Archive for the 'economy' Category



Holidays in Detroit and the downside of home ownership

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The winter months in Michigan can be, and usually are, rather dreary. During our annual holiday visit to metro Detroit, along with the usual lack of sunshine, we had experienced the joy of pouring rain on Christmas day. Fun. Of course many can get used to such weather, and some will even claim to like it. For some reason many Michiganders complain all winter about snow.  Some even claim to prefer cold, damp weather to dry, cold weather. Many say, “well, at least it’s not snow!”, whenever it rains. Because soaking wet and cold is apparently so much better. Besides, snow is the only thing that covers up the brown grass, bushes, trees, and all of the mud that we get to experience a good four, or more, months of the year. But, if someone claims to like it, who am I to judge. Whatever makes you happy…

On the plus side, we enjoyed the usual things during our visit to metro Detroit. We spent time with family for holiday brunches, lunches, and dinners, as well as at a memorial for my grandmother who had recently passed away at the age of 98. We ate and drank at some of our favorite metro area restaurants and bars, and caught up with Friends. We also got to enjoy a Red Wing’s game, as we watched Detroit beat the Colorado Avalanche.

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In the weeks leading up to our trip back to Detroit, we scheduled some drywall work to be done prior to our arrival. Over the eight years we’ve owned the home we’ve gutted the bathroom and kitchen. And by gutting, I mean we ripped out absolutely everything. In the bathroom we had to stand on floor joists as we laid new sub-flooring. In the kitchen we spent days ripping out old underlayment covered with nasty, worn out linoleum made to look like bricks. In both rooms everything went. The bathroom got a new cast iron tub, all new plumbing, ceramic floors and tub surround, as well as new insulation and drywall. The kitchen received all new cabinets, appliances (other than the fridge), and new oak, hardwood flooring. We also replaced insulation and drywall in two bedrooms, refinished all of the old, existing hardwood floors, as well as the new kitchen flooring, after ripping out disgusting, rental house carpeting. We patched holes in the foundation leftover from the cement forms. All of this was done by us, with the rare helping hand of a professional plumber or electrician. The only thing we didn’t play a major role in installing was the new furnace and air conditioners.

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We did as much as possible ourselves because we didn’t want to take out a loan on our house. We didn’t believe that borrowing to fix up our rather modest ranch house was a smart move. Instead invested a lot of sweet equity, saved money in envelopes, and always paid all bills in full. The only exception was the twelve months, same as cash, credit card Ikea gave us. We did take advantage of a free year long loan. Of course we paid this off in full before the deadline. We had also purchased a house we could afford, even on one income should one of us lose our jobs. And this happened shortly after buying the house. My wife’s company was purchased by good ole’ Barry Diller, and was promptly laid off. I quit my job a few years later to try my hand at self-employment. We never had to stretch to afford the house. We were never house poor. We even paid extra on the measly $666 dollar mortgage each month in a effort to pay down the principal.

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While we did see hardship coming to the metro Detroit area, we didn’t have the renovations finished soon enough to sell when we new we should. And while we saw the writing on the wall, we certainly didn’t know it would get as bad as it did. Upon arriving home we worked hard on finishing the basement on our house, not really knowing the extent of the value lost in the previous six months. Sure we new it had lost value, but all told, it’s probably down 40% or more from it’s peak value. We were told by our real estate agent that we really needed to finish the basement, and so we were intent on it…until we realized what kind of shape we were in. Instead of throwing good money after bad, we began to think in terms of damage control. We may as well burn a pile of money on the driveway. Or perhaps put a pile of money on the driveway. At least that would generate some interest in the place.

Now I constantly read articles like:

Underwater Mortgages Hit 11.3 Million

Strategic Defaults

Debtor’s Dilemma: Pay the Mortgage or Walk Away

Strategic Non-Foreclosure Becomes Official Policy

Freddie Mac: “Potential Large Wave of Foreclosures”

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After learning that we were hopelessly under water, we dropped all tools and stopped work on the house. Strategic default, the new term for walking away even though you’re currently good on your payments, became a very appealing thought. We moved for work, and we can’t, and don’t want to, go back. Two years of paying the mortgage on even a cheap house (that we don’t live in) is a huge amount of money that is not saved for retirement (not that I ever expect to actually retire), or for the unthinkable potential need for a future debilitating illness, or for other future needs.  The money becomes locked away, in a sense, prevented from being used for more useful in the economy. Even though we bought way less than we could afford, never borrowed against it, and did all renovations ourselves, we are still faced with the possibility of owing $30,000, if we can even sell the house. This is perfectly plausible scenario even though we did everything “right”. And now the mortgage and banking industry wants me to think of my legal obligation as a moral obligation. The legal documents say it all. They state in the terms what we owe, what the collateral is, and what happens if we fail to pay. There’s no mention of heaven or hell, good or bad, right or wrong…only terms of agreement, and potential penalties should one side fail to uphold their end of the bargain.

