Detroit the City vs. 'Detroit' the Auto Industry

Robert Samuelson wrote one of the columns on Detroit that I find a bit frustrating, and leave me wondering if Samuelson has ever been to the city. Samuelson finds it to be a "great irony" that Detroit's bankruptcy "seems to suggest the obsolescence of central cities when just the opposite is true", pointing to the success and revival of "Boston, New York, Philadelphia, Seattle, San Francisco and others".

All have stubborn concentrations of poverty, but many have benefited from gentrification and stronger job markets. High energy costs, a backlash against commuting, lower crime and cities’ vibrancy have renewed their appeal.

But here's the thing: Detroit developed as something of a suburban city, the place where you could live the city life while residing in your own home. Detroit is not situated in an area in which developers are constrained by geography, and must redevelop within its limits. Instead, Detroit is sprawling - 139 square miles - with a low population density, roughly 5,100 people per square mile, as compared to New York City's 27,000 or San Francisco's 17,400. Thanks to poorly considered urban planning decisions in the 1960's, the sort of neighborhoods that have helped lead to redevelopment in other cities, loft conversions and the like, were bulldozed to make way for freeways. Mass transit is poor and, even if it weren't, if you were to develop new residential neighborhoods within Detroit, the jobs for people who could afford to live in them would largely lie outside of the city limits.

Samuelson then asserts that the leading reason for Detroit's failure is that "It became a prisoner of its dependence on the auto industry." Here, Samuelson makes the common mistake of confusing the common shorthand term for the domestic auto industry ("Detroit") with the actual city called Detroit. The problem is that the auto plants that used to employ residents of Detroit were for the most part around the city, and the hollowing out of Detroit was well underway before Michigan started losing those plants to non-union states. Workers were easily able to relocate to towns outside of the city limits while keeping their factory jobs. And as much as Samuelson complains,

In the 1950s and ’60s, most Americans — not just people in Michigan — took the dominance of the Big Three for granted. General Motors, Ford and Chrysler commanded about 90 percent of the vehicle market. Who could challenge them? The result was a plausible and self-serving business model: high wages, generous fringe benefits, job security (with supplementary unemployment benefits to cover workers during temporary layoffs). The compact generally bought labor peace between the companies and the United Auto Workers. Given their market power, automakers could pass most costs on to consumers.

But what made short-term sense spelled long-term suicide — for companies, workers, Detroit and Michigan. High costs, shoddy quality and mediocre management made the companies vulnerable to foreign competition from imports and nonunionized plants, generally in the South. Employment eroded. Worse, the auto industry’s model shaped the state’s labor market and policies. By 1978, average hourly earnings in Michigan were 32 percent higher than the national average. Michigan had an anti-business reputation. This frustrated the state in its efforts to diversify its economic base.

Again, Samuelson confused "Detroit", the domestic automobile industry with "Detroit", the city. Samuelson, who seems to be generally opposed to collective bargaining, drops "nonunionized plants, generally in the South" into the mix without mentioning the policy choices that led to the split between "union" and "non-union" states, as if the City of Detroit were somehow responsible for the Taft-Hartley Act. He neglects to mention that many of the southern states that benefited from the relocation of plants from Michigan subsequently experienced plant closings as factories were moved to the developing world. But perhaps most of all he isn't even capturing the reality of what was happening in Detroit and surrounding communities. Take a look at a household income map for Michigan from the year 2000. If you don't know that Detroit is in southeastern Michigan, well, now you do - now take a look at that map and tell me where Detroit is located. You can see that the area surrounding Detroit remained quite wealthy, while Detroit had average wages similar to the most isolated and rural parts of the state. In 2010 Michigan's per capita income was $25,135. The state with the lowest per capita income was Mississippi, at $19,977. Detroit's per capita income was $15,261. Michigan certainly has struggled in the face of a global economy and a loss of traditional manufacturing jobs, but the areas immediately surrounding Detroit remain the richest in the state while Detroit sits, impoverished, in their midst.

Now a second map. This map shows the ethnicity of the residents of the Detroit metropolitan area, "White people are represented by pink, Black people are represented by blue, Hispanic’s represented by orange and Asians by green." How many seconds did it take you to locate Detroit? Knowing that that the northern boundary of Detroit was Eight Mile Road, how many seconds did it take you to figure out where that road is located on the map? Knowing that there's a separately incorporated city within Detroit, the City of Hamtramck, how many seconds did it take you to figure out where Hamtramck is located?

