Jan 14, 2019
From all corners of the globe, we hear talk of Detroit’s “comeback,” or “revitalization.” The city is becoming renowned for its centrally located sports stadium complex, its bustling restaurant scene, shops that sell high-priced custom-made items like Shinola watches and bikes, for attracting corporations like Compuware and Quicken Loans to locate their headquarters downtown, redevelopment projects like Campus Martius and the coming replacement for the old Hudson’s building, and the improving transportation with the brand new streetcar system, the QLine and bike paths.
But if Detroit is “coming back,” then what let to its downfall? Detroit used to be the center of the auto industry, and a center of the workers’ movement, as well as of the struggles of the black population. It was filled with workplaces, stores, schools, culture and public places. Over six decades it was torn to bits. Parts still look more like a war zone, as though they had been bombed out. Many neighborhoods have effectively been destroyed, filled with numerous abandoned homes or empty lots filled with trash. What happened?
What caused Detroit’s downfall, and what sparked its so-called “renewal”? And what kind of “renewal” is it?
The conventional wisdom, whether from the news media, politicians, or mainstream historians is to blame the city’s downfall on the urban rebellion, what they refer to as the “riot,” which occurred in Detroit in 1967. According to such pundits, this was the main cause for the loss of jobs and the impoverishment of and decline in the city’s population.
In fact, the destruction of the city of Detroit began well before 1967. And it was brought about by the normal functioning of the capitalist system, as major corporations moved their plants out of Detroit, tearing up the city, tossing away lives – all in the search for a bigger profit. What happened in Detroit is not unlike what has taken place in a number of other cities like Pittsburgh, Baltimore, Memphis, or the South Side of Chicago. These were cities in the industrial heartland, places where the working class had organized, where workers felt a sense of solidarity – cities or parts of cities from which industry fled. If Detroit was different from other so-called “Rust Belt” cities, it was only a matter of degree; what happened to Detroit was simply more extreme.
From 1945 to 1957, what came to be called the Big Three auto companies built 25 new plants in the Detroit area, none of them in the city or in the three smaller cities surrounded or partly surrounded by Detroit. General Motors opened plants in Livonia, Romulus, and Warren. Chrysler built factories in Warren and Sterling Heights. Ford started operations in Plymouth, Madison Heights and Wixom, located 35 miles from Detroit.
During World War II, Detroit had been a hub of war production, as the auto plants were shifted to military goods production. With the end of the war, U.S. corporations were facing an unmet consumer demand inside the country and surveying a world in which much of the industrialized facilities of Europe and Asia had been destroyed. The Detroit auto companies, like much of American industry, pushed to expand their productive facilities to take advantage of the opening. For auto, this meant building new plants. Yet even while expanding, what the auto companies did in this period led to the beginning of Detroit’s destruction a decade and a half later.
It undoubtedly was cheaper to acquire land in the suburbs, which were only lightly populated. And already, some of the areas outside the city at least helped pay to put in infrastructure for the new plants, changing tax laws to accommodate them. But the real issue is not cheap land. Capital took the accumulated surplus value stolen from the workers’ labor over the years, and put it, not to the improvement of the workers’ situation, nor the easing of their work load, but to expand the possibilities of making more profit.
Besides the economic benefits the auto companies received from moving their plants to the suburbs, they gained a secondary advantage, a social one. The mass mobilizations of the 1930s that led to the organization of the United Auto Workers union and the strikes and big demonstrations that followed the end of World War II created a concentration in the city of a vast, politicized workforce, one for whom “solidarity” was not just a word – as was made clear by the rapid spread of strikes first during the sitdowns, and then even during World War II, as Detroit plants underwent almost constant wildcat strikes.
The building of plants outside the city was the beginning of a process that eventually was to see all the companies practically close down in Detroit, and a large part of the workforce to be scattered to the winds. In addition to moving to suburbs around Detroit, the auto companies also shifted operations to plants in other states such as those in Lima, Lorain and Walton Hills, Ohio, and Kokomo and Indianapolis, Indiana, with the beginning of some plants in the South and West. In 1950, 56 percent of auto employment was in Michigan. Ten years later, that figure had been cut to 40 percent.
