Will Detroit Be The First Major US City To Be Abandoned?

Will Detroit follow in the footsteps of the great Mayan cities of antiquity?

In 1930, Detroit was the world’s fastest growing city.

In 2012, it was America’s fastest shrinking city – harboring over 100,000 abandoned houses and lots.

On Friday, Detroit defaulted on $18.5 billion in debt:

Detroit defaulted on some debt on Friday and proposed most creditors receive just pennies on the dollar owed by the “insolvent” city in order to avoid the largest municipal bankruptcy filing in U.S. history.

In a forceful opening salvo of negotiations with holders of as much as $18.5 billion of debt, Detroit Emergency Manager Kevyn Orr announced a moratorium on some principal and interest payments, including one due on Friday.

Under his proposal, Orr said unsecured debt holders would be paid less than 10 cents on the dollar, but some creditors would get a bit more based on city revenue. Some $11.5 billion of the debt is unsecured and $7 billion secured, according to figures presented by Orr.

Orr said secured creditors would get better treatment, although how much better was not specified.

“We may try to get a discount from them, but the reality is they are secured,” Orr said. Secured credit means an asset is pledged to back the debt, for example Detroit has secured its interest rate swap agreements with casino revenue.

He said the city would skip a $34 million payment due on Friday on $1.43 billion of pension certificates of participation, to allow the city to conserve cash needed to provide services to residents.

There are startling parallels:

“They did it to themselves,” says veteran archeologist Tom Sever.

“The Maya are often depicted as people who lived in complete harmony with their environment,’ says PhD student Robert Griffin. “But like many other cultures before and after them, they ended up deforesting and destroying their landscape in efforts to eke out a living in hard times.”

A major drought occurred about the time the Maya began to disappear. And at the time of their collapse, the Maya had cut down most of the trees across large swaths of the land to clear fields for growing corn to feed their burgeoning population. They also cut trees for firewood and for making building materials.

“They had to burn 20 trees to heat the limestone for making just 1 square meter of the lime plaster they used to build their tremendous temples, reservoirs, and monuments,” explains Sever…

“We believe that drought was realized differently in different areas,” explains Griffin. “We propose that increases in temperature and decreases in rainfall brought on by localized deforestation caused serious enough problems to push some but not all city-states over the edge.”

The Maya deforested through the use of slash-and-burn agriculture – a method still used in their old stomping grounds today, so the researchers understand how it works.

“We know that for every 1 to 3 years you farm a piece of land, you need to let it lay fallow for 15 years to recover. In that time, trees and vegetation can grow back there while you slash and burn another area to plant in.”

But what if you don’t let the land lay fallow long enough to replenish itself? And what if you clear more and more fields to meet growing demands for food?

Not only did drought make it difficult to grow enough food, it also would have been harder for the Maya to store enough water to survive the dry season.

“The cities tried to keep an 18-month supply of water in their reservoirs,” says Sever. “For example, in Tikal there was a system of reservoirs that held millions of gallons of water. Without sufficient rain, the reservoirs ran dry.” Thirst and famine don’t do much for keeping a populace happy. The rest, as the saying goes, is history.

The Maya depended on the agricultural productivity of the area to sustain them and they exhausted it by consuming more than it could produce. They exceeded the carrying capacity of their environment and failed to adapt to changes – and when that carrying capacity was significantly reduced by drought, the civilization disappeared.

Detroit depended on the productivity and supply of capital. The collectivist policies of city government with its profligate spending (at one time in the not too distant past, the Detroit Public School board members were being driven around in limousines), the unions placing ever greater demands on the employers of the area and a populace suckling at the teat of the welfare state finally exceeded the carrying capacity of their primary resource – capital, and when the drought came (shrinking automobile sales and then the global economic downturn), the abandonment began.

There are many “progressives” and collectivists who claim that Detroit is an example of failed capitalism, that the robber barons of the automotive industry raped and pillaged the city, accumulated their riches and then ran – but as with most assertions of these fine folks, if capitalism failed it is because it was distorted by “progressivism”, it is because collectivism always ties one of capitalism’s hands behind its back. Collectivism always raises the fixed costs of a society (distorted wage rates and benefits, welfare, guaranteed public pensions, and taxes) on the one hand and on the other, the goal becomes the maintenance of jobs, not the health of the organization funding those jobs.

State sponsored collectivism prevents a necessary element of the corrective mechanism of capitalism – creative destruction, the act of eliminating the inefficient and replacing it with productivity.

There are some startling pictures of Detroit’s fall from grace here, here, here and here.

12 thoughts on “Will Detroit Be The First Major US City To Be Abandoned?

    • If there was evidence of the destructive power of liberalism, Detroit is it. This isn’t “progressivism” of the late 1800’s, at least that ideology actually believed in progress, these modern “progressives” are leeches on the ass of mankind.

      • Exactly. One day when you are bored out of your mind (usually the days when McPherson and Cobb stop by to interrupt logical discussions), go check out the who’s who of Detroit politicians. If that motley bunch does not make a case for “regressivism”, nothing ever will.

        So, I concur.

      • This is exactly what happened / is happening in Greece except it’s starting inthe US First on a City Level and, waiting in the shadows, on a State Level with Calif.

        “Detroit defaulted on some debt on Friday and proposed most creditors receive just pennies on the dollar owed by the “insolvent” city in order to avoid the largest municipal bankruptcy filing in U.S. history.”

        RECIEVING PENNIES ON THE DOLLAR …. this is What will happen to Soc Security all pensions ( and Private IRAs and 401(K)s….if they aren’t stopped). ObamaCare rationing of Healthcare and just flatout denial to people who aren’t friends of the Gov’t is one form of “Pennies on the Dollar” already working its way through our system Now.

        All the Federal Printing QE schemes and the monetizing of the Debt, and the Ever increasing Gov’t entitlement and Gov’t Agency spending has effectively quaranteed “pennies of the Dollar” for all our savings and investments.

    • Memphis is going downhill fast, Joe. It has always been a Democrat town but it was conservative Democrats until they elected a true blue liberal in 1992. He beat the incumbent by less than 150 votes but remained in office till 2008 when he ran out of taxpayer’s money and couldn’t even float bonds to keep the giveaways going.

      It has been downhill since. He was the head of the Memphis schools before that and ran them into the ground before running for mayor…but he is black, so all the black folks voted for him because he promised them free stuff.

      It got so bad that he resigned because it was all coming down around his head and then decided to run for Congress against a white guy in the Democrat primary in a majority black district in 2010. He only got 20% of the vote – he was/is such a scumbag, Obama endorsed the white guy, Steve Cohen.

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