More Like Hurricane Coleman

by Don Boudreaux on August 1, 2013

in Budget Issues, Crony Capitalism, Current Affairs, Debt and Deficits, Other People's Money, Reality Is Not Optional, Seen and Unseen

Here’s a letter to The New Yorker:

John Cassidy’s analysis of Detroit’s problems is surprisingly feeble (“Motown Down,” Aug. 5).  Why, for instance, does he uncritically accept Steven Rattner’s assertion that that city’s fiscal woes are a natural disaster, like hurricane Sandy, rather than a man-made one?  Sure, consumer demands and industrial structures have changed since Detroit’s heyday in the 1950s.  But as Joseph Schumpeter famously explained in 1942, capitalist change is constant; it is unique neither to Detroit nor to the last few decades.  Yet unlike today’s Detroit, nearly all cities and regions adapt to this change and not only survive, but thrive.  When reasonably free of government-imposed obstacles, the competitive market’s incessant “destruction” is creative.

Chicago didn’t collapse when its once-booming stockyards closed as meat-packers moved to rural areas.  Denver isn’t destroyed because it is no longer a mining town.  And the shift of agriculture away from Silicon Valley obviously hasn’t impoverished that region.

The forces that laid Detroit low were hardly beyond human control.  The rulers of that city, for example, (according to the Lincoln Institute of Land Policy) have imposed on Detroiters the highest effective rates of property taxation among America’s 50 largest municipalities.  Property-tax rates there run about double the U.S. average – a fact that, by itself, goes far toward explaining why so much of Detroit’s landmass now lies abandoned and decrepit.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

On a related note, see this short post at Division of Labour by Frank Stephenson.

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