Sunday, April 18, 2010

What's Behind the Detroit Economic Crisis?

What's Behind the Detroit Economic Crisis

A Socialist perspective on the current situation and the growing fightback

By Abayomi Azikiwe
Editor, Pan-African News Wire
Note: The following speech was delivered at a public meeting on the economic crisis in Detroit on April 17 and featured other speakers including Ben Prado of Union del Barrios in San Diego, Cheryl LaBash, a retired city worker, Andrea Egypt of MECAWI and Abayomi Azikiwe, editor of the Pan-African News Wire whose address is printed below. The meeting was chaired by Debbie Johnson of Workers World Party.

On April 13, 2010, Detroit Mayor Dave Bing presented the city’s 2010-2011 annual budget to the City Council amid much anticipation and fanfare. The budget called for the cutback in city services and the laying off of over 300 employees.

Although many people had speculated that there were plans to lay off hundreds more workers, when the actual details of the report are read and analyzed, it becomes clear that there remains many unanswered questions of revenue generation, the amount and status of the municipal debt-service and the degree of local control that will be relinquished to the private sector, the state and other non-governmental entities.

Detroit is the epicenter of the economic crisis in the United States having been the focus of decades of rapacious capitalist policies aimed at the weakening of the trade union movement, the super-exploitation of labor and the maintenance of racism and national oppression against African-Americans.

Corporate Detroit, which encompasses the financial institutions, insurance companies and other multinational corporations, continue to set the agenda for the future of the city. If people read the locally produced Crain’s Detroit business weekly it is easily discernible where Mayor Bing is getting the bulk of his ideas and policy pronouncements.

With such a political orientation it is not surprising that the city of Detroit is continuing to decline in all the major economic indicators. This failure of economic policy is not exclusively confined to Detroit, the state of Michigan has the same problems that are facing the city. In fact the crisis is national and even international in scope due to the phenomena of over production and the unequal distribution of wealth and economic power globally.

Over the last three years the economic situation in Detroit and throughout the country has taken a drastic turn towards disaster. In the fall of 2008, the collapse of several major banks, insurance companies and industrial firms caused panic among the ruling class and the state.

Up until that period, the corporate media, the spokespersons for the capitalist system and the bourgeois politicians had denied there was a serious economic crisis in the United States. During the 2008 presidential and congressional elections, the discussions around the economy avoided the real underlying causes behind the decline.

A hypocritical debate around whether to cut taxes or implement measures to provide more human service benefits to an increasingly impoverished population remained dominant in the newspapers and electronic media. Tax cuts had been the hallmark of the Bush administration where three such programs had only an increasingly negative impact on the wages and social conditions of working people.

When President Obama won the elections in November 2008, there were reports that his administration would engage in a more vigorous economic stimulus program quite similar to the New Deal of the 1930s under Franklin D. Roosevelt. Yet when Obama announced his appointees to the key portfolios of the treasury, foreign affairs, labor, housing and defense it became quite obvious that there would not be any real shift in domestic or foreign policy in the United States.

Over the last 15 months both wars in Iraq and Afghanistan have continued with the enhanced occupation of central Asia reaching unprecedented levels. The Obama administration announced in December that it would send another 30,000 or more troops to Afghanistan in order to carry out the same imperialist aims as the previous Bush regime. The president said that the principal reason for the escalation was to root out al-Qaeda and the Taliban and to prevent the spread of “Islamic terrorism” in the region.

Not only has the war in Afghanistan escalated, in Iraq, the puppet government that was installed by the U.S. after the invasion and occupation of 2003, is still deeply divided and incapable of deciding on who will divide up the leftovers from the imperialist exploitation of the oil industry and war related contracts. In Pakistan, over a million people have been displaced due to the increasingly aggressive policies in Afghanistan.

