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Perpetual Pneumonia–Structural Unemployment and Functional Illiteracy in Detroit

Posted in News & Entertainment by trickyd313 on August 10, 2012

 

Perpetual Pneumonia–Structural Unemployment and Functional Illiteracy in Detroit

Jesse D. Sutton

24 April 2012

WSU – ECO 5800–001

 

 

 

Introduction

The unemployment rate for the United States is 8.2 percent, down from 9.6 percent last year. The unemployment rate for Michigan is 8.8 percent, down from 10.7 percent last year. It is rather common for a state to lag a fraction or so behind the national rate and in many cases for a city to lag behind the state rate by a few points. In contrast, Detroit’s unemployment rate is a colossal 17.8 percent—more than double the state’s unemployment rate (“Employment & Unemployment”). Detroit’s unemployment rate has only decreased by one point over the past year. This would suggest that Detroit is not recovering from the recession at the same rate as the rest of the state or the rest of the nation. That would seem reasonable if applied to this adage. “When the country has a cold, Michigan has the flu.” To this I add… “When Michigan has the flu, Detroit has pneumonia.” So, how well does the country need to be for Detroit to just have a cold? Some reports have Detroit’s U-6 (real) unemployment rate at nearly 50 percent (“Huffington Post”). This means that nearly every other person that you meet in Detroit are unemployed. Michigan’s U-6 unemployment rate is 20.3 percent (“mLive.com”). This would suggest that if Michigan achieved full employment, Detroit would still have a U-6 unemployment rate of 30 percent. The reason for this is that much of the Detroit workforce suffers from structural unemployment. Structural unemployment is the mismatch between the demand in the labor market and the skill set of the available workforce. The skill set of the Detroit workforce is largely manufacturing. When technological advances eliminate manufacturing jobs, structural unemployment is the result. This is why perceivably, the country and the state can recover from this recession, but unemployment in Detroit would remain high. In this essay, I will discuss some factors that contribute to structural unemployment, along with possible solutions.

Development

This pneumonia called structural unemployment is prevalent in the movie 8-Mile. Many see the movie as a struggle to win a rap battle but the b-story deals with economic conditions in Detroit. The character B-Rabbit lives with his unemployed mother. She is not collecting unemployment so she would be represented in Detroit’s hidden unemployment statistics. B-Rabbit who works at the New Detroit Stamping plant is a part-time employee who wants more hours. He would also be counted in the hidden unemployment statistics as underemployed. The character B-Rabbit is loosely based on rapper Eminem’s life story and we know that Eminem dropped out of high school so it is safe to assume that B-Rabbit did not graduate. While at work, B-Rabbit decides to skip out and competes in a rap battle. Though he wins the battle and gets his deserved respect, he goes back to work to finish his shift. The question is what happened to B-Rabbit the next day? B-Rabbit’s untold story most likely reflects a large percent of the unemployed and underemployed population in Detroit. That story is that he went back to work and continued to press out bumpers at the stamping plant. Labor processes at the plant were automated or jobs were outsourced to another country (“World Socialist Web”). Either way B-Rabbit was terminated due to some form of downsizing. This process has played out thousands of times in the real world over the past 40 years. Improvements in technology have been a benefit and a disadvantage to the Michigan economy. These improvements have shifted the demand from manual labor to highly skilled knowledge based jobs. Unfortunately, the B-Rabbits of Detroit does not have the education necessary to fill these new jobs.

The main symptom of this pneumonia called structural unemployment is Detroit’s literacy rate. Nearly 50 percent of adults (more than 200,000 people) in Detroit are functionally illiterate (“Detroit Regional Workforce Fund”). This too means that every other adult that you meet in Detroit can only read and write on the most basic level. Half of these functionally illiterate people have a high school diploma; suggesting that the problem cannot be solely attributed to high school completion. In Oakland and Macomb counties, functional illiteracy is at 13 percent. The municipality breakdown in the region rivals Detroit: Southfield 24 percent, Warren 17 percent, Inkster 34 percent and Pontiac 34 percent (“National Center For Education Statistics”). Functionally illiterate people have problems reading job advertisements, completing job application or writing resumes. This contributes to the number of discourages workers that decides to stop looking for employment.

Individuals that demonstrate a higher level of literacy are more likely to be employed. As literacy levels increase, weekly earnings increase (Jessup). As weekly earning increase, stimulus through a cycle of spending between households and firms moves the economy (Mankiw). Conversely, considering that a vast number of functionally illiterate people live in Detroit, many of these people are doing just fine. Many adults with limited skills are high earning managers or professionals that work in a field that they are experienced in (Jessup). These people don’t have to face the reality of their literacy until that job goes away. This produces a false sense of security in the workforce. Although there are many people who are managing without formal education past high school, this will be their major problem if they ever become unemployed.

