Financializing Detroit

abstract

Taking as its focus the not-so-special case of Detroit, which recently experienced the largest municipal bankruptcy in US history, this article explores the financialization of American urban governance in both conceptual and concrete terms. The financially mediated restructuring of Detroit, through the imposition of emergency management by the state of Michigan and subsequently through the federal bankruptcy code, has been portrayed as an extreme event, with deep roots in histories of deindustrialization, racial exclusion, and suburban flight. It is not to downplay the significance of this experience to suggest, however, that the Detroit case also represents an ordinary crisis of a faltering regime of financialized urbanism. Compounding a shift toward entrepreneurial urban governance, cities now find themselves in an operating environment that has been constitutively financialized. Bondholder-value disciplines have become systemic in reach, along with an amplified role for financial gatekeepers like credit rating agencies; technocratic forms of financial management have been spreading and deepening, both in supposedly normal times and under externally imposed emergency measures; and in some cities the routinized play of growth-machine politics is being eclipsed by a new generation of debt-machine dynamics. While the ultimate focus of this article is on Detroit, its chief concern is with the framing of the city’s storied financial crisis—theoretically and then institutionally.

Key words:

• financialization
• entrepreneurial governance
• neoliberal urbanism
• technocracy
• credit rating
• bond markets
• Detroit

Acknowledgments

For helpful discussions and suggestions around the issues in this article, we are especially grateful to Josh Akers, Brett Christophers, Lucas Kirkpatrick, and Bob Lake, as well as to Jim Murphy and the reviewers at Economic Geography. We thank Eric Leinberger for cartographic assistance. The authors acknowledge the support of SSHRC through its postdoctoral fellowship and Canada Research Chair programs. Responsibility for these arguments remains ours alone, of course.

Notes

¹ The experience of punishing downgrades during the 1990s gave rise to another secondary market in the expanding universe of municipal finance—the bond insurance industry. The state of California, for example, spent $102 million, between 2003 and 2007, on the insurance of its bonds (Mysak 2008).

² Detroit precedents are now regularly cited by financial-crisis managers near and far, from Atlantic City to Greece and Puerto Rico (see Corkery and Walsh 2015).

³ The nine-member commission comprises the state treasurer and budget director, the city’s mayor and the council president, as well as five gubernatorial appointees (the latter confirming the sociological narrowness of the world of financial oversight—Detroit’s former deputy emergency manager, executives from the auto and construction industries, a bankruptcy consultant, and an agent from PricewaterhouseCoopers).

⁴ With speculators often dodging property taxes or abandoning purchases altogether, fifteen Michigan House and Senate bills were introduced in 2013/2014 to improve local enforcement through stiffer penalties (including wage garnishment and forced property foreclosure).