This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org
This article is from the September/October 2013 issue of Dollars & Sense magazine.
at a 30% discount.
Detroit and Deindustrialization
Questions and Answers with Barry Bluestone
This July, the city of Detroit—half a century ago the jewel of U.S. industry and technology, and the unofficial capital of the U.S. labor movement—declared bankruptcy. Since its heyday in the 1950s, Detroit has seen the departure of most of the auto plants, first to surrounding suburbs, then further afield, and a downward spiral of the city’s economy. The loss of population—fueled by suburbanization, “white flight,” the loss of jobs, and the deterioration of city services—followed. From a high of over 1.8 million people in 1950, the city’s population had declined to about 700,000 by 2010.
The factors involved in the city’s bankruptcy include multiple issues covered in the pages of Dollars & Sense in recent years. The city is not merely bankrupt, but heavily indebted to Wall Street banks. The New York Times has noted how “big banks … abetted Detroit’s descent into bankruptcy.” Like other cities, Detroit had gotten involved in recent years with interest-rate swaps, which have forced it to make big payments to the banks as interest rates have fallen (for more on this issue, see Darwin BondGraham, “We Have Your City—Pay Up or Else,” Dollars & Sense, May/June 2012). The bankruptcy announcement led, predictably, to conservative commentators heaping blame on public-sector workers, and, of course, to the possibility that these workers will end up taking the fall by losing their pensions (see Katherine Sciacchitano, “Making Labor Pay: Why We Need Universal Pensions,” Dollars & Sense, September/October 2012). The city’s economic decline is also tied to the rise of international competition and, more broadly, the increasing globalization of the U.S. economy over the last half century.
We addressed some key questions about the long-term causes of Detroit’s troubles to Barry Bluestone, director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University and co-author, with Bennett Harrison, of the landmark book The Deindustrialization of America (1982). Bluestone has a long history with Detroit, having grown up in the city, and with the auto industry—his father, Irving, was a vice president of the United Auto Workers. And he himself was a member of UAW Local 898 in the 1960s, working summers at a Ford parts assembly plant to pay for college expenses. His answers point to the ways that the seeds of Detroit’s decline were sown during its industrial heyday—and in particular in the auto companies’ insistence on excluding workers from any meaningful input into the design of the production process. —Eds.
Detroit’s Heyday: A One-Industry Town
If you were to play word association, the reaction you would get to the word “Detroit” would change dramatically between the 1950s-1960s and the present. Can you walk us through that history?
In the 1950s and ‘60s, when I was growing up in Detroit, it was one of the richest cities—if not the richest—not only in the United States but in the world. The city had the most powerful industry in the world—the auto industry. The General Motors Corporation itself was so huge that its total annual revenue in the mid-1950s was larger than the gross domestic product of Belgium. That made it the 18th largest country in the world—not just company. Ford and Chrysler were also powerful. American Motors, although it had no production sites in Detroit, had its headquarters there. And there were Packard and Hudson and other automobile companies. That created tremendous wealth and then that wealth was spread at least somewhat more equally because of the powerful auto workers’ union, the UAW, which was able to win at the bargaining table both wage increases and benefit increases—pensions and health care and life insurance—that made auto workers some of the highest-paid workers in the world. The gains made by the UAW not only benefited white workers but also provided black auto workers with the ability to join America’s middle class.
Packard Automotive Plant, East Grand Boulevard on Detroit’s east side, 2006. Designed by Albert Kahn, the plant produced luxury cars for the Packard Motor Company from 1903 through 1958. Credit: Yves Marchand and Romain Meffre. See below for more information about the photos accompanying this article.
How is Detroit’s experience of deindustrialization different from those of other U.S. cities, like Pittsburgh, Cleveland, or Chicago?
The auto industry was so powerful and so rich, and the auto workers union was able to win such great benefits for the workers, that few other industries were willing to come into the city and compete for that labor pool. That was not as true in other cities where there was a more diverse industrial base—Chicago, even Pittsburgh, to some extent Cleveland, and other industrial cities. Detroit was a one-industry town. When that industry was doing well, the city prospered. But when the industry faced global competition and initially was unable to compete, the fortunes of Detroit plummeted rather quickly, beginning in the 1970s and continuing into the 1980s and thereafter, right up to the bankruptcy of General Motors and Chrysler in 2009.
“Management Rights” and Detroit’s Decline
There’s a widely recited labor-blaming narrative about the UAW supposedly wrecking the auto industry with its outsized demands. How do you reply to that?