The current school system is not producing high school graduates that are capable of meeting the needs of 21st century employers. This is contributing to Detroit’s illiteracy rate. In the past, someone may have been able to work in the manufacturing industry with less than a high school education and make a good living. B-Rabbit represents my grandfather who worked for Ford Motor Company for 45 years without a high school education. My grandfather retired in the 1980s. He was fortunate enough to complete an entire career without being downsized due to out sourcing or technological improvements to the Rouge Factory. By the same token, he was unfortunate; in that he retired from Ford Motor Company with the same education level that he had when he started there at 15-years-old. Today, technological advances have changed the qualifications necessary to get a job in the manufacturing industry. The education system has not kept up with these demands. The most recent attempt to overhaul the public school system was the No Child Left Behind Act of 2001. This Act was supposed to improve the basic skills of elementary and secondary education students (“NCLB2001”). The effectiveness of this program is of much controversy. Students that have been a part of the No Child Left Behind system are now college age. Studies are underway to measure the effectiveness of the program. One indicator of its effectiveness was clear in an early April 2012 news report. Fifty students walked out of Fredrick Douglas Academy because they felt they were not getting an adequate education (“Lang”). Reportedly, one of these students received a passing grade for just showing up to class on test day. Another student was interviewed and his English skills were well beyond so-called Ebonics. These students represent a portion of the functionally illiterate people that we meet every day. When these people speak you mentally translate what they said because you “know what they mean.” One of the Fredrick Douglas Academy students stated that it was too late for them, but they were protesting to help make conditions better for the next class. They were all suspended for their action and when they graduate, they will be counted among the population of Detroit’s functionally illiterate.

One marketplace solution for structural unemployment is the stimulate demand through retail spending. Demand in the marketplace creates jobs. Growing these jobs through rebuilding Detroit’s central business districts is a short-term solution to Detroit’s unemployment rate. In the early 1900s, the retail industry in Detroit grew along with the automobile industry. The population that migrated to Detroit for manufacturing jobs found their shopping needs met by a merchant named Joseph L. Hudson. During the same time that Henry Ford changed the manufacturing world, J. L. Hudson changed the retail world. In 1911, Hudson’s Department Store on Woodward Avenue with a vision that it would become the heart of Detroit (“Detroit News”). Though he died a year after it’s opening, his nephews took over the business and kept up the customer pleasing traditions of the founder. Over the next 40 years, Hudson’s became a giant of retail due to the company’s “more and better” philosophy.

In 1954, Hudson’s opened the world’s first shopping center, Northland Mall, in Southfield, Michigan. The idea was to provide retail services to the growing suburbs. This idea backfired on the main store. The suburban shopper no longer needed to come to Downtown Detroit for their retail needs. Other malls opened in the suburbs modeled after Northland. These mall openings helped facilitate Detroit’s population loss to suburban communities. This population loss called “white flight” was escalated due to the 12th Street Riots in 1967.

In 1970, the project to build the Renaissance Center was launched to revive the Detroit economy as part of the larger “Bridge To Bridge” project (Detroit News). The Renaissance Center Project was wildly successful generating over one billion dollars in economic activity after opening. Retail shops were available inside the Renaissance Center complex. This “city within a city” concept did not foster the long-term growth of retail establishments along the east riverfront as planned. Additionally, this “city within a city” concept was copied in the suburbs with the construction of the Southfield Town Center a few years later. This further facilitated “white flight” and created new central business districts in Southfield. In what seemed to be a final effort to stimulate the Downtown Detroit retail district, the Republican National Convention was held at Joe Louis Arena in 1980. This was a boon for economic activity in the central business district. However, when then California Governor Ronald Reagan left with the republican nomination, retail goods and services appeared to leave with him. Hudson’s main store closed in 1983. They became victims of their own creation (Northland Mall). The retail establishments in the surrounding areas began closing thereafter.

In 1984, the Detroit Tigers went to the World Series. By then, retail stores in Downtown Detroit were mostly closed. The crown jewel of Detroit, the Book Cadillac Hotel, closed after the Tigers won the World Series. This event was emblematic of the decline of Detroit’s retail economy in the central business district. In the late 1980s, former Mayor Coleman Young proposed a project for a new super mall in Downtown Detroit to rebuild retail economic activity. Decision makers did not view this to be a successful endeavor and the plan was abandoned. Downtown Detroit has not had a vibrant retail district since the height of the success of Hudson’s Department store in the 1950s and 1960s. The effort to bring retail back to Downtown Detroit continued with Mayor Young’s successor Dennis Archer.

