Detroit's Failure and Implications for Small Countries

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The Capitalist Failure in Detroit and its Implications for Small Developing Countries 

 by Pachamama 

Detroit

During the middle years of the twentieth century Detroit emerged as a major success for western industrial capitalism. That success imposed American technological dominance over the world and determined the modern transport systems. There was a massive drive to transform the means of transportation from horse drawn coaches to the more ‘efficient’ internal combustion engine. Within this success developed the largest and wealthiest middle classes yet known to man, largely through the efforts of worker’s unions’ engagement in successful collective bargaining. The population swelled to 1.5 million at the height of prosperity thus fueling industrial expansion in all other industries at an exponential rate. Detroit and its motor companies was indeed the leading edge of American cultural dominance after its shared victory in the Second World War. 

The fall of Detroit started to gain momentum around the oil crises of the early 1970’s. Concomitant with transformation in the energy sector there was, starting a few decades prior, effort to de-industrialize the USA in the search for cheaper labor elsewhere. There were management failures to innovate, to reduce fuel consumptions rates, to revolutionize designs, to transform its relationships with workers, to redefine the nature of business. These were strategic failures. These failures led to the rise of competitors from Asia, Europe and elsewhere and opened up the American domestic markets to a level of competition hitherto unknown. Foreign competitors were eating Detroit’s lunch and economic death was not to be too distant. This reminds us of the Barbados tourism industry of today. 

The slow death of industrial Detroit contracted the population to 700 thousand by 2013. Tax revenues dwindled, City government has closed or is closing hundreds of schools, urban areas were depopulated, and crime has surged and frontally affects the poor and working classes remaining there. At the same time the Federal governments of Bush and Obama could spend hundreds of billions, some say trillions, to bail out the auto companies, their executives and shareholders while the people of Detroit were to be left to their own devises. Today an unelected bankruptcy lawyer has effective administrative power over the citizens of Detroit, in a political democracy, what an oxymoron. This must be a near slavery experience. Mr Orr, as bailiff, would now be deciding to sell-off the commons, master pieces of art, public spaces. As bailiff, he has signaled that a bail-in is on the cards, meaning that recipients of pension obligations are to receive a substantial hair cut. Small businesses owed money by the City can expect pennies on the dollar, as determined by the Bankruptcy Court. Detroit is not alone; ten other cities within the USA are at various stages in bankruptcy and more are expected to be added within the coming year.    

Could this be a possible scenario as the failure of capitalism comes to the developing world? We are, up to now, used to the machinations of the World Bank, The International Monetary Fund, the rating agencies, the OECD and the Washington Consensus. Up to now global capital has kept corporations, somewhat, on a leash. Could this be the time when disaster capitalism unleashes their dogs of war – corporations- with a level of economic violence yet unseen on developing countries? We have asked before whether it was possible for Caribbean countries to be owned, again, by a multi-national corporation? Remember ‘Enterprise Barbados’ was started as a corporation. The Charter of Barbados (1652) was indeed a corporate structure for ownership and control. Would we be willing to gleefully sing the national anthem of a country called Microsoft-Barbados? Perkins, the Economic Hitman, has made us well aware how these forces of global capital were harnessed to pressurize developing countries to serve Empire even through assassination, destabilization and war. 

We have previously expressed our misgivings about Caribbean governments transferring public assets to private interests. We have seen this as anti-developmental and as the first step in a larger plot to further consolidate wealth in the hands of the ‘one percent’. This massive global transference of wealth is quickly gaining a level of respectability as the ability of people to resist appears to have recognized certain limitations. Southern Europe has seen failed banks, not bail out by central governing authorities and insurance companies but by depositors themselves as deposits are reduced, not shareholder or executive equity alone. We would like to re-register our objection to the insistence of the MOF to meddle with the savings of the people of the Caribbean. We feel confident that these transfers will not be repaid in the same way that large transfers to banks in the USA by the Federal Reserve were never repaid and were never intended to be repaid. Some will say that the USA experience represents a different calculus. However, we will maintain that both situations are part of one overarching and coming economic dispensation. 

Radical changes in global governance will especially impact small nation states. We have always been vulnerable, even those states with an abundance of natural resources. The absence of industrial bases for the consistence production and distribution of basic life sustaining needs will be even more difficult in circumstances where importation is impossible. An overreliance on tourism and financial services could add greater pressures on societies as receipts diminish. Demands for repayment received from corporate holders of foreign debt maybe impossible to be met. Central government appropriation of reachable private assets could instigate generalized social disorder.       

The discourse on blogs, in media and in academia still underestimates the gravamen of the circumstances developing countries are facing now and that will further deteriorate in the coming years. There seems not to be even a clear determination as to whether we are in a depression or a recession as though an economic concept of time matters to people who are smelling hell and having been seeing their ability to provide for basis existence becoming more and more ‘challenging’. It even presents great difficulty to convince policymakers that we should, it least, have some type of strategic plans that estimate worst case scenarios, even if they use become unnecessary. All actors are living in hope that manna will fall from up there. As things get worse and with little signs that any improvement is in the offing, policymakers in developing countries remain in a developmental no-man’s land unable to escape. People still want to talk about economic growth and generally extend the life of the post Breton Woods architecture no matter, all the signs everywhere, that we have entered a phase in human civilization, when all the forces around us are considered, that Keynes could not have anticipated though for his time was able to make adjustments that serve to blunt the power of the internal contradictions of capitalism.    

The bankruptcy of Detroit, and maybe many more American cities, States and even the Federal government of the USA itself portend a capitalist cataclysm. We must now start to think about a world without capitalism while defending ourselves from those who would want to re-impose other more authoritarian forms - feudalism.