Few people can clarify complicated issues in just a couple paragraphs as brilliantly as Professor Bourdreaux from Cafe Hayek. Reposting of his letter to the editor of The New Yorker is with his kind permission.
1 August 2013
Editor, The New Yorker
Dear Editor:
John Cassidy's analysis of Detroit's problems is surprisingly feeble ("Motown Down," Aug. 5). Why, for instance, does he uncritically accept Steven Rattner's assertion that that city's fiscal woes are a natural disaster, like hurricane Sandy, rather than a man-made one? Sure, consumer demands and industrial structures have changed since Detroit's heyday in the 1950s. But as Joseph Schumpeter famously explained in 1942, capitalist change is constant; it is unique neither to Detroit nor to the last few decades. Yet unlike today's Detroit, nearly all cities and regions adapt to this change and not only survive, but thrive. When reasonably free of government-imposed obstacles, the competitive market's incessant "destruction" is creative.
Chicago didn't collapse when its once-booming stockyards closed as meat-packers moved to rural areas. Denver isn't destroyed because it is no longer a mining town. And the shift of agriculture away from Silicon Valley obviously hasn't impoverished that region.
The forces that laid Detroit low were hardly beyond human control. The rulers of that city, for example, (according to the Lincoln Institute of Land Policy*) have imposed on Detroiters the highest effective rate of property taxation among America's 50 largest municipalities. Property-tax rates there run about double the U.S. average – a fact that, by itself, goes far toward explaining why so much of Detroit's landmass now lies abandoned and decrepit.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Professor Boudreaux is right to cite the lack of ‘creative destruction’ as a contributing cause to Detroit’s decline, which on its own may be necessary, but never could be sufficient to destroy Detroit. Schumpeter, himself, would have realised that.
Correct. Both Schumpeter and Boudreaux know that.
The point Dr. Boudreaux was making was the leaders of Detroit caused the downfall and should have be able to turn the city around like other cities have done.
But alas, they simply continued their tax and spend policies.
The real issue here as well as the top twenty-five cities in America is the tax and spend policies of the leftest regimes that run these cities.. All are run by the Democratic Party sponsored mayors and their political machines and the ones that are not, New York City for example, are all on the left.. Families, both white and black, are driven out of the city for the safer suburbs.. Taxes are lower, school sare superior and neighborhoods are safer.. Washington, D.C. is a classic example over the past fifty years of the urban flight.. As the tax base continues to erode because of oppressive taxes, nitwit politicians keep raising taxes as deficits skyrocket and bankruptcy becomes inevitable.. Detroit today looks like a war zone as does other decaying cities in America.. Hopefully bankruptcy will usher in an era of prudence and social rest.. If not, little will happen and urban decay will continue until a constructive era of rational economic thinking will revitalize what were one great cities..