In 1996, Michigan voters approved a referendum to bring casinos gambling to Detroit (“Michigan In Brief”). The Archer administration scrambled to assemble the land parcels to create a casino/retail district on the Detroit Riverfront. By 2001, that effort failed and the task went to Mayor Archer’s successor Kwame Kilpatrick. Due to conflicts with Riverfront landowners and a sense of urgency to have these establishments built by the time Detroit hosted the 2006 Super Bowl; a deal was brokered to have the permanent casinos built on their current temporary sites. This deal also saw the plans reduced from 800 to 400 room hotels. MGM Grand Casino was allowed to move but the permanent site was less than half mile from the temporary site (though still not on the riverfront.) This same deal allowed Peter Karmonos to scale back the number of buildings to be built for the new Compuware World Headquarters at the Campus Martius location. These concessions effectively killed that economic stimulus through developed retail establishments in an organized shopping district on the riverfront.

The casino industry more so than any other industry is in the business of retaining every dollar from their customers that they possibly can. Casino economics are known to destroy urban areas. This is part of the reason opening new casinos is such an arduous process. Therefore, the risk of having casinos in urban areas should produce a long-term benefit for that risk. The long-term benefit of having casinos in Detroit should have been realized by the development of retail shops along main thoroughfares that attract walking traffic. However, the casino deal that was renegotiated in 2002 broke the first three rules of real estate (location, location, location). This is evidenced by the lack of retail development around their current locations (except for Greektown Casino that was built in a pre-existing retail district). The casinos are content with this situation because they are not interested in competing with any entities outside of their four walls. Motor City Casino was built across the street from Carl’s Chop House and denied that they would have any negative effect on Carl’s business. Motor City argued that Carl’s legendary reputation would cause the casino to lose customer in their restaurants (MacDonald). Carl’s Chop House, who previously had no competition at that location, was now in direct competition with the gaming industry. Prior to Motor City Casino opening at Grand River & The Lodge, there were no other businesses there except for Carl’s Chop House. After the casino opened, Carl’s did not have the benefit of retail attractions that facilitated walking traffic that could patronize his restaurant. He had to compete with the restaurants inside of the casino. After losing over one million dollars in 2008 alone, Carl’s closed for remodeling and never reopened (“Detroiturbex.com”). The Detroit casino industry has employed a great deal of Detroiter’s however, employment and growth through local entrepreneurship has not been realized through the failure to create a dynamic agglomeration economy through this casino deal. Although this opportunity has passed, there are still favorable circumstances where Detroit can receive treatment through retail stimuli.

The effort to bring new retail outlets to Detroit will not be successful without a population base to support it. People will not migrate to a place that doesn’t have retail establishments to provide for their needs. This presents the problem of the chicken and the egg. Which came first? This argument is avoided altogether with what’s being called “The Big Bang” approach. “The Big Bang” approach is a plan where Detroit’s population and retail establishments, grow together; and in a short period (“Crain’s Detroit Business”). Entrepreneur Dan Gilbert spearheads this project and has purchased several buildings in Downtown Detroit for development. These purchases have initiated a number of offers from retailers that are ready to develop these buildings. Gilbert is holding back on these offers until the project can be launched to its maximum effect. As part of “The Big Bang,” Gilbert has moved his Quicken Loans company from Livonia; and by the end of 2012 will have moved over 5400 employees into Downtown Detroit. This follows Peter Karmanos decision to move his Compuware headquarters and over 4000 employees from Farmington Hills to Downtown Detroit in 2003.  “The Big Bang” is a short-term approach to bring retail and people in the same place at the same time however–this plan is missing the critical element of providing jobs that match the skill sets of the available workforce in Detroit.