Don't get me wrong - I don't mean to suggest that there is some sort of racial redlining at work, or that the boundaries of Detroit were drawn to include only poor black neighborhoods. The problem is that as Detroit has lost population it has been unable to provide adequate municipal services, while its property taxes are high due to the low value of its real estate. If you're an employer thinking about opening a business in Detroit, you have to consider that your workers are probably going to want to commute in from a suburb where they have better schools and municipal services, and that they're going to pay a city income tax. Unlike the cities that have existing working class populations, and where living in the city can mean a shorter commute - or a commute on public transportation - working in Detroit can mean a longer commute, with a higher tax bill to boot.

Samuelson pontificates,

By reducing debt and pension payments — though hurting creditors and retirees — bankruptcy might break this cycle. But there’s no quick fix. What Detroit teaches is that those who deny economic change often become its victims.

It's difficult to see how reducing Detroit's debt will "break" its cycle - which is much less a cycle and much more of a decades-long downward trajectory. It's even harder to see how reducing pension benefits for the city's retirees, many of whom still live in the city, will benefit the city. By national standards the pension benefits aren't even particularly generous. Samuelson's theories of economics often seem to be driven by austerity theory and thus tend to be counter-factual, but surely even he can recognize that further reducing Detroit's per capita income and giving its people even less money to support local businesses is more of a stumbling block than a road to recovery. The cuts may well be necessary to balance Detroit's books, but if Detroit does not do far more than that to reinvent itself this is likely its first bankruptcy, not its last.

What I would like to see Detroit accomplish is a serious plan to consolidate its all-but-abandoned areas, and to engage in the wholesale removal of abandoned buildings. To do that effectively will require an infusion of state and federal money - many abandoned buildings are simply too large or require too much environmental clean-up for the city to do itself, particularly when it has no money. But I don't see that the void inside of Detroit will be filled with new people, businesses and jobs unless developers are looking at brownfields ready for redevelopment, as opposed to having to spend a small fortune demolishing an abandoned structure, and it's not realistic that developers will want to erect new structures or homes alongside vacant, derelict shells. The reasons that there is development around Detroit, but little development within Detroit, are not state secrets. Detroit is not going to become what Samuelson describes as an "incubator[] for new ideas and industries" as long as most businesses don't preface the idea of building or expanding in Detroit with the phrase, "anywhere but...."

Samuelson's admonition about "Detroit" holds more true for the state as a whole, which makes sense given that the State of Michigan is more aligned with that conception of Detroit than is the city itself. Contrary to Samuelson's suggestion, though, that Michigan workers get paid too much and have benefits that are too good, the fact is that Michigan is best served by trying to attract the sort of jobs and talent that keep wages high in the counties around Detroit. Samuelson observes, "New York has recovered, led in part by a resurgent (and maligned) financial industry", so let's be honest - being grossly overpaid relative to your contribution to society isn't an impediment to urban renewal, or even something to which Samuelson actually objects. (We can note, also, that Beltway pundits are paid extremely well for what amounts to a marginal contribution to society.) It's a matter of finding jobs and industries that fit with the present economy.

Shrinking Detroit

Detroit Mayor David Bing wants to come to terms with the city's shrinking size, clear abandoned areas, and scale back city services to serve the needs of the actual population. Measures that are long overdue.

In a sense, though, they may be too late. That is, it may be possible to stop Detroit from bleeding as badly, and there may be a benefit from turning blocks of vacant buildings into "urban farms and park spaces" (or whatever the City ultimately decides), but even the reduced city will face property tax levels that discourage redevelopment and the city cannot afford across-the-board cuts. If you reduce property taxes in the cleared areas to encourage redevelopment, you'll effectively create a tax structure in which the city's long-term, largely poor residents pay at a much higher rate than affluent newcomers. I don't see that as politically viable. You could try encouraging development of industrial parks, but with a city income tax, an abundance of commercial and light industrial space in the region, and Michigan's seemingly never-ending economic recession, where would the demand come from? Even parks must be maintained - if you can't find urban farmers (agricultural zoning for parts of Detroit?) would cleared areas actually be parks or would they revert to nature?

Even without the clearing of buildings, parts of Detroit are reverting to nature. There are decrepit buildings that have trees, sprouted in the basement, now growing through what used to be the roof. If you want a sense of what Detroit once was, and what it has become, see The Fabulous Ruins of Detroit, The Ruins of Detroit, The Ruins of Detroit (yes, a different one), and The Ruins Of Detroit Industry: Five Former Factories. There are some abandoned structures that, due to size and scale, environmental contamination, or both, will stand until either the state or federal government bankrolls demolition and clean-up, not something that's likely to happen any time soon.

Please, Not Centralized Planning....

