Posts Tagged ‘Detroit’

Bloomberg: How To Use Immigration Policy to Save Detroit

Monday, May 2nd, 2011

Three thoughts regarding this suggestion by Mayor Bloomberg on Meet the Press yesterday morning:

1) This is exactly the sort of sensible, pragmatic suggestion that Bloomberg is known for — that is business-focused but would never get through any Democratic or Republican legislature because of the anti-immigrant backlash.  But it’s a good idea — and one grounded in the American tradition — as Matt Yglesias explained a year ago — similar to the homesteading policies that the U.S. used to encourage settlers to move West. Which leads me to my next point.

2) When I heard Bloomberg say this, I thought: “Aha! I wonder if he reads Matt Yglesias too!” Probably a silly thought — as Bloomberg spends his days focused on urban policy. But when I first heard Bloomberg say it, I had thought this was one of Yglesias’s many excellent ideas — but as I read his original post, it was instead one of the many interesting ideas that Yglesias brings to his audience from other sources.

3) Bloomberg’s approach to government is so successful because it is pragmatic and businesslike. But this comment also reveals what he misses. He uses the rather obnoxious line that any business run as the government is would fail. Of course! That’s part of why we have a government — to perform tasks that aren’t profitable but are still necessary. Bloomberg explains how politicians fail to act like businessmen by focusing on “issues they can’t come together on.” For a company, it makes a lot of sense to steer your company away from any matter on which their isn’t agreement. But politics is precisely where these ideas are hashed out. Of course, the tendency of some purists to insist on halting all action until the other side gives in needs to be balanced with the pragmatism that all successful businessmen and politicians have in common.

Housing in Detroit

Monday, March 9th, 2009

The Associated Press:

The average sales prices of [single-family]homes [in Detroit] plunged from $46,702 in 2003 to $8,692 last year. Through the first month of 2009, average sales were $6,035. 

The Detroit Investment Group

Friday, December 5th, 2008

Jon Stewart pointed out against last night how non-constructive the political debate regarding the bailout of the Big Three Automakers has been:

Clearly, politicians are applying a double standard. But I think the hypocrisy is worse than Stewart suggests – because the product financial companies are supposed to be creating is profit with the risks associated thoroughly managed and quantified. Their product has proved to be far more defective than the cars produced by the Big Three, as the financial products have not just malfunctioned, but acted as a virus spreading the failures around to everyone.

Stewart previously pointed out how the first story regarding the bailout of the Big Three focused almost exclusively on the method of transportation used by the CEOs of the auto companies to get to hearing instead of any substantive issues. The real controversy has barely been discussed:

Corporations, whose primary purpose is to amass wealth by any means available for their owners (and who always manage to simultaneously amass wealth for the managers) cannot be trusted with public money. There is no public purpose to such profit-making. The public value of a corporation comes from it’s incidental activities – the means by which it is able to amass it’s profits. By bailing out General Motors, the government would be giving it’s money away for no public purpose. But the government does serve a public purpose by keeping General Motors’ factories churning out cars – by keeping people employed, by providing stability, by keeping the economy going and producing usable items.

Within that distinction lies the difference between outrageous abuse of taxpayer funds and a valid public purpose. The more difficult question is how to avoid the abuse while serving the purpose. [edited slightly from my original]

Which is why I think a bailout should be postponed – to attempt to find the least worst of all the options – rather than to cause great problems with hasty solutions. If the automakers won’t survive without an instant cash infusion though, the government needs to step in one way or another.

Michael Moore described his common sensical solution to this whole mess earlier this week:

1. Transporting Americans is and should be one of the most important functions our government must address. And because we are facing a massive economic, energy and environmental crisis, the new president and Congress must do what Franklin Roosevelt did when he was faced with a crisis (and ordered the auto industry to stop building cars and instead build tanks and planes): The Big 3 are, from this point forward, to build only cars that are not primarily dependent on oil and, more importantly to build trains, buses, subways and light rail (a corresponding public works project across the country will build the rail lines and tracks). This will not only save jobs, but create millions of new ones.

2. You could buy ALL the common shares of stock in General Motors for less than $3 billion. Why should we give GM $18 billion or $25 billion or anything? Take the money and buy the company! (You’re going to demand collateral anyway if you give them the “loan,” and because we know they will default on that loan, you’re going to own the company in the end as it is. So why wait? Just buy them out now.)

3. None of us want government officials running a car company, but there are some very smart transportation geniuses who could be hired to do this. We need a Marshall Plan to switch us off oil-dependent vehicles and get us into the 21st century.

