In a historic blow to democracy, Detroit declared bankruptcy, and Governor Snyder of Michigan appointed an “emergency manager,” Kevyn Orr. He, despite not having been elected, can fire city workers and abolish contracts with unions all by himself. But his recent comments that Detroit’s people are “dumb, lazy” show that he’s quite disconnected from the average Detroiter. In Detroit, not only are we seeing the demise of a once-booming city, but we’re also seeing something that’s becoming more common throughout America: The bankruptcy of democracy, and with it, redistribution of wealth from the poor to the rich.
Detroit’s Not Bankrupt, It’s Been Looted
This kind of class warfare on the poor in Detroit has become characteristic in the past few years, especially with the “right-to-work” laws, which prohibit union security agreements. In states without such laws preventing unionization, wages tend to be higher; that’s no coincidence. But we probably shouldn’t be surprised. According to Larry Bartels’ groundbreaking research, what the bottom 66% want doesn’t really matter for anything when it comes to policy.
Before we get to why this is class warfare, one important detail: A state judge already ruled that the bankruptcy is illegal according to Michigan’s Constitution. Then why is it still happening? Gov. Snyder and Orr deceptively maneuvered to get this ruling delayed by 5 minutes, during which they filed for bankruptcy in a federal court.
The bankruptcy won’t affect everyone equally. Bondholders (people the city borrowed money from) will be paid in full. Richer people tend to hold bonds, which makes sense, since only they have money to lend. The bottom 40% in America have a negative average net worth (they owe more than they own). Meanwhile, the public employees and 20,000 pensioners, working class people, will be punished. Ordinary people, who were promised a stable retirement if they worked hard, are the ones losing out. For them, the American dream is turning into a nightmare.
Is America Becoming Detroit?
Unfortunately, yes. Everywhere we see the disappearance of the so-called “middle class.” The type of redistribution that we’re seeing in Detroit is a big reason why. Emmanuel Saez found that the top 1% have gotten 121% of the income gains, while the bottom 99% have lost income in this “recovery.” The super-rich have no illusions about this; CitiGroup’s leaked memo tells us, “The world is dividing into two blocs – the Plutonomy and the rest.” They understand the ever-increasing divide between rich and poor, and it’s striking that normal Americans don’t.
When the banks defrauded customers into foreclosures, they didn’t get prosecuted by the government, even though the Department of Justice was aware of their criminality. Instead they got bailed out with our money. Yet when those same customers, we the people, lost their houses, no help came. When Detroit was looted, no help came. It seems that Chomsky’s sarcastic truism couldn’t be more relevant: The market is fine for the poor. Mothers with dependent children and pensioners can be sternly lectured on the need for self-reliance, but not dependent executives and investors. For them, the welfare state must flourish.
Unless we challenge this plutocratic status quo, it’s bound to get worse for both our bankrupt democracy and ordinary people.