Political Physics: Can the Obama Administration Afford Another Bail Out? – Part II
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a blogumn by Monique King-Viehland
1972 Pittsburgh -- before the 'Burgh cleaned up its act
Last week I posed a question, can the Obama Administration afford another bail out?
This week I’m thinking that perhaps I asked the wrong question.
In the 1970s and early 1980s, the steel industry in Pittsburgh collapsed – ripping the economic heart out of the city. Almost 40% of the local economy and 10% of the jobs disappeared overnight. What followed was swift population decline, significant decreases in property values, etc. From 1974, a peak year for steel employment, to 2002, the industry hemorrhaged more than 75,000 jobs and the city shrank to 334,000 residents, from 520,000.
It was devastating.
Fast forward, nearly three decades later.
According to the New York Times, “de-industrialization in Pittsburgh was a protracted and painful experience. Yet it set the stage for an economy that is the envy of many recession-plagued communities, particularly those where the automobile industry is struggling for its life.”
In the 1980’s, nearly 15% of the workers in the Pittsburgh region were steelworkers. Today, less than 1% of the workforce today is employed in that industry. And Pittsburgh’s steelmaking capacity now accounts for less than 4% of the country’s total capacity compared with nearly 12% in 1980’s (TradingMarkets.Com).
Pittsburgh has reinvented itself, shifting from an industrial economy to one based on technology, healthcare, education, and finance.
According to Pittsburgh Future, “the retail and tourism sectors are also strong. The largest employer in the region is The University of Pittsburgh Medical Center with approximately 27,000 employees. Some of the fastest growth in the Pittsburgh Region has been in high-paying, technology-oriented jobs – science, engineering, and health occupations increased by over 12% in the Pittsburgh Region between 1999 and 2004, nearly 70% faster than the 7% growth in the U.S. as a whole, and faster than in Boston, Charlotte, Minneapolis, and Silicon Valley. And these jobs pay 50% more than the average wage in the region.”
I have no doubt that the Obama Administration will “bail out” the auto industry. Frankly, I’m not sure that politically they have a choice. Even though surveys indicate that 61% of Americans believe that the auto industry should not receive additional bail out funds, I do not think the Obama Administration can ignore the roughly 14 million jobs could evaporate if the Detroit Three are allowed to fail. There will be lots of caveats, attempts to make the industry “greener,” greater government control, etc.
But again, I think that may be the wrong question.
Will a bail out matter? Can the auto industry evolve? Can it retool to become more competitive in the growing economy? Can Detroit diversify its economy so that it is not so heavily dependent on the auto industry? I think these are more important questions.
There is a lot of disagreement about whether Pittsburgh has truly “reinvented” itself and whether it should be a model for Detroit.
But one thing is undisputable. Nearly 30 years ago, Pittsburgh (like Detroit today) was a city built on an industry that was beaten by competition, suffered from financial mismanagement and on the brink of bankruptcy. And today not only did it survive the “death” of that industry, but it has a growing economy.
I think Anderson Cooper said it best on his blog, “Detroit should take notice. There may be a life-saving lesson here,” even if Pittsburgh isn’t perfect.
But no matter what happens, the auto industry in Detroit will never be the same.
And although it may not seem like it today, perhaps it is a good thing for the long-term sustainability of Detroit’s economy.
I think your dead on with this. Until we let Detroit die it can't be reborn. I have been to Detroit many times and the city needs new industry instead of trying to hang on to our grand parents jobs.
I think your dead on with this. Until we let Detroit die it can't be reborn. I have been to Detroit many times and the city needs new industry instead of trying to hang on to our grand parents jobs.
I think you've hit on the head what I've been finding hard to verbalize about this entire bailout argument. Though, I'm all for saving jobs, it seems a bad thing to infantiltize (real word?) a city or a nation. What is gained without the pain of learning, and would it be better for Detroit in the long run to lose jobs now, so that they could be a better city in 30 years. I've also been to Detroit, and I'm not a fan. The smog is almost as bad as Pittsburgh's before the steel crash and it definitely doesn't feel like a growing and developing city.
However, the other part of me wonders what would happen if the car industry does fail in Detroit. Are the resources there for the unemployed to learn new skills? Will the city's officials step up to the plate to attract new businesses and industries? Or would the city completely collapse into crime and decay? I don't know…
I think you've hit on the head what I've been finding hard to verbalize about this entire bailout argument. Though, I'm all for saving jobs, it seems a bad thing to infantiltize (real word?) a city or a nation. What is gained without the pain of learning, and would it be better for Detroit in the long run to lose jobs now, so that they could be a better city in 30 years. I've also been to Detroit, and I'm not a fan. The smog is almost as bad as Pittsburgh's before the steel crash and it definitely doesn't feel like a growing and developing city.
However, the other part of me wonders what would happen if the car industry does fail in Detroit. Are the resources there for the unemployed to learn new skills? Will the city's officials step up to the plate to attract new businesses and industries? Or would the city completely collapse into crime and decay? I don't know…
Ernessa, you are right to be worried about whether or not the City of Detroit or the State of Michigan is prepared to deal with the fallout if the auto industry collapses. I think the answer would be no, but then again neither was Pittsburgh. There were no discussions about bankruptcy and bailouts back then. Steelworkers came to work one day and found the doors locked (for real). Perhaps the Obama Administration should take that $20+ billion and instead of giving it to GM, Chrysler, etc., they should create the infrastructure necessary to help Detroit bridge the gap between yesterday and tomorrow (e.g., unemployment benefits, job training/career transitioning, urban development programs, etc.).
Ernessa, you are right to be worried about whether or not the City of Detroit or the State of Michigan is prepared to deal with the fallout if the auto industry collapses. I think the answer would be no, but then again neither was Pittsburgh. There were no discussions about bankruptcy and bailouts back then. Steelworkers came to work one day and found the doors locked (for real). Perhaps the Obama Administration should take that $20+ billion and instead of giving it to GM, Chrysler, etc., they should create the infrastructure necessary to help Detroit bridge the gap between yesterday and tomorrow (e.g., unemployment benefits, job training/career transitioning, urban development programs, etc.).