Detroit’s Recovery

Question

Formal writing paper assignment, 12 pages, 12 point font, should be typed in accordance with standard citation rules. Proper form will be an important consideration in grading. (The pages does not including work cited pages) on a current topic or a case study about urban planning. include information about stakeholder involvement, discussion of the positive and negative aspects of urban policy, Include a recommendation for or against the policy, Cite resources according to the Scott and Garrison Political Science Student Writer’s Manual at the end of the paper use APSA citation as appropriate, papers will be graded on style, content, and grammar. The project is for the Urban and Regional Planning course.

Answer

Detroit’s Recovery

The city of Detroit filed for Chapter 9 bankruptcy on 23 July, 2013. Standing at an estimated $18-20 billion, this is the largest municipal bankruptcy filing in the US by debt. In addition to this debt measure, it is also the largest city by population to file forbankruptcy. Detroit’s population which stood at close to two million people in the 1950s is now at about 700, 000 (Egertsorm, 2013). This population decrease has been coupled with obvious abandoned businesses and streets that remain unoccupied and uncared for. This crisis is as a result of a combination of factors such as poor management, corruption by leaders, the automotive industry and economic or industrial shifts that occurred during World War II (Egertsorm, 2013). This analysis will thus look into these foundational factors, their development over the years and the recovery procedure. The main goal is to determine whether the recovery is in fact a real representation of improvement based on financial, policy, political and demographic measures. While many have termed this recovery one of the strongest ongoing economic recoveries, more doubts continue to arise especially with the new policies concerning immigration according to the newly elected government. Furthermore, most of the financial solutions have been analyzed as unsustainableand inefficient to the current situation.

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It is often said that Detroit rose and collapsed alongside the movement of the automotive industry. In the early years of the 20^th century, Detroit had an average population of about 200, 000 (Egerstorm, 2013). Even though the city was highly ranking as one of the most industrious in the US, it had no major concentration area with some of its manufacturing industries being in food processing, metal work, pharmaceuticals and chemicals. With most of these industries placed along the river, the population was also concentrated in downtown Detroit. Over the years, the automotive industry began to take more center stage in the area. As the Depression proceeded, most of the other industries were unable to survive and shut down. The automotive industry backed by international finance and technological advancement was able to survive and establish its position as the dominating industry in the region. Detroit was well placed in a region that had good transport and access to raw materials. With the Great Lakes waterways and the well established cargo rail system;this industry could easily source for iron and copper from neighboring Minnesota as well as the still mills in Pittsburgh and Chicago.

Starting out with small-sized operations, the auto industry was revolutionized with technology and new strategies of mass production and distribution as developed by Ford. With famous structures such as the Highland Park Plant and the River Rouge plant, Ford created sophisticated assembly and storage facilities that had efficient networks with supply and distribution logistic plans (Walsh and Davey, 2013). With Ford offering very good wages, more immigrant workers continued to move to the area from rural areas, other states and most from Canada. Metal and wood specialists from German also moved to the region in large numbers as did other laborers from other European countries. Over a very short time, the Detroit population grew in diversity and population.

As this industry was coming into its peak in terms of unskilled labor, there were numerous immigration restrictions and laws that completely locked out European laborers. Contrary to the trends in hiring African Americans at the time, Ford implemented an engaging method that integrated units of their church and culture and influenced most of them to work in the industry. As most black workers were allocated and willing to work some of the most difficult and dangerous tasks the industry was able to boost production (Halliday and Carruthers, 1998). Other players such as General Motors and Chrysler also joined the market in the same momentum. Over time, the city’s demographic arrangement and landscape continued to restructure it. Most Chrysler workers were positioned on the eastern region where their plants were located with Ford and General Motors plants drawing most of their workers along the west region. Over time, the European immigrants mostly made up of Polish, German, French and Spanish people pulled their resources and established settlements as well as magnificent structures that were reflective of traditional European architecture (Moulton, 1936). Overtime, there was a high growth of churches, schools and public buildings that exhibited European architecture. The Detroit landscape was truly transformed into a sophisticated city with a combined representation. Housing settlement also emerged in most areas with the Ford housing scheme for black workers being equally successful.

