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Marketplace Morning Report

Is a Detroit-style default coming to a city near you?

Kate Davidson Jul 22, 2013
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When Detroit filed for bankruptcy last week, it made history. Until Thursday, major American cities in financial distress had always — eventually — found a way to avoid Chapter 9. Detroit’s not the only post-industrial city struggling to meet pension and health care costs with a decimated tax base. So is Detroit just the canary in the coal mine … a harbinger of things to come?

The short answer, says Jennifer Bradley, is no. She’s a fellow with the Metropolitan Policy Program at the Brookings Institution.

I think that Detroit is actually unique, in that it was a perfect storm of a lot of things that no other place has had,” she says.

Like a combination of global competition in the auto industry, years of mismanagement and political corruption, federal policies that encouraged suburban over urban development, and the collapse of a tax base that had been one of the largest in the country. But a lot of cities face many of the same challenges. So how do they stave off a Detroit style crisis? Eric Scorsone is an economist with Michigan State University.

The diversity of the economy is critical and it means you have industries that go up and down in different ways,” he says. “And Detroit is really now just a health care industry. You know, the auto industry’s pretty much disappeared.”

So, ingredient number one: economic diversity. Ingredient number two: public/private partnerships. That may sound like jargon. But it wasn’t 30 years ago, when Pittsburgh was staring down double digit unemployment and the demise of its steel industry. An economic development partnership known as the Allegheny Conference helped turn the city around, leveraging the region’s educational institutions to create jobs in life sciences, engineering and other sectors. Dewitt Peart is with the Allegheny Conference.

You know, all of this work didn’t happen overnight, it has taken us 30 years to really reach a point where we really feel good about where our economy is headed and what we’ve accomplished,” he says.

While Detroit’s bankruptcy may be a unique case, a lot of old manufacturing cities hope that Pittsburgh’s turnaround is not.

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