On the continent of Africa, the Pentagon’s Africa Command (AFRICOM) has received an increase in funding under the Obama administration. The U.S. interference in Somalia, Zimbabwe, Sudan, Nigeria and many other nations on the continent continues at a rapid speed. This U.S. military involvement costs the working people of the country at least $800 billion a year, not to mention the toll taken resulting in deaths, injuries, psychological distress and the lost labor power of those misused in a series of wars that cannot be won.

How does this scenario play itself out in the city of Detroit and the state of Michigan? The most pressing need in Detroit is the lack of meaningful employment for nearly half the population of the city. Detroit has the highest unemployment rate among all major cities in the U.S. Let us examine the impact of joblessness and the phenomena of the declining rate of wages.

Unemployment and Underemployment

In the city of Detroit the problem of joblessness has multiple ramifications on the overall social fabric of the municipality. Without viable jobs and income the city of Detroit has an extremely high rate of poverty, approximately 40 percent and rising. As a result many people who have not been working for an extended period of time become discouraged and completely drop out the labor market.

This declining rate of employment and income loss affect small business, housing, schools, family and community life. These factors can even hamper the ability of people to mobilize and organize around their most basic needs such as food, clothing and shelter.

In Detroit there is a dearth of not only money for individual households but the availability of fresh foods, recreational facilities, cultural activities and reliable public transportation. Consequently, the overall quality of life has deteriorated and this negatively impacts the general standard of living.

Nonetheless, the problem of unemployment is not limited to the city of Detroit. Recent reports indicate that virtually every major urban area in the United States has seen an increase in unemployment over the last few months despite the ruling class propaganda that promotes the myth of an economic recovery.

In a recent article published by a San Diego-based website, “Regional and state unemployment numbers were little changed in March according to the Dept. of Labor’s Bureau of Labor Statistics, however California was a standout for a record-high jobless rate. Although non-farm payroll jobs increased by 4,200 during the month, according to the California Employment Development Department, California’s rate climbed from 12.5 percent in February to 12.6 percent in March. “(, April 16)

This article continues by pointing out that “The national rate remained at 9.7 percent for the third straight month, up from 8.6 percent in March 2009, and San Diego’s rate shot up to 11 percent. The state, which tied for the third worst jobless rate in the nation with Rhode Island and just behind Michigan and Nevada, has 458,600 fewer people employed over the past year.”

In addition to these developments, the western region of the United States had the highest jobless rate during March 2010 at 11.0 percent. In the state of Utah, the highest unemployment rate in 26 years was reported for March.

The Deseret News says that “The state’s non-farm wage and salaried job count has shrunk by 1.9 percent over the past year, with about 22,500 jobs removed from the Utah economy since March 2009. The state’s seasonally adjusted unemployment rate was 7.2 percent in March, an increase of a 0.1 percentage point from February. A year ago, unemployment in the Beehive State stood at 6.4 percent.” (The Deseret News, April 15)

In the state of Oregon unemployment was up as well. In March the unemployment rate was 11.2 percent in comparison to 10.6 percent during the same time period in 2009.

In the southern United States, the state of Arkansas saw a rise in unemployment for the second straight month. The state’s jobless rate in March 2009 was 7 percent, however, one year later the figure had climbed to 7.8 percent.

Kimberly Friedman, who is the communications director for the Arkansas Department of Workforce Services, said that “Although Arkansas is still feeling the affects of the recession, the increase in our rate this month follows historical trends. In the last 10 years, Arkansas’ March rate has increased five times.” (The City Wire, April 16)

On the east coast of the country, the situation is also reflective of the general trend towards higher rates of joblessness in urban areas. In fact “New Jersey ranked second among the states with the largest increases in initial unemployment claims for the week ending April 3.” (, April 15)

The situation in New Jersey, where the number of unadjusted initial claims grew in the first week of April by 3,582 to 14, 570, earned the state second place behind Pennsylvania. This increase was blamed on escalating layoffs in the public sector which has been affected by the decline in tax revenues.

