Wednesday, October 22, 2014
YOLO COUNTY NEWS
99 CENTS

Detroit, the new Greece

PaulKrugmanW

By
From page A6 | July 26, 2013 |

When Detroit declared bankruptcy, or at least tried to — the legal situation has gotten complicated — I know that I wasn’t the only economist to have a sinking feeling about the likely impact on our policy discourse. Was it going to be Greece all over again?

Clearly, some people would like to see that happen. So let’s get this conversation headed in the right direction, before it’s too late.

OK, what am I talking about? As you may recall, a few years ago Greece plunged into fiscal crisis. This was a bad thing but should have had limited effects on the rest of the world; the Greek economy is, after all, quite small (actually, about 1 1/2 times as big as the economy of metropolitan Detroit). Unfortunately, many politicians and policymakers used the Greek crisis to hijack the debate, changing the subject from job creation to fiscal rectitude.

Now, the truth was that Greece was a very special case, holding few if any lessons for wider economic policy — and even in Greece, budget deficits were only one piece of the problem. Nonetheless, for a while policy discourse across the Western world was completely “Hellenized” — everyone was Greece, or was about to turn into Greece. And this intellectual wrong turn did huge damage to prospects for economic recovery.

So now the deficit scolds have a new case to misinterpret. Never mind the repeated failure of the predicted U.S. fiscal crisis to materialize, the sharp fall in predicted U.S. debt levels and the way much of the research the scolds used to justify their scolding has been discredited; let’s obsess about municipal budgets and public pension obligations!

Or, actually, let’s not.

Are Detroit’s woes the leading edge of a national public pensions crisis? No. State and local pensions are indeed underfunded, with experts at Boston College putting the total shortfall at $1 trillion. But many governments are taking steps to address the shortfall. These steps aren’t yet sufficient; the Boston College estimates suggest that overall pension contributions this year will be about $25 billion less than they should be. But in a $16 trillion economy, that’s just not a big deal — and even if you make more pessimistic assumptions, as some but not all accountants say you should, it still isn’t a big deal.

So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.

What? Market forces have victims? Of course they do. After all, free-market enthusiasts love to quote Joseph Schumpeter about the inevitability of “creative destruction” — but they and their audiences invariably picture themselves as being the creative destroyers, not the creatively destroyed. Well, guess what: Someone always ends up being the modern equivalent of a buggy-whip producer, and it might be you.

Sometimes the losers from economic change are individuals whose skills have become redundant; sometimes they’re companies, serving a market niche that no longer exists; and sometimes they’re whole cities that lose their place in the economic ecosystem. Decline happens.

True, in Detroit’s case matters seem to have been made worse by political and social dysfunction. One consequence of this dysfunction has been a severe case of “job sprawl” within the metropolitan area, with jobs fleeing the urban core even when employment in greater Detroit was still rising, and even as other cities were seeing something of a city-center revival. Fewer than a quarter of the jobs on offer in the Detroit metropolitan area lie within 10 miles of the traditional central business district; in greater Pittsburgh, another former industrial giant whose glory days have passed, the corresponding figure is more than 50 percent. And the relative vitality of Pittsburgh’s core may explain why the former steel capital is showing signs of a renaissance, while Detroit just keeps sinking.

So by all means let’s have a serious discussion about how cities can best manage the transition when their traditional sources of competitive advantage go away. And let’s also have a serious discussion about our obligations, as a nation, to those of our fellow citizens who have the bad luck of finding themselves living and working in the wrong place at the wrong time — because, as I said, decline happens, and some regional economies will end up shrinking, perhaps drastically, no matter what we do.

The important thing is not to let the discussion get hijacked, Greek-style. There are influential people out there who would like you to believe that Detroit’s demise is fundamentally a tale of fiscal irresponsibility and/or greedy public employees. It isn’t. For the most part, it’s just one of those things that happens now and then in an ever-changing economy.

Comments

comments

.

