The city of Detroit, which has thrived as the center of America’s auto industry, filed for Chapter 9 bankruptcy protection in federal court in July. It is said to be the largest municipal bankruptcy filing in the United States history by debt, estimated to amount to roughly 2 trillion yen. The decline of the city triggered by loss of tax revenue indicates the danger of a regional economy depending on a handful of firms. America’s free market economy, in which the strong victimizes the weak and widens the gap between rich and poor, is beginning to collapse beneath its feet. Japan, which is pushing aggressively for deregulation and competitive markets, could let itself turn out like Detroit.
A couple of years ago, when I visited Downtown Detroit, I was shocked to see that only a few hundred meters away from a complex of skyscrapers of the GM Renaissance Center, the street scene changed drastically. Houses and shops stood abandoned and in ruin, and there were vacant lots everywhere. The streets were more or less deserted, as few people would visit the area with one of the highest crime rates in the country.
In the corner of a deteriorated building, I interviewed a volunteer group engaged in support activities for downtown residents. The group cultivated vacant lots, and grew vegetables and raised livestock there to secure their own food. One of the volunteers explained to me that as the automobile industry declined, many people dressed in neat clothes began to line up for free meals, indicating that more people are dropping down from the middle class into lower classes.
Detroit’s population was 286,000 in 1910. As major manufacturers built plants along with the growth of the auto industry, the population continued to grow, reaching 1.85 million in 1950. Companies attracted workers with generous pay and benefits, letting them realize their American dream, and the companies’ growth led to more jobs and increased tax revenues.
Its prosperity, however, did not last long. The auto industry, which faced competition with Japanese cars, declined gradually and the number of workers decreased due to companies’ restructuring and transfer of manufacturing operations overseas. The city’s population plummeted also because people with high income, mainly white, moved to suburban residential areas, fearing that crime rates in the city would rise. Consequently, the population dropped to 713,000 in 2010. As tax revenues shrunk, Detroit’s fiscal condition quickly deteriorated, making it difficult to maintain its megacity infrastructure or secure resources to fund public employee pensions. Finally, the city’s difficulties worsened to the point of no return.
General Motors, the city’s last resort, filed for bankruptcy in 2009 as it suffered decline in sales in a drastically depressed market after the Lehman Shock. It recovered later thanks to a federal bailout by President Barack Obama’s administration. Its earnings showed an upturn in the past two years, but it moved many of its manufacturing operations overseas where production costs are low. Vying for a bigger share in the global market, American automakers chose to enhance their competitiveness rather than their corporate social responsibility.
The city of Detroit is closing its schools, fire stations and police stations one after another, and is working on cutting costs and selling off public assets. But the effort is a mere drop in the bucket, and the residents’ living conditions will most definitely get poorer.
The American-style economic system, which puts top priority on seeking profits, lets the richest 1% of the population capture the nation’s wealth and creates numerous victims at the same time. The Japanese government, which is again trying to push ahead with neoliberal reforms, must face up to the realities of America’s economic collapse so as not to follow in its footsteps.
(Aug. 2, 2013)