David Brooks arguesthat there's a popular trend toward community,

If you asked people in that age of go-go suburbia what they wanted in their new housing developments, they often said they wanted a golf course. But the culture has changed. If you ask people today what they want, they’re more likely to say coffee shops, hiking trails and community centers.

Brooks declares,

To take advantage of the growing desire for community, the Obama plan would have to do two things. First, it would have to create new transportation patterns. The old metro design was based on a hub-and-spoke system — a series of highways that converged on an urban core. But in an age of multiple downtown nodes and complicated travel routes, it’s better to have a complex web of roads and rail systems.

Second, the Obama stimulus plan could help localities create suburban town squares. Many communities are trying to build focal points. The stimulus plan could build charter schools, pre-K centers, national service centers and other such programs around new civic hubs.

In other words, Brooks would have us spend tens or hundreds of billions of dollars on new roads, and would favor public transportation that can move small numbers of people, slowly, over short distances as opposed those that would quickly move large numbers of people over longer distances. Brooks would also encourage muncipalities to "build on today’s emerging patterns", then stick their hands out for billions from Obama to pay for their plans. Does Brooks think this is likely? No.

But alas, there’s no evidence so far that the Obama infrastructure plan is attached to any larger social vision. In fact, there is a real danger that the plan will retard innovation and entrench the past.

What "past" is Brooks talking about? The "golf course community" past of, say, five years ago? The "big cities, few suburbs" past of a century ago? The past that, five years ago, Brooks would have been writing while lamenting that the President's vision didn't focus on building the golf courses that people wanted as part of their new social landscape?

To put it mildly, Brooks' idea is bad. Here's an anecdote I previously related,

Later today I will be driving past a large, unattractive cement building, owned by a national newspaper chain. That location of that building will seem peculiar - it is, after all, a relatively new building, but its location will be on the main road to downtown, where it is apparent that many shops and homes once stood. It also is the sort of building that one would expect to be in an industrial park, or at the outskirts of a town, not right at the edge of downtown.

It seems that this town had a brilliant idea some decades back that it would "renew" its downtown area. It set about acquiring a large tract of property, with the goal of clearing off the old homes and businesses and building a large shopping mall. After the land was acquired and cleared, somebody finally asked the important question - "If we build it, will they come?" Okay, so that wasn't the actual question - "Private projects of this type and magnitude don't break ground until they have their anchor tenants signed to leases. Do we even have any potential anchor tenants who have expressed interest, let alone any who have signed leases?" Perhaps you have anticipated the answer to that question.

So the city was left with an empty stretch of land, once occupied by homes and buildings, and a revitalization plan which was not commercially viable. The best offer they got from a private enterprise for the land was from the newspaper company, hence the cement behemoth.

Meanwhile, in the city where I live, after an initial purchase price in the millions, hundreds of thousands of taxpayer dollars are being expended in relation to what is now a vacant lot because the city's desire for low-income housing on that land have failed to come to fruition. Almost next door in Ypsilanti, the city has struggled for a decade to reinvent an area near downtown into the very type of community Brooks claims everybody wants.

I don't particularly trust municipalities to plan the specifics of redevelopment of a community redevelopment - or even in relation to single lots. I have no problem with a municipality zoning or rezoning areas to encourage the development of more vibrant downtown areas. I have no problem with the federal government joining with cities to clear abandoned buildings and clean up environmental problems, creating brownfields where development will not otherwise occur. But do I want cities to try to impose a David Brooks vision of downtown centers including "restaurant and entertainment zones, mixed-use streetscape malls, suburban theater districts, farmers’ markets and concert halls" on the public? No, I don't.

I can walk downtown and enjoy several such zones - e.g., a Main Street area zone that is dominated by restaurants and upscale and specialty retail with a popular live music venue, the Kerrytown area with its farmer's market and upscale food and specialty shops, or the State Street/Liberty/South University area with its abundance of restaurants, coffee shops, boutiques, movie theaters, and live theater. I appreciate that the city's zoning allowed for that development to occur, and that the University of Michigan's budget allows for a lot of theater and cultural options that would otherwise be missing from this city. But had the city tried to dictate how those areas developed instead of leting them evolve, just as with its troubled effort to turn a single vacant lot into low-income housing, it would likely have impeded or prevented the successful development of those areas.

As for pretending that having "a complex web of roads and rail systems" helps prepare us for a future in which people are not dependent upon cars? While I respect the idea that public transportation should make it quick and easy to get from "point a" to "point b", and that hub and spoke systems can create delays and inconvenience that force people who would happily take a bus to instead drive a car, Brooks seems to be paying no heed to the cost of developing, operating and maintaining the "complex web" he desires. It's almost as if he's demanding, "Build a public transportation system I would use," without considering either the needs of others, or how in fact such a system could be created and operated in a cost-effective manner. (Or maybe that's exactly what he's demanding.)

