What Bankrupted Detroit: China? Or Robots?
The Motor City's population collapsed as manufacturing jobs disappeared.
We know that, unlike most defeats, Detroit's bankruptcy has a thousand fathers -- everything from mismanaged pension funds to interest rate swaps gone the wrong way to years of racial animus that hollowed out the core of an already too-sprawling metropolis.
But the fundamental problem of late has been the city's depleted population: More than a quarter of its residents leaving town between 2000 and 2010. That's a function of bad city services and urban blight, but it's also because it's hard to make a living there. You can see that reflected in the chart above. Jobs in the Detroit metropolitan area, which held fairly steady through the nineties, plunged after 2000, as the unemployment rate rose. Between 2001 and the end of 2012, Detroit's Wayne County lost more than 60,000 manufacturing jobs alone.
What changed in 2000? After all, Detroit had weathered other economic challenges. The auto factories that once defined Detroit have been moving out since the fifties, when big auto-makers sent them to the American sunbelt in the hopes of avoiding pesky unions, and as pressure from Japan's auto industry began building in the 1980s.
Besides the popping of the tech bubble, it's easy to point to trade normalization with China. GM (which sells more cars in China than in the US) and other automakers invested in factories in China, and many parts suppliers did the same.
And as you might expect, if you look at Detroit's manufacturing GDP in the same time period, it decreases:
And in the last decade, the US's global imports of both cars and auto parts have increased. But though their rise has been slower than that of imports, US exports of cars and auto parts have climbed as well. In fact, the US continues to make more stuff than ever -- even Detroit. Its metropolitan area exported $55 billion in goods last year, according to the US Department of Commerce. That's more than it produced seven years ago, and good enough to make it the fourth-largest exporting city in the country.
So why did exports rise even as the city shed manufacturing jobs and output fell?
Detroit factories rely more than ever on parts from other places -- and that's where some of those jobs went. Some did indeed go to China, leading to a US complaint at the World Trade Organization that the country subsidizes its parts industry. However, some of those jobs went to factories within the US: Detroit's share of total US production fell from 3.1% in 2001 to just 1.7% in 2011.
That still doesn't explain why, between 2005 and 2011, Detroit's manufacturing jobs fell by 30%, while its manufacturing production fell by only 16%. Where did those job go?
In the end, you can blame robots--or increased productivity in these factories. As manufacturing requires fewer and fewer people to make more goods, there is less work to go around. Detroit, heavily dependent on manufacturing, suffers the most today. But the problem of adapting social and economic institutions to a world where mechanization enhances productivity but costs jobs is one that all wealthy countries face, regardless of trade competition.