Don't Let Bankruptcy Fool You: Detroit's Not Dead


As I've written here on Cities, Detroit's downtown urban core is seeing more investment, economic activity and an influx of talent than it has in decades. This revitalization is concentrated and spotty and it is far from inclusive, but it is certainly something positive, generating jobs, revenue and much-needed hope and optimism that provide a foundation to build upon.

The broader metropolitan region is home to huge assets – truly great research universities, world-class research, development and design capabilities, abundant musical and creative talent, a great global airport, and, after years of neglect, a massive effort to invest in and revitalize its downtown core.

Of course many of these assets are concentrated outside the city, in its suburbs and adjacent communities and metro areas such as Ann Arbor and Lansing. And for that reason, the real key to the city's rebirth will depend on true regional cooperation. For too long the city and its suburbs have been beset by racial and class division, at times stoked by divisive politicians from both sides. The city's looming bankruptcy provides the deep crisis that may at long last be the spur for the regional cooperation from the suburbs and outlying areas that long-run recovery requires.

Over the weekend, a number commentators have suggested there is a way forward beyond the city's fiscal crisis. Here are a few of my own reasons why the bankruptcy may signal a turning point for the city and region:

A fiscal crisis and an economic crisis aren't the same thing. Bankruptcy is a restart, not a defeat.

Detroit is not the first city on the verge bankruptcy, nor will it be the last. New York's suffered near-bankruptcy in 1975 and has recovered in ways few could have imagined at the time. Orange County, California, also recovered after suffering the nation's third-largest municipal bankruptcy to date in 1994.

Detroit has been in economic crisis for decades. But a fiscal crisis is a crisis of municipal budgets; It reflects a long history of decline and overspending. But it is not the same thing as an economic crisis. In fact, it is occurring at a point when the city and region's economy actually looks to be turning upward. And it will likely help the city's turnaround by cleaning out the fiscal mess.

The ingredients for long-run economic recovery are already present in the region.

As a metropolitan region, Detroit has the assets needed to underpin economic recovery. While the decline of the auto industry left it reeling, the region has strengths that enable it to reposition for the knowledge economy. The broad region is home to more than 5 million people and produces nearly $200 billion in economic output.* Its economy is larger than New Zealand's and not too much smaller than that of Hong Kong or Singapore. There are substantial concentrations of talent: about 34.5 percent of the entire metro area's workers are members of the creative class, slightly above the national average. Its older suburbs like Birmingham, Royal Oak and Ferndale – which stand as textbook examples of mixed-used walkable communities – have concentrations of of talent and human capital that rival creative centers like San Francisco, Washington D.C., and Boston. The Greater Detroit region has also shown a persistent ability to attract global talent in the form of new immigrants – another big asset that differentiates it from many other economically hard hit metros.

The region has world-class cultural and educational institutions. Downtown there's the Detroit Institute of Arts and Wayne State University. Much more has been concentrated in the suburbs. There's the Cranbrook educational community in Bloomfield Hills, the great for art, architecture and design. Michigan State is in East Lansing; the University of Michigan in nearby Ann Arbor. In the last few years, Ann Arbor itself has boomed, with a high rate of startup activity and a top-tier ranking among small metros on my creativity index.

The size and scale of the region's economy, the quality of knowledge institutions, its International airport, and openness to global talent put Detroit in a different category than other hard-pressed Rustbelt cities.

Bankruptcy is not likely to disrupt the flow of capital, technology and talent back to the urban center.

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