The auto industry began to decentralize and open new plants by the 1950s. As it proved more cost-efficient to operate these plants most of which were in Canada and Mexico, more plants in Detroit began to shut down. More workers moved to these new plants in what was supported by growing suburban areas. Sadly,the black people were the least flexible and were notable totransfer their previous positions to other regions as black people were not equally supported in these new areas. During the Second World War most of the Detroit plants were also used to manufacture weapons which further devastated the industry (Surgue, 2005). Over time, as more and more workers abandoned the town, all the businesses that depended on these populations also began to shut down their businesses. The restaurant chains were among the first businesses to be hit and the first to close their doors. In progression, all other industries shut down and more immigrants moved to other areas that were more economically active. As Detroit had begun to build a negative image, most of the buildings were never sold or occupied and remain even so.

At the same time, Chinese, German and Japanese automotive manufacturers had developed a higher market share owing to their affordability and economization in terms of fuel usage. Since this was also a time of oil crisis, oil shortage, complex global oil politics and high prices for fuel, many people continued to abandon the American models for the Japanese models. Ford, Chrysler and General Motors’ continued to struggle financially and closed down more factories. Chrysler was bailed out by federal government but reopened plants were not met with the same level of labor population. Production was slowed down in Detroitas wasthemarket for these cars (Turner, 2000). By the 1990s, most of the auto workers were mostly white with the introduction or robotic technologies leading to further downsizing of employees. While these led to the loss of employment, the industry was able to slightly boost production. Ore people continued to move to less paying sectors which further lowered their buying powers. Currently, Detroit still remains the headquarters to these companies most of which have been able to restructure their operation, technology and offer more efficient cars for affordable prices. In recent years, these American companies have been able to boost their competitive edge and have increased their sales.

Contrary to most analysis, the automotive sector had one of the biggest roles in Detroit’s bankruptcy and in its current recovery process. The city continues to suffer financially as it attempted to stabilize its operations and encourage a growth in population. It was severe financial mismanagement, poor planning and corruption thatfurther drove thecityto bankruptcy. One of the biggest events was when the localgovernment decided to terminate payments on some of the unsecured debts whichalso included pensions. After months of bargaining and negotiating, Kevin Orr,the appointed financialmanager of Detroit was unable to balance the creditors,debtors,unions and pension boards and filed for the Chapter 9 bankruptcy (Egerstorm, 2013). Asexpected,one of the reasons for the filing and crisis was the low tax revenue caused bythe shrinkingpopulation. Other factors included high borrowing to cover even higher budget deficits, corruption, poor records, and irregularprogram cots for retirees.

The first step towards recovery came on 5 November 2013, when Gerald Rosen set up a meeting with some of the top foundations which were directly represented by their leaders (Egerstorm, 2013). Rosen who was the Chief Justice for the eastern District described his plan in what came to be known as the Grand bargain. With foundations such as Ford and Knight, Rosen was sure he would be able to satisfy his proposals financially, socially and politically. His primary goal was to raise about $800 million over a period of twenty years (Egerstsorm, 2013). This would enable the Detroit Institute of Art to preserveits artand become a privet entity. Previously,the institution had gone through controversy over the ownership of its items. As only less than a fifth had been bought sing public money, the remaining was left susceptible to liquidity in order to settle some of the debts.

This was followed by a well-coordinated process of receiving offers and negotiating them. Starting at $230 million, Rosen rejected this deal between the city, the Bank of America, Lynch and UBS (Egerstorm, 2013). This was followed by a $185 million deal that countered by Rosen leading to a final settlement of $85 million. The DIA which also offered $50 million towards the bargain was finally persuaded and settled for $100 million (Walsh and Davey, 2013). Deals with the retirement systems prohibited them from suing the state over reductions. In addition, retirees who had previously been threatened with 50% cuts were eventually reduced to 4.5 % which was accepted even by the retirees. By November 2014, Rodhes accepted the city’s plan and further praised it as a representation of the American spirit. On 10^th December, DIA transferred ownership to non-profit DIA. Detroit soon exited bankruptcy protection (Walsh and Davey, 2013).

This bargain has been the cornerstone for Detroit’s recovery process. It dealt with the most immediate financial constraints and the pension scheme crisis. With social security holding great importance to the democracy of America, this bargain represents how companies and foundations can take charge of their own local challenges as opposed to relying on national bail outs or assistance as the primary strategy. In addition, this bargain integrated public, private and non-profit organizations in one of the most unique and organized ways. Ata time when the retiree and pension payments was termed as crippling to the economy of Detroit, the Ford foundation set the foundation with an initial pledge of $125 million (Walsh and Davey, 2013). Yet the idea of pension liabilities affecting fiscal stability is a common problem that often requires intervention from federal government, this internal bargain was able to stabilize the financial components of the city despite the fact that they had reduced tax revenue.