The Great Lakes Global Freight Gateway Project addresses a critical missing piece to “The Big Bang.” The industrial Midwest has been on a decline for the past four decades. Manufacturing jobs have left due to outsourcing or advances in technology. This exodus has left Southeastern Michigan with buildings, land, and other manufacturing infrastructure being unused. The Great Lakes Global Freight Gateway Project is a program that will use these vacant assets to create an inland port in Detroit, to promote global trade from the manufacturing Midwest to worldwide markets (“Building Consensus for Michigan’s Integrated Global Freight Hub”). Detroit has been a manufacturing city for more than 150 years. From railroads, to the auto industry, the citizenry of Detroit have become accustomed to labor based jobs and not knowledge based jobs. This blue-collar work ethic has been passed down over the ages and Detroit still has a workforce that is ready and willing to perform demanding manual labor for a decent wage. Unfortunately, this is the viral root of the pneumonia called structural unemployment. Nevertheless, The Great Lakes Global Freight Gateway Project will bring 200,000 new jobs that match the skill set of the available workforce in Detroit. This is only a short-term remedy for Detroit’s structural unemployment woes. The Great Lakes Global Freight Gateway Project will take advantage of the current factors of production that are readily available in Detroit. This project coupled with the “Big Bang” project addresses the immediate needs of both industry and labor in Detroit. These are short-term remedies. Detroit’s long-term cure for this pneumonia called structural unemployment is education reform.

Summary / Conclusion

The population of Detroit is 50 percent unemployed and 50 percent functionally illiterate. The unemployment rate is a function of the literacy rate. Therefore, improving education in Detroit will contribute to lowering the unemployment rate. This is a long-term solution. The No Child Left Behind generation of students is just entering the workforce. Though it is speculated that The No Child Left Behind act has not worked, their contributions to the economy cannot be measured for decades. The same can be said for any newly initiated education reform. Therefore, education reform should be pursued as one part of a two-fold strategy to reduce unemployment in Detroit. The second part is to grow Detroit’s economy using the skill sets of the available workforce. The Great Lakes Global Freight Gateway Projects will bring 200,000 jobs to the region and use the available infrastructure and unemployed industrial workforce that already exist in the region. The “Big Bang” project is set to stimulate population growth through the development of a retail district that has not been seen since the height of Hudson’s success. These two projects use the same approaches and largely the same infrastructure that lead to Detroit’s growth in the early 1900s. It worked before and with a focus on the long-term needs of Detroit’s economy– and it will work again.

References

“Addressing Detroit’s Basic Skills Crisis.” Detroit Regional Workforce Fund. 2010: n. page. Print.

“Adult Literacy in America.” National Center For Education Statistics. 04 2002: n. page. Web. 22 Apr. 2012. <http://nces.ed.gov/pubs93/93275.pdf&gt;.

Brandon Jessup. Forward Conversations: Detroit Illiteracy. 2010. Video. Michigan Forward, Detroit. Web. 22 Apr 2012. <www.youtube.com/watch?v=_xLxr5AIEVA>.

“Carl’s Chop House.” Detroiturbex.com. web. 22 Apr. 2012. <detroiturbex.com content=”” downtown=”” <span=”” class=”hiddenSpellError” pre=””>carls/carls.html>.

“Casinos and Other Legal Gambling.” Michigan In Brief. Council of Michigan Foundations, 01 Apr 2002. Web. 23 Apr 2012. edition07/Chapter5/CasinosGamb.htm>.

“Dan Gilbert’s “Big Bang Theory for Detroit Development.” Crain’s Detroit Business. 07 03 2012: n. page. Web. 22 Apr. 2012. http://www.crainsdetroit.com/article/20120307/STAFFBLOG08/120309905/8216-big-bang-theory-for-detroit-development>.

“Detroit’s Unemployment Rate Is Nearly 50%, According to the Detroit News.” Huffington Post. 18-03-2010. web. <www.huffingtonpost.com/2009/12/16/detroitsunemployment-rat.html>.

Ed.Gov. Us Department of Education. No Child Left Behind Act of 2001. Web. <www2.ed.gov policy=”” <span=”” class=”hiddenSpellError” pre=””>elsec/leg/esea02/index.html>.

“The Engineering Society of Detroit Institute.” Building Consensus for Michigan Integrated Global Freight Hub. 10-03-2011. Web. 22-Apr-2012. <www.esdinstitute.net/transportation/docs/ESDI-GFH-Web.pdf>.

“General Motors closes Buick City Complex in Flint Michigan.” World Socialist Web. 2 07 1999: n. page. Print. <http://wsws.org/articles/1999/jul1999/auto-j02.shtml&gt;.

“How J.L. Hudson changed the way we shop.” Detroit News. 17 03 2000: n. page. Web. 22 Apr. 2012. <http://apps.detnews.com/apps/history/index.php?id=29&gt;.

Lang, Amy, perf. “Seniors at Detroit’s Frederick Douglass Academy Walk Out in Protest.” Fox 2 News. Fox Broadcasting Company: WJBK, Detroit, 29 March 2012. Radio. .

MacDonald, Christine. “Carl’s may go from strip steaks to strippers.” Detroit News. 23 01 2008: n. page. Print. <www.detroitmemories.com <span=”” class=”hiddenSpellError” pre=””>newsfromhome/carls-may-go>.

