Sunday, March 27, 2011

Can Detroit Be Saved?

While on vacation, I heard the latest bad news to come out of Detroit: the loss of 25 percent of its population from 2000-2010. The new population according to census figures is 713,777; the lowest figure in a century and before the Big Three made the Motor City the fourth largest city in nation in the middle of the 20th century.

During the vacation, a friend commented on how we are seeing the death of an American city. I have to admit that such talk bothered me. Of course, part of the reason it does bother me is because it's so personal to me. I'm not from Detroit, but my hometown of Flint is just 70 miles up the road and I have relatives that live in and around Detroit. So, it's hard not to take such talk of the death of Detroit as a slight against me and my people. I know my friend meant no offense, so I'm not mad at him. Just goes to show that when you hail from Michigan, you tend to feel somewhat embarassed from being from there because of the current state of the economy.

The continued loss of population makes one wonder: can Detroit be saved? It's been the question that we Michiganders have been asking for about 30 years or so. I think Michigan's largest city does have a future, but I think that the state and the city have to find ways to build a future where cars are not king.

Cars are what made Detroit Detroit. Just like Pittsburgh was known for steel, Detroit was known for the horseless carriage. The problem is that the world is changing. When the Big Three were king, they ruled. Future competitors like Toyota weren't a factor since most of Japan was bombed into the last century. But over time, Japan rebuilt and made affordable cars and later cars that were just as good as the Big Three if not better.

Detroit has never been able to really respond to changing tastes and the rise of competitors in Japan and later Korea. The jury is still out as to whether General Motors, Ford and Chrysler have learned their lesson. Ford, I think is getting the idea, but the other two are still doubtful.

For Detroit to rebound, it has to give up it's car addiction. Autos will still have some role in Southeastern Michigan, but let's face it: the days when the Big Three employed tens of thousands of Michiganders is long gone. The Economist links to a Bloomberg article that Detroit is seeing a big growth in tech jobs, but there's just one problem:

Auto industry executives are trying to make Silicon Valley engineers feel at home in Detroit. With a burgeoning number of technology job openings to fill, they’re scouring Internet companies for workers, wining and dining applicants, and seeking promising students at schools such as Stanford University...

Expertise in cloud computing, mobile software applications and energy management are in demand in the Motor City as automakers replace car stereos with Internet radio and gasoline engines with motors powered by lithium-ion batteries. Technology job postings in the Detroit area doubled last year, making it the fastest-expanding region in the country, according to Dice Holdings Inc. (DHX), a job-listing website.
Do you see the problem here? Yes, there are tech jobs to be had in Detroit, but they are coming from the auto industry. I don't have a problem with these jobs per se, after all, as cars get more technical the auto industry has to become more high tech. The problem here is that this seems to be the same song with a different verse. Michigan is again hitching its star to an industry that could bring some great highs and some really low lows.

Here's what the Economist has to say about these tech jobs:
I think it's a little disconcerting that so much of the hiring seems to be driven by carmakers. As a kernel around which to build an initial concentration of talent, that's fine, but ultimately Detroit's success will hinge on whether it becomes a hub for new firm growth. There's just a limit to the extent to which the carmakers can scale up tech employment. For the city to rebound as a tech centre, skilled workers need to be able to strike out on their own and start new enterprises that then employ many more people.

This is one place where Detroit is at a significant disadvantage thanks to the condition of its broader economy. A tech worker in Silicon Valley who tries to start a new firm and fails will probably be able to find new tech employment fairly easily. A tech worker in Austin who starts a new firm and fails may not immediately find another tech job, but can almost certainly find some work. This safety net of employment reduces the risk of entrepreneurship and encourages new firm formation. In Detroit, could a worker who sets out on his own and fails expect to be re-employed within a few months?
Detroit has a lot of things that could make it a Silicon Valley of the north, but as the blog notes there are also a lot of knocks against it.

For Detroit to survive, it has to create a sustainable base of jobs. That's why southern cities like Raleigh and Austin are doing so well. The problem is that Detroit has never created a base of sustainable jobs; it never had to. After the wrenching changes to the auto industry that started in the 70s, Detroit never really seriously tried to move beyond cars. In Detroit and in most of Southeastern Michigan, there has always been hope that something would come and make things like they were circa 1962. We have always hoped the auto industry would come bouncing back and things would be okay. The articles I've linked to shows we still cling to that hope.

What Detroit should be doing is trying to bring the Dells and Apples to the area in ways that Raleigh and Austin did. It should also help foster new industries to develop that are not so tied to the Big Three. The first step to rebuilding the city ( to make it sustainable, NOT make it what it once was) is to admit we have a problem with an addiction to autos. Once we can be free of that habit then maybe Detroit and the rest of Michigan can grow.

So is anyone up for an intervention?

Photo by Shakil Mustafa.

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