Moore’s solution seems like what was done with the railroad industry in the 1970s – when it was taken over by the government, revamped, and then privatized again. I think Moore’s almost got it right. But not quite. Moore’s solution seems very 20th century – like India’s Five Year Plans or other centralized, government-sponsored attempts to solve large problems. Instead, I think Moore could take a lesson from Nassim Nicholas Taleb, the philosopher, economist, and former hedge fund manager who has been explaining the underlying weakness of our financial markets since he made a killing in the 1987 crash. Taleb understands that if you put a bunch of geniuses in charge, you might get something great. But as he points out, the truly game-changing developments happen by accident. The computer, lasers, the internet – all of these innovations have accidentally changed the world in a way that could not be anticipated. He refers to this type of game-changing development as a Black Swan.

And a Black Swan is exactly what Michael Moore, Barack Obama, and the rest of us know we need to jump start the green energy industry. The best way to catch a Black Swan in Taleb’s parlance is to tinker.

In that spirit I propose to create a government-affiliated entity, the Detroit Investment Group (DIG).1  DIG would be a modern-day government intervention in the market that would take inspiration from the Tennessee Valley Authority (especially it’s regional focus), the Manhattan Project (it’s think tank aspect), NASA’s moon shot (in the specificity of it’s goal and it’s timeline), and the Department of Defense (in how it creates incentives for inventors to create new technologies with the promise of contracts.)

Government intervention is necessary as the marketplace has failed to invest in the long-term development of green energy. This tendency of the market to focus on short-term profits over long-term projects has certainly been revealed to be a significant flaw in our current economic structure, as, for one common example, corporate managers seek instant profits which lead to huge bonuses and leave before the long-term effects of their actions hit. Not knowing how to fix this tendency to focus exclusively on the short-term, a government agency can create incentives within the market to focus on long-term issues that are essential to our nation’s security and stability. This would be the purpose of DIG – to supplement the market rather than to impose it’s own hierarchical structure.

DIG would be given goals and rules rather than a typical bureaucratic organization. It’s goals would:

  1. To spur the creation of new green technologies and a green energy industry in America; and
  2. To rejuvenate Detroit and the surrounding areas.

To accomplish both of these goals, DIG would make Detroit the place to go for green industry – the way Silicon Valley is for computer technology. DIG would not have a specific method of encouraging green industry – but would use an infusion of cash and people to tinker and innovate and generate solutions. It would need quite a number of tools to spur this growth and innovation:

It would need the authority:

  • To offer government contracts to license green technologies or buy green products;
  • To sponsor a think tank of top experts in various fields to come up with technologies;
  • To offer prizes for creating products that meet certain benchmarks or accomplish certain ancillary goals;
  • To have input into a cap-and-trade program not managed by DIG;
  • To buy companies with worthwhile technologies or resources (including General Motors for example) and continue to operate them.

The point is – DIG would try everything. It’s task would not be to follow certain procedures, but to achieve it’s goals. It would be structured in such a way as to create market incentives and to centralize planning – on two alternate tracks – and let each influence the other. If this problem is fixable, then DIG would unleash the money and human resources to find the fix – and it would be agnostic about the ideology of it’s solution.

It is, in short,  a very Obama-esque approach to the problem.

  1. Dig.gov is not being used by any government agency at the moment. []

How the Media and the Politicians Failed to Understand the Detroit Bailout

Monday, December 1st, 2008

Al Gore, in his book, Assault on Reason, described a media and political focus on “gotcha” journalism, on gaffes, on irrelevancies and personal scandals, on the Freak Show – rather than a focus on long-term issues, on character, and on principles as one of the major factors that has led to our current crises. “News” coverage is dominated by questions of whether this or that politician has a mistress (he probably does) or whether this or that entertainer is secretly going out with this or that sports star. Our news has become tabloid.

If, as the drafters of our Constitution believed, a well-informed citizenry is essential to the proper functioning of any nation, then our nation clearly cannot be functioning properly.

This lack of good information, this focus on the trivial over the significant, was evident when the CEOs of Ford, Chrysler, and General Motors went to Washington to beg for handouts. As Jon Stewart sagely observed in a pox-on-all-your-houses bit:

Unable to understand the actual problem, Congress seizes on tangential details for grandstanding purposes.

[Cue tape of various Congressmen expressing various types of outrage in semi-novel ways regarding the fact that each CEO flew to Washington in a separate private jet.]

The media coverage did manage to convey a few things:

  1. All these big shot CEOs travel by private jet.
  2. The Big Three automakers support, directly and indirectly, some 2.5 million American jobs.
  3. These American car companies made a big mistake by focusing on gas-guzzlers on the assumption that oil prices would remain low indefinitely.

Everything else was clouded in some confusion – not all of which is the media’s fault. Many economists asserted that they would normally want the government to avoid bailing out these automakers, but in this economy, believed the government must act. Some opinion-makers blamed the automakers troubles primarily on union-negotiated legacy costs – on the various deferred wages and other forms of deferred compensation the automakers entered into contracts to provide. But what seemed lacking from either the Congressional hearings or the media coverage was any serious and sustained attention to the problems themselves.