Bankrupting Detroit


Detroit’s recent declaration of bankruptcy has been a long time in the making. And this tragedy has a familiar scapegoat—the purportedly generous pensions paid to unionized municipal workers.  Just as in the late sixties and seventies, when race riots were held responsible for white flight and urban decay, most corporate commentary on Detroit neglects the ways that global capitalism and racial injustice combined to reinforce each other and render the city virtually impotent.

Pension fund liabilities simply will not do as an explanation of the city’s woes. Dean Baker points out that the obligation of on average $18,500 a year hardly compares with the obscene salaries and bonuses on Wall Street sustained by the Federal government’s bank bailout. And now Detroit’s bankruptcy administrators threaten to confiscate municipal workers’ pensions, an act that will once again serve the interests of those banks, the city’s major creditors.

The city’s fiscal problems lie in a declining tax base and escalating social service needs. If Detroit is the city that most represented American manufacturing might, it is not surprising that it would experience inordinate decline now.  That declining tax base itself has been a function of both of capital flight facilitated by so called free trade treaties that benefit corporations at the expense of workers and racially based “white flight”. Both have a long history.

In the immediate post World War II period, Detroit was lauded for its role in fostering the creation of an affluent middle class.  Tbat middle class, however, had limited membership and relatively few rights beyond increasing salaries and steady pension and health benefits. Though workers won the right to unionize and to regular cost of living and productivity based wage increases, unions had no voice as to the location of future factories or product priorities. As early as the 1950’s corporate management responded to wage demands by periodic attempts to speed the assembly line, building new plants in the South or in rural areas less sympathetic to unions, and automation.

Corporate apologists defend stockholder and management prerogatives as basic property rights. These are justified by the stake risk these shareholders have assumed as well as their broad knowledge.  But in modern corporate capitalism doctrines of limited liability narrow their risk. Workers often stake their whole lives on enterprise success and have more day- to- day understanding of the productive process.

University of Massachusetts/Amherst emeritus professor Richard Wolff comments that in the1950s and ’60s “The key decision-makers — major shareholders in General Motors, Ford, Chrysler, etc, and the boards of directors they selected — made many disastrous decisions. They failed in competition with European and Japanese automobile capitalists and so lost market share to them. They responded too slowly and inadequately to the need to develop new fuel-saving technologies. And, perhaps most tellingly, they responded to their own failures by deciding to move production out of Detroit so they could pay other workers lower wages.”

This corporate failure undermined a large part of the city’s tax base. As tax base slipped away, it became ever more difficult for the city to maintain an adequate level of social services, which in turn made Detroit less desirable as a location to invest.

But Detroit’s fiscal demise cannot be laid exclusively at the foot of corporate management. Contemporary US capitalism took on its shape in part through the ways a racial and economic vectors comingled and intensified each other. From the Depression era on Detroit was a major attractor of African Americans from the South.  Many working class whites in Detroit were hardly welcoming. In a recent interview, University of Pennsylvania historian Thomas Sugrue points out: “White Detroit sent out a signal they would fight for their turf. There were 250 attacks on blacks in all-white neighborhoods. When they realized resistance wouldn’t work, turnover happened really quickly.”

The UAW for its part was a strong supporter of federal civil rights legislation, but in its internal politics was resistant to equal opportunity for African Americans. Though they did gain jobs in plants during the war, these were generally the dirtiest and most dangerous. The Detroit metropolitan area soon became one of the nation’s most segregated urban communities. White flight started well before the riots of the sixties. Racial stereotypes and animosities played a role in this flight, but federal policy was a major factor in this flight and in helping to reinforce the stereotypes.

Federal highway programs aided suburban sprawl and contributed to a mindset that the best way to solve disagreement was to flee it. In addition, Sugrue points out — “Two … Depression-era federal programs — the Home Owners’ Loan Corporation and the Federal Housing Administration — encouraged homeownership and bankrolled suburbanization, but in the North and South alike, whole neighborhoods were redlined, many of them black. Even after the passage of civil rights laws, dozens of studies showed that minorities had a harder time getting access to market-rate mortgages. Moreover, black home buyers were likely to be steered to neighborhoods of older housing stock, often in declining central cities, places where housing values often depreciated rather than appreciated. This meant that blacks, if they were lucky enough to be homeowners, were often trapped in neighborhoods on the margins, economically and politically.” Their situation has only been worsened by the subprime mortgage exploitation to which blacks were disproportionately subjected and the subsequent foreclosures.

The effects of such programs were not only economic. The poor state of African American homes confirmed in the minds of many whites the notion that they could not take good care of property. In the process, poverty and economic inequality took on a subtle racial tint for many.   

Although the greater Detroit area consistently elected liberal Democrats to national office, in local races citizens consistently supported segregationist mayors. These suburban majors opposed tax sharing with the city, and for its part Detroit leaders often refused to cooperate with their suburban counterparts on such region wide issues as transportation and land use planning.

The racial antagonism expressed and symbolized in urban boundaries has had an economic effect. Several recent studies indicate that when core cities lose their economic base, suburbs suffer long- term damage as well. Politically the effects may be even more enduring. In his classic “The Origins of the Urban Crisis”, Sugrue recounts the role of UAW leadership in marginalizing its heavily African American River Rouge Local. That Local had recognized early on the perils of deindustrialization and argued for a politics of hours reduction and job sharing. In addition, the local insisted on the corporation’s obligations to the community and the right to a job. How far its goals might have gone in the McCarthyite 1950’s is an open question, but had UAW leadership at least granted it a greater voice, the frontiers of the possible might have expanded.

Unfortunately today racial antagonism, an auto industry with pre-union era wages, a shrinking tax base, and ever poorer public service have intensified each other. A positive future for Detroit requires not only a worker and community centered auto industry but also attention to the ugly racial and cultural politics that has governed the landscape for so long.

John Buell lives in Southwest Harbor, Maine, and writes regularly on labor and environmental issues. Email

From The Progressive Populist, September 1, 2013

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