Detroit is bankrupt. The city symbol of the American industrial vocation whose last hopes of revival were also linked to the Italian contribution with Fiat, has formalized its financial collapse.
Extraordinary commissioner Kevin Orr, imposed in December 2012 to try to avert the inevitable, has assessed the use of bankruptcy proceedings as the best alternative. In this way it will be possible to reduce the management costs of the administrative machinery at the same time as being protected from creditors.
Chapter 9 of the US bankruptcy law, which governs the bankruptcy of public entities, in theory gives Orr and the bankruptcy judge broad powers to redirect management back on track. However, the size of the bankruptcy, about 20 billion dollars, and the subject involved, the largest American city that has ever been involved in the procedure, make the evolution of the story very uncertain. In fact, fierce opposition from creditors is likely, including former city employees who risk obtaining 10% of the pensions to which they are entitled. The debts with the most devastating social consequences, those relating to health care and precisely pension spending, amount to a good 9 billion dollars. In a city that already suffers from rampant crime, any cut could represent the final blow to any hope of social stability or revival.
Detroit's decline, which went from 7 million citizens in the 50s to 714 today, has its roots in remote times, and is not only linked to the boom in the real estate market.
The slow process begins with the exodus of the white population towards the richer suburbs, accelerated after the protests of the blacks in the late 60s, which impoverished the city by reducing taxable incomes and triggered a vicious circle: the city hall has less and less funds to pay for public services, which made the city less and less welcoming and encouraged emigration. So «The emigration of a large part of the middle class to the suburbs has resulted in the closure and abandonment of offices and shops in the centre. The remaining population was poorer and more dependent on public services that the city was increasingly unable to provide.
Even today the factories and headquarters of the Ford and Chrysler car companies (General Motors is based in the Renaissance Center, in the center) are in the suburbs where the employees live and pay taxes (lower than in the center).
One could also draw a parallel between the decline of the industrial base of the metropolis and the continuous outflow of inhabitants, or between the chapter 11 that General Motors and Chrysler resorted to in 2009 and the Chapter 9 now requested by the city hall.
However, the Detroit bankruptcy is not free from darker aspects. The most murky part of the story concerns the political sphere of the decisions taken. In 2011 the changing of the guard in Lansing (capital of Michigan) between the Democrat Jennifer Granholm and the Republican Snyder introduced a new variable: the political conflict between the city, black and Democrat, and the state, now Republican and with a white majority.
It was Snyder himself who appointed the emergency manager Kevin Orr, effectively commissioning the mayor and the city council and he will manage the Chapter 9 procedure. However, this does not erase the responsibilities of a city council where corruption is rampant (the mayor of the first 2000s, the black Kwame Kirkpatrick is in prison for fraud) and the unpopular management choices have been postponed to the bitter end.