Mankiw, Greg. Principles of Microeconomics. 5th. 2008. Print.

“Michigan: History: How the Renaissance Center changed the landscape of Detroit.” Detroit News. 29 09 2001: n. page. Web. 23 Apr. 2012. <apps.detnews.com/apps/history/index.php?id=122>.

“Michigan’s ‘real’ unemployment rate is 20.3 percent.” mLive.com. 13-06-2011. Web. <www.mlive.com/jobs/index.ssf/2011/06/michigans_real_unemployment>

United States of America. Bureau of Labor Statistics. Employment & Unemployment. 2012. Web. <www.bls.gov>.

The Great Lakes Gateway Project: Detroit—The Manu City

Posted in News & Entertainment by trickyd313 on August 10, 2012

The Great Lakes Gateway Project: Detroit—The Manu City

Jesse D. Sutton

29 March 2012

WSU – ECO 5800–001


 

Introduction

The Great Lakes Global Freight Gateway (GLGFG) Project is an initiative that seeks to transform the Southeastern Michigan and Southwestern Ontario region into a multimodal transshipment hub. This hub will be where goods are moved through the Port of Halifax, loaded on the new Maersk Triple-E container ships, and shipped to worldwide markets. The Port of Halifax is now the only deep-water port that can accommodate these post-panamax container ships. These Triple-E ships can move up to 18,000 containers and, due to the economies of scale, reduce the shipping cost per container; thereby reducing cost to manufactures (GLFGr4, pg. 4). Detroit is currently the best-situated city for repositioning its main economic engine to transcontinental shipping. The location on an international border and the system of rail lines and roadways in the region, are the assets that make this opportunity possible. That is the broad view of the project, but many people want to know a more narrow scope of the project. They want to know the local impact of the project. This essay will address the local angle by illustrating how the decline of the automobile industry has placed this region in a position for revival as a transshipment hub. Also, this essay will illustrate how economic activity from The Great Lakes Global Freight Gateway Project can regenerate local real estate markets.

Development

Shipping goods through Detroit to the Port of Halifax provides the opportunity to use vacated industrial centers by repurposing these facilities for transshipment and manufacturing. Detroit as a transshipment hub provides a distribution system for goods to move to worldwide markets. Many manufacturers have failed due to a lack of an adequate distribution system (UEA12, pg. 65). Distribution and manufacturing goes hand-and-hand. This is the strength of Detroit’s industrial centers. The automobile industry has benefited from these strengths but also contributed to the decline in Midwest manufacturing due to outsourcing. This is one reason Detroit—“The Motor City” has been on a steady decline for more than 50 years, and part of this decline is because of the failure to realize that this is not the “Motor” city. The automobile industry had benefited from the “Motor City” moniker for nearly 100 years. The Great Lakes Global Freight Gateway Project provides an opportunity to convert the assets and resources for the economic benefit of the manufacturing Midwest. The same conversion happened during World War II when “The Motor City” converted to the “Arsenal of Defense” (UEA10, pg. 48). It is now time to convert from Detroit—“The Motor City” to Detroit—“The Manu City.”

Long before Detroit was known for automobile manufacturing, this region was the railroad manufacturing capital of the world (UEA11, pg. 56). The workers that migrated, lived and worked in Detroit more than 150 years ago had skills that they were able to transfer into the automobile industry. As the automobile industry grew, Detroit became known as “The Motor City” however, it was and still is… a manufacturing city. By the 1950s, the automobile industry had emerged from the war economy with a 90% share of the worldwide automotive market (UEA10, pg. 48). General Motors was a dominant force in that market. A group of GM stockholders attempted to create a consolidated voting block by combining their shares. These moves within the company were to leverage generational advantages and transfer wealth and employment opportunities to a few well-connected stockholders (OGM, 0:50/1:10). Unfortunately, this hoarded wealth became worthless because of the GM bankruptcy of 2008 (UEA21, pg. 87).  This is an example of how the automobile industry allowed itself to be cannibalized by its leadership and investors. The Great Lakes Global Freight Gateway Projects seeks to create a mutual benefit from this history of pitfalls by collaborating with private and public stakeholders and bringing manufacturing and transshipment jobs back to the Midwest region.

