Detroit’s 60-Year Decline into Bankruptcy Hell
Policy + Politics

Detroit’s 60-Year Decline into Bankruptcy Hell

The “Motor City” has been singing the blues for decades.
Reuters/Mark Blinch

Some time back in the early 1990s, I returned to my hometown of Detroit and took a ride on the “People Mover,” an elevated train that looped through the Motor City. The federally funded project was supposed to help revive a downtown in need of a jumpstart, but instead it showcased the plight of a once-great city caught in a downward spiral. 

My brief trip around Detroit that one Friday afternoon revealed a shocking and troubling insight: My sister and I were practically the only passengers on the train. And at virtually each of the 13 stops along the way, we were greeted with boarded up or dilapidated buildings. 

J.L. Hudson Co., which once loomed as the city’s premier department store, was abandoned and ghostly. The People Mover was supposed to be the feather in the cap of Detroit’s long-time mayor, Coleman Young, but it became a cash suck for a city destined for financial ruin.


I couldn’t help but recall that fateful trip late last week after Detroit—having piled up as much as $20 billion in debt—had filed for Chapter 9 bankruptcy protection. Once the nation’s fourth largest city, it now faces prolonged legal challenges that likely will force major cutbacks to already pathetic levels of policing, education, and social services. Municipal workers who have soldiered through the blight will likely face cuts to their retirement, health, and pension benefits.

“These are problems of Detroit’s own making,” Kevyn Orr, the emergency financial officer put in charge of the city by Michigan Gov. Rick Snyder,  told MSNBC on Friday, in dismissing talk about a possible government bailout. “We’ve dug this hole of our own making. We need to dig our way out of it.”

Detroit’s People Mover in a small way epitomized much of what has led to the biggest municipal bankruptcy in U.S. history. It was a superficial fix that lined the pockets of developers and provided politicians with a photo-op, while doing little to improve people’s lives. The train was like an aging car with a sputtering engine that could run smoothly with new hubcaps.

The multi-million-dollar train was designed to accommodate up to 15 million passengers a year on its three-mile track. But after the ceremonial ribbons were snipped in 1987, it was quickly ignored by locals and tourists, serving a few thousand riders a day. For years, the city essentially was spending $4 or more to subsidize every 75-cent rider fare.

The People Mover was part of Coleman Young’s ambitious effort to spawn an urban renaissance between the mid-1970s and 1994, when he finally retired. Riots in 1967 had left Detroit smoldering, as the middle class departed for the suburbs.

Although the former Democratic labor leader rose to power as Detroit’s first black mayor by mobilizing the left and attacking the city’s nearly all white police force, he subsequently called a truce with the city’s economic elite and mounted an effort to rebuild with private and federal funds. 

Young was instrumental in the construction of the Joe Louis Arena, a sports and convention center on the Detroit River, and upgrading the city’s mediocre mass transit system. He came under criticism from many residents when he supported General Motors in building its new “Poletown” plant at the site of the former Dodge Main plan – a project that required evicting many long-time residents.

He also pressed for completion of the Renaissance Center, the towering office edifice that defined a new skyline, as well as the restoration of the iconic Fox Theater and other important downtown commercial and residential projects.

But for all his buildings, the people of Detroit and their employers were unimpressed.
• The once-proud “arsenal of democracy” during World War II and car capital of the world suffered the loss of  hundreds of thousands of manufacturing jobs to other states and other countries
• A once-vibrant population of 1.85 million in the 1950s dwindled to a mere 700,000 by last year;
• Riots and freeway construction over the past four decades rendered huge swaths of the city a moonscape of abandoned and burned out houses and garbage-strewn vacant lots.

It’s hard to overstate the traumatic and lingering effects of the 1967 riots, which for many older native Detroiters forever marked the watershed in the city’s downward economic spiral and triggered the mass exodus of its population.

When I was growing up in Detroit, the city was a patchwork of tightly knit working class and more prosperous neighborhoods, lively commercial strips and clusters of good restaurants and diners along the main thoroughfares of the city’s East Side and West Side. The public school system was pretty good – I attended James Vernor Elementary, named for the founder of a popular ginger ale maker, and Mumford High School, which at the time was integrated and sent many of its graduates to the best colleges in the country.

Woodward Avenue cut diagonally across the entire city and served as the beautiful gateway to downtown Detroit. The Fisher Theater, a jewel of a performing arts center, attracted major talent and many of the plays and musicals that were headed for Broadway.  Nearby was the Detroit Institute of Art with its priceless Diego Rivera murals and the quirky Detroit Historical Museum with its basement exhibit of Old Detroit.

The Detroit Lions and Detroit Tigers shared a stadium for years on Trumbull Avenue before the Lions moved to a domed stadium in Pontiac. And no visit downtown was complete without a Coney Island hotdog in Greektown or a hot fudge sundae at Sanders Confectionery. The biggest hits on the radio came from the hometown record label, Motown.


