Amid Detroit’s Bankruptcy, a New Vibrancy Emerges

Amid Detroit’s Bankruptcy, a New Vibrancy Emerges
December 26, 2013

For years the news media have depicted Detroit as nothing more than a dumping ground of endless ruin and “war-torn” neighborhoods abandoned by both businesses and residents.

In 2008, when the national economic meltdown seemed to have delivered all the agony it could muster to a metropolis already stricken by decades of exploitation, there arose a heartbeat that could be heard, but not quite interpreted, by those of us who are intimately tied to the soul of Detroit urban life. A new energy, in the form of entrepreneurial flurry and grass-roots activism, was starting to reclaim the city from its troubled past.

In spite of a coast-to-coast recession and ensuing uncertainty regarding this country’s economic prospects, the core of the city center, and many of the city’s historic neighborhoods, have been experiencing an economic revitalization driven by private investment, philanthropy, and perseverance on the part of communities that are reshaping their existence through hard work, hope, and an ample supply of faith and effort.

The New York Times referred to this phenomenon as "a private boom amid Detroit's public blight," and CNN Money called Detroit "the nation's hottest downtown." Even as city services disappear further into the abyss, urban gentrification is full steam ahead and occupancy rates have skyrocketed to as high as 99 percent in Midtown, a place that was once designated as one of the seediest districts in the city.

Private Investment Outstripping Government Ineptness

The real story that tends to get lost in the shuffle of the news media melodrama is that Detroit has been able to move forward and thrive in spite of decades of government corruption, largesse, and regulatory barriers to success. Detroit is being transformed via a groundswell of entrepreneurial and grassroots efforts. Its revival has been able to advance at breakneck speed due ironically to an inept and powerless local government that cannot possibly keep up with regulating the renaissance of entrepreneurial and community ventures that are taking root so rapidly.

The auto industry is no longer the sole savior and economic nucleus of an entire region. The Detroit economy has attracted numerous startups and venture capitalists, entire creative communities, and entrepreneurs who are competing against government in formerly public domains such as transportation and security.  

Many areas of the city have become a Mecca for pop-up businesses that require underused or empty space, low-cost real estate, and dense neighborhoods with a demand for unique retailers and services. These pop-ups help to bring innovation, stability, and, eventually, more permanent businesses to the city's dense areas. The pop-up model allows for entrepreneurs to test the business waters with low risk and up front investment costs so that local markets can be evaluated for consumer interest and long-term viability. A January 2012 Forbes article aptly noted that Detroit is one of the best cities in the U.S. to be an enterpreneur.

Bankruptcy and Government Cleanup

Meanwhile, the government’s financial disaster -- the largest municipal bankruptcy in this nation’s history -- is mistakenly held up as the standard by which all things Detroit should be measured. In fact, the bankruptcy is the only viable solution for cleaning up the graveyard left behind by multiple political regimes that plundered and taxed and criminalized the productive class until they scattered from the city to the more business-friendly environments in the surrounding suburbs.

Still, the city has its share of central planning proponents who haven’t learned anything from the city’s history of government intervention and an obstructive regulatory framework. They are convinced that Detroit is a clean canvas that is to be reshaped by central planners as long as the right people are in place and the "needle" pointing to public or private is adjusted so as to moderate between two extremes. Yet bureaucrats with opposing political interests who are tugging on the needle are engaging in coercive politics that trip up or impede market solutions. Detroit’s history demonstrates that political intrusion does not bring gainful outcomes.

Whereas government planning and abuse of a political system have long served to turn Detroit into the most despairing city in the nation, private market forces are finding solutions for the economic plight and turning the city into a hotbed of commercial activity and a destination for the productive class.

Turnaround Expert in City Hall

The key to sustaining the momentum to keep moving forward is keeping the local government out of the way, especially with the transition to a new mayoral administration on the first day of 2014. New mayor Mike Duggan is a pragmatic Democrat and not a liberal ideologue. He has a resume that highlights a successful effort as president and CEO of Detroit Medical Center, where he led an effort at turning the city's most desperate healthcare system into a nationally recognized, for-profit powerhouse that has lured top docs to what was once regarded as a basement institution.

Duggan’s leadership and willingness to allow market forces to continue unabated will be crucial to Detroit’s entrepreneurs and their ability to continue to invest in and profit in the city. The locals aren’t excited about a politician so much as they are motivated by action and are thus hopeful about a mayor who they hope will allow the ideas and vision to flow freely without continued hindrance from the city’s bungling bureaucrats.

Karen DeCoster, CPA (kdecoster@gmail.com) has an MA in economics and is employed as a finance professional at one of downtown Detroit’s largest firms that is committed to rebuilding the city’s core through density initiatives, renovation, and private investment. She formerly lived in Detroit’s East English area and now resides a tad north of the city.