This is the trend that is taking place throughout the more urbanized areas of the United States. In a recent article on the impact of job losses for cities, it states that “In January, 363 of 372 metropolitan cities reported higher unemployment rates than the previous year.” (Examiner.Com, March 23)

The article continues by pointing out that “More than 35 areas recorded unemployment rates at 15 percent or more, including 15 in California and six in Michigan. In January, New Jersey’s unemployment was 9.9 percent. Prior to that, the state average rose to 10.1 percent, its highest rate in over 30 years.”

Even Bloomberg news service reported that “Unemployment increased in 27 U.S. states in February and dropped in seven, a sign the labor market needs to pick up across more regions to spur consumer spending and sustain the economic recovery.” (Bloomberg, March 26)

Citing Labor Department figures, the Bloomberg article notes that the government’s own “report indicates broad-based hiring is yet to develop following the loss of 8.4 million jobs since the recession began in December 2007. Florida, Nevada, Georgia, and North Carolina set record levels of joblessness last month.”

Of course in the city of Detroit where unemployment is highest and with its 85 percent African-American population, the problem could accurately be described as being at depression levels. The disproportionately high unemployment rate among African-Americans has become a cause of concern for many civil rights organizations.

Giving voice to the growing impatience of the African-American community, a recent article by John A. Powell, Executive Director of the Kirwan Institute for the Study of Race and Ethnicity, and Heaster Wheeler, Executive Director of the Detroit Branch of the NAACP directly addressed the failure of the United States to develop programs that would alleviate massive joblessness among African-Americans.

"The recent employment figures released by the Bureau of Labor Statistics indicate that Black unemployment is on the rise again (returning to 16.5%). These figures remind us that the persistent economic crisis facing the Black community is not being addressed by the broad and universal approach to job creation embraced by the Obama administration and Congress. More pointedly, growing evidence suggests that Black communities and other marginalized populations are not being adequately reached and are not benefiting from these current economic policies."

This same statement goes on to emphasize that "The reason for this continuing challenge is fairly simple and straightforward; the circumstances that different groups in the United States face are all particular to them, and different. For example, Black workers are more likely to be physically isolated from job centers, to be located in poor urban and rural areas and to face conditions that other communities might not.

"Such challenges are not limited to just Black workers. Women are less likely to be in the construction trades and other groups may face language barriers. In this post-industrial age, industrial centers like the city of Detroit have been turned into ground zero for the economic crisis with de-industrialization and the housing crisis creating conditions unlike any other place in the nation. Unfortunately, meaningful federal policies have not been crafted to address this situation."

Even Obama himself refused in a 2009 press conference to commit to implementing programs that specifically address the depression-like conditions in the African-American community. Although the president has had meetings with civil rights and church leaders, no specific initiatives have been announced and implemented.

Powell and Wheeler said also in their statement that "Regardless of the conditions the Black community faces, the President continually asserts that he is president of all Americans and cannot just focus on Black America. We accept this, and we do not call for the Black Community to receive special treatment, but we insist that the Administration's policies be sensitive to the particular challenges and disproportionate impact of the economic crisis on the Black community and other marginalized groups.

"We contend that to meaningfully regard someone as a member of society requires for our government to acknowledge and be sensitive to their circumstances. The failure to do this makes them all but invisible and represents a form of callous disregard."

The Crisis in Education

In Detroit the school system has been severely affected by the decline in employment and the drastic loss in incomes for individual households. In 2009 Gov. Jennifer Granholm appointed an emergency financial manager to purportedly address the growing deficit.

Yet the problem of urban education is directly linked to the overall economic crisis and the national oppression of African-Americans and other people of color in the United States. Detroit's overwhelmingly African-American school system has been in decline for decades due to underfunding, the loss of students and the foreclosure problem.

However, in 1999 when the state took over the Detroit public education system under former Gov. John Engler, the district had a surplus of funds as well as a voter-approved $1.5 bond for capital improvements. After five years of state control, the Detroit school system was returned virtually bankrupt. Since 2005, the district has fallen deeper into debt and with the appointment of an emergency financial manager the deficit has increased by $100 million during the course of one year.

