioned that Detroit held the key to unlocking the future of technological progress.  No one questioned that “what was good for General Motors was good for the country.”

Detroit was going to build the future of prosperity and technology about which everyone dreamed.

Now, instead of building the dream, Detroit has become the city of the nightmare. Today is the tomorrow into which Detroit was boldly going to lead us. But instead of brimming with prosperity, Detroit is bankrupt, in the red for $20 billion. Instead of futuristic roads and buildings, Detroit has crumbling highways and 78,000 derelict buildings. Instead of an educated and competent workforce, the city has one of the highest unemployment rates in the nation.

What went wrong?

If the lesson of Detroit and the auto industry in its meteoric rise the first half of the twentieth century was prosperity through mass production, through technological prowess, it has equally important lessons to teach in its collapse.

Detroit’s major problem was that it was living a lie, and it expected everyone else to uphold the same lie. The lie was that since it once had a monopoly on progress, it always had the right to claim that monopoly even if it no longer deserved it.

By the time the 1970s rolled around, Detroit’s hegemony in the auto industry was beginning to crumble. It was crumbling under pressure from foreign auto makers in Japan and Europe, who were simply making more reliable and more fuel-efficient cars and wresting away market share.

But instead of retooling and confronting the challenge by producing better automobiles, Detroit whined and complained. It asked for a cap on imports; it developed mass advertising campaigns to make Americans feel guilty if they bought foreign cars; it asked for handouts from the government, as in the case of Chrysler, to stave off bankruptcy. It did everything it could to save itself, except to make cars that people wanted to buy.

But as long as it refused to recognize the truth and make tough choices, its market share continued to ebb in the face of foreign competition. The rest of the world was leaving Detroit in the dust. It could fool itself, but it couldn’t fool Americans.

Indulging in the same lie, the United Auto Workers union refused to yield in wages and benefits in order to be more competitive with the foreign auto makers. They demanded the same pensions, the same health benefits that the auto makers were able to sustain in their heyday.

The same illness of denial that hit the three big car makers also afflicted the city of Detroit. As the auto industry began to shutter plants in Detroit, throwing workers out of jobs, the city kept hiring municipal workers, despite the eroding tax base.  Like the auto makers, the city refused to retool, to admit that the auto industry was a shell of its former self. It didn’t invest in other industries that would create jobs and tax revenue.

Politicians, who only cared about re-election and were afraid to tell constituents the truth, promised obscene pay raises and pension benefits to municipal workers that were only sustainable through massive borrowing, expecting bailouts from creditors and from the state government. Middle-class taxpayers, soaked by ever-rising taxes, fled by the hundreds of thousands. Detroit has half the population it had 50 years ago.

Detroit has become an American tragedy, but it will be a greater tragedy if other cities don’t act on its lessons. Here are the stark but simple lessons.

Cities can’t borrow their way to prosperity. They can’t tax the middle class to death. Throwing money at city workers will buy votes, but it doesn’t buy a sustainable future of growth, jobs and wealth. Without diversification of industry, a focus on innovation, and investment in education, a city can rust away. Create an environment that’s too expensive for corporations to survive and they will transplant themselves elsewhere.

Detroit is a grim reminder that no city, no matter how large, can afford to be left in the dust of progress.