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I don’t like the idea of walking away, and we’re doing what we can to avoid it. But at some point we need to, once again start saving the large sums of money needed for our future. The longer we hold off, the worse it becomes. Even the moral compass in my head is weak compared with pending problems of a future with too little saved. Which potential scenario is worse? The one were we walk away from a legal obligation with a bank? Or the moral obligation were we fail to take care of ourselves and our families, without relying on public handouts?

Detroit’s abandoned house of the week

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Who understands how Detroit needs to change?

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After living and working for the past two years in D.C., and Denver, Colorado, coming back to the Detroit area is a real eye opener. What was once a maddening and frustrating place to live is now just plain depressing. With the real unemployment rate estimated to be near 20% for the state, and a ridiculously high 50% for the city of Detroit, still falling real estate values (down 40% in my area, and including our house), a crumbling infrastructure, financially strapped municipalities and school districts, and a apparent 50% commercial vacancy rate (just judging by what I can see..), the metro area seems to continually worsen. Each time I come back it seems that things couldn’t get worse (even though I don’t believe the area’s hit bottom yet), yet it always does.

Living in the area, one becomes accustomed to things residents in most other areas would never imagine. Roads that get complaints in other areas, metro Detroiters can only dream about. The public transit that others complain about being crowded or expensive, doesn’t even exist here. Same with the practically non-existent bike lanes. In Denver I ride my bike everywhere, only getting in the car to make longer distance trips. It’s something that I found to be unacceptably difficult here in southeastern Michigan. When I did make a trip by bicycle here, I was that strange person riding their bike on the road carrying grocery bags; presumably some poor sap who’d had his license taken away, or who didn’t have enough money for a car. In Denver, I’m just one of many using a bicycle for, believe it or not, transportation. Imagine that… Our neighbor here in metro Detroit would drive one block to buy cigarettes.

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Driving around metro Detroit, it’s rare to see more than one or two people out getting exercise of any kind. In Denver it would be rare to see less than a dozen people exercising on my two mile ride to work. The weekly Wednesday night cruiser ride in Denver attracted up to 850 riders on a single night this past summer. Of course one has considering how many other options there are for socializing, entertainment, and outdoor activities. On any given week there will be rides, runs, creative Meetups, art openings, and just about anything else an active person under the age of 95 might enjoy. I know some of these things exist in metro Detroit, but the often long distance between them isn’t just inconvenient, but a huge waste of time, and dangerous when you consider all of the different highways one would have to travel to get from, say, Royal Oak to Ann Arbor on a weekday evening.

I have a point, beyond yet one more rant about the area. And the point is this: does anyone, who hasn’t left, or doesn’t want to leave, understand what needs to change about the metro area? Everyone knows that Michigan needs jobs. But I get the feeling that many who remain believe that those who left were weak, or quitters, or don’t like hard work. Those “quitters” who left the state, left because they had other opportunities…better opportunities, and most likely a chance at a better lifestyle. They didn’t leave because they weren’t up for a challenge. If an area offers jobs, and “opportunities” rooted in the past, and another area is embracing the future, why would I choose that challenge? If you can be on a better team, who wouldn’t choose it? Sure, some would rather be a big fish in a small pond, but this particular pond keeps getting smaller, and dirtier.

The point is often made that the area needs to bring back manufacturing jobs. I wouldn’t argue that manufacturing jobs…heck any jobs, would be good for the area. But maybe what the area really needs is to face reality. Metro Detroiters need to adapt to changing times. An education may be a good place for many to start. The claim is often made that metro Detroiters are scrappy, gritty, and hard working survivors. What mid-west city doesn’t believe that? The question is, what do survivors do when there old way of doing things doesn’t work anymore? They change their way of doing things. What did metro Detroit do when it was obvious the ways of the past were going to end soon? Nothing. Detroit made pretty much all of the same mistakes Pittsburgh has made, but unfortunately, unlike Pittsburgh, Detroit’s had very little of the fortuitous investments in other industries.

The question that should be asked, that often isn’t, is why have our young and highly educated citizens been leaving for decades? If the question was asked of every one of them, that has left the state, one would get a variety of answers from jobs to lifestyle. If you were to ask what it would take to get them to come back to metro Detroit, the answers would be equally varied, but I doubt many want to come back for traditional manufacturing jobs. Nor did many of them leave because of a lack of traditional manufacturing jobs. As a friend said the other night, “the state is a storefront. Why would anyone want to come in?”

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When time Magazine offered advertising space for a campaign designed to draw this very demographic to southeastern Michigan, they asked five large agencies to answer the question, “If I’m young, talented and creative, and open to all kinds of opportunities, why Detroit?” Take a look at the ads… My personal opinion is that these ads do a better job of answering, “if I’m young, talented and creative, and open to all kinds of opportunities, why leave Detroit?” The ads do a great job of pointing out the disconnect that exists between those who have lived here a long time, and made lots of money here, and those of a younger more mobile generation. Outside of the suburbs of Detroit, who cares about Kid Rock? It really makes me wonder, if these people even understand what types of music the target demographic listens to? I can tell you, it’s not Kid Rock. Not a single one touched on any compelling reason for someone from outside of the area, to relocated here. Why are we even asking the old guard how to attract a new generation of creative, enthusiastic, and highly motivated entrepreneurs and creatives? L. Brooks Patterson still wants to stake metro Detroit’s future on the widening of I-75 from 8 Mile to M-59. MDOT and SEMCOG still seem to believe all transportation should be done in an automobile. No bikes, no trains, no walking…again that’s for the Third World poor, such as those in New York, Chicago, Atlanta, San Francisco, Portland, Denver, London, Brussels, and Toronto.

The morning after I arrived back in metro Detroit, we watched part of a round-table discussion on a local news show. The topic was, of course, about the area’s future. It appeared that not one of the participants was under the age of 60. Not that those over 60 have nothing to contribute. But asking only those who lived through a very different time period how we should proceed into the future misses the point entirely. We are in this situation because we (they) thought that what worked in the past would surely work in the future. If it was good enough then, it’s good enough now. Needless to say, watching did not make me feel very encouraged about the future of metro Detroit. Does anybody here, in any leadership position, with any power, or with money, get it yet? Do they understand the real issues? Do they know what it’s going to take to bring people back, or to make them stay?

Freelance Nation

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I recently got to thinking about freelancing, why I and others do it, and what it means for cities like Detroit. An article on Business Week’s website titled, Beware the Freelance Economy, discusses a recent trend in this country in which the share of business with no employees (freelance) has increased relative to traditional employee businesses. The author contends that freelance businesses do not increase employment, nor create wealth. Furthermore the author believes that, “…people would be more productive in this part-time work if they did it as employees who were part of a bigger organization that could achieve scale economies…” He finishes up with a bit of a warning, and a general question as to why this trend is occurring.

Having been a full time freelancer, or self-employed individual as I liked to call it, for almost five years, and now a part time freelancer, I feel like responding to some of the points made in the article. I also think I have a pretty good answer for why this trend, that the author finds so troubling, is occurring. Being a fairly typical Gen Xer, I saw the Boomer Generation as missing out on so many important parts of life. I lacked direction, and questioned everything. The answer, “because that’s life…” or whatever, didn’t quite cut it for me. I saw a lot of, unnecessary in my mind, stress, and anger in the generation ahead of me as they strove for middle and upper management positions at large corporations that ultimately failed to offer the promised stability or loyalty that their employees seemed to give them.

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This appeared to be the American Dream. Work 60 plus hours at a company that saw you as disposable, so you could own a couple of cars and a house in the suburbs. Along with that came dedicating your life to a corporate entity that often became more important than family, hours waiting in rush hour traffic, and generally mind numbing and unrewarding work. Like so many others though, as much as I despised the large corporate workplace, I found the need to make a decent living, have health insurance, and a desire to save some money for later in life. Working in bike shops, and the like wasn’t cutting it. After college graduation I bounced between “real” jobs like accounting, and fun jobs like working in bike shops. The real jobs left me feeling unfulfilled. I worked hard at them, and was often recognized by my employers as a top employee, yet they did little for my soul. Working in the bike shop, on the other hand, allowed me to introduce people to an activity that could become a meaningful part of their lives. Often times the relationship between customers and employees turned into long term friendships in ways they rarely did in my “real” jobs.

During the almost five years of self-employment, I experienced unprecedented self motivation, and dedication to my work. Ownership, it turned out, was very important to me, as was actually being interested in what I did all day…every day. Furthermore the feeling of control, and the escape of the high school mentality of my “real” jobs, where employers cared more about when I came and went and less about what I actually accomplished, was rather nice. Self employment comes with it’s own set of headaches, but what job or career doesn’t?

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Now, almost everyone I know is self-employed or a part time freelancer. We all do multiple things with our lives. Dedication to the big corporation isn’t as appealing, doesn’t seem to offer what it used to, and certainly isn’t the end all, be all of most people’s lives. Personal growth and satisfaction seem to be as important as money these days. And while a part time job at Starbucks may (this is arguable) contribute more to wealth and job creation than freelancing, it may not contribute more to self-fulfillment and personal growth. While the author, Scott Shane, may be a professor of entrepreneurial studies, most freelancers couldn’t care less about the National implications of their side businesses. They do it because they want to. They do it because they need to. And this is as it should be. As a country we should embrace this. If someone feels motivated enough to do work on the side, it should be encouraged. My freelancing earns me more money to me than a second job would, and employs me just as much. The additional money earned is put back into the economy when I go out to eat, go on vacation, or by a new bicycle. It’s money that wouldn’t have been spent with out the side work. And more importantly it’s fed my need for personally satisfying work, and has led to other career opportunities that I would not have had otherwise.

Finally, what does freelancing mean to cities like Detroit? And why should cities like Detroit embrace freelancing and self-employment? While most freelance work may never lead directly to larger, job producing companies, some will. Connections will be made, networks will grow, and the area can benefit directly from them. Portland, Oregon, is an example of a city that has, for many years, attracted freelancers, and many companies have been started by the self-employed joining together. Detroit currently has a low cost of living, allowing for freelancers to keep a low overhead while building their business. Most will never amount to more than that, but even if a few do, it will contribute to health of the economy and the reputation of the area. A good reputation for entrepreneurship, self-employment, and creativity will attract more of the same. The alternative is always relying on someone else to provide for employment opportunities. And as it stands right now, nobody seems to be stepping in to fill that need.

Abandoned houses…three in a row

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Learning to cope or what a career coach discovered in Detroit

The article  reinforces the importance of flexibility, and continual education for a successful career. For most, the days of learning something in school, or on the job, and applying it in one career for the rest of your life, are gone.

On the other hand, the recommendation for the church newsletter publisher to put together a portfolio and shop it around at creative Meetups, will likely lead to nothing. A brand new designer at a designer Meetup, will, at worst, meet other new designers with no work, and at best meet successful veterans who don’t have enough work. This is true in most places, and even more so in metro Detroit.

Happiest U.S. states are wealthy and tolerant

I didn’t find this surprising. It actually reinforced my preconceived notions. Unfortunately Michigan didn’t do too well in either category. And  it shows in the results, with Michigan ranking 41st in happiness.

The following quote from the article was particularly interesting: “Of the personality factors, neuroticism took a toll on a state’s cheery count, suggesting people living in the happiest states are more relaxed than their gloomy counterparts.”

From Wikipedia comes the following definition of neurosis:  “poor ability to adapt to one’s environment, an inability to change one’s life patterns, and the inability to develop a richer, more complex, more satisfying personality.”

Steven Rattner: Why we had to get rid of GM’s CEO

When Rick Wagoner was ousted from GM, many people came to his defense. There was anger. How dare a government appointed “czar” (Steven Rattner), with no automotive industry experience, fire GM’s CEO.  “What does the government know about running a car company?”, the defenders would say. I constantly heard how Rick was a “nice guy”. As if that matters. I like nice guys too, but Wagoner had proven his inability to turn GM around.

What does the government know about running a car company? Nothing. What did Rick Wagoner know about running a car company? I don’t know, but it was definitely time for a change. Don’t worry too much though, over his tenure at GM, Rick Wagoner made over $63 million, and left with a $20 million retirement package. Raise your hand if you’d like to lead a failing automotive company…

Clusters of Entrepreneurship 

There were a few points that immediately stood out in their relevance to the metro Detroit area, including the following:

“Economic growth is highly correlated with an abundance of small, entrepreneurial firms.”

“There is a remarkably strong correlation between smaller average firm size and subsequent employment growth due to start-ups.”

“Evidence does not support the view that regional differences in demand for entrepreneurship are responsible for these entrepreneurial clusters. Instead, the evidence suggests that spatial differences in the fixed costs of entrepreneurship and/or in the supply of entrepreneurs best explain cluster formation.”

Automobiles on Steroids

“If weight, horsepower, and torque were held at their 1980 levels, fuel economy for both passenger cars and light trucks could have increased by nearly 50 percent from 1980 to 2006. Instead, fuel economy actually increased by only 15 percent.”

Technology usually makes things more efficient, and cheaper. In the case of the Big Three, they made them less efficient and more expensive.

Slaying of murder witness in Detroit leaves trail of fear

There’s not much to say about this, other than those who feel that the suburbs don’t need to worry about the plight of the city are mistaken. The brutal murder occurred at a restaurant at 12 Mile and Telegraph Rd. The witness to that murder was gunned down before the trial.

Home Builders (You Heard That Right) Get a Gift

It’s great to see a Michigan company who played a large role in the collapse of the real estate market get $450 million in tax refunds. Guess who’ll get to pay for that? With “$1.5 billion in cash and cash equivalents on its balance sheet, according to its most recent financial statement”, it’s not like Pulte was in danger of shutting it’s doors any time soon.

Don’t call  him a Detroiter

A recent post on Time’s Detroit Blog about a letter written in response to a comment by George Jackson, in which he stated, “in a sense we are all Detroiters”, brought out some angry and emotional comments.

“When the city of Detroit begins to embrace the economic models that make great American cities, perhaps then the surrounding counties that are enjoying a modicum of economic success will consider aligning themselves with Detroit.” Unfortunately, modicum is the key word here.

Signs of Hope

Can energy be Michigan’s salvation? What the author, Bob Herber says is, “What we’ve lacked so far has been the courage, the will, to make it happen. ”

One of the recurring sentiments I get from metro Detroiters is not just a lacking will, but a belief that things don’t need to change. “V-8s are good damnit! We’re America!” V-8s are pretty cool…but, it’s old technology, and we need to start embracing the future in this state.

The Abandoned House of the Week

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The entire area in which this house is located has been abandoned. Cement barricades block several of the streets, and large weeds, bushes, and even trees are growing through cracks in the pavement. Over the years I’ve visited this area many times, and have been chased by a pack of stray dogs, and had to drive around 20 foot high piles of toilets, and sinks. This time the overgrowth, mainly the tree of heaven (aka. ghetto palm), was almost completely obscuring several of the houses, and the grass was chest high.

Only a short distance away cars rushing from the suburbs to the city, and back again, pass by continuously. From the sunken Lodge Freeway, it’s almost easy to ignore the devestation, as often only the burned out rooftops are visible from the driver’s vantage point. This section of the city borders Highland Park, and has been particularly hard hit by population loss, unemployment, and abandonment.

Who’s left Michigan? And who’s left in Michigan?

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The other night I had a conversation with someone still living in metro Detroit. We talked about the national economy, and local Detroit metro economy as well. Now that I’ve been, for the most part, working outside of Michigan for the last couple of years, I see things from a slightly different perspective. Those who live in Michigan are, I imagine, feeling a greater weight,  than those of us who live in areas with a better economic outlook. While I’m not viewing the world through rose colored glasses, I certainly see a better national future than did the person on the other end of the line. I believe many regions in this country are well positioned for the future. Unfortunately, where we did agree was in the belief that Michigan, and metro Detroit, is not one of those regions.

For many years now, I’ve been stressing that as bad as things were, I believed they would get much worse for the area. Upon moving back to metro Detroit from Portland, Oregon, I suffered from a pretty big dose of culture shock. The people, the place, and mostly the attitude was completely different. In Portland people, with good educations, often with plenty of experience as well, moved to the area just to be there. They wanted to be around other young, educated, and often creative, individuals. They wanted to be around the kinds of people that start businesses like Resource Revival, Portland Design Works, and River City Bicycles. They wanted to have the chance to work for companies like Nike, Keen, Adidas, Weiden + Kennedy, and Second Story Interactive. I’ve never been able to say the same about Detroit. Though I’m sure there are some who have made a decision to live in Detroit for reasons other than family or a job, I’ve never met any.

Growing up in metro Detroit almost everyone I knew with a lot of money worked in the one industry. If they didn’t work for the Big Three, they had a family business, and it was most likely an automotive supplier, or somehow serviced the auto industry. The pay was often ridiculously high, and the bar was often too low. The pay didn’t necessarily go to the best, but to most well connected. Of course this wasn’t, and isn’t, strictly a problem in one industry, but as the auto industry grew, the problem grew too. At one point in the late 80’s and early 90’s the zip-code I lived in was the wealthiest in the country. This occurred even as the auto industry was in decline. Already almost everyone I knew, around my age, wanted to “escape” from Michigan, and the bloated, insular, and dysfunctional industry that dominated the area. Unfortunately the high pay, and security of the jobs in the industry sucked many back to the state after college, but the foundation for a healthy, innovative, and diversified economy was long gone. As soon as the over heated economy, built on debt, began to cool, the exodus from Michigan moved into overdrive.

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Who has left? Anyone with a good education, or skills that were in demand nationwide, such as software engineers, chemical engineers, and many other high tech and creative workers. They were the ones who could go almost anywhere. If you had a good education, and new you could get a good job anywhere, would you stay in a region whose main city leads the nation in crime rates, unemployment and poverty, suffers from a low level of education, has few cultural and recreational opportunities, bad traffic with no alternatives, and a sprawling and poorly designed metro area? Of course the suburbs don’t suffer as the city does from these afflictions, but let’s be honest, young, educated, creative types like cities. No matter what your middle aged, suburb loving, curmudgeon beliefs are, the younger generation likes what cities offer. Even if they don’t live in the city, they want to be near a vibrant one. They want culture, jobs, variety, choices in transportation, and vitality.

So who is left? Is it, as this article claims, the strongest that remain? Maybe those who stayed are stronger. Who knows, though it looks like it is the educated who are leaving, and it appears that the poorer, and less educated would like to leave, but find it much more difficult. But, regardless, metro Detroit needs much more than strength. It needs leadership, creativity, innovation, and vision. Detroit needs a new direction. There are a few good signs, as the article points out, but why did it take so long for anyone to take action? What was going on the last 20 years or so? Nothing as far as I could see. I was there. It wasn’t necessarily that no one cared, but that no one cared to see what was coming. Sure there were the few who were planning for the future, but for the most part it seemed as if Michigan was enjoying a party most believed would never end. Now the party is over, and many are pointing fingers. It’s the liberals fault. It’s bad tax policy. Blah, blah, blah… The ship is underwater. Time to stop the blame game.

It’s not that I believe Detroit has no future, it’s just that I think that it’s going to take a long time to attract the people that are needed to turn things around. Maybe a turn around isn’t even possible. Do we even want to go back? What we really need is to move forward. Michigan has waited far to long to face what was the future, and is now the present, but better late than never I guess. I certainly don’t have the answers, but I do know that unless Michigan can attract, and keep the types of people that are leaving, the state doesn’t have much of a future.

The abandoned house of the week

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Health care can’t save Michigan, or I told you so part 3…Michigan’s future, and some photos

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In May of 2008, I read an article regarding the expansion of the area’s hospitals, and the growth of the health care industry in general.  At the same time, I also wrote about how I had viewed this as a potential problem for a long time. The idea, at the time, seemed to be that Michigan’s, and in particular, metro Detroit’s, economy could be saved by health care. And, so the growth of the local hospitals could put more people to work. Former automotive employees could be retrained to work in the health care industry. Best of all, the health care industry was largely immune to the ups and downs of the economy. People always need health care! And with our aging population, we’d have an ever increasing supply of patients.

What wasn’t often mentioned was that Michigan, and again, metro Detroit in particular, was losing population at the same time that the hospitals were expanding. The problem with the health care as savior plan, was no different than the belief that the housing market, or the commercial real estate markets would keep growing despite a declining population. From my conversations with industry “experts” and from reading and watching the local news, it was obvious that many people, whom I had generally assumed knew more than me, couldn’t imagine a Michigan any different from the one they were living in in 2005 or so. The real estate markets were booming, the health care industry was booming, and the Big Three seemed to be doing not to terribly bad (other than maybe Ford). If one only looked at the surface, things may have looked so-so in Michigan, but if you were to have looked a little deeper, things looked like they were going to become downright horrible. The population had been stagnant or declining for a while. Michigan was one of the few states in recent history with this distinction. We were far too heavily dependent on an ailing industry with a broken business model, whose employee’s pay rate was not based off of market forces in any way, and whose management teams couldn’t seem to see past the ends of their noses, or a least past the next quarterly profit report. And we kept on building, and moving further from Detroit, using used tax payer money to help build infrastructure for new developments, while our old infrastructure crumbled. It angered at least a few of us, that no one seemed to be able to (or at least didn’t want to) see that a declining population whose economy was based on one broken and declining industry, and whose current investments were being made on new, and largely unneeded infrastructure, was doomed to failure, and soon.

In my business, when I asked questions about the, seemingly huge, number of new housing developments being built in the middle of nowhere, I was constantly told things like,  “our projections show that we can build like this indefinitely”, and “as fast as we build them, people buy them”. Were are these people coming from, I would ask. The answer was usually something like, “a lot come from Detroit, or from older suburbs”. Apparently, no one thought to follow this logic to the end of the line. If Detroit has been losing population for 40 years, and people move from Detroit to Dexter, who is buying the house in Detroit so that the purchase in Dexter can be made? People were buying houses in Detroit at the time, but obviously less than were leaving Detroit. The problem was simple. You can not expand the number of houses if the number of people is going down, with out driving prices down. But what was such an obvious sign of trouble at the time, is that prices were rising, and people were sure they would keep rising.

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So Michigan had a declining population, dependent on a downsizing industry with a broken business model, that had already been laying off large numbers of employees for years, an over saturated residential and commercial real estate market, and of course a largely under educated work force. But, we need not fear because the health care industry was going to save us. We’d all become doctors, nurses, assistants, or administrators, and we could just all be at the hospital all the time, either taking care of someone, or being taken care of by someone else. It’s the logic that seemed to be used by the Big Three for a while. For quite some time, almost all television advertising was directed toward their own employees. Who advertises to themselves? I’ll pay you, and you can then give it back to me in exchange for the thing you just made, that I paid you for. Maybe if we just make a chain letter, and send it to all of our friends, we can all get rich!

Unfortunately, a market based economy requires more than one or two industries to work. And so, it was always obvious, that unless something fundamental changed in Michigan, that we couldn’t depend on the health care industry to save us. As it turns out, the health care industry isn’t immune to downturns in the economy after all. It should have been obvious all along. If you are out of a job, or have no insurance, do you put off medical care and procedures? Of course. And if there are less people in the state, are there less potential patients? Of course. Michigan, like any other state, can’t depend on any one industry to keep the economic engine running. It takes a progressive, and diversified economy to be successful. No one knows for sure what the next big industry will be. Who predicted Google? At the time, most people thought search engines couldn’t possibly make money, and yet online advertising, has been a growth industry for years. Trying to create a plan for the future, based on the past, is unlikely to work. Sure the past holds lessons to learn from, but the future remains unknown. What Michigan needs to do is to put a priority on education, entrepreneurship, and quality of life. Of course Michigan’s broke, so it’ll be very difficult for the government to do what is needed, but the real change needs to come from the citizens who live there. If Michigan becomes a holdout of stodgy, grumpy, and angry citizens, that resists any change at all costs, then the downhill slide will continue for decades more. But if the cheap living can attract a new younger and more progressive generation, then Michigan may have a chance.

Socialism, and other isms, and of course, some abandoned houses

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As a continuation of my previous post about some ideologies that seem to be misunderstood by so many, I am writing about several different ‘isms’ that seem to be used frequently in discussions and arugments. I am not an expert in any kind of “ism”. I am simply interested in social, economic, and political theory and ideologies.

After writing this I came across an article in the Atlantic Monthly. It’s interesting, in that I see the type of agenda (both liberal and conservative) the article discusses far too often much of our media. I’m not in this to win. I don’t want to destroy anyone. I just want to encourage rational thought provoking discussion. It also made me think about what I’ve written in the past. Has it contributed to anger and hate, or has it contributed to a more admirable goal? Hopefully I can achieve the latter more often in the future.

