By Frank Joyce
As a life-long Detroiter who has lived both in the city and the suburbs, I’ve been fascinated by the media frenzy over Detroit’s bankruptcy. Like most big news topics these days, Detroit has become a screen onto which people project whatever political viewpoint they have.
First off, it’s worth considering why the bankruptcy is getting so much attention. Is there really that much there, there? After all, as with any bankruptcy, isn’t it just an argument among some people about some money (or artworks, real estate and other assets).
In the private sector companies file for bankruptcy every day without making much, if any, news. And why not? Bankruptcy is a tool used by capital to manage failure. Capitalist orthodoxy is that some degree of failure is both inevitable and desirable (it’s called creative destruction). It’s no surprise therefore that capitalism creates procedures to manage it.
At the height of the depression Congress added a new tool, Chapter 9, to the Bankruptcy Code to address financial failure by local governmental bodies. While it’s true that “failed states,” or in this case a failed city government, are different in various ways from a corporation, the basic issues of who owes who how much are the same.
Admittedly municipal bankruptcy is not as common as private sector bankruptcy. (Not yet anyway.) So, up to a point, the “look, look, a man is biting a dog” scenario is justifiably in play. Further, because cities are units of elected governments, there is understandably a different sense of the stakes.