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The Cost and Potential of Detroit’s Bankruptcy by Opportunity Scholars

by Opportunity Nation   •  

With a debt ballooning to at least $18 billion, once-mighty Detroit, Michigan became the largest American city to declare bankruptcy in U.S. history. Though the city’s problems are severe, the announcement on July 18th is a blow to everyone who cares about the Motor City and the decline of great American cities that have been tied to struggling industries. As we work to expand economic mobility for millions of Americans, what does the bankruptcy mean for Michigan’s largest city, a place that remains home to 700,000 people, many of whom are low-income?

Wayne County, where Detroit is located, scores just 39.1 out of 100 points on the Opportunity Index. This is well below Michigan’s state average of 48.2 and the national average of 49.1 – an indication of just how challenging the region’s economic, educational and community environments are these days.

Detroit had a population of 1.8 million in the 1950s. The city’s decline since then is evident in its blocks of deserted buildings, its dwindling population, struggling public schools, in adequate public servies and high unemployment rate. In May 2013, the national unemployment rate was 7.6 percent while Michigan’s was 8.4 percent and Detroit’s was 9.3 percent.

We know that an Opportunity Nation Coalition Partner, the Michigan League for Public Policy, is working broadly to expand opportunity in Detroit and around the state.

Opportunity Scholar Breannah R. Alexander, a student at Saginaw Valley State University, shared a hopeful message on the Opportunity Leaders and Scholars Facebook page by Donna Murray-Brown, president and CEO of the Michigan Nonprofit Association.  Murray-Brown’s message on Monday urged nonprofits to take a leading role in turning the city around as it recovers from bankruptcy. She called the crisis an opportunity “to create the next Detroit.”

We asked Opportunity Scholar Madelynne Grace Wager, a senior at the University of Michigan in Ann Arbor, to share her reflections about Detroit’s bankruptcy and the future of a city she loves. While acknowledging the challenges facing Detroit, Madelynne offers insight into the city’s problems as well as a plea for cooperation to ensure economic prospects improve for the region’s youth.

Madelynne: Optimism will be essential to make this tough decision reap substantial benefits for Detroiters.

Detroit’s fiscal troubles are well-known and politically contentious. Regardless of who or what is responsible for the city’s financial trouble, pragmatic action has to be taken to provide citizens with even basic public services and to support public programs that will foster opportunity in Detroit. However, the management of things that bear real human costs — like public pension funds — will be a huge determining factor in the success of the city’s bankruptcy. And bankruptcy should not be seen as the solution to Detroit’s fiscal problems; it’s merely a starting point from which the city will have to work to ensure it doesn’t end up in the same position.

As with any difficult decision, Detroit’s bankruptcy will bring both costs and benefits for the city. But, if managed sensitively, I think it will present Detroit with a great opportunity to attract people back into the city and spur much needed growth. That said — both the local government and labor organizations will need to work together to ensure Detroiters get the best deal possible.

Madelynne Grace Wagner graduated with distinction from the University of Michigan’s Gerald R. Ford School of Public Policy in May 2013, where she earned a BA in Public Policy and Minor in Economics. She is currently the Machel-Mandela Intern at the Brenthurst Foundation in Johannesburg, South Africa, where she is doing consulting for African governments and leading research on how the private sector can effectively contribute to human capital accumulation and subsequently address inequality. She sent her thoughts about Detroit’s bankruptcy via email.

Opportunity Nation Opportunity Nation is a bipartisan, national campaign comprised of more than 350 cross-sector organizations working together to expand economic mobility and close the opportunity gap in America. Opportunity Nation envisions the United States as a nation where everyone – regardless of where they were born – has equal access to opportunity, economic mobility, and success at all stages of life.

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