Detroit Bankruptcy – American Dream to American Nightmare Shows Redundancy of Capitalism
Finian Cunningham (SCF),- The recently declared bankruptcy of Detroit City could serve as an epitome of the rise and fall of not just American capitalism, but the capitalist system generally as an historical mode of production. It is a mode of production that is no longer viable as a way of efficiently organizing and sustaining society in the 21st Century. In fact, the system has become the nemesis of American and other societies across the world.
In its earlier glory days, Detroit reflected the awesome productive power of American capitalism and many of the system’s undoubted initially progressive attributes. In the first half of the 20th Century, the northern American city became the centre of the giant US automobile industry. That industry seemed to symbolize all that was positive in American-style capitalism and society at large. It employed millions of workers in modern, clean factories with relatively decent wages. Fordist Production – named after the car manufacturer Henry Ford (1863-1947) – was based on the reasoning that if assembly workers were paid generous wages and benefits, then these workers would in turn be able to buy the cars that the factories were mass producing. It sounded eminently reasonable and for a while it worked admirably.
Photo courtesy of CSMCM
This social contract appeared to be a win-win formula for the capitalist factory owner and the labor force he employed. It became an accepted model right across the auto industry and many others followed suit, making American society productive, wealthy and seemingly a paragon for the rest of the world. The prodigious social gains made by the American auto workers were not merely a result of unilateral employer enlightenment and generosity. Decades of hard-fought organized labor protest and struggle for better wages and conditions were also a factor in forming this implicit social contract.
For decades the prestige of American capitalism seemed unassailable. In terms of output and quality of product, the US economy was the undisputed world leader. This was due partly to the sheer size of its population and abundance of natural resources, but also to the relatively progressive social pact that lay at the heart of American-style capitalism. Workers and their families benefited enormously from the material gains accrued from «Fordism». These families were able to afford pleasant homes with white picket fences in congenial suburbs. The American car and its iconic brands – Chevrolet, Buick, T-Bird – symbolized the American Dream of popular wealth and seemingly happy lifestyle. Drive-in movies, drive-in fast-food restaurants, inter-state highways, everything seemed boundless and bountiful and all so egalitarian. It is understandable how the popular American psyche had such an affinity with consumer capitalism. Those halcyon days seemed golden indeed.
Detroit City became affectionately nicked-named Motown in deference to the motor industry. It was the home of American industrial and social prowess in the post Second World War years. The bustling city provided in particular a destination for poor, rural African-Americans to migrate to and escape from the poverty and backward racism of the Deep South. Along with the mass production of the auto industry, Detroit flourished as a cultural centre for modern American music, producing new genres of soul, rock and jazz. Motown was not just a world leader in car and transport industries; it provided the upbeat soundtrack for all that seemed progressive about modern American capitalist society.
But the tide would change dramatically and irreversibly. The material gains that American labor was able to wrest from American capital in the social pact that had made the economic model such a success would soon come under attack. From the 1970s onwards, the American upper class embarked on a nationwide «tax revolt». With the rise of international industrial competitors in Europe and Japan, the American economy began losing competitiveness and profitability.
However, American capital was unwilling to cut its cloth accordingly. Instead, it saw that concessions would have to be yielded by US workers. This was the beginning of the rise in neo-liberalism, a political trajectory spearheaded by President Ronald Reagan and his financial backers from within the American ruling class. This ideological shift – known as Reaganomics and also Thatcherism in Britain – prevails to this day. All political parties in the US and Europe conform to the neo-liberal agenda. This agenda has and continues to oversee a secular shift in wealth from the working and middle classes to the upper echelon of society. So much so that many commentators note the phenomenon of a disappearing middle class in which society is more characterized by just two classes – the haves and the have-nots. Under neo-liberalism, the prevailing orthodoxy is dominated by relentless tax cuts for rich individuals and companies, deregulation of industries to maximize financial profit, decimation of workforces, pay and conditions, union-busting, and balancing government budgets by slashing public spending and investment.
Some figures help illustrate this historic shift. In the US, some 40 per cent of all income tax derived by central government comes from payrolls, while 9 per cent comes from corporation tax. Six decades ago, the ratio of contributions was reversed, with worker payrolls accounting for 10 per cent of total tax take and corporate tax providing some 33 per cent of government revenues. This trend can be seen in Europe as well. It has become the hallmark of Late Capitalism, whereby the wealth gap between a tiny social elite and the vast majority has become a stark chasm. In the US, the top 400 richest individuals have a combined wealth greater than more than 150 milllion Americans – half the total population.