Urban Renewal

Later today I will be driving past a large, unattractive cement building, owned by a national newspaper chain. That location of that building will seem peculiar - it is, after all, a relatively new building, but its location will be on the main road to downtown, where it is apparent that many shops and homes once stood. It also is the sort of building that one would expect to be in an industrial park, or at the outskirts of a town, not right at the edge of downtown.

It seems that this town had a brilliant idea some decades back that it would "renew" its downtown area. It set about acquiring a large tract of property, with the goal of clearing off the old homes and businesses and building a large shopping mall. After the land was acquired and cleared, somebody finally asked the important question - "If we build it, will they come?" Okay, so that wasn't the actual question - "Private projects of this type and magnitude don't break ground until they have their anchor tenants signed to leases. Do we even have any potential anchor tenants who have expressed interest, let alone any who have signed leases?" Perhaps you have anticipated the answer to that question.

So the city was left with an empty stretch of land, once occupied by homes and buildings, and a revitalization plan which was not commercially viable. The best offer they got from a private enterprise for the land was from the newspaper company, hence the cement behemoth.

In recent days there has been a lot of debate on a variety of law-related weblogs about eminent domain, sparked by a somewhat peripheral comment on The Volokh Conspiracy about textualism as an approach to constitutional interpretation. One of the more interesting comments that came up through Crime and Federalism, more in relation to eminent domain than in relation to textualism, is actually an older post by Timothy Sandefur, where he discusses changes in philosophy whereby public takings for a private purpose became somehow "acceptable". The Volokh Conspirators also point to a critical reply from A Stitch In Haste which in turn points to a discussion at Legal Affairs between two law professors. In any event, if you follow the web, you'll read more about the "Takings Clause" and eminent domain than you probably want to....

The debate at Legal Affairs includes the observation that "only Justice Scalia expressed any enthusiasm for [the] argument to limit 'public use' to actual use by the public." It also alludes to what can happen if you don't allow a private landowner to force a neighbor to permit construction of a road: "There are cases of acute holdout difficulties where the property owner has little or no subjective value to his scrub land, but wants to prevent a mine owner from getting his ore to the railroad." But I have to admit, I find Scalia's minority opinion to be compelling, and I have little sympathy for a person who buys a mine, digs shafts, extracts ore, and only then realizes that he doesn't own a road from his mine to the railroad. If the neighbor never wanted a road on his land, the presence of the mine shouldn't change his private property rights. If the neighbor doesn't mind the road, but wants a share of mine profits, the mine owner would have been well-served to secure an easement for the roadway before digging the mine. Either way, the mine owner enters the situation with his eyes open, takes a gamble, and should not expect the state to bail him out. Or, as the Michigan Supreme Court put it a few years ago when striking down Michigan's Private Roads Act:

We note that the act does not impose a limitation on land use that benefits the community as a whole. Instead, it gives one party an interest in land the party could not otherwise obtain. By eliminating the landowner's right to exclude others from his property, the act conveys an interest in private property from one private owner to another. The taking authorized by the act appears merely to be an attempt by a private entity to use the state's powers "to acquire what it could not get through arm's length negotiations with defendants."

Tolksdorf v Griffith, 464 Mich 1, 10; 626 NW2d 163 (2001).

The professors debate about the wisdom of New London, CT urban renewal plan, discuss such things as whether "fair compensation" should include compensation for an emotional attachment, mention how the government carved out some peculiar exceptions to its property acquisition plans, and discuss the limits of when one person's assumed "better use" (for property tax purposes) should trump another person's property rights. But at the end of the day, I think Scalia (and Sandefur) have it right; in Sandefur's words, "Prior substantive due process decisions took it for granted that, since it was not legitimate for an individual to steal property, so it was not legitimate for a group of people to order the state to steal property on their behalf."

Today's Washington Post assumes a different philosophy:

The takings clause was meant less to restrain government than to ensure that it pays fairly when it infringes upon private property. And while the public-use requirements forbid land seizures where no conceivable public purpose exists, that is not the case here. New London may have proceeded in a bullheaded fashion, and ideally voters can evict officeholders who behave that way. But New London is unquestionably a distressed city in need of economic development, and federal courts shouldn't be second-guessing the city's determination of how best to accomplish that very public goal.

I disagree that the existence of a "conceivable" public use should transform a governmental taking into a public use. But then, I'm going to be spending part of the day driving past an ugly cement reminder of a "conceivable" public use gang aft agley.