The initial post-war demand allowed the auto companies to keep the old plants in production even while building new plants. But as the 1950s proceeded, three quick recessions hit auto, one after the other. And the first casualties in the city came from companies that began to succumb to the rapid competition within the auto industry. Studebaker-Packard, Hudson, and Kaiser-Frazer not only shut down their plants in the city. The companies themselves either shut or were gobbled up by a bigger company. Parts manufacturers like Bohn Aluminum, Falls Spring and Wire, and Federal Mogul also closed operations in the city in the 1950s. As one recession led to another, the remaining auto companies began to adapt to the situation by closing plants and by pushing to increase output in the ones that were left. Recessions are an ordinary part of capitalism. Capital uses them to cut its old facilities, streamlining its operations. For those who used to work in them, it meant job loss, in many cases permanently. Most of the permanent job losses in the area came in the city of Detroit. From 1947 to 1963, the city lost 138,000, over 40 percent of its manufacturing jobs.
This restructuring of the economy brought a lot of social changes with it. Most of the people who had worked in the plants located in the city also lived in the city. The movement of auto jobs to the suburbs forced workers who were able to move out of the city to be closer to work. But at what cost? In the city, they had lived next to one another, shopped in the same stores, ate in the same restaurants and socialized together.
Leaving the cities meant the neighborhoods where they had lived were torn up, while the people who moved no longer had the same ties with each other as when they had lived in the city. Indirectly, it was an attack on workplace solidarity.
As people moved out, companies running big department stores and supermarkets left the city as well, taking more jobs and needed facilities with them.
The movement of jobs to the suburbs meant those who stayed in the city needed transportation to get to where the jobs were. Public transportation at least would have made this possible. In an earlier period, the auto companies supported public money being used on transit. But in a period when the auto industry had a surplus of workers, public transportation was an afterthought.
On the contrary, the auto companies helped bury public transportation. In the 1940s and ‘50s, the auto companies worked to have the trolley system in Detroit shut down, in favor of buses. Hardly a coincidence that General Motors produced the buses the city was to use. But, once the conversion was complete, the built-in conflict of interest between providing public transportation and pushing people to purchase cars took over. Eventually, the bus system was turned into a skeleton of its old self.
It meant people needed a car to get to work in the suburbs. But without a job, you couldn’t buy a car, and without a car you couldn’t get to the job. It was a vicious circle that rapidly increased the impoverishment of those left behind in the city.
The racist nature of this society meant it was largely the black population that was forced to stay in the city, with fewer jobs and fewer facilities. It added to the already growing impoverishment of the city’s black population.
Contrary to the conventional wisdom, the urban rebellion in Detroit in 1967 actually put a brake on this impoverishment for some time. Detroit’s black population fought – and won some important changes – much like workers in the 1930s had when they carried out sit-down strikes as part of the drive for unionization, particularly in auto. Detroit’s 1967 rebellion forced the auto companies to open up jobs, largely for the first time, to the black population. But these gains were temporary, and as the financial crisis that broke out in the 1970s gained steam, those gains began to be reversed.
As the financial crisis of the 1970s expanded and took on more aspects, big capital increased the cannibalization of its own productive apparatus, in favor of pouring money into the financial industry. Detroit is simply a more vicious microcosm of what was beginning to happened throughout the industrial heartland.
The smaller plants that still existed in the city in the 1950s and ‘60s left the city by the hundreds over the decades that followed. By 1977, the city had lost 55 percent of the manufacturing jobs it had in the post-war period; by 2010 the losses reached 94 percent. Over 63 years, 338,000 manufacturing jobs shrank down to just 20,000. This complete removal of manufacturing jobs led to a collapse in the economic base of the city of Detroit.
As the financial crisis deepened, the capitalists increasingly looked to their state apparatus for help in propping up profits, putting out their hands for subsidies and tax breaks. And that meant, de facto, that money spent on public services went into decline – as did the services themselves. The water system went without repairs, the lighting system broke down, garbage collection was reduced, bus service was reduced, and the last public hospitals in the city were finally closed.