I would trace the problem back to the 1970s and ‘80s, when the auto industry itself seemed to pay very little attention to what it was producing or the quality of its products. It didn’t respond quickly to the import challenge from Germany and Japan and other countries. And while I would put about 95% of that blame on management, I would tag the UAW with about 5% of that blame, since for too long it fought for higher wages and better benefits but did not really pay attention to the issues of productivity and product quality in the industry—even as the import challenge was leading to massive auto-company layoffs. Part of the problem was that the union had no right under the contract to become involved in such issues. Only what was explicitly included in the written contract was in the union’s province and matters of productivity, quality, and innovation were kept jealously as management rights, excluded from union influence.
There was indeed a big debate within the UAW about the “management-rights” clause, in 1946, during negotiations over the first post-war contract. In the end, the UAW agreed that they had won so much from management in terms of annual wage improvements, cost of living protection, fringe benefits, and union recognition that they were willing to concede to GM and the other auto companies Paragraph 8, the management-rights clause. Essentially, the union agreed that management would be solely responsible for determining what to produce, how to produce it, and how to market it as long as the company agreed to pay good wages and benefits and provide seniority protection. Back then, when there was no global competition, the contract worked beautifully for both the companies and the unionized workforce. But the management-rights clause, in retrospect, played a critical role in the destruction of many of these industries, because it left labor and what labor could have contributed to improving the product out of the picture altogether. The structure of the UAW auto-industry contracts seemed great at the time, and in fact it worked wonders for a few decades, but the seeds of the industry’s destruction were buried deep inside the concept of dividing management’s responsibilities from labor’s role.
My father, when he was vice president of the United Auto Workers, did something quite extraordinary. When he first became vice president of the UAW, after the untimely death of Walter Reuther in an airplane crash, my father had a poster produced which said “Quality Is Our Concern, Too,” with a big UAW logo behind it. He ordered that that poster be put up on the union’s bulletin boards in every GM plant in the country where the UAW had representation. He was telling his members but also management that for the good of the workers, the union and its members had to be just as concerned about quality as the industry itself. But as soon as those posters went up in GM plants, the General Motors vice president for human resources called my father and told him, “Irv, you have no right to put that poster up—‘Quality Is Our Concern, Too’—that’s management’s prerogative, not yours.” And he ordered my dad to have the posters removed. My father responded, “No way. You touch one of those posters on the UAW bulletin board in a GM plant and we’re on strike.” Unfortunately, there was too little attempt by the UAW generally to follow what my father tried to do. There was too little concern about the quality of the product from management and from labor.
During the days in which there was little international competition in the auto industry—in the 1940s, ‘50s, ‘60s, and right up until the early ‘70s—neither the industry nor the union had much to worry about. Imports as share of gross domestic product in the United States never exceeded 5.7%, about the same level as in the 1920s, until the early 1970s. After all, during World War II the industrial might of both our allies and enemies was literally destroyed. So the United States came out of World War II as the undisputed industrial leader of the world. It had almost no import competition for decades. Under those circumstances, it was possible for the company to do almost anything and build almost any product, and it was possible for the UAW to ask for major advances in pay and benefits without having any impact on the fortunes of the company. The company could sell pretty much anything they produced and both stockholders and workers did very well.
Once the European economies and Japan recovered, and later Korea, they began to produce products that were competitive if not more than competitive with American products. Nonetheless, the managers of America’s auto companies and the leadership of the UAW continued to basically play the same game that they had played when import competition was not a problem. There were UAW leaders like Doug Fraser, Irv Bluestone, and Walter Reuther who saw a day of reckoning in the auto industry and were urging the company to work with the union to improve the product. Unfortunately, the leadership in the company, and the leadership in the union who followed these labor pioneers, failed to follow up on their collaborative approach to improve the industry. The result was that imports took a major share not only in the auto industry but in other industries as well.
Suburbanization, “White Flight,” and the Vanishing Tax Base
The Ruins of Detroit
A state of ruin, write photographers Yves Marchand and Romain Meffre in their introduction to The Ruins of Detroit, is “essentially a temporary situation that happens at some point, the volatile result of a change of era and the fall of empires.” Having previously photographed derelict architecture in and around their native Paris, and on the abandoned Japanese coal-mining island of Gunkanjima, the duo aimed their lenses at the Motor City. They spent five years documenting the remnants of Detroit’s industrial landscape, public architecture, and abandoned residential buildings. The end result is a vivid and haunting collection. Ranging from the iconic Michigan Central Station (pictured on the book’s cover, right) to more mundane urban fixtures such as courthouses, neighborhood libraries, and elementary schools, the scenes captured by Marchand and Meffre are at once chaotic and serene. Finding “a contemporary Pompeii,” they capture the slow-motion destruction of what was once the crown jewel of American industrialism, now used up and nearly forgotten by the currents of global capital.