Notably, Detroit is a good example of the Rust Belt cities that built a stable corporate leadership and base by synchronizing the major local stakeholders such as Ford, Kellogg and Knight who all set up foundations as a philanthropic community that stood at about $50 million (Walsh and Davey, 2013). As these foundations were able to accumulate wealth,resources and networks during the industrial expansion, Detroit was able to prolong its survival even at its most difficult time.  Even though these foundations were set up with a philanthropic goal, they have influenced decisions and moves to rectify poor local government spending that often leads to bankruptcy as it did in Detroit. This bargain was mostly successful in Detroit owing to the legal alignment. For the same reason, other states would mostly be unable to implement the same strategy. In essence, states such as New York that have looked into this strategy would not implement it because of strong legal obligations that prohibit cuts on benefits.

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This model’s biggest strengthslie in its legal alignment and foundation support. With a commitment to attain the great bargain, most parties were flexible including the DIA. Ford is recognized for famously supporting this strategy and explaining that it was important to support cities, their culture and social organization as a means of supporting the country in entirety. Ford was thus operating ahead of its time and was able to understand and back the importance of art and cultural preservation as much as financial stability (Claessens, Djakov and Mody, 2001). With years of foundation strengthening, most organizations and companies in Detroit, there is a sense of philanthropic obligation and responsibility. The size and ability developed by these organizations also supports the recovery through research and other networks. Evidently, players such as Ford continue to develop community ties as they did with the black population workers.

The great bargain was hailed as a smart and successful move. Today, it is still acknowledged as one of the strongest foundations of Detroit’s recovery. Current recovery is now influenced by even more factors as the country continues to adapt to new political, legal and economic restructuring of the country. Current recovery is always a topic of debate: while there are many positive growths in the area, many suggest that the current situation continues to deteriorate with the growth being unevenly distributed (Turner, 2000). This reflects on the imbalance between the recovery strategy and the sustainability of Detroit. On a secondary level, it shows an imbalance or is calculation in matching these strategies with the actual challenges in the area.

Local statistics shows that Detroit continues to decline steadily despite the recovery efforts. Clearly, the rate of recovery has proved itself much slower than that of decline. Those on the ground suggest that employment rates continue to decrease as poverty continues to affect the residents. A bigger problem is that the recovery and subsequent development has only been concentrated at one area. This progress which is mainly centered in the downtown region, is the primary location for most government offices and social amenities. Over the last years, the hospitality and service industry has also recorded growth in this region with more restaurant and retail stores opening in the downtown area. The downtown area accommodates only 26,000, a very small fraction of the metropolitan population. As a result, it is almost impossible for these localized progresses to have a direct and progressive effect on the whole of Detroit.

Signs that depict the slow growth are evident through areas characterized by empty streets, lots, buildings and an overgrowth of weeds. Real estate growth has been equally slow even in the down town and midtown regions. The revitalization process is thus not spreading to the adjacent areas at a sustainable pace. Thus continues to create a growing difference between the downtown area and the neighboring towns that continue to be ghost towns (Surgue, 2005).

Another negative trend has been observed in the employment in Detroit. While unemployment rates continue to rise for non-locals, the local people demonstrate increasing numbers of unemployment. The suburban population made up of more white people is thus better placed than the minority groups. Ironically, in the years that were characterized with decentralization of the auto industries, most of the white workers moved to these new plants leaving the minority workers in Detroit. Even so, the slightest growth still favors these white workers over the minority such as the black people. For an area that was initially characterized with a very diverse population, most of these people remain unemployed and highly prone to harsh conditions of poverty (Turner, 2000).

Even so, thegreat bargain is being criticized for its democratic failures. Most of the negotiations were later criticized for the fact that they did not follow most of the democratic processes that should be followed during such a negotiation. In essence, the negotiation was extremely controlled and gave too much power to the funders. Finally, the very organizations that were being funded were put ina compromising situation of decision making. In truth, this was a very flawed concept that deviated from the principles of democracy. Supporters of the bargain argue that though the process was flawed, it represented the people’s idea and willingness to work hard and sacrifice in order to improve these conditions. Withouta doubt, despite the moral and democratic accuracy of the bargain,it was a step that was necessary and beneficial to revitalize Detroit and prevent permanent collapse. The municipality had been completely crippled with basic functions such as garbage collection and street lighting being neglected. Evidently,the bargain was built on other values such as the preservation of the art center more than it concentrated on the pension crisis (Walsh and Davey, 2013). Even so,the stakeholders did identify value in the pension settlements and developed a plan that was somewhat efficient to allsectors.

