Friday, July 26, 2013

Krauthammer & McArdle Conduct Detroit Postmortems

From Dr. Krauthammer:

If there’s an iron rule in economics, it is Stein’s Law (named after Herb, former chairman of the Council of Economic Advisers): “If something cannot go on forever, it will stop.”

Detroit, for example, can no longer go on borrowing, spending, raising taxes, and dangerously cutting such essential services as street lighting and police protection. So it stops. It goes bust.

Cause of death? Corruption, both legal and illegal, plus a classic case of reactionary liberalism in which the governing Democrats — there’s been no Republican mayor in half a century — simply refused to adapt to the straitened economic circumstances that followed the post–World War II auto boom. . . .

. . . The legal corruption was the cozy symbiosis of Democratic politicians and powerful unions, especially the public-sector unions that gave money to elect the politicians who negotiated their contracts — with wildly unsustainable health and pension benefits. . . .

McArdle's post-mortem finds a tsunami of causes. She is certainly right about the number of contributing causes, though I think that, from the standpoint of simple math, Krauthammer has it right. That said, this from Ms. McArdle:

If you listen to the interwebs, the answer is “terrible, Democratic-run urban politics.” Or “union-busting anti-labor policies” in Southern states that transformed solid middle-class jobs in the Midwest into near-minimum-wage jobs in states such as Alabama and Tennessee. Or maybe “racism.” Or “the urban underclass.”

All of these answers are impossibly reductive. The city of Detroit has no one problem; it has a constellation of them. Here, in no particular order, are some of the most important factors. . . .

The factors she lists:

- The decline of shipping along the Detroit River.

- The claim that the South stole high paying union jobs by allowing for non-union near minimum wage pay is a falsehood. There is little wage disparity between Michigan UAW workers and non-union workers in Southern Right To Work states. The three killers have been expansive health and pension benefits for UAW retirees, deeply inefficient union work rules, and competition.

- Post-WWII UAW Pattern Bargaining tactics failed when competition came to the auto industry. This was at least as big a problem for the UAW and the auto industry as the availability of jobs in Southern right to work states.

- Middle Class flight: This was a real problem for Detroit caused by a huge increase in crime during the 50's and 60's. It picked up even more in the wake of the 1967 race riots - the most violent in the nation.

- White Flight and Reverse Racism: A large chunk of the white population fled after the race riots. Those that were left were subject to a series of deeply anti-white black dominated city governments.

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