California was empty, then it filled up, and that’s why there are no native Californians. Some families have been here for generations, but they are all descendants of some previous generation that came here to reinvent themselves, because there was opportunity here. When gold was discovered up north we had that famous Gold Rush – folks poured in from all over to strike it rich. Some did. Everyone else just stayed and on and settled for providing support services. In Southern California it was oil, and then the early movie industry moved out here from New York and New Jersey and Long Island, because the light was good, and it was free – it was sunny all the time. Production was a breeze, and there were mountains and beaches and streets and deserts that could be framed to look like anywhere. By the twenties, Hollywood was the place to be. It presented the world to the world, and a good number of folks did get very rich. Those who didn’t stayed for the weather, and there were jobs aplenty. When the Dust Bowl ruined the Great Plains, at the same time the economy totally collapsed in the Great Depression, the middle of the country emptied out – they hit Route 66 and headed for California, where there might be work. There wasn’t – you remember The Grapes of Wrath and all that. Those folks stayed anyway. Ten years later, with another worldwide war, Los Angeles became the place where fighter planes and bombers and transports were produced in vast numbers – more folks poured in to do that work. A generation later that turned into the aerospace industry – the geosynchronous satellite was invented by the guys at Hughes down in El Segundo, and suddenly there were TRW and the other aerospace giants, most of them founded by engineers who really couldn’t stand to work for Howard Hughes even one more day. There was a need for engineers, and they poured in from all over. Up north it was computers – both Apple and HP were started by guys tinkering in the family’s suburban garage, because the weather’s always so nice everyone parks in their driveway anyway. That exploded and Silicon Valley was the center of a new industry, and thus became a magnet for talent from around the world, with major hardware and software corporations created by guys from India and Russia and all over. There never were any native Californians in all of this.
Everyone came because it was dreary and flat where they were. There was nothing to do, and certainly no way to get ahead. Few came to California to become a movie or television star, or a championship surfer, or Paris Hilton – although there are always a few of those. They come and go in this apartment building just off the Sunset Strip. No one else is that silly. People come here because their hometown is dying, or dead. There’s nothing there. Henry Mancini wasn’t going to stay in Aliquippa. Gene Kelly wasn’t going to stay in Pittsburgh. Drew Carey wasn’t going to stay in Cleveland. An underpaid English teacher wasn’t going to stay in Rochester, in the obscure upper left-hand corner of New York, where the big city was Buffalo. The Dust Bowl is long gone, but the Rust Belt provides the same nudge. The center of the country is dying again. Head for California.
Now Detroit is officially dead – the city has declared bankruptcy, even if it’s not that simple:
A hearing on whether Detroit’s bankruptcy filing violates the state’s constitution rules against tampering with pension benefits was adjourned to July 29.
Despite the state’s desire to move the case to federal court, Judge Rosemarie Aquilina of Ingham County Circuit Court said Monday that she believes the case should be heard in state court.
“This is a very important issue,” she said. “I understand that there may be this question of moving it to federal court. … But these are state issues. We’re dealing with the state constitution and an emergency manager who is a product of the state legislation.” The city’s emergency manager, Kevyn Orr, filed for Chapter 9 bankruptcy in federal court Thursday, and Detroit became the largest city government ever to declare bankruptcy.
The issue with the state constitution and an emergency manager is a tricky one – earlier the Republican governor had declared that Detroit just couldn’t govern itself, so he was, by fiat, declaring the state would run things, and the elected mayor and city council might as well go home and mow the lawn or take up stamp collecting – they were removed. He’s done that a lot, and of course the people of Detroit, now having no say in anything, are a bit upset – but the people in all the other towns and cities where he’s done this were upset too, as if it matters. It doesn’t matter. There’s no money.
How did this happen? Ask an economist. Ask Paul Krugman:
When Detroit declared bankruptcy, or at least tried to – the legal situation has gotten complicated – I know that I wasn’t the only economist to have a sinking feeling about the likely impact on our policy discourse. Was it going to be Greece all over again? Clearly, some people would like to see that happen.
Yes, he said Greece, and it’s a Republican thing:
As you may recall, a few years ago Greece plunged into fiscal crisis. This was a bad thing but should have had limited effects on the rest of the world; the Greek economy is, after all, quite small (actually, about one and a half times as big as the economy of metropolitan Detroit). Unfortunately, many politicians and policy makers used the Greek crisis to hijack the debate, changing the subject from job creation to fiscal rectitude.