But seething beneath the surface were growing racial tensions between blacks and a predominantly white police force.  In the early morning heat of July 23, 1967, a police raid on an after-hours bar popular with blacks on the corner of 12th and Clairmount Streets touched off one of the deadliest and most destructive riots in U.S. history, lasting five days and surpassing the violence and property destruction of Detroit’s 1943 race riot. It required military intervention.

In all, 43 people were killed in the violence, shooting and burning – of whom 33 were black and ten were white. Nearly 470 others Detroiters were injured, including 167 Detroit police officers and 83 firefighters. And the damage was unimaginable:  2,509 stores were looted or burned, 388 families lost their homes, and 412 buildings needed to be demolished.

Young wrote in a 1994 memoir, as he was leaving office, that the city never recovered from the riots.

“Detroit's losses went a hell of a lot deeper than the immediate toll of lives and buildings. The riot put Detroit on the fast track to economic desolation, mugging the city and making off with incalculable value in jobs, earnings taxes, corporate taxes, retail dollars, sales taxes, mortgages, interest, property taxes, development dollars, investment dollars, tourism dollars, and plain damn money.

He added that “The money was carried out in the pockets of the businesses and the white people who fled as fast as they could.” Conservative economist Thomas Sowell once noted that before the riots, Detroit's black population had the highest rate of home-ownership of any black urban population in the country, and their unemployment rate was just 3.4 percent.

“It was not despair that fueled the riot,” he wrote. “It was the riot which marked the beginning of the decline of Detroit to its current state of despair. Detroit's population today is only half of what it once was, and its most productive people have been the ones who fled.”

The 1970 census showed that whites still made up a majority of Detroit's population. However, by the 1980 census, whites had fled at such a large rate that the city had gone from 55 percent white to only 34 percent white in a decade. Today, 82 percent of Detroit residents are black, and the median household income is around $28,000 a year.

Young tried to blame white flight for the downturn, but his two decades in city hall were plagued by uninviting rhetoric about race and civic mismanagement. Under his leadership, the Detroit police department and other city agencies were rife with corruption and incompetence.

While Young was never directly implicated in the malfeasance, his heirs turned city hall into a national punchline. Democratic Mayor Kwame Kilpatrick was forced to resign on Sept. 18, 2008, after pleading guilty to obstruction of justice. Earlier this year, Kilpatrick was convicted of running a racket while in office to enrich himself, his family, and his friends by shaking down city contractors.


When the Great Recession washed over the country, Detroit—one of the few cities where home prices never became untethered from reality—got trapped by its undertow. GM and Chrysler were both rescued by the federal government, but Detroit and other Michigan cities limped their way into the control of the Michigan state government. Pockets of gentrification, old money, and hipster industry exist, yet they are few and far between in the 139,000-square mile city.

Stuck in a desperate search for a renaissance, Detroit hasn’t found a way to expand its tax base, manage the city government’s health care and pension costs. It can’t account for a school district cursed by embezzlement, or the acquisition of 160 unused Blackberrys, and bizarrely, 11 motorcycles. Nearly 80,000 buildings are abandoned or seriously blighted and 40 percent of the street lights don’t work. Annual deficits in the city’s operating budget have been climbing since 2008, and city services crippled by aged computer system, poor record-keeping and widespread dysfunction have declined dramatically.

Any fixes—casinos, new sports stadiums, and condo projects—could not cause the government to change its parasitic and increasingly spendthrift ways. So the state opted this March for the financial bulldozer, appointed Orr, a Washington bankruptcy lawyer, as the emergency manager. He tried to win concessions from Detroit’s creditors.

In desperation, he recently invited about 50 of them on a bus ride through Detroit to help them understand the magnitude of the problem.  Orr warned repeatedly that he would move quickly to seek bankruptcy if negotiations hit an impasse – and he made good on that threat on Thursday.

The balance sheet still looks dire. And the wrenching bankruptcy process will hardly do little to invite investment from anyone other than loyal hometown successes such as Daniel Gilbert, the founder of Quicken Loans, who already has invested heavily in reviving the downtown area. What Detroit does have is the spirit of its motto: “We shall hope for better things; it shall rise from the ashes.”

“Going through this process, Detroit is going to be a stronger, better city,” Gov. Snyder said on Friday. “If you look at it, Detroit has been on a downward path for 60 years. If you step back and look at it in terms of most violent city, in 24 of the last 27 years Detroit has been listed in the top ten. That’s unacceptable. We need a better resolution. This is the format to do that.”

I hope so. But at this stage, all we have is faith.

The Fiscal Times’ Josh Boak contributed to this piece.