Developments in technology along with the freeing of capital under globalization policies also meant that industries could export jobs to cheap labor countries and regions – all under the politically legitimized pursuit of maximizing profit. This has led to deindustrialization of cities across the US and elsewhere, replaced by poorly paid, insecure service jobs or massive unemployment.
Detroit City is a case study of this demise in American industry. In its heyday, during the 1960s, the city was the fourth largest in the US with a population then of some 3 million. Today, the city’s population has dwindled to 700,000, making it now the 18th largest. That demographic collapse is intimately related to the collapse of US industry as dictated by the demands of capitalist logic. Other signs of urban decay are that 60 per cent of Detroit’s children live in poverty, there are more than 70,000 abandoned residences across the city, more than half the municipal parks are closed, and the once salubrious suburbs have degenerated to a state of destitution and crime, or reverted to natural wilderness. Some 40 per cent of the city’s street lighting has been turned off and in many areas vital public services, such as firefighters and ambulances, have ceased operating.
Motown’s workforce has been decimated to number some 10,000, in addition to 20,000 retirees. Those jobs that do exist are now subject to further lay-offs and wage cuts as the city planners rationalize how to pay off up to $20 billion in debts to bondholders and Wall Street banks. The unelected financial controller of Detroit, Kevyn Orr, a Wall Street bankruptcy lawyer who was appointed back in March by Michigan State governor, Rick Snyder, has set the priority of paying off the banks above all other obligations, including public welfare. The city’s bankruptcy status gives the controllers dictatorial powers to tear up statutory employment and pension contracts. As in Europe, public austerity and in effect public embezzlement is to be enforced by unelected technocrats in order to placate the sacrosanct profits of banks and hedge funds.
Detroit City’s debt has been decades in the making. But while the city’s planners, media and Wall Street flunkeys blame the fiscal situation on «onerous» public welfare and pensions, the truth is that, like much of America, the soaring deficits and plummeting social conditions are due to the historic, inexorable shift demanded by capitalism. The social pact that previously worked for Detroit and the US generally was always vulnerable to attack by the rich and powerful. Capitalism is a system whose ineluctable dynamic is to polarize wealth and power, and to shift the burden of costs and losses on to the less powerful. Detroit demonstrates how political constraints on the aggrandizement of wealth and power will eventually be ruptured by the elite and their bought-and-paid-for politicians. Even with the best of intentions, as Detroit proves, capitalism as a system is bound to end in misery for the majority while enriching an elite to ludicrous and obscene levels.
This elite includes the two Big Business political parties of Democrat and Republican and their lobbyists in Congress. Since the financial collapse in 2008, the Washington political establishment has pumped some $3 trillion of taxpayer money into bailing out Wall Street and its banks, the very section of society whose crony capitalism caused the economic collapse. This bailout, given the quaint name of Quantitative Easing, continues at a rate of $85 billion a month under the aegis of the US Federal Reserve. That amounts to four times the debt of Detroit City – paid out to the banks every month. Yet the Obama administration maintains that there is no federal cash to help rescue Detroit. How crassly undemocratic is that? Indeed, some commentators opine that the White House and Congress are setting up Detroit as a precedent case for gutting public funds in other similarly indebted cities across America.
It doesn’t have to be this way. Detroit workers and other citizens are fighting back with lawsuits, strikes and civic disobedience. They say that the city should simply repudiate the debts to Wall Streets and let the already bloated banks take the financial hit. The priority must then be on public investment to regenerate decent jobs, housing, education, healthcare and communities. That is, the economy of the city must be brought under democratic planning to serve public needs, not private elite profits. That is a paradigm shift that the whole of the US (and Europe) needs to adopt. Some may call this socialism. One thing for sure is that such an alternative political program is certainly not capitalism. The story of Detroit shows that whatever progressive aspects capitalism may have had in former times, it is no longer viable for sustaining societies in the 21st Century. Indeed, how could it be? It is a voracious, irrational system that inevitably destroys more than it creates.
Finian Cunningham via Strategic Culture Foundation
Related articles:
Union Busting in the USA Continues; Detroit Citizen’s Prepare to Fight Their Corporate Master
Local Fights Against Austerity Are Growing Across the U.S.
