Detroit Bankrupt:
In 1960, the richest per capita city in America, according to the U.S. Census Bureau, was Detroit.
Today Detroit has filed for bankruptcy, the largest American city to do so. This tragedy is a stark reminder of the unintended consequences of recent financial crisis.
Before we examine what truly caused the decimation of one the world’s richest cities, let us review just how rapidly the conditions in Detroit have declined.
Sixty percent (60%) of all of Detroit’s children are living in poverty. Fifty percent of the population has been reported to be functionally illiterate. Eighteen percent (18%) of the population is unemployed.
A major reason for Detroit’s economic woes is often cited from a review of U.S. 2010 Census data, which notes Michigan lost 48% of all its manufacturing jobs from 2000-2010. The obvious follow-up question is, why?
A major portion of the answer can be found in national reporting concerning the actual effects of NAFTA. When the North American Free Trade Agreement was first signed in 1994, supporters said it would eventually create jobs for the U.S. economy.
Today, however, a growing number of academic research reports contend NAFTA cost the U.S. millions of manufacturing jobs. According to a report by Economic Policy Institute economist, U.S.-Mexico trade and job displacement after NAFTA were heading south, an estimated 682,900 U.S. net jobs have been "lost or displaced" because of the agreement and the resulting trade deficit.
In Union Pacific’s 2012 report to stockholders it noted, “We anticipate by 2014 50% of all cars and light trucks sold in the U.S. will be shipped by train from assembly plants in Mexico.
Five decades of ongoing job losses saw white flight occur in Detroit as those with the resources to leave the city did so in search of new economic opportunities. Today Detroit is a city with the worst of all scenarios: a poorly qualified workforce and few job opportunities available.
Detroit's bankruptcy has now come. The city's history should stand as a clear reminder of the unintended consequences of the financial crisis.