The Tragedy of Detroit

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Detroit had the perfect quasi-corporatist business model for 1965; unfortunately, it never updated that model for the 21st century, as Michael Barone writes in the New York Post today:

Detroit was the prime example of what I have called “Big Unit America,” in which the heads of large organizations — big business, big labor, big government — made the big decisions and the hundreds of thousands of people below them, small cogs in a very large machine, carried them out.

For a time, Big Unit America seemed to work splendidly. The Big Three automakers, with some cooperation from the United Auto Workers and at the behest of big government, made Detroit “the arsenal of democracy.” Arthur Herman tells the story in his most recent book, “Freedom’s Forge.”

The big units’ prestige continued high for a generation after World War II. General Motors’ president was Time’s man of the year in 1955. John Kenneth Galbraith’s 1967 book, “The New Industrial State,” argued that big automakers could manipulate demand through advertising and should share more of their inevitable profits with union members and the government.

That was just about the time the big units started to sputter. But Detroit’s leaders didn’t notice.

White flight to the suburbs accelerated after the 1967 riot, and in 1973 Detroit elected its first black mayor, Coleman Young — smart, charming, politically shrewd. But his 20 years in office were disastrous for the city. He ended what he considered police brutality, and crime rates soared. There were hundreds of arsons every year on Devil’s Night, Oct. 30.

Young relied on big units for economic growth. Big government paid for projects such as the People Mover, which moved few people. The city condemned one of its few viable neighborhoods for a General Motors plant. Unions were given a stranglehold on city finances.

Numbers tell the story. In 1950, there were 1,849,568 people in Detroit. In 2010, there were 713,777. White flight was followed by black flight; there were fewer black residents in 2010 than 20 years before.

General Motors and Chrysler were forced into bankruptcy in 2009, and Hudson’s downtown store was demolished in 1998.

Now Detroit has ineffective public services and overwhelming public obligations. Bankruptcy looms. The “big unit” model doesn’t work anymore.

And yet, it was the business model for Obama’s own corporatist fantasies from the start of his first term; which helps to explain why his own 1950s-minted goal of the marriage of Big Business and even Bigger Government was “unexpectedly” doomed to fail from the start.  Or as Michael Barone wrote in September of last year, “Obama: Industrial Age Solutions to Information Age Challenges.”

But then, that’s the danger of fully embracing the Cargo Cult of the New Deal.