Why Has Detroit Continued To Decline?

Post-war deindustrialization is one thing. But why has Detroit continued to decline for the last 4 decades?

Scott Beyer | August 3, 2018 | |
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The narrative about why Detroit declined often just covers the landmark events of over a half-century ago – factory closings, race riots, urban renewal, segregation, etc. These events were certainly important, as they produced a catastrophic population loss of over 600,000 between 1950 and 1980.

But this narrative leaves out important questions. Why has Detroit continued to decline (and at a faster rate) in the nearly four decades since? Was there some rule saying that, because of those previous events, Detroit had to keep declining? Or are new causes to blame?

These questions are worth asking, because other Midwestern cities with similar legacies to Detroit have outperformed the city during this period. Kansas City’s population has slowly grown since 2000. Chicago, Milwaukee, Cincinnati and Philadelphia began their upticks in 2010. Even the Rust Belt cities that continue declining – like Pittsburgh, St. Louis and Cleveland – haven’t done so to Detroit’s extent, nor do they generally have Detroit’s level of poverty, unemployment, service failure, and visible decrepitude.

Detroit’s decline also makes it an outlier within its own metro. This would likely surprise some people, whose image of Detroit is as this declining urban prairie of a city, that sits in a declining state, in a cold, stagnant, post-industrial Midwest region. None of those notions are true, either.

The southeast Michigan region does quite well – for example, less than an hour west of Detroit is Ann Arbor, a bustling city with an eds-and-meds economy. Of the nation’s 20 largest metros, the Detroit metro area performs about average, with 2.1% GDP growth in 2016. Six of the ten largest cities in greater Detroit have grown in population since 2010. In fact, there is significant wealth throughout the metro, and much of it butts up right outside the city border.

Such facts should at least tweak the narrative alluded to above. When pundits cover Detroit’s decline, they not only invoke the events from long ago, but their language is often fatalistic, as if some outside force just swooped in and yanked everything out from under Detroit. Often, this is a reference to “capitalism,” or close cousins like neoliberalism or globalization.

Detroit is an outlier in an otherwise booming metro area.

“Detroit’s decline is a distinctively capitalist failure,” screamed a Guardian headline after the city went bankrupt. Vice Magazine called the bankruptcy process itself a testament to “the cruelty of American capitalism.”

But if other Midwestern cities have begun repopulating, and other parts of southeast Michigan have diversified their economies, then “capitalism” can’t be blamed. Detroit has become an outlier, suggesting that its problems are unique and internal.

The question is – what are those internal problems? That, too, is subject to debate.

One side claims that Detroit’s earlier events, although long past, left behind ingrained problems that continue to hold back the city. For example John Mogk, a Wayne State University Law Professor who specializes in Detroit history, says two of these legacy burdens include the city’s demographics and its infrastructure. Detroit’s demographic character – which is largely poor and black – was an early result of government engineering. A combo of urban renewal, subsidized highways and discriminatory loan policies drove white people to the suburbs, and kept black people inside the core. This segregationist pattern, said Mogk, continues, and may not organically reverse itself.

As he wrote by email, “most white families will not locate in majority black neighborhoods. Most middle and upper-income families will not locate in low-income neighborhoods. The presence of both of these factors in many of the city’s neighborhoods, and public services that were not competitive with most suburbs, largely explain why the white middle class and some members of the African-American middle class did not choose to live in Detroit.”

As for infrastructure, Mogk says the leftover housing and factories have made it difficult for Detroit to develop economically. Old blighted buildings are expensive to repair, and their removal has been a slow process. This means that prospective Detroit businesses can’t assemble large pieces of land.

Pete Saunders, a Detroit native and fellow Forbes columnist, wrote a lengthy essay that makes more refined versions of these points. He claimed that Detroit’s antiquated and idiosyncratic land-use character has prevented it from post-industrial growth. These range from its old (but non-descript) housing stock; to its non-cohesive neighborhoods; to its car-oriented road design.

“Once the auto industry became established in Detroit,” wrote Saunders, “political and business leaders abdicated their responsibility on sound urban planning and design.”

But Michael LaFaive, of the Mackinac Center for Public Policy, disagreed with these premises. He said that existing infrastructure and demographics should not matter – what’s more important, is a city’s ability to attract capital. And for that, Detroit has failed miserably, with corporations often locating right outside the city border, so that they can enjoy the central proximity, without actually having to deal in Detroit. There is a reason they do that, continued LaFaive by phone.

My explanation involves the basic idea that capital, be it financial or human, goes where it’s welcome, and leaves if it’s not. And Detroit politicians for decades have repeatedly made capital unwelcome.”

LaFaive listed three ways. One is Detroit’s high taxes. A 2014 study by the Lincoln Institute of Land Policy found that it had the highest property tax rates of any major U.S. city. The second is poor services, which should theoretically be counterintuitive since Detroiters pay such high taxes. But the services are quantifiably bad, in a way that’s deeply-rooted and terminal – police who don’t arrive, schools that are growing mold, blighted properties that go decades without being demolished, waste that is dumped and never cleaned up, and the list goes on.

These two problems – high taxes and poor services – conjoin around the fact that the city spends much of its revenue on non-services. At the time of bankruptcy, half of the city’s $18 billion debt was for worker-related liabilities, including retiree pensions and healthcare – aka for people who were no longer contributing to the city’s daily operations.

LaFaive’s third factor was regulation. According to a study by Florida Gulf Coast University, Detroit’s “economic freedom” ranking (which includes factors like regulatory climate) is 345th out of 384 metros. The city – and the state of Michigan – has strict occupational licensing laws, and Detroit is known for heavily enforcing them through random stings.

Detroit has high taxes, yet maintains poor-quality services.

That said, much of Detroit’s regulatory burden is hard to quantify, instead surfacing through anecdotal tales of corruption and clandestine impediments against business. To name a few examples – when ex-mayor Kwame Kilpatrick’s extensive corruption finally earned a jail sentence in 2013, some of the cases were about how he only steered permits and contracts to businesses that would agree to inside dealing. There’s no telling how often this activity occurred under Kilpatrick and other Detroit officials – and which other businesses it may have detracted. And the Detroit Land Bank Authority, which owns 14% of parcels citywide, has a history of hoarding land that investors actually want to purchase and develop.

Collectively, these four factors – taxes, regulations, poor services, and plain corruption – could be called “bad public administration.” They are precisely what, to LaFaive’s point, would discourage – and in some cases directly prohibit – capital from entering Detroit.

These public administration factors also make the arguments about infrastructure and demographics look weak. The infrastructure argument, in fact, is a complete red herring. Most of America has been laid out like Detroit, but almost none of it performs this poorly. There are countless cities – think New York, San Francisco and Savannah – that have many old buildings, yet have revived them to greater values than before. Again, though, this historic restoration process requires inbound capital.

The demographic argument is also flimsy. There are many cities that have more poor people in net than Detroit, including Houston, Dallas, Philadelphia, Chicago and New York City. They are all far more economically successful because they’ve also managed to attract rich people, who create the jobs and fund the services needed for those cities to continue growing. This proves that the existence of low-income demographics, do not, unto themselves, bring cities down.

No, Detroit’s struggles are about its inability to attract capital, business and economic growth. In fact, all those things stop abruptly at the city border, on all sides, before immediately resurfacing in the suburbs. And this is because such growth is largely discouraged by Detroit’s public administration. That fact is more relevant to the city’s ongoing struggles than anything that happened 50 years ago.

[This article was originally published by Forbes.]

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