WASHINGTON -- Detroit is filing for bankruptcy to get out from under crushing debts incurred to bondholders and pensioners during decades of economic decline and financial mismanagement. This should be seen as a fundamentally positive development that gives the city a chance to escape the errors of the past and build a better future for itself. But the city faces a dilemma far more serious than any specific policy error. The structural decline of American manufacturing has dealt a hammer blow to factory-dependent cities. Throw in a severe violent crime problem, and the stage has been set for a downward spiral of depopulation and declining service quality. The key to reviving Detroit is not just to get the finances in order and avoid mismanagement, but to break the spiral.
The political and legal barriers to doing so are enormous, but in principle the decline of Detroit could be slowed by literally making the city smaller and its population larger.
"I don't think Detroit can fund its current operations without shrinking substantially," David Schleicher, a George Mason University professor who studies urban law and economics issues, told me. This raises "really tricky legal-type questions" about the permissible scope of eminent domain law, but a fully empowered mayor could get the job done. Detroit famously can't get 40 percent of its traffic lights to work, and its 58-minute 911 response time for major crimes is abysmal. Abandoning whole areas of the city and forcibly relocating families into currently vacant structures closer to the core would be a drastic step, but in a way, it wouldn't be so different from a normal eminent domain process to build critical infrastructure. In this case, rather than creating new services, it would allow Detroit to provide much better services to a new, smaller city. And with over 20 percent of the existing housing units in the city vacant, it would be feasible to rehouse a large number of people.
Not only would a smaller city be more affordable to service, it would be friendlier to small-scale businesses. A denser neighborhood is better for local retailers, and more sales means more hiring and more tax revenue.
Concentrating the population would also let Detroit take more advantage of a genuine urban revival taking place in the city's historic core. In their book "The Metropolitan Revolution," Bruce Katz and Jennifer Bradley point out that the midtown and downtown neighborhoods of the city have a 96 percent rental occupancy rate and the expanding retail presence that comes from a growing population. But that development-ready swathe of the city makes up just 5.2 percent of the municipality's land area. Shrinking borders and concentrating people closer to the vibrant center would let more of the city's residents share in the benefits of a nascent downtown revival.
A perhaps even more radical, outside-the-box notion would be to repopulate Detroit with immigrants. People have been leaving Detroit in droves, but for all its problems, there are billions of people around the world living in worse places. Gallup surveys indicate that there are 165 million people in the world who'd like to move to the United States, far more than will be allowed in under any plausible immigration reform bill.
Brandon Fuller of NYU and Sean Rust of Temple University have been promoting the idea of region-based visa programs for some time now, and the idea could be particularly beneficial for Detroit. As economic consultant Adam Ozimek writes, Detroit had a much more immigrant-heavy population in happier times, with an immigrant share of the population that's fallen from about 20 percent in 1940 to around 5 percent today. Immigrants, in other words, have been avoiding Detroit in even greater numbers than natives have been leaving. Currently America allows many foreigners to come here on employment-based visas that tie workers to a specific company in a way that greatly decreases their practical freedoms. Creating an alternative path in which workers are free to switch employers, but must stick to living and working in a particular city, could be appealing to many potential migrants.
The 60,000 or so foreign-born workers it would take to bring Detroit back to its 1960 share of foreign-born residents would be a drop in the bucket compared with the tens of millions eager to come to America. That means we could be choosy, insisting that the majority of visa recipients be highly skilled and have some pending offer of employment. Potential access to a new crop of skilled workers would create a powerful incentive for existing companies to open a Detroit office, or for investors to finance Detroit-based startups. Detroit currently faces a paradoxical situation. Both skilled and unskilled workers benefit from living in a city with many skilled workers, but the generally low skill level of Detroit's population means relatively weak economic opportunities for skilled workers.
In other words, a kid who grows up in Detroit and does well in school is likely to leave for greener pastures elsewhere. If skilled workers could earn even a fraction of the sixfold wage premium that exists for those who get H1-B visas by moving to Detroit, then city-specific visas could drive new business investment in the city. That would both benefit less educated Detroiters and provide an anchor for the upwardly mobile to rise up in their own community rather than moving elsewhere.
Both of these ideas are long shots, and would require changes in Michigan and federal law to implement. But it seems unlikely at this point that bankruptcy and cutbacks will be enough to pull Detroit out of its downward spiral, and the idea of a federal fiscal bailout for Detroit is wildly implausible. Empowering the city to physically shrink and opening its doors to migrants, by contrast, are essentially zero-cost ways outsiders can help the city save itself.