Voting Rights Act Under Threat Amid Broadening Attacks on African Americans
About the Author
Finian Cunningham - Originally from Belfast, Ireland, Finian Cunningham (born 1963) is a prominent expert in international affairs. The author and media commentator was expelled from Bahrain in June 2011 for his critical journalism in which he highlighted human rights violations by the Western-backed regime. He is a Master’s graduate in Agricultural Chemistry and worked as a scientific editor for the Royal Society of Chemistry, Cambridge, England, before pursuing a career in journalism. He is also a musician and songwriter. For many years, he worked as an editor and writer in the mainstream news media, including The Mirror, Irish Times and Independent. He is now based in East Africa where he is writing a book on Bahrain and the Arab Spring.He co-hosts a weekly current affairs programme, Sunday at 3pm GMT on Bandung Radio. Finian Cunningham is a frequent contributor to international media, including PRESS TV and nsnbc, where he began contributing in 2012.
Photo Credit: Shutterstock.com
People uninterested in change and progress tend to cling to the jingoistic fantasy that America is an exceptional country. Often this implies that the U.S. is somehow superior to other nations. Some, like the neocons, have taken the idea of exceptionalism to mean that America should be above the law and that other countries should be remade in our image. Others, like conservative evangelicals, believe that America's supposed exceptionalism is God's will.
In recent decades, America has indeed pulled ahead of the global pack in a number of areas. But they aren’t necessarily things to go waving the flag over. If we can't address the following trends, we'll end up snuffing out the things that truly have made the country great, like opportunities for mobility and a decent social safety net.
1. Most expensive place to have a baby. In the U.S., having a baby is going to cost you, big-time, before you even get that bundle of joy home. The New York Times reports that on average, a hospital delivery costs $9,775 — and make that $15,041 if you’re having a Cesarean. No other first-world country on earth expects new parents to shell out that kind of money just for the privilege of procreating.
You might think insurance would help. You’d be wrong. A staggering 62 percent of private plans come with zilch in the way of maternity coverage. Mothers-to-be are dragged through what the Times calls “an extended shopping trip though the American healthcare bazaar” where they try to figure out the cost of things like ultrasounds and blood tests. Pricing is often opaque and widely variable, and it’s common for mothers to receive treatments they don’t necessarily need. Even when insurance does cover maternity care, between the deductibles and co-insurance fees, women can expect to shell out thousands in out-of-pocket expenses: an average of $3,400.
Do American mothers get some kind of unusual care for all that dough? Nope. They receive the same services moms receive in other first-world countries; they just pay for them individually and at higher rates.
2. Obesity. The U.S. has been ranked as the most obese country in the world, though a recent report by the U.N. says that Mexico is pulling ahead of us. Not surprisingly, obesity is considered a national health crisis and contributes to an estimated 100,000 to 400,000 deaths in the U.S. per year. In 2010, the Centers for Disease Control and Prevention reported that 35.7 percent of American adults are obese, and 17 percent of American children. More than two-thirds of American adults are either overweight or obese.
Americans are ballooning for a number of reasons, including our fondness for fried food, sugary drinks, cheap, pre-packaged foods, processed meats, our sedentary lifestyle, particularly television-watching, too little sleep, and a lack of exercise. Obesity is associated with diabetes, heart disease, complications in pregnancy, strokes, liver disease —the list goes on and on. The obesity epidemic is also responsible for increased healthcare use and expenditures. Kentucky is the most obese state, and Colorado is the least obese.
Researchers predict that the cost of obesity in the U.S. is likely to reach $344 billion by 2018.
3. Anxiety disorders. Americans are freaking out. Researchers have looked at the prevalence of various types of mental illness around the globe and found that the U.S. is the world champion in anxiety. According to the 2009 results of the World Health Organization’s World Mental Health Survey, 19 percent of Americans were found to experience a clinical anxiety disorder over a given 12-month period. The National Institutes of Health puts the number at 18 percent of adults, which means that at least 40 million Americans are suffering.
Researchers have found that anxiety disorders, which include several varieties such as generalized anxiety disorder, obsessive-compulsive disorder, and post-traumatic stress disorder,take a tremendous toll on the population. Often, anxiety disorders are associated with other ailments such as chronic pain and they tend to limit the sufferer’s participation in daily activities. The disorders are more prevalent in women, and only a third of sufferers receive treatment specifically addressed at anxiety.
The Anxiety and Depression Association of America finds that people suffering from anxiety disorders are up to five times more likely to go to the doctor in general and six times more likely to be hospitalized for psychiatric disorders than others.
4. Small arms ownership. The Graduate Institute of International Studies in Geneva ranks the U.S. number one in both the total number of civilian firearms and in per capita ownership of small firearms, beating out recent war zones like Yemen, Serbia and Iraq.