Now, the truth was that Greece was a very special case, holding few if any lessons for wider economic policy – and even in Greece, budget deficits were only one piece of the problem. Nonetheless, for a while policy discourse across the Western world was completely “Hellenized” – everyone was Greece, or was about to turn into Greece. And this intellectual wrong turn did huge damage to prospects for economic recovery.
So now the deficit scolds have a new case to misinterpret.
The difference is that this time they get to talk about municipal budgets and public pension obligations, getting everything wrong again:
Are Detroit’s woes the leading edge of a national public pension crisis? No. State and local pensions are indeed underfunded, with experts at Boston College putting the total shortfall at $1 trillion. But many governments are taking steps to address the shortfall. These steps aren’t yet sufficient; the Boston College estimates suggest that overall pension contributions this year will be about $25 billion less than they should be. But in a $16 trillion economy, that’s just not a big deal – and even if you make more pessimistic assumptions, as some but not all accountants say you should, it still isn’t a big deal.
If the economy grows at all the pensions will be fully funded again. One might assume the economy will never grow again ever, but that may be the case in Detroit alone, and pensions aside, there’s this:
So was Detroit just uniquely irresponsible? Again, no – Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.
What? Market forces have victims? Of course they do. After all, free-market enthusiasts love to quote Joseph Schumpeter about the inevitability of “creative destruction” – but they and their audiences invariably picture themselves as being the creative destroyers, not the creatively destroyed. Well, guess what: Someone always ends up being the modern equivalent of a buggy-whip producer, and it might be you.
This wasn’t an American city, full of black folks and run by black folks, all of whom knew nothing about finances and capitalism and personal responsibility – all the big boy stuff black folks just don’t get, and may be incapable of getting. This may have been a city destroyed by free-market capitalism:
Sometimes the losers from economic change are individuals whose skills have become redundant; sometimes they’re companies, serving a market niche that no longer exists; and sometimes they’re whole cities that lose their place in the economic ecosystem. Decline happens.
Krugman will, however, grant this:
True, in Detroit’s case matters seem to have been made worse by political and social dysfunction. One consequence of this dysfunction has been a severe case of “job sprawl” within the metropolitan area, with jobs fleeing the urban core even when employment in greater Detroit was still rising, and even as other cities were seeing something of a city-center revival. Fewer than a quarter of the jobs on offer in the Detroit metropolitan area lie within 10 miles of the traditional central business district; in greater Pittsburgh, another former industrial giant whose glory days have passed, the corresponding figure is more than 50 percent. And the relative vitality of Pittsburgh’s core may explain why the former steel capital is showing signs of a renaissance, while Detroit just keeps sinking.
That’s a tale of two cities, and the issue is geographic, in a way. Encourage only suburban development and you can kill even a growing city. The point is one must talk about the right things:
So by all means let’s have a serious discussion about how cities can best manage the transition when their traditional sources of competitive advantage go away. And let’s also have a serious discussion about our obligations, as a nation, to those of our fellow citizens who have the bad luck of finding themselves living and working in the wrong place at the wrong time – because, as I said, decline happens, and some regional economies will end up shrinking, perhaps drastically, no matter what we do.
The important thing is not to let the discussion get hijacked, Greek-style. There are influential people out there who would like you to believe that Detroit’s demise is fundamentally a tale of fiscal irresponsibility and/or greedy public employees. It isn’t. For the most part, it’s just one of those things that happen now and then in an ever-changing economy.
Elsewhere, at his wonky blog, Krugman does a bit of specific comparison to prove his point:
Here’s a question: is the crisis in Detroit simply a function of the industrial decline of the U.S. heartland, or is it about internal developments within the metro area that have produced a uniquely bad outcome? I think a useful comparison can be made with Pittsburgh, another city that once had an iconic monoculture economy – based on steel, not autos – that also took a terrible hit, but seems to be in a much better position now.
This divergence is fairly recent, at least at the aggregate metro level.
After a look at the employment data, he adds this:
As late as 2005 or 2006 – that is, until the eve of the Great Recession – you could argue that there wasn’t a whole lot of difference in aggregate performance between greater Pittsburgh and greater Detroit. Obviously, however, Detroit’s central city has collapsed while Pittsburgh has had at least something of a revival. The difference is really clear in the Brookings job sprawl data, where less than a quarter of Detroit jobs are within 10 miles of the traditional central business district, versus more than half in Pittsburgh.
At this point, Pittsburgh is showing a lot of resilience; it seems to have managed to diversify its economy, and in fact is more than matching national employment performance. Detroit, despite the auto rescue, isn’t – and, of course, its center did not hold.