The biggest of those services was education, and it had the biggest pot of gold. Public education may provide a service to the population, but it has always been organized in ways that served the needs of the capitalist class, providing the level of education the capitalists needed for those who were to come into their workplaces, but not much more. But as industrial jobs moved out of the city, the capitalists saw little need for a large educated workforce in Detroit.
Starting in the 1970s, the politicians running the state government rapidly cut funding to the city schools, and instead shifted money to the suburban schools. Over the next two decades, the gap between money given to Detroit schools and schools in suburban areas continued to grow. By 1994, the wealthier suburban school districts were receiving three times as much per pupil as was Detroit and other poor districts. By 2000, the decline in the quality of the public schools drove more people to leave the city, in hopes of sending their children to better schools. Those who were left behind were condemned to an increasingly inferior education.
The state used the declining enrollment as an excuse to close Detroit’s schools even more rapidly. In the 1970s, there had been 370 public schools in Detroit. Today there are only 104. The city has not shrunk in physical size. Distances for school children to travel vastly increased.
It was not only the number of schools that declined, however, it was the quality of the public schools as well. Detroit schools, incidentally, were not the only ones to experience cuts and the inevitable decline in the quality of their students’ education. Schools in the working class suburbs did as well.
As the crisis developed into the 1980s, public services began to provide another backstop for private profit, through the privatization of public services. Education was one of those services. In their search for new ways to increase their profits, capital began to look at the schools not only as something that had to be cut because they absorbed too much tax money. It began to focus on the schools as a source from which to take money. The financial industry especially began to move into public education. The development of charter schools is the clearest example of that in Detroit.
In 1993, the Michigan legislature passed a law allowing for the creation of charter schools sponsored by public school districts, community colleges and universities, but operated by private interests for profit. That law allowed charter school operators to keep three per cent of the money budgeted for the schools which came off the top of public school funding. But by gaining control of running the schools, charter school operators could take much more than three per cent for themselves. They were allowed to buy up old school buildings for a pittance, then make money on them by leasing them back to the schools they themselves were running, providing additional profits, year after year. They were even given an exemption from paying property taxes on the buildings they leased to the schools, increasing their profits even more.
Running the schools allowed the charter school operators to use public school money to buy computers which they often didn’t even use, working out lucrative deals with computer companies. They paid private companies to provide janitorial services, nurses, and consulting, funneling profit to all those companies.
By 2011, private companies operated 80 per cent of the charter schools in the state. And Detroit’s big public school system, which had been their primary target, was being shut down, a step at a time.
The creation of charter schools sped up the process of declining enrollment that had already been occurring in the Detroit Public Schools. By 2015-2016, only 50,000 students were left in the schools. Despite the decline in the number of students, schools remain badly overcrowded with 40 to 50 students in some classes. The deterioration of the schools pushes more people to scheme for ways to get their children into better schools outside the city – often only to find the same kinds of problems there, if not yet so extreme.
In the 1970s, Detroit had had a very high level of home ownership. For the black population, the rate of home ownership was the highest of any big city in the country. By the 1980s, however, the loss of jobs, the decline of public education, and the resulting growing impoverishment made it harder for people to hold onto their homes.
It was at that point that the financial industry started to move in, relaxing credit standards so low-income people could afford to refinance mortgages – at the cost of higher interest rates. This happened slowly over a couple of decades, but with the bursting of the tech bubble in 2000, the financial industry threw itself into mortgages with a passion, and especially mortgages in poor areas.
In the midst of real devastation in the city, big capital stepped into the housing market in Detroit, as they did in cities around the country, and did so with financial schemes that ended up threatening to bring down the whole financial system.
The poorest people in cities like Detroit were devastated by what happened – and the city with them. In the early 2000s, banks and mortgage companies stepped in to offer many people “subprime” mortgages. From 2004 to 2006, close to 70% of mortgages sold in the city were subprime, meaning they carried higher interest rates, by at least 3 percent, than other mortgage loans. The big majority of these were adjustable-rate mortgages, designed to suck buyers in with low interest rates that later skyrocketed. You’d have to have been a lawyer to see the ballooning interest rates coming.
