[URBAN NOTE] Two links about how Donald Trump is wrong about Detroit

[rfmcdonald]

Donald Trump's statements about globalization being the downfall of Detroit were criticized on my RSS feed. Wired's Issie Lapowsky took him on in her "Trump's Right: Detroit Is Hurting, But He's Wrong About Why".

As Trump sees it, Detroit’s main issue is trade deals like the North American Free Trade Agreement, which was signed during Bill Clinton’s presidency, and which Trump says sent precious automotive industry jobs overseas. “Detroit is still waiting for Hillary Clinton’s apology,” Trump said Monday, before sneaking in a dig. “I expect Detroit will get that apology right around the same time Hillary Clinton turns over the 33,000 emails she deleted.”

But experts say blaming trade is at worst wrong, and at best a vast oversimplification of the case. Blame the unions. Blame Detroit’s dependence on a single industry. Heck, blame the robots. But, they say, don’t blame trade, or at least, do so at the risk of jeopardizing even more industries across the country.

[. . .]

The first and most glaring issue with Trump’s argument is his insistence that all of Detroit’s automotive jobs now exist somewhere overseas. Some do. But many don’t. In fact, many of them have just moved to southern states. And that’s not a new phenomenon, either.

Since the 1950s, American automakers have been relocating factories outside of Detroit to states like Kentucky and Mississippi where union presence isn’t as strong. Foreign car manufacturers have been going into those states, too. What that means is that while Detroit may be suffering from job loss, other cities like Jackson, Mississippi and Nashville, Tennessee are exploding with high-tech auto industry jobs.

[. . .]

Experts say you can also argue that Detroit’s leaders were delinquent in not diversifying the city’s economy sooner, and that the big three auto makers were remiss in not responding quickly enough to foreign competition. “Detroit as a city was killed in part by itself,” Macomber says, noting that Detroit invested too much time preserving a single industry and not enough creating new ones. “The big three declined because of productivity efficiencies coupled with complacency about poor quality and variety of product.”

BLoomberg View's Paula Dwyer wrote "Trump's Fairy Tale About the Fall of Detroit".

The city collapsed mostly because it overpromised what it could deliver to public employees and others, then borrowed too much to try to make good on those deals. All of that, plus a combination of a rapidly declining tax base -- the city has lost 1 million residents since the 1950s -- overreliance on a single industry, a failing education system and municipal corruption meant it couldn't pay off its debts.

Trump promised that Detroit would come roaring back under his plans to lower corporate income taxes. His revival plans also include cuts in regulation, especially environmental rules, and a rewrite of the North American Free Trade Agreement.

So let's break it down, starting with Obama's role. Rather than blame, the president gets credit from most analysts for rescuing General Motors and Chrysler. True, it was painful and costly for investors and taxpayers. He forced the companies to restructure, via quickie bankruptcies, in exchange for federal money. The companies closed plants, laid off workers, cut ties with dealers and shed obligations for retiree health care, transferring the costs (and a big chunk of stock and cash) to a union-dominated trust fund. Stockholders were wiped out, and creditors were forced to take cents on the dollar.

Today, however, the companies are profitable and competitive, even if record-high sales are slowing down a bit and the industry is still over-reliant on SUVs. As my Bloomberg View colleague, Matt Winkler, has written, the Big Three -- GM, Chrysler and Ford -- are selling more cars and trucks and are more profitable now than in 1994, when their market shares were twice today's size.