Rent and transportation cost are the lowest when the real estate being used is at the optimal locations for railhead and expressway access (TC, 0:00/3:45). Detroit’s industrial centers are already at these optimal locations. Containerized goods need to be moved quickly through the shipping process to gain the cost saving advantages of being produced near a multimodal-shipping hub. Detroit—“The Manu City” offers industrial centers that are suitable for manufacturing and transshipment; with access to interstate highways and main line rail service to the Port of Halifax. Detroit’s multimodal industrial centers were once used to move auto parts around the world. This allowed the automobile industry to grow. Conversely, many businesses died due to a lack of a distribution system and the ability to produce goods on economies of scale  (UEA12, pg. 65). The worldwide distribution from the Midwest to markets abroad and the economies of scale of shipping through the Port of Halifax, will allow other manufacturing businesses to grow while keep rent and transportation cost low.

Low rent and low transportation cost are a concern for the 200,000 employees that will be needed to work in these new jobs. This job growth will create a demand for affordable housing (Mc10B, pg. 184). The demand can be met by selling, renting and by real estate development. The good news is that real estate development can be done cheaper in this post mortgage bubble economy. Detroit has lost population to job opportunities elsewhere. The decline in population has left more than 30,000 vacant houses available in the housing market (RPS, pg. 19). These vacant houses have contributed to declining home values (Mc9C, pg. 168). The financial crisis of 2008 has also contributed to a decline in home values. Mortgages that were written for groups of people who could not afford the loans are now in default (UEA8, pg. 38). Deregulation of the banking industry provided for questionable financial instruments to be created (LEC, pg. 3). These financial instruments were bundled with mortgages and traded on the New York Stock Exchange. In 2006, housing prices decreased and many people found that their mortgages were more that the house was worth (Mc9E, pg. 175). Many of these houses went into default or were foreclosed upon. Although many homeowners were financially devastated during this financial crisis, the result is a housing market with affordable home values. This is one reason stakeholders in The Great Lakes Global Freight Gateway Project should feel a sense of urgency to act now. Real estate developers have already made purchases in Midtown and Downtown Detroit. These developers have decided that the risk is worth the investment (Mc13D, pg. 250–253). These development projects are not far from the industrial areas where the job growth is projected. For that reason rent may be higher than in the neighborhoods (Mc10F, pg. 191–192). However, real estate development could take a several years due to the complexity of the various stages in the development process (Mc13B, pg. 245–248).

There are arrays of housing programs to keep home prices affordable (Mc11C, pg. 219). Various economic reasons may not make it feasible for everyone to become a homeowner so rental units need to be available and affordable. Approximately 34% to 45% of all housing are rental units (Mc10E, pg. 188). Rent control policy keeps landlords from inflating rent to unaffordable levels (Mc11F, pg. 228). This mix of freehold and non-freehold housing options are what makes Detroit the right place at the right time for The Great Lakes Global Freight Gateway Project (RET1, 5:25).

As The Great Lakes Global Freight Gateway Project reaches capacity, expansion of commercial real estate as well as expansion of affordable housing will be necessary to accommodate the arrival of new workers to the region. It may even be necessary for residential land to be rezoned for commercial use. The transshipment industry has room for a tremendous amount of growth and the real estate redevelopment process can mature along with it.

Summary / Conclusion

Detroit—“The Motor City,” has been on a decline for more than four decades. Past being prologue, what have we learned? We have learned that Detroit grows as part of a solid manufacturing industry. This has been the case from the early days of the railroad industry and has continued through to today. We have learned that the infrastructure is available to support Detroit as a manufacturing and transshipment hub. We also know that Detroit has a workforce that can support the transshipment industry and when called to do so, Detroit can switch gears and produce the goods that the world needs. The Great Lakes Global Freight Gateway is the Project that can take advantage of the assets that are available to produce sustainable jobs and produce billions of dollars of economic activity in the region. We know that this economic activity will contribute to real estate development and improve housing markets. The decline of this region did not happen overnight and it will not be fixed overnight. However, The Great Lakes Global Freight Gateway is the right project at the right time to revitalize Detroit—“The Manu City.”


 

References

McDonald, J. F., & McMillen, D. P. (2011). Urban Economics and Real Estate: Theory and Policy. (2nd ed., p. 168, 175, 184, 188, 191–192, 219, 228, 245–248, 250–253). Danvers, MA: John Wiley & Sons.

Sase, J. F. (2009). Urban economic anatomy: Upheaval & Change in Detroit. (p. 38, 48, 56, 65, 87). Lathrup Village, MI: SASE Associates.

Sase, J. F. (Producer). (2010). Real Estate Agent test Cram 1. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2011). OGM: Legends of Detroit—Old General Motors. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2011). TC: Rent+Transportation=Total Cost. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Detroit Office of Foreclosure Prevention and Response, Data Driven Detroit (D3), Community Legal Resources, University of Michigan — Edward Ginsberg Center and Living Cities, eds. Detroit Residential Parcel Survey. Detroit, MI: 2009. (p. 19). Print.

