Excerpt:
But it (Detroit) is hardly the worst and certainly not hopeless. Europe is filled with cities that have risen from similarly miserable conditions.
Take Belfast, which suffered not only industrial decline and disinvestment, but also paralyzing religious guerrilla warfare. Although it received the same sort of hammer blow from globalization as Detroit, it now has steady job growth after decades of losses. Its economic output leapt 35 percent
per capita between 2000 and 2005. And, throughout the European continent’s industrial belt--the parts that are distinctly not Disneyland for American yuppies--there are many other examples of old redoubts of manufacturing (Bilbao, Leipzig, Sheffield, St. Étienne) that have enjoyed the very same sort of dramatic recoveries. This is not to oversell the optimism that these cities should inspire. They will never recover their full manufacturing might or swell with quite so many residents as before. Still, they represent realistic models for the rescue of Detroit.
It is strangely fitting that the recent auto bailout endowed Detroit with a new corporate patron hailing from Turin, Italy. Like Detroit, Turin was once a grand capital of the auto industry, which accounted for 80 percent of the city’s industrial activity, most of it with Fiat, Chrysler’s new owner. But the Italian auto industry didn’t fare much better than the American one in the face of new competition. Fiat’s Turin operations went from 140,000 workers in the early 1970s to a mere 40,000 in the early ’90s. And with the collapse of Fiat came the collapse of Turin. Its population plummeted almost 30 percent in 25 years. National and local leaders focused more on combating domestic terrorism from the Red Brigades than on providing basic services. The city spun through four mayors in seven years and accumulated a budget deficit in the mid-’90s of 120 billion lira.
Recovery from this kind of spiral begins with political leadership. And, in 1993, the city elected a reformist mayor, Valentino Castellani, who devised a breathtakingly ambitious plan for the city. Potential investors were never going to have faith in Turin unless the city spelled out its strategy with specificity, so the plan laid out 84 “actions” for development, which Turin vowed to implement by the year 2011. Despite its gritty condition, the city promised to develop a tourism industry and the transportation network to support it. It used its own funds, plus money from national, regional, and provincial governments and private companies, to create a range of institutions--business incubators, foundations, research laboratories, venture-capital funds, and technology parks--that would promote its information-technology and green-energy industries. Other efforts built on Turin’s historical strengths. Turin may no longer have had cheap industrial labor, but it still possessed people with a deep understanding of production and design. They simply needed new outlets and markets for their core competencies.
Turin’s plan worked. By 2006, it posted its lowest levels of unemployment ever and its highest levels of economic activity in half a century. The city reinvented itself as a center for design, not just of cars, but also for aerospace, cinematography, and textiles. Plenty of parts suppliers still depend on business from Fiat, but they have also found new customers in China and other growing markets. Physical regeneration accompanied the economic recovery. The city submerged the old central railway line that had bifurcated the town, transforming that route into a boulevard that serves as Turin’s new backbone. What Turin shows is that even a decaying industrial base can be the foundation for a new economy. That is, the industry may fade, but expertise doesn’t. Detroit’s American cousins, Akron and Toledo, have already shown how specialties developed for car manufacturing can be repurposed. As Akron’s tire-making industry declined, companies, working with local universities, shifted their focus and research efforts into the related business of polymers. The former Rubber Capital of the World now makes polymers and plastics that can be used in clean energy and biotech. Or take Toledo, which long specialized in building windows and windshields for cars. One industry leader, known locally as “the glass genius,” started tinkering with solar cells in the 1980s. The University of Toledo showed an interest in his work, and the state gave the school and two companies some money to investigate photovoltaic technology. That spurred other business and university collaborations, which drew more infusions of state economic development funds, and the region now has some 5,000 jobs in the solar industry.
Institutions developed at the height of Detroit’s postwar prosperity remain--and provide the city with advantages that similarly depressed industrial cities cannot claim. It has educational institutions in or near the city (the University of Michigan, Wayne State) and medical institutions (in part, a legacy of all those union health care plans) that are innovative powerhouses and that currently generate private-sector activity in biomedicine, information technology, and health care management. And there is already a smattering of examples of old industrial outposts that have reacquired relevance. An old GM plant in Wixom has been retrofitted to produce advanced batteries. There’s a new automotive-design lab based in Ann Arbor. And Ford, the most promising of the Big Three, has made a decisive shift toward smaller, cleaner cars.
Retooling Detroit’s old industries and advancing its new ones will take public money, and the feds are the only ones with money to give these days. But Washington already spends heavily on Detroit--$18.4 billion went to the city and the surrounding county in 2008. This money, however, isn’t invested with any broader purpose, a sense of how all this spending can add up to something grander. A better return on federal investments will take a functioning local government as well as leadership in suburban counties that is willing to collaborate closely with the city. And, with so much sclerosis, change will only emerge with a strong hand from above. State and federal governments should place the city’s most dysfunctional agencies in receivership as a quid pro quo for federal investment--a milder version of the federal takeover of Washington, D.C., in the 1990s. These higher-level governments should also insist that the city and its suburbs end their wasteful bickering and act as one on issues that naturally cross borders, like transportation and the environment. The region’s elected officials should be strongly encouraged to replicate the metropolitan mayors’ caucuses in Chicago and Denver, or a strong metropolitan transportation and land-use agency, as in Portland or Minneapolis. Business will never have faith in Detroit with local government in its current condition and with the metropolis so riven by old city-suburb divisions.
The point of Turin is that dramatic reform in local and metropolitan governance, coupled with strategic interventions from above, catalyzes market revival. Turin reoriented manufacturing with smart, subtle, and relatively minimal government interventions. And there are plenty of opportunities like this in Detroit. The metropolitan region is packed with companies that supplied parts to the Big Three. Because of the current credit desert, these companies should receive low-interest loans that allow them to reconfigure their plants to produce parts that can be sold to the international auto market--or for other types of machinery. And local government (or NGOs, even) can play the role of industrial planner. That is, they can look across the map and find instances where research institutions and manufacturers should collaborate on new ventures.
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