Detroit's Decline Is a Distinctively Capitalist Failure
By Professor Richard D. Wolff / democracyatwork.info
Jul 27, 2013

The auto industry Big Three were loyal only to shareholders, not the people of Detroit. The city was gutted by that social choice.
 

Capitalism as a system ought to be judged by its failures as well as its successes.

The automobile-driven economic growth of the 1950s and 1960s made Detroit a globally recognized symbol of successful capitalist renewal after the great depression and the war (1929-1945). High-wage auto industry jobs with real security and exemplary benefits were said to prove capitalism’s ability to generate and sustain a large “middle class”, one that could include African Americans, too. Auto-industry jobs became inspirations and models for what workers across America might seek and acquire – those middle-class components of a modern “American Dream”.

True, quality jobs in Detroit were forced from the automobile capitalists by long and hard union struggles, especially across the 1930s. Once defeated in those struggles, auto capitalists quickly arranged to rewrite the history so that good wages and working conditions became something they “gave” to their workers. In any case, Detroit became a vibrant, world-class city in the 1950s and 1960s; its distinctive culture and sound shaped the world’s music much as its cars shaped the world’s industries.

Over the past 40 years, capitalism turned that success into the abject failure culminating now in the largest municipal bankruptcy in US history.

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.

Despite what the heroic sit-down strikes and other actions of the United Auto Workers had earlier won for their members, the auto companies’ decision-making powers remained in the hands of major shareholders and their boards of directors. They used that power to evade, weaken and eventually undo what union struggles had won. The unions proved incapable of stopping that process. Detroit’s capitalists thus undermined the middle-class conditions workers had extracted from them – and thus destroyed the “capitalist success” city built on those conditions.

Detroit’s decline, like the parallel decline of the United Auto Workers, teaches an inescapable lesson. The very contracts that militant unions win with employers give those employers great incentives to find ways around those contracts. They usually do.

The top-down structure of capitalist enterprises provides major shareholders and boards of directors with the resources (corporate profits) to cut or remove the good conditions unions can sometimes win. That’s how this system works. Detroit has “been there and done that”. The solution is not more contracts.

If the autoworkers had transformed the auto companies into worker co-operatives, Detroit would have evolved very differently. Worker co-operatives would not have moved production, thereby undermining their jobs, families and communities, including especially Detroit. Workers would not have destroyed themselves and their communities that way. Moving production, a distinctly capitalist strategy, was key to Detroit’s population dropping from 1.8m in 1950 to 700,000 today.

Workers co-operatives would also have searched and likely found alternatives to moving that might have saved Detroit. Workers co-operatives, for example, would likely have paid less in dividends to owners and salaries to managers than was typical at Ford, General Motors and Chrysler. Those savings, if passed on in lower automobile prices, would have enabled better completion with European and Japanese car makers than Detroit’s Big Three managed.

We cannot know how much more Detroit’s auto industry might have benefited from technical progress had it been organized as a workers’ co-operative. We can guess that workers have greater incentives to improve technology in co-operatives they own and operate than as employees in capitalist enterprises. Finally, worker co-operatives would likely have switched to producing (and helped to promote) mass-transit vehicles or other alternatives to the automobile to retain jobs and well-being once they saw that continued automobile production could not secure those priorities for worker co-operatives.

What kind of a society gives a relatively tiny number of people the position and power to make corporate decisions impacting millions in and around Detroit while it excludes those millions from participating in those decisions?

When those capitalists’ decisions condemn Detroit to 40 years of disastrous decline, what kind of society relieves those capitalists of any responsibility to help rebuild that city?

The simple answer to these questions: no genuinely democratic economy could or would work that way.

