Detroit: A Glimpse into America’s Future?

June 16, 2009 | by | Topic: Economics & Political SystemsPrint Print

Wouldn’t it be wonderful if, like Ebenezer Scrooge, we could have a preview of the future so that we could change our course if necessary? This can happen in real life. Such a dispensation was granted to me 35 years ago. It happened while I was studying literature at Oxford University in England.

At the time, I hadn’t yet outgrown my youthful flirtation with socialism. The United Kingdom appeared to me to be about 30 years ahead of the United States on the path toward socialism.

Living for a while with a teacher and his young family, I saw up close and personal how bleak life under socialism would be. The government owned most of the primary industries. The economy was stagnant. The homeowners’ monthly mortgage payments were adjusted upward to keep pace with inflation—that insidious, impoverishing monetary cancer that crops up wherever government grows too large. The outlook for a middle-class family was hopeless. The overall atmosphere was suffocating.

This experience opened my eyes. More government control was NOT a desirable future for the United States, and I’ve been in the free-market camp ever since. And fortunately for the United Kingdom, in 1979 Margaret Thatcher became prime minister. She privatized many of the nationalized industries, reinvigorated the market economy, dispelled the economic gloom and stagnation, and revitalized a great country.

Today, a similar preview of the damage of an overbearing government can be gained by spending some time in Detroit, my hometown. Detroit was arguably the most prosperous city in the world in the 1920s. Today, however, whole neighborhoods are abandoned; still-occupied neighborhoods are in a frightful state of decay; some of the streets are so rough you would think that the military used them for target practice. Most startling is that the median sale price for a house in the once-thriving city of Detroit this January was $7,500. Yes, 75 HUNDRED, not “thousand.” You can buy two or three houses in Detroit today for the price of one new car.

What happened? What explains this sad decline? In the simplest economic terms, the ultra-low prices of houses in Detroit are explained in terms of supply and demand. Specifically, there is little demand. Few people want to live in this former boomtown. Why?

Here is what friends and neighbors told me over the years: Starting in the 1960s, governance in Detroit started to deteriorate. The mayor and the city council began to view government as a mechanism for redistributing wealth, primarily to one’s friends and political constituencies. Detroit became known for abnormally corrupt politics, rife with nepotism and favoritism. Leaders appeared to care more about their own self-enrichment than about implementing constructive policies. (Let me say that Detroit’s current mayor—successful businessman and erstwhile Detroit Pistons star Dave Bing—is highly respected for his integrity, and I wish him every success in improving conditions in Motown.)

Taxes were raised. Productive tax-paying citizens moved out of the city, commuting into the city to work. In an attempt to recapture lost revenues, the city imposed a tax on income commuters earned in the city limits. Consequently, many businesses uprooted and relocated, reducing tax revenues further.

Members of public employee unions—close allies of city hall—profited handsomely, even while the quality of municipal services declined. Detroit’s once-respected public schools went into a tailspin—a trend exacerbated by Uncle Sam’s welfare policies which perversely promoted single-parent households, resulting in restless and undisciplined children.

Crime soared. The city of Detroit failed to discharge the primary function of government—protecting the life and property of citizens. As a result of the lawlessness, more and more businesses fled, and the downward spiral accelerated.

The failures of Detroit’s city government were compounded by misguided policies imposed by the federal government. Decades of Uncle Sam’s costly meddling with the Big Three—forcing these corporations to become healthcare agencies and retirement planners, in addition to the already formidable economic challenge of trying to survive in a highly competitive industry (see “Team Obama’s Auto Coup”)—has brought down GM and Chrysler, two pillars of Detroit’s economy. Now the devastation has rippled out to the surrounding counties, where many fine homes have plunged into negative equity and foreclosure in recent months.

Detroit’s decline was not caused by natural disaster. There was nothing mysterious about it. Detroit is a casualty of the “government disease.” Instead of bigger, more activist government solving problems, as its advocates had hoped, the foreseeable result was a government that has done what it should not do (e.g., redistribute wealth to political allies) and hasn’t done what it should (i.e., defend life and property).

Detroit may be the most advanced case of “government disease” in the United States today, but signs of suffering are widespread. Compared to glistening, modern airports in cities like Shanghai and Bangkok, Los Angeles International seems like a Third World airport. The whole state of California is suffering from a Detroit-like exodus of thousands fleeing the economic devastation wrought by Big Government.

We should keep these self-inflicted tragedies in mind in considering whether to assent to the massive expansion of government that President Obama and his congressional allies are seeking. We don’t want the whole country to share the fate of Detroit.

Mark W. Hendrickson

Mark W. Hendrickson

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.

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