Tired of "poor" Detroit stories

For anyone who doesn't already know, I grew up in the Detroit area and went to the University of Michigan. While I have been gone for over 10 years now and am now a bit out of touch on the local scene, Detroit will always be "home" for me.

I am so incredibly tired of all these stories where everyone feels sorry for Detroit. And the one below is one of the dumbest I have read - the idea of turning Detroit into another brain dead "yuppie" town is about as stupid and ridiculous of an idea as I have heard. Why don't we turn the entire United States into a huge version of SoCal where the entire economy revolves around refinancing mortgages, making movies and teaching each other yoga?

We all know what happened to Michigan (and more broadly to the Rust Belt) over the last 40 years and nobody has any delusions over where the area is now. While the economy will eventually get better and even the auto industry should rebound somewhat, clearly there needs to be a new direction. So let's get it over the past (one of the few times you will ever hear me say that) and look to the future.

I am going to go out on a limb and make a radical suggestion on what needs to happen to "save" Michigan. I hope that I don't come off like John Mauldin with some asanine suggestion like having foreigners pay $200,000 to come live in Michigan - sorry tangent.

To create a sustainable new industry that adds value and brings in investment, there needs to be a true competitive advantage which Michigan can offer. What is that advantage: fresh water - something that is in shortage in 35 states and countless countries globally (including India and China).

Here are my thoughts:

Break the Great Lakes protection act that was signed last year by the U.S. and Canada which banned the sale of water from the Great Lakes. I don't say this because I hate the environment, on the contrary I consider myself an amateur environmentalist (just ask me my views on surface parking lots).

There are a lot of blogs and research websites that are dedicated to this very issue (here is a good one: http://www.glelc.org/blog/water-and-economic-development/) so I won't get into this aspect any further.

They should look to begin selling fresh water by pumping or shipping water throughout the U.S. and possibly even globally. Over the next 30 years, water scarcity is going to be one of the biggest issues in the western U.S. and in many parts of emerging Asia (not to mention places like Africa where water shortages have already reached critical levels).

Yes, I realize that this is going to have an impact on the local environment eventually, but I have read studies that the Great Lakes could supply U.S. water needs for like 200 years before materially impacting the ecosystem of the lakes. Even if that number is 70 years instead of 200 years - the cashflow would help solve an economic situation that is at a critical tipping point for not just Michigan, but the entire Great Lakes basin (from Wisconsin to Buffalo, NY) and even Canada where Ontario is suffering from the fallout of the global collapse in industrial production.

Also, when you look at it from a humanitarian standpoint where people all of the world are going to suffer from lack of access to clean, potable water - to me its a no-brainer.

And here is the beauty of it, you take the cashflow from the sale (and don't forget the jobs that would be created in the development of the water distribution infrstructure) and invest it into making Michigan, and the entire region, into a clean water technology hub. You can provide subsidies and incentive for companies that do research and production in water technology (everything from cleaning up poluted water sources to replenishing depleted aquifers and advanced desalination techniques) to set up in the area and hopefully create some critical mass.

Sale of water technology would create a booming export sector for the next 30 years or longer due to the anticipated U.S. and global demand for such technology. And the areas that need the most water (Middle East, China and India) are the countries that are developing the fastest and (in the case of the Middle East and China) have the money to pay for it. To be honest, this is something for the local governments to think about even if they don't want to sell the water to fund the investment.

My idea might suck but its better than self-pity and much better than becoming a center for teaching yoga.



"Poor Detroit Story": GM Bankruptcy May Say 'No Reason to Stay' to Detroit Residents

June 3 (Bloomberg) -- General Motor Corp.’s bankruptcy is the last thing Detroit and the state of Michigan need.
Michigan already has lost 780,000 jobs this decade, the most of any state. Its April unemployment rate of 12.9 percent was the highest in the country.

The fourth-largest U.S. city for four decades starting in the 1930s, Detroit now ranks 11th. Its population of 916,952 is less than half the peak of 1.85 million in 1950.

Now, with 6 of the 12 plants on GM’s bankruptcy hit list located in the state, Michigan and Detroit are bracing for what may be an accelerated exodus of people and jobs.

“People have no job, no home, no credit and no reason to stay,” said Bob Daddow, deputy executive of Oakland County in suburban Detroit, which expects to lose one-third of its property-tax revenue from 2007 to 2011. “We’re very much still on a downward spiral and we haven’t hit bottom yet. I don’t see anything that will be good with the bankruptcy of GM.”

