What happened to Detroit? Detroit declared bankruptcy in 2013, with debts of $18 billion.
Detroit was the fourth largest city in the United States at one point and so large that nobody could ever have imagined that it would fail. Indigenous people have lived in the area for thousands of years and the first Europeans to reach the area were French missionaries. Other settlers followed and by 1701, France had a small settlement of 100 people. The name Detroit comes from the French, le détroit du Lac Érié (the strait of Lake Erie). The population was 800 by 1765 and 2,144 by 1778. The settlement became a British territory and they changed the name to just Detroit, then, after the American War of Independence, Detroit was ceded to the new United States.
The city of Detroit began to slowly grow. It was an important stop on the underground railway for slaves fleeing to Canada and it became a multiracial city. It was a trading center and a ship building center, but it was Henry Ford and the growing popularity of the automobile that put the city on the map. Henry Ford built his first car in Detroit and he founded the Ford Motor Company there. Dodge, Packard, General Motors, and Chrysler were all founded there as well. Car factories sprang up and by 1920, Detroit was the fourth largest city in the United States. More commerce was shipped along the Detroit River out of Detroit than out of New York, London, and Paris combined. So, how did the city go from such a prosperous growing city to having to file for bankruptcy in less than 100 years?
There are many reasons, but let’s look at six of them. Firstly, the population rapidly declined. The other five reasons we will look at are many of the reasons why the population declined, but it meant that the city had a much smaller tax base and had to borrow to stay ahead. The population peaked in 1950 at 1,849,000 people. Today, the population is 639,000 people. Over 1.2 million people have left the city and there are no new people coming in. This has left buildings empty, has stopped people wanting to invest in the city, and has severely cut the amount of tax the city can take in. So, why have people left?
The second reason for the decline is that the automobile industry faltered. The economy of Detroit was based pretty much solely on the automobile industry. An enormous percentage of the city relied on it for their jobs and the city relied on it for the tax money it brought in. The American automobile industry started to shrink in the 1970s. The oil crisis of the 1970s forced Americans to start looking for smaller and cheaper cars. Often these were not American cars. Slowly, production of cars shifted away from America and the large automobile companies started to lose money. Also, the unions were very strong in the car industry and the automobile companies had to go to great lengths to keep factories open during strikes. All of this stifled competition. The unions also demanded high wages that couldn’t be met because it kept the prices of the cars high and cars from other countries were much cheaper. By the end of the 20th century, the automobile companies in Detroit were closing down and the people that they employed were out of work. The city of Detroit lost a huge source of tax, the economy took a massive hit, and they had to pay unemployment benefits to the people who had lost their jobs. Because the city was so reliant on cars, once those factories closed down, there were no other jobs and people started to leave.
Racial tensions and segregation is the third reason. A lot of African Americans moved to Detroit for jobs and the white people of the city resented it. The KKK was very big in Detroit. The city was segregated and African Americans were banned from buying houses. They were forced to live in all African American neighborhoods. Relations between black and white communities continued to worsen. All of the police, the authorities, and the city council were white. The black people had enough and in 1967 there were mass riots and 43 people died. After the riots, white people started to move out of the city into the suburbs, or left the city completely.
The fourth reason is this suburbanization. More and more people moved from the city to the suburbs. After a while, the businesses started to follow them and there were not enough people paying tax left in the city. The government had to keep borrowing money to cover the shortfalls.
Fiscal mismanagement is the fifth reason. The city council did not handle the situation very well. There was corruption among city officials. A lot of money was wasted on unnecessary big projects. Money was allocated to places where it shouldn’t have been. The city tried to keep paying wages and pensions, and other institutions, but it didn’t have any money coming in and had to borrow heavily.
And the last reason Detroit declared bankruptcy is crime. This is probably a product of the declining city as well as a cause. It is hard to tell. Many people were leaving the city and the public facilities were breaking down, which caused a rise in crime. On the other hand, the rise in crime caused more people to leave the city. And the population continued to drop.
By 2013, Detroit had an $18 billion loan that it could not repay and it declared bankruptcy. It has come out of the bankruptcy now, but it is hardly fixed. One way they came out of the bankruptcy was to see art from the Detroit Institute of Arts, which was not a very popular solution. And this is what I learned today.
Photo by Bl∡ke : https://www.pexels.com/photo/drone-shot-of-fisher-body-plant-21-in-detroit-michigan-9599945/
Sources
https://en.wikipedia.org/wiki/Detroit_bankruptcy
https://en.wikipedia.org/wiki/Coleman_Young
https://www.bentley.edu/news/detroits-downfall
https://www.thetravel.com/abandoned-detroit-rust-belt-city-visiting/
https://en.wikipedia.org/wiki/Detroit
https://archive.nytimes.com/www.nytimes.com/interactive/2013/08/17/us/detroit-decline.html
https://en.wikipedia.org/wiki/Demographic_history_of_Detroit