Why Detroit Failed

Why Detroit failed:

 The key decision-makers – major shareholders in General Motors, Ford, Chrysler, etc, and the boards of directors they selected – made many disastrous decisions. They failed in competition with European and Japanese automobile capitalists and so lost market share to them. They responded too slowly and inadequately to the need to develop new fuel-saving technologies. And, perhaps most tellingly, they responded to their own failures by deciding to move production out of Detroit so they could pay other workers lower wages.

 The automobile companies’ competitive failures, and then their moves, had two key economic consequences. First, they effectively undermined the economic foundation of Detroit’s economy. Second, they thereby dealt a major blow to any chances for an enduring US middle class. The past 40 years have displayed those consequences and the capitalist system’s inability or unwillingness to stop, let alone reverse, them.

 Real wages in the US stopped growing in the 1970s, and have not grown since, even as workers’ rising productivity generated even more profits for employers. Rising consumer debt and overwork postponed for a few years the impacts of stagnant real wages on consumption. But by 2007, with wages stagnant and further consumer borrowing capacity exhausted, a long and deep crisis arrived. Employers used the resulting unemployment to attack job security and benefits and the public sector built up in the 1950s and 1960s to support the middle class (for example, by low-cost public higher education).

 Auto industry capitalists took the lead and Detroit exemplified the economic decline that resulted. In the deep crisis since 2007, General Motors and Chrysler got federal bailouts, but Detroit did not. The auto companies got wage reductions (via the tiered wage system) that assured Detroit’s wage-based economy could not recover, even as auto company production and profits did. The failures of private capitalism thus drew in the complicity of the federal government. Via azspot.net, Detroit's failure is a distinctively capitalistic one