Order information: Yves Marchand and Romain Meffre, The Ruins of Detroit (Steidl, 2011). Artists’ website: www.marchandmeffre.com. Publisher’s website: www.steidl.de.
Predictably, in the wake of Detroit’s bankruptcy, we’ve seen the kind of boilerplate conservative narrative blaming public workers and unions for Detroit’s problems.
It’s ludicrous to blame public employees in Detroit for the downfall of Detroit. The problem is that there’s no tax base left in Detroit. Industry has left and families have left. You’ve gone from a population of about 1.8 million to 700,000, or possibly less than that today. I think Detroit has lost something like a quarter million citizens in just the last three or four years and a huge number of businesses have left the city as well, leaving little as a tax base. So it really doesn’t matter whether public- sector workers had taken large wage cuts or large pension cuts before the bankruptcy. The city would still have faced just enormous fiscal problems. The decline of the tax base is what is really responsible for Detroit’s fiscal woes, not the wages and benefits that its public employees receive.
Could you elaborate on the relationship, in Detroit, between deindustrialization, on the one hand, and suburbanization, sprawl, and “white flight” on the other?
Many white families started moving to the suburbs after World War II, as these huge suburban sprawl developments were being created. Returning GIs could use the G.I. Bill to obtain low mortgage rates, allowing them to buy that two- or three-bedroom house with the attached garage in the suburbs. These returning veterans and their families wanted good schools, nice neighborhoods, and they wanted to be closer to work, because most of the plants had moved to the suburbs. This led to the first flight from the city to the suburbs, not only in Detroit but in most major metro areas in the country.
Because of de jure and de facto segregation, black families were barred from the suburbs and they became a larger and larger share of Detroit’s city population. Then the Detroit riot occurred in 1967 and this led to an acceleration of white flight as more white families fled what they saw as a dangerous city, fleeing to the suburbs where they thought there wouldn’t be as much conflict.
But there was a third wave of flight to the suburbs—as city services deteriorated as a result of the declining tax base, and as the civil-rights movement made it possible for black families to move to the suburbs. Now it was possible for Detroit’s black middle class to leave the city as well, and that ultimately led to the dire circumstances that you see in Detroit today. It’s not just that the city lost white families, but it lost a good share of the region’s black middle class. The families left behind in the city, with the exception of a few young urban pioneers, is a population that is overwhelmingly poor. And with such a demographic, there is almost nothing left of the tax base, and there is a downward spiral of poorer and poorer public services. The result is more and more concentrated poverty in the city of Detroit, making it more and more difficult to reverse.
Changing Labor Relations and Revitalizing the Labor Movement
What could the labor movement have done differently in the era of corporate disinvestment that would have made a difference?
The UAW actually entered into a novel agreement with General Motors, in the late 1970s, to build a small, competitive car called the Saturn. It involved full collaboration between the company and the union to build a new car in a new way. Teams of workers and managers worked together to design and produce a car that could compete with small Japanese imports.
Unfortunately, before it had a chance to become a successful brand, the UAW and General Motors pulled the plug on the project. Much of this had to do with bad blood between the senior leadership at GM and the union and unfortunately, at that time, a terribly incompetent president of the UAW. Neither General Motors’ new management nor the new leadership of the UAW was willing to take ownership of something which their predecessors had created. So this experiment to stem the tide and to reverse the fortunes of the auto industry was never given a proper shot to succeed.
Mural, Brewster Wheeler Recreation Center, at the Brewster-Douglass housing projects, located west of Hastings Street, the historical and cultural heart of Detroit’s black community. Several Motown artists, including Diana Ross and Smokey Robinson, grew up in the complex, which was built between 1938 and 1952 and closed down in 2008.
If management cooperation with labor and openness to greater labor involvement didn’t happen when labor was much stronger, do you see much hope for this now that labor is weak? Why wouldn’t employers say, “We’d rather just kick you in the teeth some more”?
I do not think that American management is a monolith. There are some companies and there are some industries that are more progressive and that would be willing to work with labor. I think that Ford and the UAW have had a much better relationship than many other companies and unions, and you see it in their products. Ford now has a fine line of cars and has had for several years. Their success has been with the help of the UAW. The current president of the UAW comes out of Ford UAW Local 600 and has worked with Ford in a more collaborative way for a long time. Now Ford is profitable again and is hiring workers back. That’s the kind of thing I would like to see more broadly. Unfortunately, it takes real progressive leaders on both the management side and the labor side to make such collaboration work. It takes people who are willing to take some risks. Union officers are often accused by at least a minority of their members of making concessions to management when they collaborate. It takes a strong union leader to resist the route of always taking on the company as an enemy.
