Cities

Can Insular Detroit Become a Chicago or a Pittsburgh?


Downtown Detroit on July 19

Photograph by Nathan Weber/The New York Times via Redux

Downtown Detroit on July 19

What’s striking about the economic and human tragedy of Detroit is how unique its troubles are among major American cities. Yet only three decades ago it was commonplace to assume that cities were on an inevitable downward spiral into ruin. Major cities were considered economic dinosaurs. Yes, heavy industry and urban prosperity had gone hand in hand until the late ’60s. But falling transportation costs (think national highways) made it cost effective for companies to shift factory operations to low-cost regions, a decline that accelerated with the rise of modern telecommunication networks (think Internet). People and jobs fled for the suburbs, leaving behind rising crime rates, high unemployment, and a deteriorating infrastructure. Big cities seemed ungovernable and fiscal crisis routine. The moment that captured the popular perception of cities was the violence and widespread lootings that accompanied the 1977 blackout in New York City.

Fast forward to today: Urban America is thriving. The shops in downtown Chicago are crowded, the restaurants are full in Pittsburgh, and the bike paths are jammed in Minneapolis. City rents and home prices are steep and, in many cases, rising. Cities are seen as economic engines of growth and opportunity, idea factories and information-sharing portals for the knowledge economy. Crime is at a four-decade low. And when the streets of New York went dark during the blackout of 2003, the media was full of heartwarming stories of neighbors and strangers helping each other out, sharing conversations and flashlights. Detroit stands alone in the depths of its economic and social dysfunction.

Take the divergent fortunes of Chicago and Detroit. The two Midwestern cities were hubs of manufacturing dynamism in the 1950s and ’60s. Median household income was similar, with Detroit at $34,972 and Chicago at $33,674 in 1969. Both cities were also deeply divided by race. The industrial base of the two cities withered as cheaper foreign manufacturers took profits and markets away from domestic smokestack industries.

Yet Chicago has enjoyed an economic renaissance, especially since the 1990s, expanding its business services, finance, education, health-care, and other service jobs. A third of its population has a bachelor’s degree or higher, while median household income is $47,371. Detroit? Median household income is $27,862. Crime is rampant, abandoned buildings common, and city services failing. Bankruptcy is a reasonable choice.

Why did Detroit sink even as other major American cities like Chicago rebounded? Cities are incredibly complicated places, but several factors stand out, especially economic openness and civic engagement. For example, it’s well known that Detroit was dominated by a single industry: automaking. The city thrived during the years of U.S. auto industry dominance, and its economy declined as the Big Three lost out to foreign competitors. Less appreciated is how the car business evolved from a dynamic, cutting-edge enterprise in the early years into an insular industry resistant to outside influences. When sales soared in the 1920s, Ford Motor (F) and General Motors (GM) adopted a strategy of building their own parts rather than relying on outside suppliers. The strategy had the effect over time of sealing off the industry from outside influences, new ideas, and different ways of doing business. The insularity dampened the vitality of Detroit. So did its lack of immigrants. The foreign-born make up 5.1 percent of the city’s population, and 9.3 percent of its population speaks a language other than English at home.

Chicago had a more diverse manufacturing base that in the aggregate was more dependent on global markets. The traders at the Chicago Mercantile Exchange and the Chicago Board of Trade kept the city well-informed on global trends. Chicago is also a city of immigrants: The foreign-born make up 21 percent of the city’s population, and 35.5 percent of the population speaks a language other than English at home. Immigrants revitalized neighborhoods, not just in Chicago but also in New York, San Francisco, Minneapolis, and other urban centers. “The broader leadership of Chicago was global before global was cool, while Detroit was much more insular,” says Bruce Katz, director of the Metropolitan Policy Program at the Brookings Institution. Adds Robert Sampson, social sciences professor at Harvard University: “Chicago has seen a healthy influx of immigrants for a long time. Detroit is a more home-grown town.”

Chicago was also blessed by a pragmatic generation of mayors, most notably Harold Washington (1983-87) and Richard M. Daley (1989-2011). Mayor Daley in particular worked with the suburbs on issues of mutual economic concern. The city has a deep reservoir of civic engagement, a vast network of philanthropists, foundations, nonprofits, and community activists. These groups may fight a lot, yet they also put enormous money and time into the city. Coleman Young, Detroit’s longtime mayor (1974-94) set the tone for the city by actively feuding with surrounding suburbs and pursuing the politics of racial polarization. The civic culture of Detroit paled compared with a Chicago or Pittsburgh, says Sampson.

The silver lining is if Detroit gets relief from its onerous financial obligations, there’s no reason why it can’t emulate and adapt the urban revitalization strategies of other major cities. Embrace immigrants, legal and illegal. Take advantage of cheap land and buildings to encourage entrepreneurs to open for business. Work with creative industries that like funky old buildings and urban lofts. Get foundations and business leaders to focus on education, economic development, and public safety. Government needs to transforms itself into a partner of business and suburban peers whenever possible. Persistence is a virtue, since the transformation isn’t easy and takes years to accomplish.

Here’s the thing: These initiatives and more are under way already. The city’s central core is enjoying a small boom, thanks partly to mortgage lender Quicken Loans moving its headquarters downtown. Foundations are concentrating their resources and committing millions and millions of dollars to a long-term effort to improve education and entrepreneurship. The state recently created a regional transportation agency with a goal of sharing the costs of transit expansions. Suburban voters in three counties agreed to tax themselves to support the Detroit Institute of Arts. Smaller, creative enterprises are starting to build a presence in the city’s urban core. “Hopefully the conversation about Detroit’s fiscal future will open a conversation about Detroit’s economic future,” says Katz.

Without underestimating the barriers to revival, for the first time in years optimism and Detroit isn’t an oxymoron.

Chris_farrell
Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace.

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Companies Mentioned

  • F
    (Ford Motor Co)
    • $17.41 USD
    • -0.01
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  • GM
    (General Motors Co)
    • $34.8 USD
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