Plans are underway to close over 40 schools and lay off more employees in the district. The ultimate plan is complete privatization and charterization of schools in Detroit. There has been a substantial growth in charter schools which disallow unions and direct parental involvement.

Parents, teachers, students and the community have been outraged at the plans to close more schools in Detroit. There have been demonstrations by unions against the proposed changed imposed by the state under Granholm's direction. The debt incurred by the district is hampering its ability to function. 80 percent of the state aid is being directed to service the debt.

A lawsuit to halt the emergency financial manager from implementing academic decisions and the closing of schools without the involvement of the locally-elected Detroit Board of Education, won a preliminary injunction in Wayne County Circuit Court on April 16. However, the response of the state and the actual outcome of the case will not necessarily result in keeping all of the schools open that are slated to close.

What is needed is a broad-based effort on the part of students, parents, unions and the community to question the legitimacy of Public Act 72 that mandates the appointment of emergency financial managers in local governments and school districts. The systematic underfunding of education in majority African-American districts and the general decline in the social wage of working people are at the root cause of the crisis in education.

Pension Funds and the Further Privatization of Health Care

Two other areas of concern in Detroit are the proposal to transfer the city worker pension funds out of the control of an elected trustee board and to place them under the Municipal Employees Retirement System (MERS) which is facing a funding crisis. There was widespread opposition to these plans and the Detroit City Council passed a resolution in opposition to the transfer. However, the state legislature has to address the issue and the plans to transfer the pension funds has bi-partisan support in Lansing.

In addition, the Detroit Medical Center is under siege by the Vanguard Health System which is seeking to take control of the non-profit entity. Although there have been statements indicating that Receiving Hospital will continue to provide care to uninsured patients, many people do not trust the incoming private group.

Several non-profit health care organizations say that the sale is illegal and may challenge the plans in court. Nonetheless, such a critical issue as health care for working people and the poor requires the mass mobilization of the people in Detroit and throughout the region.

These decisions related to schools closings, the seizure of pension funds and the further privatization of health care are coming at a time when the national census is being taken. These assaults on working people in Detroit are really designed to continue the dis-empowerment of the residents of the city and to further exploit their labor and resources, consequently driving more people out of the area and providing a rationale for the "downsizing" of the municipality.

The Ruling Class Culpability and Response

In order to build an effective struggle to fight against the current onslaught against working people and the oppressed, we must be clear about what is the source of the problem. In a city like Detroit with a majority African-American population which dominates the political institutions such as the mayor's office, city council, election commission, charter commission, school board, etc., organizers must continue to emphasize that the economy of the city is still controlled by the capitalist class which is exclusively white and based outside the city limits.

This phenomena is somewhat similar to the conditions that prevail on the African continent and many other post-colonial societies, where despite the attainment of national independence, the economic sources of power still reside in the hands of the former colonial masters or the United States, which is the number one imperialist power in the world. The complexity of this situation requires a global class analysis of the international division of labor and economic power. Consequently, no matter what the class composition or orientation of the political figures operating inside these post-colonial states, the role of the world capitalist system remains paramount.

Nkrumah called this political phenomena neo-colonialism. In 1965 he published a book entitled "Neo-Colonialism: The Last Stage of Imperialism," which analyzes the challenge facing Africa and other regions struggling to throw off colonial rule and build independent national states. According to Nkrumah, "The essence of neo-colonialism is that the State which is subject to it is, in theory, independent and has all the outward trappings of international sovereignty. In reality its economic system and thus its political policy is directed from outside." (Revolutionary Path, P. 314)

