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Kevin Klowden
Executive Director, Center for Regional Economics and California Center
California and Entertainment & Sports and Global Economy and Regional Economics and Technology
Kevin Klowden is the executive director of the Milken Institute’s Center for Regional Economics and California Center. He specializes in the study of key factors that underlie the development of competitive regional economies (clusters of innovation, patterns of trade and investment, and concentration of skilled labor), and how these are...
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Urban Pioneers and New Immigrants Won't Replenish Detroit
By: Kevin Klowden
August 12, 2013
   
   
The recent decision by the state of MichiganaEUR(TM)s appointed emergency manager to file for bankruptcy for the city of Detroit is certainly a matter of politics, with a Republican governoraEUR(TM)s appointee fighting with entrenched Democratic-leaning public sector unions in a heavily Democratic city. However, the actual state of DetroitaEUR(TM)s finances, and indeed the finances of many troubled municipalities around the country, is far more a matter of demographics and economic shifts than dramatic political infighting. There is no question that Detroit is an extreme case of demographic and industrial decline. The pressing question, though, should be whether the example of Detroit sets is one that is likely to be followed elsewhere. The problems of flight to the suburbs and a declining urban core have caused significant problems for numerous other cities, including Los Angeles, Chicago, New York, Cleveland, Pittsburgh, St. Louis, and many others. In the 1970s, New York City lost more than 800,000 people, and was itself on the verge of bankruptcy in the middle of that decade aEUR" because a combination of industrial decline and middle-class flight combined with overspending led to major financial problems. Los Angeles saw a dramatic decline in its heavy manufacturing in the late 1980s and early 1990s, but it managed to recover due to a shift to high technology and services that allowed the employment and income base to stabilize for a number of years. But DetroitaEUR(TM)s population crash, combined with a continued lack of investor confidence, have made the necessary recovery all but impossible. Even efforts to reinvest and develop, such as the ambitious Renaissance Center in the 1970s and the new Comerica Park in the 2000s, have made little impact on the overall trends. For the first part of the 20th Century, Detroit was one of the great miracle cities that helped to define AmericaaEUR(TM)s rise to prominence, not only in automobiles but in overall manufacturing. The cityaEUR(TM)s skyline soared, with dramatic new buildings, a widely admired symphony hall, and a thriving creative and arts scene that would eventually produce the fabled Motown Records. From 1900 to 1950, the city of Detroit saw its population swell dramatically from 285,704 people within its city limits, to nearly 1,850,000 (1,849,568) by 1950. Much of this influx comprised African Americans migrating from the South to fill vital industrial jobs that provided a path into the middle class. The problem that developed in Detroit is that after 1950, the suburbs began to grow rapidly, but did so at the expense of an urban core that would have difficulty retaining jobs, let alone population. AmericaaEUR(TM)s manufacturing, especially its auto industry, started shifting away from Detroit even before it went into decline in the rest of the country. Pressure from foreign competition and lower-cost locations in other parts of the Midwest and in the South hurt the industryaEUR(TM)s home town. From 1950 to 2000, Detroit reversed its amazing growth dramatically, losing nearly half its population, which fell to 951,270 people by 2000. By 2010, the cityaEUR(TM)s population had shrunk further on a percentage and absolute basis to 713,777. There are a number of significant factors that affected Detroit even beyond the decline of urban manufacturing. One of the most important is the dramatic flight of the non-Hispanic Caucasian population from the city. While this supplanting of the older wave of immigrant groups with newer immigrant and internal migrant groups (especially African-Americans) is a trend seen in many industrial cities, Detroit simply lost overall population far faster than it could be replaced. Even though Detroit became a great center for Arab immigration after World War II and has increasingly attracted Hispanics, the continued population decline has made any means of paying for services and pensions of a much larger city impossible. When comparing Detroit to other municipalities that have filed for bankruptcy, the closest comparison, albeit on a much smaller scale, is Stockton, California. Like Detroit, Stockton saw a population and prosperity reversal, although a much faster one due to the housing bubble. And like Detroit, Stockton has a salary and pension structure that is out of scale with the cityaEUR(TM)s size and financial situation. The concern for other cities is not the burden of a dramatic population decline, but instead the issue of an aging workforce drawing pensions and benefits while the local economy stops growing. Few cities will face DetroitaEUR(TM)s astounding $18 billion in debt, but on the other hand, it is unlikely they will be able to stall and borrow away the issue for the number of years Detroit has. Fortunately, no other American city is quite like Detroit, but many are far less different than we would like.