Sase, J. F., and Gerard Senick. Another Mortgage Tsunami? “Let Them Eat Cake” (Part Two). 2010. Print.

Sase, J. F., and Gerard Senick. “Legal News Expert Witness column.” The Great Lakes Freight Gateway: $11 Billion in New Economic Activity and 150,000 New Jobs. November 2011. Print.

The Great Lakes Global Freight Gateway Project: Detroit to Halifax

Posted in News & Entertainment by trickyd313 on August 10, 2012

The Great Lakes Global Freight Gateway Project:  Detroit to Halifax

Jesse D. Sutton

22 February 2012

 WSU – ECO 5800-001


 

Introduction

The industrial Midwest has been on a decline for the past four decades. Many companies have left Southeastern Michigan to produce goods elsewhere. When these companies moved their operations to other cities, much of the population in the region moved also. These people left to seek job opportunities in other urban areas. When industries and people leave an area, the infrastructure is often left behind. Buildings, land, and infrastructure remain vacant in Detroit because of this exodus from the region. The framework of the region largely resembles the period before Detroit was incorporated as a city, aside from the infrastructure that has been left behind. The availability of existing industrial centers coupled with the new capabilities of the Halifax Port in Nova Scotia, Canada, offers Detroit the opportunity to use this infrastructure to transform the region into an international shipping hub. The Great Lakes Global Freight Gateway Project is a program that will use these vacant assets to create an inland port in Detroit, and to promote global trade from the Midwest (GLFG3, 3:33/8:46). This essay is going to show how the Great Lakes Global Freight Gateway Project can restore economic vitality to the region and provide growth opportunities for all stakeholders.

 

Development

The United States economy has shifted from being predominately manufacturing based to being largely service based. In contrast, Detroit’s economy is still based on manufacturing. Manufacturing jobs have been on a steady decline for more than 40 years. Repositioning Detroit from a manufacturing only industry to a manufacturing and transcontinental shipping industry can open new revenue possibilities for stakeholders in the region.

Detroit’s population peaked in the 1950s with more than two million residences in the region (Mc, Pg. 12). This period of growth contributed to the clustering of various economic activities around manufacturing (Mc, Pg. 66). These clusters of economic activities still exist today, however the population has declined to pre-1920s levels, and the economic growth of the region is stagnant. When manufacturing jobs left the region, large amounts of the population followed. The population that remains are largely from the manufacturing sector and have the necessary skill set to be employed in the shipping industry (Mc, Pg. 44). The Great Lakes Global Freight Gateway Project can promote growth in the region by utilizing the same regional assets that were used for urban growth in the mid 1900s.

Nearly half of the nation was formed between 1790 and 1860. Innovations in the productions of goods and services coupled with the transportation revolution led to rapid urbanization (MC, Pg. 56). In Southeastern Michigan, this urbanization took form in the 50 villages that developed during the pre-civil war years (EV1, 1:00/12:10). These villages were connected through a network of roads (EV2, 1:12/2:30). These roads were the basis for establishing rail lines and industrial centers. By 1926, these villages and towns had been incorporated into the City of Detroit, and the population was nearly one million residences (DGA, 1:00/1:10). The manufacturing industry continued to expand, and contributed to the population doubling in less than 25 years. The rapid growth of the manufacturing industry translates into rapid population growth. This rapid growth can also destroy sectors of the economy.

Creative destruction is the minor pains that one industry suffers because of the greater gains of a replacement industry. The nation has felt the pains of creative destruction, as manufacturing has been displaced by the service industry. Detroit specifically has felt the pains of creative destruction, but with no benefit of an emerging industry. Creative destruction can also be described as the pains that an area feels because of globalization (UEA7, Pg. 33). Detroit feels the pains of creative destruction from globalization as well. Manufacturing job have been outsourced to other countries and the unemployment rate has risen to nearly 10%. There are no industries in Detroit to support the talent pool of workers that are available. In other words, globalization and the service industry have wreaked havoc on the manufacturing based economy of Detroit and the surrounding areas. The benefits of creative destruction have not been realized. The Great Lakes Global Freight Gateway Project will provide the benefits of creative destruction to the region though repurposing of assets and repositioning of the major industry in the region. This repositioning will combine manufacturing and transcontinental shipping from the industrial Midwest, through Detroit and on to The Port of Halifax. From there, goods will be shipped to and from emerging markets in Europe, Africa, India and China.