There are two things that labor can do today, given its massive loss of membership and given the defensive corner it has been forced into. One is to lash out because they’re cornered and they’re on the defensive, which is a natural reaction even though it may not be a very positive one. The other is to reassess and to come out with new ideas and new approaches that can rebuild support for trade unions in the country, both in the public and private sector. With such a small percentage of the workforce now unionized, most families don’t have a union member in their midst anymore. Most folks don’t know what unions are or what they really stand for. We need to have a campaign to not only change what unions do in support of their members, but to work hard to rebuild popular support as the union movement had in the 1930s, ’40s, ’50s, and ’60s.
If you go back historically to the sit-down strikes in 1937 at General Motors in Flint, what made them successful was massive popular support for the workers. The company had very little support. In Michigan, Governor Murphy called out the national guard to protect the strikers rather than to bust the strikers. But the reason he did that and the reason why the UAW was successful back then is that the union had built up tremendous support from workers everywhere and even from members of the middle class. As a result, when the chips were down the people were with the workers and their union. Unfortunately, that does not appear to be the case today.
Woodward Avenue seen from the Broderick Tower on marathon day, 2006. Woodward Avenue is the main street around which downtown and the rest of the city developed. Many buildings along Woodward remain abandoned, despite the gradual gentrification of the city center.
New Glory Days for Deindustrialized Cities?
More on Detroit on the D&S Website
In an online exclusive to Dollars & Sense, economists Mason Gaffney and Polly Cleveland explore how progressive tax policies helped make Detroit an industrial powerhouse. During the city’s heyday from the 1890s through the 1940s, mayors and other civic leaders embraced the principles espoused by American economist Henry George, raising revenue through property taxes, rather than income or sales taxes. These policies, easing tax burdens on small businesses and working people, also supported robust public services, drawing workers and migrants from all over the country. This combination of a viable community of smaller shops and industrial suppliers, together with a growing workforce, was what made Detroit so enticing to Ford, General Motors, and other large companies. Starting around 1950, however, changing economic policies at both the city and state levels, along with shifting demographic trends, began to sap the city’s coffers. To read more about the history of Detroit’s economic policies and how they shaped the city, find the full article here.
What are the solutions for Detroit and other deindustrialized cities? People are talking again about industrial policy and reindustrialization—now sometimes with the new spin of green development. What role do you see for labor in developing and fighting for such policies?
I’ve been working for over fifteen years with the older industrial cities of Massachusetts and a few other states. Looking at the Lawrences, Lowells, Holyokes, Springfields, Worcesters, and Lynns across the state, what I’m seeing is differential success. Cities as poor as Lawrence—one of the poorest—have actually had a very good record of increasing the number of businesses and increasing employment between 2001 and today. We’re also finding from our analysis that there are factors that cities and towns have control over that increase the probability that firms will settle in their cities. Obviously, you need to have available sites—that’s important. You need to have parking—that’s important. But we find things like timeliness of approvals—the ability for a city or town to work closely with the business community and sometimes with the union to make it possible for them to get up and operating quickly. Time is important in this globally competitive world. Having the business community itself work with the city government to market the city to other businesses can help bring investment and jobs. Those things turn out to be statistically quite important when it comes to understanding which communities are successful at reinventing themselves and those that are falling behind like Detroit. Indeed, these factors turn out to be much more important than, for example, keeping taxes low, or gutting social services. Our statistical analysis finds no correlation between tax rates and business investment. If anything, low taxes may even have an adverse effect on investment and job growth if low taxes mean poor city services.
What I believe is happening is that cities and towns are waking up to the fact that they can play a critical role in their own future. Moreover, what we’re seeing, at least in Massachusetts—I haven’t looked around the country—is a rebirth of manufacturing. Manufacturing had nearly collapsed in my state, but still has over a quarter of a million jobs and the second-largest payroll of any industry. Only the health-care sector is larger. And it’s alive and well because it’s diverse, it’s incredibly productive, with lots of innovation going on, lots of advanced technologies even in old-line industries, and a commitment to retraining the workforce for it. In fact, we estimate that, because the workforce is aging rapidly, there will be one hundred thousand job openings in manufacturing in Massachusetts over the next ten years, most of them in the state’s older industrial cities. The real problem is going to be how we are going to find enough workers to replace the ones who are retiring. That’s very different than the kind of scenario that Ben Harrison and I wrote about in The Deindustrialization of America back in the 1980s.
Whether those policies could help Detroit, I don’t know. Detroit may be too far gone and it may be too difficult to get business to agree to resettle in Detroit unless something quite spectacular happens—and I can’t imagine what that spectacular factor would be. But other cities—the Pittsburghs, Chicagos, and Clevelands—and certainly many of them here in New England—the Holyokes, Springfields, Worcesters, and Lawrences—they have a reasonable opportunity to have a new era of glory days.