The Local and the Global: Lessons from Detroit

imageIn The Nicomachean Ethics, Aristotle articulates three types of friendship: friendship based on utility, friendship based on pleasure, and perfect friendship based on goodness. When it comes to the relationship between multi-national corporations and local places within the context of the global economy, I cannot help but think Aristotle’s description of friendship based on utility hits it on the head.

“Utility is an impermanent thing: it changes according to circumstances. So with the disappearance of the ground for friendship, the friendship also breaks up, because that was what kept it alive. Friendship of this kind seem to occur most frequently between the elderly (because at their age what they want is not pleasure but utility) and those in middle or early life who are pursuing their own advantage. Such persons do not spend much time together, because sometimes they do not even like one another, and therefore feel no need of such an association unless they are mutually useful. For they take pleasure in each other’s company only in so far as they have hopes of advantage from it.”

The detrimental effects of this economic utilitarian friendship really hit home for me a few weeks ago when I attended the 24th annual Congress for the New Urbanism in Detroit. As a planner and local economist, seeing Detroit was an absolutely fascinating experience. Walking around the city evokes the same feeling as the ruins of Rome or Athens; everywhere you look you see evidence of a once great, flourishing economy– beautiful architecture, mills and factories, extensive neighborhoods – nearly all of it abandoned and idle. I was amazed to see pleasant, functional houses next to dilapidated buildings or vacant lots where a previous building had been bulldozed. Detroit was the Silicon Valley of its day – the tech capital of the world back when the automobile was the latest technology. But just as global forces picked Detroit for investment and people economically migrated there to follow the jobs, in the end there really wasn’t anything preventing this same capital and people to leave in favor of the next hot spot. And they did. Over the past 50 years a city that once boasted a population of 1.8 million people has shrunk to 670,000.

The economic lessons of Detroit really need to be taken seriously. First, on a national level we need to rethink what economic progress is and how to sustain it. Lots of people over the centuries have battled to improve labor and environmental standards.  Inheriting this rich legacy, it seems to be a grave mistake to provide a back door for allowing capital to move places that don’t have these same standards (to the devastating effects to people and the planet). To then allow, through free trade, the importation of these outsourced goods back to the United States with no economic consequences adds further insult to injury. This undermines all social progress in economics and prevents good people back home who want to do things the right way to do so in a way that is price competitive.

(NOTE: To those who say “well this is just capitalism and the free market at work” I would say this is partially right. One of the inherent assumptions of classical economics is that both labor and capital are mobile and can respond accordingly to supply and demand. However, this is not the reality of the day. Capital is mobile – able to set up a factory anywhere in the world, but the vast majority of the labor force is not – it’s restricted within the borders of its country. This inequality seems to be a large part of the problem. When capital and the labor force were fairly rooted in place and had to negotiate their mutual coexistence and dependence, labor and environmental standards were won battle by battle. But the inequality in mobility today seems to create a race to the bottom because people are trapped in place while the capital can move).

On a regional and local level, the take-away lesson of Detroit is the importance of the development of a local economy by providing for local needs as locally as possible. This means identifying the things that you’re importing now and finding and nurturing ways of being able to produce that locally. The fact is that relying on the global economy makes local places vulnerable. What would happen if that major company decided to leave your town? Or the price fell on the goods and services your town specializes in? Chance are these economic events have the potential to start the economic death spiral of jobs and people leaving, corresponding service retail leaving, and the City left upside down, supporting infrastructure without the tax revenue to do so. The alternative is a City led by its locals, committed to its place in good times and bad, producing a diversity of product that start by serving local needs but then gets exported out elsewhere. This is real economic development.

On an individual level, the reason companies can come in and out of places and potentially shirk labor and environmental standards is because there is a separation made between us as producers and as consumers. Traditionally, in a local economy, if Ebenezer Scrooge was unfair to Bob Crachit, we as consumers would know about it and choose not to do business with Scrooge. Local production creates a transparency for consumers. But if Bob Crachit lived halfway across the world, hidden away and all consumers really saw was the quality and price of services provided via free trade, well then that solves a lot of Scrooges problems and makes him a rich man. And indeed, as I have done a little work with local food producers this dynamic seems to come up. Honest and good people want to do the right thing. They want to pay a living wage to their employees. They want to be environmentally sustainable. But they are consistently being undercut because they are competing for consumers with a bottom-line price and marketing/packaging that doesn’t tell the whole story, particularly as it relates to where that product came from, and what labor and environmental impacts went into it. (Note: I believe this is starting to change. Kudos to companies like Whole Foods in creating its rating system that really starts to do just that).

The funny thing about the local economy is that it doesn’t seem important, until it is. In good times, everyone is your friend, and similarly in financial good times your options seem unlimited and buying local is not as competitive. But in tough times, when financially it makes no sense for anyone to stick with you, because you are more of a burden – will those friends still be there? This is the economic resilience that can only be home grown.

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