In fact, we may even have more guns in the U.S. than we have people: The rate of private gun ownership in the U.S. was tabulated at 101.05 firearms per 100 individuals in one study. According to a recent report on CNN, Americans own as many as one-third of the guns in the entire world. Research also shows that while the number of households with guns has declined, current gun owners are stockpiling more guns. Part of this concentration seems to stem from the fact that guns are primarily marketed to people who already own guns.
A related statistic: In the U.S., the gun-related murder rate is the second highest in the developed world. Only Mexico, where the ongoing drug war expands the number, has us beat.
5. Most people behind bars. Incarceration rates in the U.S. blow right past the likes of Russia, Cuba, Iran or China. According to the International Center for Prison Studies, the U.S. locks up 716 out of every 100,000 people. Norway, in contrast, only puts 71 out of 100,000 in the clink. Japan jails 54 and Iceland locks up only 47 out of 100,000.
The latest stats show that the total prison population of the U.S., including pre-trial detainees and remand prisoners, is 2,239,751. These people are behind bars at 4,575 different facilities. The estimated capacity of our prisons, by the way, is only 2,134,000. In 2010, there were an estimated 70,792 juveniles locked away.
Racism is rife in the prison system, with blacks and Hispanics disproportionately represented. Inhumane conditions abound, from poor care for those suffering from serious diseases like HIV/AIDS to the torture of solitary confinement to rape to abuse of the mentally ill. Debtor’s prisons are thought to be a relic of the 19th century, but starting in 2011, in the U.S. you can find yourself imprisoned for debt in several states, including Florida. High rates of imprisonment seem to derive from a number of factors, including long sentences, the incarceration of non-violent offenders (20 percent of the prison population is made up of drug offenders) and the privatization trend, in which private corporations rely on “growth” models to increase their profits.
6. Energy use per person. The U.S. is the global leader in the amount of energy use per person. We get top billing in electricity consumption, we’re miles ahead of everybody in oil consumption, and when it comes to coal consumption, we’re number two, right behind China.
The U.S. Energy Information Administration reports that Americans account for nearly 19 percent of Planet Earth’s total primary energy consumption, which comes from petroleum, natural gas, coal, nuclear, and renewable energy. About one-quarter of primary energy consumed in the U.S. in 2011 was supplied from natural gas, made cheap through fracking.
Factors contributing to high use include the cost of heating and cooling increasingly large homes, electricity requirements for home electronics, the high amount of energy required to produce consumer goods in the industrial sector, and transportation usage.
U.S. energy consumption almost tripled from 1950 to 2007, driven by population growth and increased standards of living, and then dipped in 2009 due to the Great Recession. The U.S. is predicted to experience a slight decline in energy use in the coming years, but world energy demand is on pace to double by 2050.
7. Health expenditures. The U.S. devotes more of its economy to health than any other country, 17.6 percent of GDP in 2010, and the trend is slanted upward. We spend more in every category of healthcare, especially in administration costs, due to the existence of thousands of different insurance companies.
Yet the Commonwealth Fund ranked the U.S. dead last in healthcare quality among similar countries, while noting that U.S. care is the most expensive. A coronary bypass in the U.S., for example, costs 50 percent more than it would cost you in Canada, Australia and France, and twice as much as you’d pay in Germany.
Despite all the money sloshing around, the U.S. has fewer physicians per person than most other OECD countries, fewer hospital beds, and a lower life expectancy at birth, according to a recent PBS report. The same report stated that the U.S. spent $8,233 on health per person in 2010. The next highest spenders, Norway, the Netherlands and Switzerland spent at least $3,000 less per person.
8. Cocaine use. When it comes to cocaine use, we’ve got a tie with Spain. In both countries, according to the 2008 World Drug Report released by the UN Office on Drugs and Crime, three percent of adults and teens say they’ve given it a try.
Between 2006 and 2010, cocaine use is reported to have declined significantly in the U.S., but demand has by no means disappeared: about 2 million Americans are regular users (crack users account for about 700,000 of these). Colombia was once the major supplier of cocaine to Americans, but it has now fallen behind Bolivia and Peru, according to the Office of National Drug Control Policy. Cocaine is the second most popular drug behind pot, but unlike marijuana, it is associated with high rates of death, particularly due to cardiac arrest.
Interesting factoid: Cocaine has a nasty link to industrial capitalism. It first became popular with laborers as a way of increasing productivity, and employers often supplied the drug.
Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' She received her Ph.d in English and Cultural Theory from NYU, where she has taught essay writing and semiotics. She is the Director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.
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