Among the mortgage lenders that pushed the most failed mortgages in Detroit, incidentally, was Quicken Loans, owned by none other than Dan Gilbert, the man now treated by the local media as the city’s savior.
Some people almost immediately lost their homes. Others wound up paying still more in renegotiated mortgages. Eventually, the near collapse of the mortgage industry in 2007-8 brought a vast expansion of foreclosures. In four years, mortgage lenders foreclosed on 65,000 homes in Detroit, the majority of which still stand vacant.
Having lost tax money from companies that either moved out of the city or received tax exemptions, as well as from all the vacant buildings, the city and county governments tried to make up the difference by raising property taxes.
The city increased taxes by assessing the value of homes well beyond what they were worth. A study by a Wayne State University law professor recently found that in the period from 2009 to 2015, property values were assessed between 55 and 85 per cent too high. Over-assessments that high are actually against the law! Homeowners could have appealed their assessments, or gained an exemption. But to do those things you need a lawyer. And who in the city had money to hire a lawyer?
As a result, more people were driven out of their homes, this time by tax foreclosures. Since 2008, another 73,000 homes were foreclosed on due to unpaid property taxes.
In total, close to 140,000 homeowners lost their homes to mortgage and tax foreclosures in the city. This likely affected close to 400,000 residents. Detroit lost 237,000 people between 2000 and 2010. Some of those affected stayed in Detroit by doubling up, or renting places in the city, but it’s not hard to imagine foreclosures had a lot to do with that many people leaving the city.
The city also imposed high water rates, among the highest in the country. When mortgage and tax foreclosures didn’t cause people to lose their homes, water shut-offs often did. Since 2014, the city water department has disconnected the water to over 100,000 homes. When people run up too much debt from unpaid water bills, they move out.
If the loss of jobs, the destruction of the public schools, mortgage rip-offs, illegal tax assessments and subsequent foreclosures, and exorbitant water bills didn’t drive people out, there was still the decimation of public services – street lights didn’t burn at night, garbage wasn’t picked up, snow wasn’t removed, public health facilities were closed.
One mayor, Dave Bing, even openly admitted that his administration was shutting off public services to certain areas of the city in order to convince people to move out, so those parts of the city could be taken over by private interests for “new investment.”
It was in this situation – with most industrial jobs gone, retail stores gone, and much of the population of the city emptied out – that the so-called “revitalization” of Detroit began.
The way the story is being told, benevolent wealthy investors like the Ilitch family and Dan Gilbert decided to step in to save the city.
Nonsense! Corporations aren’t moving to the city to revitalize it. They are going there to make a bigger profit. With the carcass of Detroit almost stripped bare, there is an opportunity for a very small investment to turn a very big profit.
That’s why the auto companies moved to the suburbs in the first place. It’s why Chrysler moved its headquarters to Auburn Hills. It’s why the Detroit Lions put the Silverdome in Pontiac. And it’s why some of these same people are coming back into the city.
When the politicians hand over money to the corporations, they tell us they are getting tax breaks in exchange for providing jobs. But corporations don’t exist to provide jobs any more than they go to a city out of goodwill for the population. The profits they make off the labor of their workers or the sale of tickets, concessions, or merchandise, more than pay for any money they borrow to build there. While the corporations get tax breaks, other businesses and residents of the cities have to pay for infrastructure, city services, and police and fire protection to be provided. It’s all just a great big handout to the companies and their investors.
Just to have some idea what this so-called benevolence of investors consists of, look at the Ilitch family and Dan Gilbert. The Ilitches own Little Caesar’s Pizza, the Tigers, and the Red Wings. Earlier, they got tax breaks and a 95 million dollar subsidy from the city when the stadium for their baseball team went up. Currently, they are the beneficiaries of hundreds of millions of dollars more in subsidies to build their hockey arena and entertainment complex. They got 39 parcels of expensive downtown land for $1! They will pay no taxes on their arena. They were granted an exemption from laws requiring large parking lots to include landscaping that can prevent rainwater runoff from asphalt surfaces polluting the flow into storm drains.