One-third of the population of Detroit, GM’s hometown, lives in poverty. That’s the most of any U.S. city with more than 250,000 people and almost triple the national rate. Public schools graduate 32 percent of their students, according to a study by Michigan State University, compared with the national average of 72 percent.
‘Middle-Class Bind’

With rising white-collar job losses, the pain is seeping into the suburban ring surrounding the city, said Kevin Boyle, a Detroit native who won the National Book Award for an account of race relations in the city in the 1920s. The suburbs have a population of 3.5 million.

“It’s a terrible middle-class bind,” Boyle said. “It’s the entire state, certainly the entire metropolitan area.”
The contrast with the Detroit of five decades ago is stark. In those years, residents flowed into the area from the south and rural Michigan and landed good-paying jobs in Detroit’s factories without having more than a high school diploma.
“You were instantly vaulted into the middle class,” said Mike Smith, director of the Walter Reuther Library of Labor and Urban Affairs at Wayne State University in Detroit.

The bankruptcies of GM and rival Chrysler LLC, in nearby Auburn Hills, may doom the chance of any return to the prominence and prosperity Detroit once enjoyed as the world’s motor capital, said former autoworker Sean McAlinden, now an economist for the Center for Automotive Research in Ann Arbor, Michigan.

Stempel’s Experience

GM’s Michigan employment has plunged to 47,330 today from 482,000 in 1978, according to figures compiled by the center. Even if GM and Chrysler successfully reorganize under Chapter 11, their bankruptcies will result in the loss of 179,400 U.S. jobs by next year, including 35,695 in Michigan, according to a May 26 study by the research group.
“They’ve been permanently hobbled,” McAlinden said. “This is very humbling.”

“There will be a lot of grief and hard times in Michigan,” said former GM Chairman Bob Stempel, who was ousted in a boardroom coup in 1992. His time at GM was marked by large losses and job cuts, but today is much worse, Stempel, 75, said.

“I closed 18 assembly plants,” he said. “You never get over that. You worry for the communities and feel for the people.”

Detroit has tried to broaden its economic base by attracting high-tech firms and movie producers and building three casinos. The efforts have had limited success. Receipts at the casinos are falling, leading the Greektown Casino in downtown Detroit to file for bankruptcy last year.

Overcoming the Image

“There have been a lot of attempts to diversify the economy,” said Daddow of Oakland County, which is going after companies that make batteries for electric cars. “But we’re losing jobs by the thousands and only bringing them in by the hundreds.”

Luring new employers will require overcoming Detroit’s image as a city in decline, scarred by social problems and corruption, said Dennis Archer, Detroit’s mayor from 1994 to 2001. Kwame Kilpatrick, the mayor who followed Archer, went to jail last year after admitting he lied in a civil trial about an affair he had with his chief of staff.

“The city of Detroit faces enormous challenges,” said Archer, who is now chairman of the Dickinson Wright law firm in Detroit. “The economic challenges were compounded by a mayor who resigned in disgrace.”

On May 5, Detroit voters elected Dave Bing, former star of the National Basketball Association’s Pistons, as their new mayor. After leaving the NBA, Bing, 65, founded a steel company that today has about 500 workers. Spokesman Bob Warfield said the mayor wasn’t available to comment.

‘Welfare Queen’

“Immediately, his status as a professional athlete as well as a successful business person who is widely respected begins to help change the image of the city,” Archer said of Bing.

Detroit’s image is linked to its signature industry, which has taken a beating in the national discourse over bailouts and auto chief executive officers flying corporate jets to Washington last year to ask for financial aid to survive.
“We’re being treated like a welfare queen,” said McAlinden. “I don’t know how you get over that.”

Detroit and Michigan should work to transform from a low- education economy dependent on auto-factory jobs to a diversified, knowledge-based economy, according to a study co- authored by University of Michigan senior researcher Don Grimes.

Pittsburgh Example

“You have to recognize that manufacturing is not going to solve your problems,” said Grimes, who worked at a Ford factory in the 1970s. “It’s a mindset that says what we have to be is a yuppie community, attractive to educated people, particularly young people.”

He cites as an example Pittsburgh, which he says successfully transformed itself into a medical center after the steel industry collapsed.

The GM bankruptcy may be the turning point that forces the region to get on with redefining itself, said Diane Swonk, chief economist with Mesirow Financial Inc. in Chicago.

“Detroit is finally having the funeral they’ve been waiting for and they can put it to rest and start rebuilding,” said Swonk, a Detroit native whose father worked for GM for 35 years.