One of the current challenges with this recovery has been the schoolsystem. After the bargain, there was an obvious need to revive the schools system. The biggest challenge was that schools had become an avenue for support for other basic necessities that had becomemorelimited with increased poverty. Withouta clearmanagement for the public, private and charter schools, school management the school system has also deteriorated in quality with some of the lowestperforming schools being in this state.

Currently,continuous efforts are underway to create more organizations in school management and set up efficient and wellrepresented school boards. This calls formore self-governance and allowing the locals the power to make decisions (Egerstorm, 2013). Evidently, this alsoleads to discussions in democratic organization and restoring the democratic rights of allthe residents. Following the failure of the municipalgovernment and their mismanagement, current strategies focus son matching municipal outlines with district and divisional outlines in terms ofleadership. In reiteration, this move serves to reinforce the theme of self-governance as a core theme torestoration.

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The recovery process has recently been advised to focus on their non-profit sector and motivating these organizations to offer community based services. The primary concern is to extend this outreach to the minority groups such as the black population and provide themwith a voice and platform to give feedback to the political leaders. In fact, current restoration should concentrateon this function in order to eliminate the growing illusion of an improving economy while most of thepeople at the grassroot levelcontinue to struggle. These cooperation will allow the government to accurately evaluate the true progress and tae of the recovery and whether it I in fact a stable, long-term solution. Community activists still observe that the present attempts to involve minority groups aremostly not active and superficial (Egerstorm, 2013). The minority groups that feelmore secluded and discriminated. Through active participation,the recovery process will be able to identify the core priorities thataffect this population.

The intervention of Detroit’s foundations, though beneficial, also raises concerns on their future roles and positions. Local researchers fear that huge funds may be used in the future to bail out private stakeholders instead of dealing with the very roles those foundations was created for. Thelegalboundaries between foundations, public and private entities may be potentially threatened with the democracy failure going down as the earliest demonstration of this probability (Ayres, 2013).

The protests that have recently erupted in Detroitalso raise concerns regarding the sustainability of this recovery process. With the new immigration laws being implemented under Trump, the Immigration and Customs enforcement has raided this area. This puts great worry for the American-Muslim population that immigrated to this region (Moulton, 1936). As their religious and immigration characteristics qualify them for deportation, the Detroit population may continue to decline amidst the municipal efforts to increase population. This makes it even more impossible to attractmore people into the region for fearof being actively targeted.

Generally, Detroit has being making positive efforts with a notable investment in infrastructure and real estate. Themusic industry which has long being serving despite consistent struggles also receives more support with more local artists getting access to platforms. As the city has always been based on its art and culture emphasis, it is important that the recovery process seeks to strengthen this factor as well.

Conclusion

Detroit’s recovery depends on the municipal ability to balance that separate requirements and themes and aim to promote self-governance. Above all, the city still holds great potential of recovery despite the persistentchallenges. Of greatest importance is to devolve this development plans and ensure that Detroit does not stand in its own way. The core responsibility is to strike a balance between the recovery strategy and the actual needs of the most affected populations in a sustainable way. This calls for even more active participation and perspectives from the minority populations. Legal adjustments must also be met to achieve democracy and transparency to guide this whole process.

References

Ayres, L. (1933). The Economics of Recovery. New York: The Macmillan Co.

Egerstrom, L. (2013). Minnesota Growth Formula Could Help Detroit Recover. MinnPost.com .

Halliday, B. C. (1998). Rescuing Business: The Making of Corporate Bankruptcy Law in England and the US. Oxford: Oxford University Press.

Moulton, H. (1936). The Recovery Problem in the United States. Washington: The Brookings Institution.

Stijn Claessens, S. D. (2001). Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws. Washington: World Bank.

Sugrue, T. (2005). Te Origins of the Urban Crisis: Race and Inequaity in Postwar Detroit. Princeton: Princeton University Press.

Turner, S. (2000). Wages, Race, Skills and Space: Lessons from Employers in Detroit’s Auto Industry. New York: Garland.

Walsh, M. D. (2013). Wheels off Detroit Files for Bankruptcy Largest Ever in US: Debt Loans in Billions. Pittsburgh Post Gazette .