Dan Gilbert is another billionaire who continues to receive huge handouts to allow him to supposedly “rebuild” Detroit. In 2002 the city gave Gilbert the development rights for the land on which stood the old Hudson’s building, a big downtown department store. The city had already paid for the demolition of the building in 1998. The city designated the area as a Renaissance Zone through 2017, giving Gilbert millions in tax breaks.
Now the state of Michigan, the city of Detroit, and Wayne County, in which Detroit sits, are stepping in to give Gilbert hundreds of millions more in tax money. The state approved 618 million dollars in tax breaks, to be paid for by residents of the city and the county, for Gilbert’s development company Bedrock, for four projects in downtown Detroit. Gilbert is also getting 400 million dollars from the county for the construction of a new jail in Detroit, from which Gilbert will put out 150 million. And he will receive 13 acres of prime real estate in downtown Detroit currently valued at 62 million.
The money people like Gilbert get from the city and county and state is money that won’t be spent on road repairs, schools or other services that state supposedly provides, paid for by taxpayers.
These are just the latest in a long history of corporate handouts supposedly aimed at “revitalizing” the city of Detroit.
After the ‘67 rebellion in Detroit, Ford claimed to be “revitalizing” the city when it built the Renaissance Center. But the RenCen began to struggle financially and Ford was going to have to bear the brunt of it. The State of Michigan stepped in to arrange a three-way deal between itself, Ford and GM. GM took the struggling RenCen off of Ford’s hands, then moved its headquarters there, from the old GM building on Grand Boulevard, which didn’t even have central air conditioning. The state paid GM 126 million dollars for its old building and handed it over to a development company, then leased it from the development company. GM got the RenCen for only 73 million, much less than the 126 million it received for its old building, and then got tax abatements from the city of Detroit on top of that. When those ran out, GM got 221 million dollars more.
GM also got 250 million dollars from the city in 1980 to acquire land and provide infrastructure for its Poletown plant, plus a 50% tax abatement for 12 years, GM promised 6,000 jobs there. It currently employs only 1,500 and recently began carrying out plans to shut down the plant altogether.
The city also gave Chrysler 380 acres of land for its Jefferson North Plant, after the city pushed out residents from the surrounding area. How many millions of dollars are 380 acres worth? And before handing the land over, the city paid to get rid of the pollution from sites like Budd Wheel.
The city gave billionaires Max Fisher and Al Taubman a 100% tax break totaling over four million dollars for real estate development along the riverfront. Fisher’s son-in-law, Peter Cummings, got paid for selling the real estate when the development was about to go under – to another developer who got more tax breaks.
Cummings also got land cheaply that the city had cleared of poor people who lived there. The value of his holdings increased sharply after the Detroit Symphony Orchestra built a big new office building, a high school for performing arts and other buildings near Cummings land. The symphony went deeply in debt to do it, from which it has never recovered, but the expansion its debt funded served as a magnet attracting new residents and businesses to the area, raising the value of Cummings’ real estate holdings, including a nearby high-rise apartment building. And guess who helped the symphony structure all its debts in a very creative way, debts that soon backfired and led the symphony to cut salary paid out to its musicians? None other than Cummings himself. His holdings include the land where Whole Foods opened a store. And Cummings got another four million tax break for that.
In addition to the money the city put out to build the Ilitches’ baseball stadium and its hockey arena, it also paid out 215 million dollars for the land for the Ford family’s football stadium. It also paid 50 million dollars to acquire land for the casinos while Dennis Archer was mayor.
The city also gave a great big handout to health insurance conglomerate Blue Cross Blue Shield of Michigan. The city actually paid Blue Cross, which already is taxexempt, 35 million dollars for moving into and "refurbishing" two towers of the RenCen. In the end, that’s also more money going to GM, which owns the towers Blue Cross is leasing.
The city gave American Axle five million dollars to build its headquarters. American Axle has since closed its plant in Hamtramck and moved production to its plant in Three Rivers, Michigan, where it imposed three-tier wages, and to Mexico.