News

A favorite autumn tradition

By Enterprise staff | From Page: A1 | Gallery

 
Marathon specialist Winter heads to cycling shrine

By Bruce Gallaudet | From Page: A1 | Gallery

County to fund pilot project for West Sac homeless

By Anne Ternus-Bellamy | From Page: A1

 
Author showcases field biology as he revels in nature

By Special to The Enterprise | From Page: A3 | Gallery

Pedal around Davis on weekly bike ride

By Enterprise staff | From Page: A3

 
Terez will perform at Wine’d Down Thursday

By Enterprise staff | From Page: A3

Apply soon to be a Master Gardener

By Enterprise staff | From Page: A3

 
Super-fun 5K run will support UCD students

By Enterprise staff | From Page: A3

Davis Arts Center: a call to artists for Holiday Sale Wall of Art

By Erie Vitiello | From Page: A3 | Gallery

 
Wine-tasting and auction benefit Advanced Treble Choir

By Anne Ternus-Bellamy | From Page: A4

Entries due Nov. 1 in VFW essay contests

By Enterprise staff | From Page: A4

 
Teen services grant applications due this week

By Anne Ternus-Bellamy | From Page: A4

Voice of the Wood plans family Halloween show

By Special to The Enterprise | From Page: A4 | Gallery

 
Garamendi will speak at U.N. Day event

By Special to The Enterprise | From Page: A4

 
Wolk sets ‘Morning with the Mayor’

By Enterprise staff | From Page: A5

Volunteers sought to chip in on parks cleanup

By Enterprise staff | From Page: A5

 
Setting a good example

By Sue Cockrell | From Page: A5

Kids form a lifelong habit of drinking water

By Special to The Enterprise | From Page: A5

 
Composting workshop set at Grace Garden

By Enterprise staff | From Page: A5

Farmers Market hosts Fall Festival

By Special to The Enterprise | From Page: A5 | Gallery

 
A Taste of India dinner benefits Davis Community Meals

By Enterprise staff | From Page: A5 | Gallery

Women and men want the same things in cars … usually

By The Associated Press | From Page: A6

 
California state parks show off fall color

By Kimberly Yarris | From Page: A7

October is fall car care month

By Special to The Enterprise | From Page: A7

 
Railroad work will close Eighth Street

By Special to The Enterprise | From Page: A9

Special education information night scheduled

By Jeff Hudson | From Page: A9

 
Halloween Carnival planned Oct. 26

By Enterprise staff | From Page: A9

Soda bottlers spend big to fight S.F. ban

By San Francisco Chronicle | From Page: A9

 
Mondavi Center gift shop plans holiday sale

By Enterprise staff | From Page: A9

Clinton sounding like a candidate in S.F. appearance

By San Francisco Chronicle | From Page: A12

 
.

Forum

 
Vote no on Prop. 1, because it’s no solution

By Special to The Enterprise | From Page: A8

David Fitzsimmons cartoon

By Debbie Davis | From Page: A8

 
.

Sports

UCD women’s soccer postseason hopes flickering

By Bruce Gallaudet | From Page: B1 | Gallery

 
A typical Blue Devil girls water polo win

By Enterprise staff | From Page: B1

DHS boys hold off Rio Americano in the pool

By Enterprise staff | From Page: B1

 
Devils are on track for volleyball playoffs after win

By Evan Ream | From Page: B1 | Gallery

Giants rip Royals in Game 1

By The Associated Press | From Page: B1 | Gallery

 
AYSO roundup: Local winners have the Eye of the Tiger

By Enterprise staff | From Page: B3 | Gallery

Alliance/Legacy roundup: Italia cruises past Chico

By Enterprise staff | From Page: B3 | Gallery

 
Sports briefs: Fipps earns another preseason hoops award

By Enterprise staff | From Page: B8

.

Features

.

Business

.

Obituaries

Mariana Brumbaugh Henwood

By Special to The Enterprise | From Page: A4

 
.

Comics