Several years ago I was in Detroit. Americans call it a "dying city", but the airport is modern and the headquarters of General Motors dominates the skyline. It too is very modern. The urban area is dying out: abandoned homes, businesses and land. A city of 713 thousand inhabitants (still 1.8 million in 1950) is in the process of being recaptured by nature and is a ghost town at night. She symbolizes the conscious acceptance of decline into collective self-destruction. This 'Detroit syndrome' also threatens Europe, and especially France.
The bankruptcy of Detroit is necessary and even beneficial. The ruling Democrats in Detroit point to the population declining by 60 percent since 1950. Yet in 63 years leaders and government labour unions have done nothing to make Detroit adapt to the changing demographic reality. On the contrary: race riots chased whites out of town and crime did the same to the black middle class. Declining revenues were accompanied by structural over-spending. Detroit piled on huge pension deficits, forced by government labour unions which only supported Democratic candidates for City Council who clung to the 'old order'. This way the city built itself a debt of $ 18 billion (13.6 billion Euros). Detroit degenerated: the city leaders are incompetent and 47 percent of the population is illiterate.
Corruption in Detroit
In 2008, Mayor Kwame Kilpatrick was arrested. He went to prison for corruption, was released on parole and then got caught hiding hundreds of thousands of dollars to avoid a Court imposed refund to the city. Kilpatrick is back in the cell and faces a severe penalty. This affair did nothing to prevent the German Commerzbank and the Belgian Dexia to lend 400 and 305 million respectively to Detroit. You really have to be very foolish to do something like that. The city is broke and is protected from creditors. For years Detroit has denied the facts and tarred on other people's money. Funds have run dry now.
Parts of the euro zone bear the seeds of the Detroit syndrome. In about ten years Greece has performed without a major depopulation what took Detroit 63 years. Greeks lived beyond their means with borrowed money, falsified budgets, corrupt politicians and demanding unions. In 2010, Greece should have gone bankrupt, like Detroit now. But rescue efforts keep it artificially in the euro zone producing years of economic contraction. Bankruptcy is the corrective hand of reality, a psychological turning point.
For Europe, the Detroit syndrome of France is the most threatening. Since 1973 French governments have not been able to present a balanced budget. France is piling up government debts rapidly. In 2014 it will be 94 percent. In France, the government share in the national economy is 56 percent, union leaders live with their heads in the time of class struggle, and high labour costs undermine competitiveness.
Three hour breaks
Earlier this year, the U.S. tire manufacturer Titan attempted to take over a Goodyear plant in the northern French city of Amiens. After months of fruitless negotiations with radical leftist unions the CEO of Titan, Maurice Taylor wrote: "French workers earn the highest salaries. They work three hours, they spend another 3 hours of breaks, lunch and talk. This I told the unions to their face. They said that this is the French way of life". He called the French Government ‘apathetic and short-sighted’ and said the unions are ‘crazy'. A huge riot was born; the French felt offended, more so because it came from an American, and called Taylor an 'extremist'.
Taylor was right. President Hollande lowered the retirement age from 62 to 60 years. A day of unpaid sick leave for civil servants was abolished. Tens of thousands of new civil servants are recruited. Government labour Unions block reforms. France suffers from the Detroit syndrome and hopes that others (Germany, Europe) pay its bill.
The most dangerous aspect of this condition is the state of denial. The French have no understanding for necessary reforms; politicians of left and right do not recognize the facts. France collectively accepts the gradual decline into the zone of self-destruction. There comes a time when the tide turns.
Once the French Detroit syndrome becomes visible, it is a European problem of unprecedented proportions.