Arsenal of Democracy . . . Motown . . . Murder City . . .rnToo many of the bad ones have stuck.rn”Mv personal candidate?” Waldmeir writes. “For years I’vernprondlv worn a T-shirt that says all I have to say: ‘Detroit: Nornplace for wimps.'”rnDetroit is no place for wimps. F’or most of the 20th centur)’,rnits repntation has been as the tongh, working-class town of HardrnTimes or Hoffa. Ford’s Ronge complex, where the Battle of thernOverpass took place, is shll one of the largest industrial facilitiesrnin the world. Suburban Downriver is one of the most heavilyrnindustrialized areas in the United States. From atop the RougernRiver bridge, you can sec the Rouge complex to the north; tornthe south are Downriver’s auto plants and steel mills, some nowrnshut down as a result of the North American Free Trade .Agreement.rnBut the view cannot match the pungent odor that assaultsrnone’s nostrils on hot summer davs, a chemical melangernthat sometimes smells like rotten eggs.rnThe irony of Detroit is reflected in the way area residentsrnidentifs’ with the city, whether they live in it or the suburbs.rnSome suburbanites answer “Detroit” when they are out of townrnand asked their place of origin. There is a pride associated withrnthe Detroit of automobiles and Motown Records, whose performersrngae the world so many chart-topping hits before movingrnto L.os Angeles in the early 1970’s. But when they are backrnin Southeast Michigan, the answer of these suburbanites isrnmore likelv to be “Birmingham,” “Dearborn,” or “Livonia.”rnI’here is only shame for the Detroit of Murder City fame, ofrnstreetlights that do not work and snow-covered streets that wentrnunclcaned during last year’s internahonal auto show. And bitterrnmemories of the Detroit of Israeli author Ze’ev Chafets’rnbook. Devil’s Night, which told the world about the tradition,rnsince ended, of wholesale arson on the night before Halloween.rnOr the L^etroit analyzed by New York’s leftist Village Voice underrntitles such as “Motor City Breakdown” or “New Jack CityrnFats Its Young.” Some of the ruost honest coverage of Detroit’srnproblems has been written not by native or transplanted liberalsrnbut by outsiders with a left-of-eenter perspective. The samernholds true for the auto industry; it was ex-New York Times reporterrnDavid Halberstam who wrote The Reckoning, w hich documentedrnhow Ford responded to Japanese penetration of U.S.rnauto markets.rnSuburbanites’ love-hate reladonship with Detroit is not lostrnon the city’s black popidahon, which exceeds 75 percent. Tornblack Detroiters, it is rank hypocrisy for white suburbanites tornidentity with the city when outside of Michigan while disowningrnit locally. This is only one divide separahng Detroit fromrnthe suburbs. Within Detroit, the late Coleman Young, electedrnin 1973 as the cit)”s first black mayor, is viewed reverently; in thernsuburbs, he remains anathema. And no wonder: Shortly afterrntaking oftice, the former civil-rights activist told Detroit’s criminalsrnto “hit Fight Mile Road,” the boundar’ behveen the cityrnand its northern suburbs. Young sered as mayor for 20 years;rnhis tenure |)roved the old saw that “politics makes for strangernbedfellows.” Supported by the Comnuinist Party, he workedrnwith Henr’ Ford II to build the Renaissance Center, a majorrncommercial development downtown. A Democrat, Yoimgrnne’ertheless enjoyed a closer working relationship with two Republicanrngovernors (William Milliken and John Engler) thanrnwith his fellow Democrat, Covernor James Blanchard. Inrn1991, Young’s tenure ended with the election of black Detroitrnattoruc}’ (and former chief jusfice of the Michigan SupremernCourt) Dennis Archer, attacked by opponents as the candidaternof the white suburbs. Convenfional wisdom is that Archer usheredrnin a new era. But the problems of Detroit, whether city- orrnsuburb, are more complicated and desperate ftian its three millionrnmetropolitan residents have been led to believe. They arernrooted in international trade and the cold hard reality of therneconomic principle known as Factor Price Equalization (FPF).rnI here prevails on the whole earth a tendency toward anrnX equalization of wage rates for the same kind of labor,”rnwrote Ludwig von Mises. The Austrian economist Mises escapedrnthe Nazis but not the stigma of being a non-Kcvnesian inrnthe groves of post-World War II academe in America. But thernsmall group of students he influenced included Federal ReservernChairman Alan Creenspan, who peppers his congressionalrntestimony today with terms straight out of Mises’ magnumrnopus. Human Action.rnWhat Mises described with FPF was the tendency of thernprices of wages and other factors (such as land and capital) tornequalize when government-imposed barriers to internahonalrnfree trade are ended. Investment froiu across the world willrnmove to the nation offering the highest rate of return to investors.rnIn riie case of NAP’TA, there are skilled and unskilledrnworkers in both the United States and Mexico emploed by thernautomobile industrv and its suppliers. Capital will flow into thernsectors offering the greatest return to investors (U.S. skilled andrnMexican unskilled labor) and out of those sectors providing arnlower rate (Mexican skilled and I’.S. unskilled labor). Consumersrnultimately benefit, but there are clear winners and losersrnunder this process. If yon are a $50-per-hour American computerrngeek or a $5-per-day Mexican blue-collar worker, capitalrnwill flow your way because your work provides flic greatest returnrnto investors in tiie global economy. But investors in Mexicanrnskilled and U.S. un.skilled labor also want a higher rate of return,rnand to achieve this, they must spur productivity increases,rngenerally with technological advancements—or worse. Corporationsrnmust downsize, oiftsource, or send native jobs to a foreignrnland. Unskilled American blue-collar workers end up thernbiggest losers.rnWhat is to become of the MotorrnCity, the once-great Arsenal ofrnDemocracy, the industrial titan thatrndefeated the Nazis in World War II?rnManufacturing jobs, especially for unskilled workers, havernbeen disappearing from Detroit’s auto industr}’ because of flicrnemerging global economy and FPF. General Motors, thernlargest aiftomaker, has eliminated more flian 250,000 jobs inrntwo decades. Ford announced a major change of strategy in Julyrn(outsourcing to Brazil) and has also been trimming jobs. Thernprocess was already well under way at Chrysler before it wasrnswallowed by foreign investors and became Daimler-Chrysler;rnnow, only about 25 percent of its shareholders are American.rnThe process is just beginning. As more international tradernagreements are concluded, FPF will kick in with a vengeance.rnNOVEMBER 1999/19rnrnrn