Oct 11, 2013

Detroit's (Wonderful) Lack of Governance

Lew Rockwell's interview of  Karen De Coster, who has been chronicling the downfall of the city government of Detroit (and subsequent anarchy in the city) via her blog Detroit: From Rust to Riches, was both entertaining and informative.  Traveling the city by bicycle, she has a unique perspective of the nuances of how people live in a situation when the government crumbles and becomes insolvent and, thus, irrelevant.  The blog is always a fascinating read, and Karen is a great photographer, to boot!  My ears perked up when Lew asked about the city's approach to solving its fiscal disaster.  Karen's answer:

Not a whole lot is known yet about the specifics of the bankruptcy...As you can imagine, the biggest battle has been with the entitlements in the city.  The unions and, of course, the pensioners that are promised lifetime pensions, lifetime insurance, lifetime on the doll everything...the biggest battles that you see publicly right now are the unions here battling for the largesse.   @ 7:25

In reality, the city is insolvent.  We have been riding an unsustainable insolvency for a number of years (like a lot of other cities, by the way), and it was about time that the bubble break.  @8:14

She also makes an interesting comparison between Detroit and Chicago's relative crises when Lew points out that Chicago is in even deeper trouble:

I'm not sure a financial comparison can accurately be conveyed...You know, Chicago has a much, much more...an organized government.  They have a very deeply rooted bureaucracy.  Detroit is not quite so deeply rooted...our ineptness here in terms of the government and their ability to get everything done has really enabled this anarchistic environment.

(In) Chicago, things are going to be a lot more difficult.  You don't see people flocking to Chicago to do these sort of things because it's a very rigid bureaucracy.  A lot of politically powerful people have run the city for years.  @ 9:15 (emphasis mine)

A fundamental observation that can be drawn from Detroit's crisis in governance is that the market is an all encompassing phenomenon, which always lingers, waiting for its moment to spring up.  That is to say- human nature compels us to trade with each other to achieve a harmony of desires.  Even if a public institution has monopolized a service, the moment that the monopoly cannot be enforced is the window of opportunity for entrepreneurs to step in and satisfy market demand (if it exists).  In this sense, entrepreneurs are the personification not only of human desire but of human nature itself.

An interesting difference between public and private organizations is the fluidity of the environment in which each of them operates.  Private businesses must respond adequately to the needs of the customer, or risk failure.  If insolvency is inevitable, the business has a financial incentive to fold sooner rather than later.  This is the seed of mergers, acquisitions and partnerships, as people try to find the right formula to better satisfy market demand.  Thus, the marketplace is always changing to meet the desires of the most people possible.

While private enterprises may come and go, public organizations are much more stationary social institutions with no competition.  As in Detroit, governments are unlikely to take corrective action when pursuing an unsustainable course, as input from various factions and interest groups dictate decisions rather than the more accurate guidance of profit and loss.  Because of the inevitable broken promises that result from insolvency, reorganization of public institutions cause much greater social chaos than private businesses.

While public institutions and their traditions may seem unalterably entrenched, history has instead been a constant weathering away of authoritarianism in its various forms.  Contrarily, private entrepreneurship and trade have been only truly inevitable consequence of human nature.  The foundational need to satisfy one's desires ultimately trumps any attempt to intervene by outside forces.

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