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The Incredible, Shrinking Detroit

Everyone knows what ails Detroit.  The inexorable decline of America’s auto manufacturing has created a large city with a gaping black hole where its leading industry used to be.  So, there is no real reason to dwell on how Detroit got into its current state.  What is interesting is how the city is attempting to cope with its demise.  Take a look at this AP headline:

“Detroit wants to save itself by shrinking.”

The AP writes,

Detroit, the very symbol of American industrial might for most of the 20th century, is drawing up a radical renewal plan that calls for turning large swaths of this now-blighted, rusted-out city back into the fields and farmland that existed before the automobile.Operating on a scale never before attempted in this country, the city would demolish houses in some of the most desolate sections of Detroit and move residents into stronger neighborhoods. Roughly a quarter of the 139-square-mile city could go from urban to semi-rural.

Near downtown, fruit trees and vegetable farms would replace neighborhoods that are an eerie landscape of empty buildings and vacant lots. Suburban commuters heading into the city center might pass through what looks like the countryside to get there. Surviving neighborhoods in the birthplace of the auto industry would become pockets in expanses of green.

I have to respect the realism being employed by Detroit’s leaders.  This will be an interesting experiment in managed decline.  Detroit’s leaders are realistic enough to admit that the good times are not coming back.  Detroit may or may not have a bright future, but no matter what happens it will never be the powerhouse that it once was in the 1950s. Those days are gone forever.

But while bulldozing large swaths of the city might be good for the long-term quality of life of the residents, it leaves a few questions unanswered, such as “with fewer residents, where will future tax revenues come from?”

At any rate, we should all wish Detroit well.  I for one will be very interested in how this experiment plays out.  It has global implications.  Japan and parts of Europe are already experiencing on a large scale what Detroit is experiencing at the local level.  Changing demographic and migration patterns are depopulating formerly urban areas and leaving substantial legacy costs in the process (such as maintaining roads and a sewage system for a city of, say, a million people that is only being used by half a million people).

Detroit could be an interesting model for the rest.  Just as the Motor City lead the world into the automobile era, so too might it lead the world in pioneering managed urban decline.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy