In his five-month immersion in Detroit’s dysfunction, Orr has been startled by “the fact that people had gotten used to the city like this — people were tolerating the abnormal.” But Detroit’s decline began in the 1960s, well before the auto industry’s downward spiral (the United Auto Workers’ membership peaked in 1979). A half-century of the abnormal made it the norm.
Orr has found “bureaucracy on steroids” — for example, “more than two dozen layers of approval for planning and zoning.” Each layer was an opportunity for cronyism and corruption. And there was what he delicately calls “dissonance” in the political class’s thinking, which he compares to the Tulip Mania that gripped Holland in 1637. His explanation for the heedless, unsustainable pensions and other promises made to unionized city employees is: “IBG, YBG” — I’ll be gone and you’ll be gone when the reckoning arrives.
Orr’s negotiations with unions and others having been unfruitful, a bankruptcy judge will allocate pain. Especially deserving of it are Detroit’s enablers — the creditors who bought the city’s bonds assuming they would be paid first. But paid with what? Because the city is broke, they will be paid pennies on their dollars. Other cities will probably suffer from the malfeasance Wall Street encouraged in Detroit: The cost of municipal borrowing should increase when lenders add a new risk premium to the cost of credit.