Three years later Nkrumah wrote another book entitled "The Handbook of Revolutionary Warfare." The first section of this book is entitled "Know the Enemy". Nkrumah states on the first page that "A number of external factors affect the African situation, and if our liberation struggle is to be placed in correct perspective and we are to KNOW THE ENEMY, the impact of these factors must be fully grasped. First among them is imperialism, for it is mainly against exploitation and poverty that our peoples revolt. It is therefore of paramount importance to set out the strategy of imperialism in clear terms." (Handbook of Revolutionary Warfare, 1968)

Nkrumah continues by pointing out that "Once the components of the enemy's strategy are determined, we will be in a position to outline the correct strategy for our own struggle in terms of our actual situation and in accordance with our objectives. Both in the colonial territories and in the metropolitan states, the struggle was being waged against the same enemy: international finance capital under its external and internal forms of exploitation, imperialism and capitalism."

The capitalist class in Detroit is responsible for the current crisis involving joblessness, home foreclosures and evictions, utility shut-offs, the usurpation of political power from existing elective bodies, police repression and the lack of health care and quality education. Therefore, the emphasis of our overall political strategy, the tactics that we utilize, the demands we advance and the slogans we chant must always point to the actual source of the problem.

This is important because the ruling class will always attempt to blame the workers for their misfortune and poverty. In the current discussions around the economic crisis in Detroit, the corporate media never points to the role of the automotive companies and their failed policies related to capital flight, the under-minding of organized labor, outsourcing, downsizing and the lowering of wages. As a result of these distortions of the history and current situation inside the city, the workers and oppressed are attacked viciously and made to feel that their plight is a result of a lack of correct values and hard work.

In fact Dave Bing takes his play book right from the banks and multi-national corporations. Just read Detroit Crain's, the recently released Citizen Research Council Report on Detroit and the statements made by the Kresge Foundation and anyone can conclude that his policy initiatives are those of the capitalist class who created the crisis.

The Citizens Research Council of Michigan April 2010 report entitled "The Fiscal Condition of The City of Detroit" represents a blueprint from the ruling class on how to further the exploitation, impoverishment and dis-empowerment of the people in this area. This is not surprising when one reads who is on the board of directors and trustees of the Citizens Research Council.

These officers represent institutions such as Ernst & Young LLP, Deloitte, the Detroit Economic Club, Wells Fargo Bank, DTE Energy, Commerica Bank, General Motors Corporation, Kelly Services and Blue Cross Blue Shield of Michigan to name a few. How can these capitalist interests craft policies for Detroit's future when they themselves are the real culprits behind the crisis that we are facing today.

In the introduction to the Citizen Research Council report in states that "Clearly, the city government cannot afford to remain at its present size. There are four ways the government can downsize:
-The elected mayor and city council can develop and implement required changes.
-The mayor and city council can implement changes specified in a consent agreement reached with a review team appointed by state officials under the Local Government Fiscal Responsibility Act.
-An emergency financial manager appointed under the Local Government Fiscal Responsibility Act can negate the authority of the mayor and city council, can implement changes, and can renegotiate (but not abrogate) contracts.
-If an emergency financial manager recommends, and the state approves, reorganization and restructuring can occur under protection of bankruptcy, which does allow contracts to be abrogated. No Michigan municipality has ever filed under federal bankruptcy laws."

The report goes on to say that "In order to address what could be an accumulated general fund deficit exceeding $400 million, Detroit city government must be restructured. The new structure must reflect both the reduced tax base and the limited ability of state government to provide shared revenues."

Such a program of corporate dictatorship and dismantling must be rejected by the people of Detroit. People must organize to oppose the implementation of these plans by the corporate community and their agents in local government.

What Is To Be Done?: The Need for a Program of Action

In addressing these efforts on the part of the capitalist class and their agents we must be organized around a political program that attacks the exploitative and racist system at its base. This is why we have for the last three years called for the immediate implementation of a moratorium on foreclosures and evictions in order to keep people in their homes in Detroit.