 

Photograph: Rex Features

4.0 ·
1
Trending Today
Obama's Hidden Role in Worsening Climate Change
Stansfield Smith · 10,614 views today · It should be a scandal that leftists-liberals paint Trump as a special threat, a war mongerer – not Obama who is the first president to be at war everyday of his eight years...
Make The Serengeti Great Again | Resource Scarcity, Demagogues and How Creativity Can Trump Hate (2017)
5 min · 3,203 views today · A Familiar Tale of Resource Scarcity, Demagogues, and How Creativity Can Trump Hate A quick, original, illustrated allegory that pokes at the demagogues we’ve got with an...
The Top 100 Documentaries We Can Use to Change the World
Films For Action · 2,507 views today · A more beautiful, just and sustainable world is possible. Take this library and use it to inspire global change!
Baraka (1992)
97 min · 2,355 views today · Featuring no conventional narrative, this film presents footage of people, places and things from around the world. From chaotic cities to barren wilderness, the movie takes...
John Lennon's "Imagine," Made Into a Comic Strip
John Lennon. Art by Pablo Stanley · 2,016 views today · This is easily the best comic strip ever made.  Pabl
Deconstructing Hierarchies: On Contrived Leadership and Arbitrary Positions of Power
Colin Jenkins · 1,502 views today · Bosses don't grow on trees. They don't magically appear at your job. They aren't born into their roles. They are created. They are manufactured to fulfill arbitrary positions...
What Is a Gift Economy? - Alex Gendler
4 min · 1,387 views today · What if, this holiday season, instead of saying "thank you" to your aunt for her gift of a knitted sweater, the polite response expected from you was to show up at her house in...
Why I Think This World Should End
4 min · 1,126 views today · Sorry if this offends you. - Prince Ea
Union Co-Operatives: What They Are and Why We Need Them
Simon Taylor · 1,080 views today · Neoliberal policies contribute to alienation, disempowerment and non-unionised jobs, but a new model for unions could break the vicious circle, argues Simon Taylor.
Today I Rise: This Beautiful Short Film Is Like a Love Poem For Your Heart and Soul
4 min · 947 views today · "The world is missing what I am ready to give: My Wisdom, My Sweetness, My Love and My hunger for Peace." "Where are you? Where are you, little girl with broken wings but full...
How Mindfulness Empowers Us
2 min · 663 views today · Many traditions speak of the opposing forces within us, vying for our attention. Native American stories speak of two wolves, the angry wolf and the loving wolf, who both live...
Prophecy Delivered! Martin Luther King Jr. and the Death of Democracy
Reverend Osagyefo Sekou · 658 views today · “A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.” Democracy is dead. It...
The Myth of Romantic Love May Be Ruining Your Health
Susanne Vosmer · 569 views today · Romantic love in Western societies is often portrayed in a stereotypical way: two yearning halves, who search for each other to find their complete, original state. Few find...
Trump: The Illusion of Change
Helena Norberg-Hodge · 536 views today · “Only by restoring the broken connections can we be healed.” — Wendell Berry
Dinosaur explains Trump policies better than Trump!
8 min · 339 views today · Donald Trump is actually the corporate triceratops, Mr. Richfield, from the 90's TV show sitcom, "Dinosaurs". 
Bertrand Russell & Buckminster Fuller on Why We Should Work Less, and Live & Learn More
Josh Jones · 331 views today · Why must we all work long hours to earn the right to live? Why must only the wealthy have a access to leisure, aesthetic pleasure, self-actualization…? Everyone seems to have...
Why It's Crucial for Women to Heal the Mother Wound
Bethany Webster · 315 views today · The issue at the core of women’s empowerment is the mother wound
Forget Shorter Showers: Why Personal Change Does Not Equal Political Change (2015)
11 min · 297 views today · Would any sane person think dumpster diving would have stopped Hitler, or that composting would have ended slavery or brought about the eight-hour workday; or that chopping...
Meet the New Boss, Same as the Old Boss: Bracing for Trump's Anti-Worker, Corporate Agenda
Colin Jenkins · 293 views today · Rich people don’t have to have a life-and-death relationship with the truth and its questions; they can ignore the truth and still thrive materially. I am not surprised many...
Trump Is a Symptom of a Sickness That Is Raging All Across The World
1 min · 278 views today · This is why we are here. And this is what we need to remember. 
Load More
What's Next
Like us on Facebook?
Detroit's Decline Is a Distinctively Capitalist Failure