Detroit Drifts into Bankruptcy


A worker with the Michigan Works outreach program talking about Detroit Future City, a project for revamping the local economy and making use of vacant space

The decline of Detroit, Michigan, has been both gradual and dramatic. In 1960 it was the fifth-largest city in America, with the nation’s highest per capita income. Hard hit by years of deindustrialization and by a shrinking population/tax base, Detroit now ranks 18th in size. In mid-June the Motor City collided with financial reality and declared bankruptcy. In the largest municipal bankruptcy in US history, Detroit is seeking protection from creditors through the process known as Chapter 9. Governor Rick Snyder called it “the only viable option to address a problem that has been six decades in the making.” Residents hope the city will emerge from bankruptcy revitalized, but the near future is sure to be a painful period.

In reality there are two Detroits. There’s the Detroit that is synonymous with the US automobile industry and home of the Big Three automakers—GM, Ford, and Chrysler. Then there’s the city of Detroit. Today US auto companies have recovered from the recession that witnessed the bankruptcy of GM, but only about 1 in 50 people employed by the industry in the area actually work in the city. Like many of the former white residents of Detroit, the car companies moved to the suburbs or elsewhere. Free trade agreements like NAFTA helped drive much of the manufacturing that once made Detroit America’s industrial capital to other countries.

Detroit has about $17 billion in long-term debt obligations, much of it owed to retirees as pensions and health-care benefits. In addition to its financial woes, the unemployment rate is at 18 percent, more than twice the national average. And six in ten children in Detroit are living in poverty. The serious problem of underfunded retiree benefits also faces many other large American cities—New York, Chicago, Philadelphia, Portland, OR, to name just a few—though none has been as poorly run as Detroit.

Image Credit: © REBECCA COOK/Reuters/Corbis

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  1. The mysterious Pewdie says:

    That’s pretty sad, hopefully they come out of this tough time.

  2. 1x1x1x1 says:

    Detroit has been a big city and many people are poor that live their. Detroit is still a boor city but now they are further away from bankruptcy.

  3. 1x1x1x1 says: