From the Detroit Free Press:
“Detroit on Thursday became the largest American city to file for bankruptcy, a historic move sure to ignite complex battles in coming months with creditors, pensioners and unions who stand to lose significantly as the state tries to rescue a drowning city.
In the end, state-appointed emergency manager Kevyn Orr’s attempt to reach out-of-court settlements with bondholders, pensioners and other creditors to whom Detroit owes as much as $20 billion could not overcome opposition from unions, retirees and a long list of lenders.”
The Motor City has hit rock bottom. After years of decline and decay, Detroit has finally buckled under the strain of costly public employee contracts and billions in debt that will probably never be paid back.
The problem is that Detroit is a relic of America’s industrial past. We used to have vast factories all over the country that made things that you could hold in your hand, and American workers could rely on being able to work 8 hours a day, 5 days a week, for 30 years until they retired and could collect a pension.
But those times have come and gone. Cheap overseas manufacturing has dramatically reduced the price of goods for all consumers, but at the same time put American factories at a disadvantage. As a nation we moved away from a economy based making “things” to one powered by ideas and information. We live in a world where intellectual property is often more valuable than any parcel of land and where people can publish a book, record an album, close a deal, and put in a full days work without ever leaving their home.
And as with all changes, some will be left behind at first. Some people and places will not be able or willing to adapt to the changing world, and as a result we get places like Detroit.
But I am extremely confident that in a matter of decades we as a nation will be able to fully take advantage of this new economic reality, and we will witness new levels of prosperity we cannot imagine today. There will be some pain along the way, and the government should try to lessen this pain as best they can, but the end result will be not only a wealthier America, but a wealthier world for all.