There’s a lesson here:
It’s hard to avoid the sense that greater Pittsburgh, by taking better care of its core, also improved its ability to adapt to changing circumstances. In that sense, Detroit’s disaster isn’t just about industrial decline; it’s about urban decline, which isn’t the same thing. If you like, sprawl killed Detroit, by depriving it of the kind of environment that could incubate new sources of prosperity.
Krugman also recommends the William Julius Wilson “spatial mismatch” theory of urban ills – but that’s pretty wonky too. Just know that Forbes has declared Pittsburgh America’s Most Livable City – so those of us, born and raised there, now living out here in California, really should move back.
That’s not going to happen. It’s those memories of the feel of the place – the walls closing in. It may not be like that now. It may not be Detroit, but geography has consequences. In fact, the New York Times just ran an amazing article by David Leonhardt on a new study of income mobility – and the core of it is that, especially for middle-class and poor people, where you live matters tremendously to your chances of improving your economic station:
Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle and large swaths of California and Minnesota.
“Where you grow up matters,” said Nathaniel Hendren, a Harvard economist and one of the study’s authors. “There is tremendous variation across the U.S. in the extent to which kids can rise out of poverty.”
The walls are always closing in, in the Deep South and in most of the Rust Belt, but local variations matter:
The researchers identified four broad factors that appeared to affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.
Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.
Regions with larger black populations had lower upward-mobility rates. But the researchers’ analysis suggested that this was not primarily because of their race. Both white and black residents of Atlanta have low upward mobility, for instance…
Hey, if you can’t move to a city, move to a mixed neighborhood, not that it will do much good in America:
In previous studies of mobility, economists have found that a smaller percentage of people escape childhood poverty in the United States than in several other rich countries, including Canada, Australia, France, Germany and Japan. The latest study is consistent with those findings.
Whatever the reasons, affluent children often remain so: one of every three 30-year-olds who grew up in the top 1 percent of the income distribution was already making at least $100,000 in family income, according to the new study. Among adults who grew up in the bottom half of the income distribution, only one out of 25 had family income of at least $100,000 by age 30.
Or find the right pocket:
Yet the parts of this country with the highest mobility rates – like Pittsburgh, Seattle and Salt Lake City – have rates roughly as high as those in Denmark and Norway, two countries at the top of the international mobility rankings. In areas like Atlanta and Memphis, by comparison, upward mobility appears to be substantially lower than in any other rich country…
If you want to get ahead, be careful, geographically. There are dead zones. And Paul Waldman adds this:
It’s yet more evidence that bootstraps get you only so far. I’m sure that not even the Koch brothers themselves would argue that poor people in Atlanta just have less gumption than poor people in Seattle and that’s why they don’t do as well. When you have a combination of 1) poor people in a metropolitan area being concentrated together, and 2) an area where the population is spread out geographically, you wind up with people facing what the woman Leonhardt interviews for the story faces: a two-hour commute each way to get to a job. When poor people are disbursed throughout the area alongside middle-class people, they’ll inevitably be closer to a greater number of businesses where they might work, not to mention the fact that the schools to which they send their kids will likely be better funded.
Some of this is produced by factors out of anyone’s control – much of what makes Manhattan, Manhattan, for instance, is that it’s a lot of people packed onto a small island – but much if not all of it can be influenced by the policy choices we make, from zoning laws to transportation systems to school funding. When you look at the map of income mobility, it’s striking how the worst areas are almost all in the South.
Kevin Drum sees the same thing:
There are several regions that are above and below average, but the obvious outlier is the Deep South. This is yet another reminder of a lesson from politics: never look solely at nationwide data. Politically, this means that the South votes fundamentally differently from everyone else. Working class whites, for example, aren’t actually a big problem for Democrats. Only Southern working class whites are a big problem. When it comes to mobility, apparently the same thing is true. If you look solely at nationwide trends, you’ll miss the fact that one particular region is way, way different than the others. Poor kids don’t exactly have a great chance in life no matter where they live, but in the South, they have almost no chance at all. If you take a look at the policy preferences of Southern governors and legislatures, that’s apparently exactly the way they like it.
That’s why people leave, if they can. Most can’t leave. They’re too poor. They have no way to get to California, where it doesn’t matter where you grew up.
That seems to matter everywhere else. It’s not just that Detroit is now dead, officially. The walls are closing in everywhere.
Just Above Sunset 