Every one of these billionaires and corporations also received infrastructure, utilities, and city services including police and fire protection paid for all or in part by businesses and residents still paying taxes in the city.
Not only did these previous corporate handouts not revitalize the city. They led to the city’s bankruptcy and the decimation of its population.
The city continues to have one of the highest income tax rates in the country, which is paid not only by those who live in the city, but also by residents of other cities who work in Detroit. Detroiters who have not lost their homes to tax foreclosures have been paying property taxes on homes illegally overvalued. Water rates are high here as well. Water rates are increased, by the way, to pay for treating the runoff from those parking lots at Little Caesar’s Arena. They may not exactly be a tax, but they amount to the same thing.
Let’s not forget that Detroit city retirees gave up 4.5% of their monthly pension checks, and in some cases as much as 20%, to make sure the banks got paid in the city’s bankruptcy deal. Active city workers also took 20% pay cuts. Their wage loss was capital’s gain.
Bonds the city floated to build Little Caesar’s Arena will be paid back with interest – out of property taxes that are supposed to go to the schools.
Every cut in services is another bundle of available money, to be handed out to the city’s “benefactors.”
Just as residents of Detroit are being asked to pay for handouts to the very wealthy and the big corporations, so are people who lived in the suburbs when corporations previously moved there from the city. Now the suburbs find themselves with vacant office space and a diminishing tax base. When Dan Gilbert moved Quicken Loans downtown, the city of Livonia lost 1,700 jobs. Southfield lost 3,000 jobs when Blue Cross moved its workers to the Renaissance Center.
It’s not just a problem of Detroit, the problem is capitalism and the destruction it wreaks every place it goes to make profit.
The story of Detroit’s “comeback” is, in the words of Charles Dickens, “A Tale of Two Cities.” The so-called revitalization has been primarily limited to the Downtown, Midtown and Corktown areas of the city. Some people have come to refer to the “revitalized” area as the “7.2,” in contrast to the “313" as the city as a whole is known, based on its telephone area code. The “7.2” is a reference to the fact that nearly all the renovations have occurred in an area of only 7.2 square miles in a city made up of 142 square miles as a whole. That’s about 5% of the city’s land area. The QLine light rail line and bike paths like the Daycentre Cut don’t take people into or out of the “7.2,” they just circle around inside of it.
The RenCen, three sports stadiums, the Detroit Symphony Office building, Whole Foods, the riverfront developments, Cummings holdings and Gilbert’s as well are all located within the 7.2 square miles at the heart of Detroit’s “revitalization.”
For residents in the rest of the city, it’s a completely different picture. Despite recent reports of the poverty rate decreasing in Detroit – which simply reflect the fact that some wealthier people have moved into the “7.2” – the rate for black residents remains close to 40%. The city’s official unemployment rate remains high at 22%. A truer figure shows that only 54% of the labor force is employed. Housing remains decrepit, even as a kind of bubble in housing prices in the city blows up.
So when people say Detroit is coming back, what they ought to say is that the city has been stolen from the people who lived and live here and given to wealthy people who did none of the labor, paid none of the taxes, and ripped off everyone else. It’s their Detroit they’re trying to build, on the backs of the people of Detroit, the ones forced out and the ones who never left.
The victims of the removal of manufacturing from the city—with the resulting job loss, the destruction of schools, public transportation and city services and the increasing impoverishment—are being asked to pay for the city to be handed over to the banks, the big corporations and billionaire developers. It’s the final indignity for working people of Detroit.
The wealthy class has been pushed back before, as in the Detroit rebellion in 1967, the sit-downs of the ‘30s, or the mass mobilization immediately after the war, and it can be pushed back again. As much as Detroit has been reduced, it still concentrates a population with experience in struggle, one that has long known how to defy authority.
But as the history of Detroit shows, it’s not enough just to push the capitalists back. As soon as you relax, they come back, more viciously than before. When people begin to fight again, it’s necessary to keep in mind the final goal, that is, the necessity of removing the capitalist class once and for all.