Socialism

From Merriam-Webster’s dictionary:

1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
2 a : a system of society or group living in which there is no private property b : a system or condition of society in which the means of production are owned and controlled by the state
3 : a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done.

Just putting the definition out there. You can make your own decision as to whether or not Obama is a socialist or not.

Fascism

From Merriam-Webster’s dictionary:

1 : a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition

Recently Barack Obama has been accused of being a Fascist, which is of course silly. From Wikipedia, we can see that Fascists believe, among other things, that nations and/or races are in perpetual conflict whereby only the strong can survive by being healthy, vital, and by asserting themselves in conflict against the weak, and Fascism opposes class conflict, blames capitalist liberal democracies for its creation and communists for exploiting the concept. Fascists also believe in quashing all dissent and criticism of both the government, and the Fascist movement itself.

Fascists often believe in imperialismSingle-party states, Social Darwinsim, indoctrination, eugenics, and corporatism. For the most part these are not liberal ideals, and in fact, Fascism is close to the direct opposite of liberalism. It is pretty much anti-liberalism.

So to explain this in simple terms, was Obama a Fascist, the protesters at the recent town hall meetings would have been jailed or executed. Furthermore, Barack Obama is no more a dictatorial leader than George W. Bush was. Insisting on your way, if you’ve got the votes, and alliance to do so is not dictatorship. George W. Bush called it “Political Capital.” It’s not bipartisan, but it’s also not autocratic or dictatorial.

Nazism

From Merriam-Webster’s dictionary:

: the body of political and economic doctrines held and put into effect by the Nazis in Germany from 1933 to 1945 including the totalitarian principle of government, predominance of especially Germanic groups assumed to be racially superior, and supremacy of the führer.

Considering the following from the Nazism Wikipedia entry, “Nazism is often considered by scholars to be a form of fascism,” and that fascism is the antithesis of liberalism, it would be difficult to truly believe Barack Obama could be compared to Hitler, as has been done recently.

Liberalism

From Merria-Webster’s dictionary:

1 : the quality or state of being liberal
2 : a often capitalized : a movement in modern Protestantism emphasizing intellectual liberty and the spiritual and ethical content of Christianity b : a theory in economics emphasizing individual freedom from restraint and usually based on free competition, the self-regulating market, and the gold standard c : a political philosophy based on belief in progress, the essential goodness of the human race, and the autonomy of the individual and standing for the protection of political and civil liberties; specifically : such a philosophy that considers government as a crucial instrument for amelioration of social inequities (as those involving race, gender, or class) d capitalized : the principles and policies of a Liberal party

Liberalism has got to be one of the big surprises for many. I would think approximately half of the politically active in this country would hate to be called “liberal,” when in fact the U.S. was founded as, and still is, a liberal nation. The Declaration of Independence states: “all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness; that to insure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.” Furthermore, the free market, so beloved by conservatives, is a liberal ideal. Of course there are different varieties of liberalism, but with a few exceptions, that is what we really have in this country. I think it’s possible to see policies in both parties that arguably violate the ideals of above quote. Furthermore, most of the political fighting currently going on is about different varieties of liberalism.

Capitalism

From Merriam-Webster’s dictionary:

: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

There are many different forms of capitalism. One of the debates on capitalism of late is whether or not Keynesian economic theory should be used at this time, or whether or not we should continue to put our faith in the Chicago School of thought, based on neoclassical economics, which many blame for the current economic mess. One of the big flaws in neoclassical thought is the belief that people make rational decisions resulting in rational markets, and pricing. The obvious lack of rationality leads many to behavioral economics, which studies emotional factors involved in decision making.

Free Market

Once again, from Merriam-Webster’s dictionary:

: an economic market operating by free competition

This is such a simple definition, and something that we have probably never truly had in this country, contrary to many who argue that we are only currently straying from it. I would argue that we’ve had a mixed economy pretty much since the country’s inception. Although, corporations often claim they like competition, they usually don’t. Hence they often lobby our politicians for protectionist legislation (tariffs on light trucks and SUVs, and more recently, tires), restrictions on ownership (such as radio and television frequencies), and other such government interventions to give a competitive advantage to specific industries or companies.