The failure of the city administration, the state legislature and the governor to impose a moratorium has resulted in the large-scale destruction of the housing stock in the city and throughout the region. With the school systems being heavily dependent on tax revenues for its operations it is not surprising that there have been huge cuts in education not only in Detroit but throughout the state. Therefore, the appointment of an emergency financial manager over the DPS in actuality represents the inability of the elected politicians to effectively address the problems stemming from predatory lending, job loss and the decline in wages.

The appointment of an emergency financial manager also represents the failure of capitalist economic policies. Banks, insurance companies and multinational corporations have looted the cities through corrupt mortgage schemes, redlining and tax avoidance. Many of these firms do not pay any taxes to the cities yet they continue to insist that they dominate the political and economic direction of the elected bodies of local government.

It is important that the Moratorium NOW! Coalition and the Michigan Emergency Committee Against War & Injustice (MECAWI) continue to push for a halt to foreclosures, eviction and utility shut-offs. The demand for the stopping of school closures is also essential during this period because the economic crisis is manifesting itself in various ways including the theft of resources allocated for education and the weakening of unions within the school systems.

Also the effort to seize the municipal pension funds must be opposed because the capitalist will take everything away from working people in order to serve its insatiable quest for greater profits. Health care should be a right to all who live inside the United States and the attempts to sell the Detroit Medical Center to the Vanguard corporation represents another mechanism for impoverishing the people and driving them out of the city.

In addition, the Pentagon budget of at least $700 billion per year has been a consistent drain on the national economy of the United States. These funds should be utilized to create jobs, housing, health care, senior services and quality education for all.

Consequently, the opposition to imperialism internationally can serve as a rallying point for both exposing the hypocrisy of the United States ruling class as well as the building of working class solidarity throughout the world. The national security state apparatus of the U.S. is not directed against the so-called “war on terrorism” but is merely a cover to intensify the repressive apparatus against working people and the oppressed inside the country and around the world.

In raising these demands we point to the theoretical basis of the struggle. Ultimately the only solution to the current crisis in the capitalist system is the transformation of the economy and social structures toward socialism. This will require a total break with capitalism and imperialism and a protracted struggle for the realization of a society based on scientific socialist principals.

V.I. Lenin, the leader of the Russian Revolution and the founder of the Soviet Union stated as early as 1903 that “Without revolutionary theory there can be no revolutionary movement. This idea cannot be insisted upon too strongly at a time when the fashionable preaching of opportunism goes hand in hand with an infatuation for the narrowest forms of practical activity. At this point, we wish to state only that the role of the vanguard fighter can be fulfilled only by a party that is guided by the most advanced theory.” (What Is To Be Done?, 1903)

Lenin goes on to point out in this very important work that “Since there can be no talk of an independent ideology formulated by the working masses themselves in the process of their movement, the only choice is—either bourgeois or socialist ideology. There is no middle course (for humanity has not created a “third” ideology, and, moreover, in a society torn by class antagonisms there can never be a non-class or an above-class ideology).

“Hence, to belittle the socialist ideology in any way, to turn aside from it in the slightest degree means to strengthen bourgeois ideology. There is much talk of spontaneity. But the spontaneous development of the working-class movement leads to its subordination to bourgeois ideology, to its development along the lines of the Credo program; for the spontaneous working-class movement is trade-unionism, and trade-unionism means the ideological enslavement of the workers by the bourgeoisie.”

Another revolutionary leader in Africa, Amilcar Cabral, who headed the African Party for the Independence of Guinea and Cape Verde (PAIGC) pointed out in a directive to his organization in 1965 that cadres must “Always bear in mind that the people are not fighting for ideas, for the things in anyone’s heads. They are fighting to win material benefits, to live better and in peace, to see their lives go forward, to guarantee the future of their children….” (Revolution in Guinea, 1969)

Cabral ended this directive by saying that “We must practice revolutionary democracy in every aspect of our Party life. Every responsible member must have the courage of his responsibilities, exacting from others a proper respect for his work and properly respecting the work of others. Hide nothing from the masses of our people. Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures. Claim no easy victories….”

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