Detroit is better situated than any other city for repositioning its main economic engine to transcontinental shipping. The location on an international border and the system of rail lines and roadways in the region, are the assets that make this opportunity possible. Industrial centers and rail lines were built along these routes as the transportation revolution provided faster ways to trade goods (DRF1, 1:07/4:47). These roads also became the basis for the interstate highway system in the region (DRF1, 4:24/4:47). The trucking industry uses these highways to move goods to and from manufactures all over the Midwest and Canada. Canada is an integral part of this international effort to bring economic prosperity to the region. Canada’s rail assets offers mail line service through Montreal to The Port of Halifax. Using Detroit to access the Port of Halifax gets goods to and from an international port quicker and cheaper than the Chicago to Norfolk route. The Detroit region is the median location for Midwestern manufacturing inputs and outputs that are bound for worldwide markets (Mc, Pg. 43). At the median location, transportation costs are the lowest for shipping to any point in the supply chain. Rent cost are also reduced by shipping from the median location (Mc, Pg. 86). This reduction in rent cost is because manufacturers do not need to be located in the central business district (Mc, Pg. 92).  The Great Lakes Global Freight Gateway will provide manufacturers from the Midwest the opportunity to move products to and from the global marketplace quicker and cheaper. This system of industrial facilities, road and rail access on both sides of the border make the Southeastern Michigan/Southwestern Ontario region a prime location for becoming the transcontinental shipping hub of the Midwest (Mc, Pg. 46).

The region has strong input-output relations that form an agglomeration economy (Mc, Pg. 74). The downtown business district, airports, industrial centers and supporting service industries are centers of economic activity for growth around the repositioning of the city (Mc, Pg. 79). The clustering of these economic activities makes Detroit well suited for a transformation into a global city (Mc, Pg. 71). However, this transformation can only happen by using the infrastructure in its intended role. The role of infrastructure has always been to move freight from place to place (Mc, Pg. 83). To facilitate that role, new bridges and tunnels need to be built to accommodate the increased capacity of rail travel along the route (HD, 3:15/5:36.) The investment is minimum compared to the revenue possibilities of shipping through Detroit to Halifax, as opposed to using the Chicago to Norfolk route. This transformation from manufacturing only to manufacturing and transcontinental shipping can create growth and rival Chicago as one of the largest urban areas in the Midwest (Mc, Pg. 61).

The Port of Halifax is the only port in North America that is now capable of handling the new Maersk Triple E container ships. These ships are built for economies of scale and can transport up to 18,000 shipping containers. Businesses that want to expand into the emerging markets of Europe, Africa, India and Asia have new opportunities by using the Detroit to Halifax shipping route. The Triple E ships allows for parts and finished products to be moved across the world in greater quantity than what is now available.

 

Summary / Conclusion

The Great Lakes Global Freight Gateway can take advantage of the available underutilized assets in the Detroit region to the benefit of all stakeholders. The growth potential of this project will create economic activity in the region that has not been seen in a half century. The underutilized infrastructure and unemployed industrial workforce presents an opportunity to get this project moving very rapidly. The industrial Midwest has the ability to move more products to and from global markets all while reducing expenses and increasing revenue. Revenue increases stimulates growth in the industry that stimulates population growth in the region. The Port of Halifax has provided an opportunity for the industrial Midwest to capitalize on underused assets. These factors are what make urban area grow. The Great Lakes Global Freight Project is the engine to make this growth possible and will be a boon for all stakeholders.

References

McDonald, J. F., & McMillen, D. P. (2011). Urban Economics and Real Estate: Theory and Policy. (2nd ed., p. 12,66,44,56,43,86,92,46,74,79,71,83,61). Danvers, MA: John Wiley & Sons.

Sase, J. F. (2009). Urban economic anatomy: Upheaval & Change in Detroit. (p. 33). Lathrup Village, MI: SASE Associates.

Sase, J. F. (Producer). (2010). Early Villages That Became Detroit – Part 1. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2011). Early Villages That Became Detroit – Part 2. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2011). Detroit Growth by Annexation (Study Version). [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2010). Detroit: Economic Rise, Fall & Rebirth. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2011). Halifax to Detroit. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

Sase, J. F. (Producer). (2011). Great Lakes Global Freight Gateway. [Web Video]. Retrieved from http://www.youtube.com/user/urbanecondetroit

 

 

The Best Ten O’clock Drama on TV (Sorry Jay, you and Conan come in Second.)

Posted in News & Entertainment by trickyd313 on February 19, 2010

The Kwame Kilpatrick Show and The Sam Riddle Show are two of the best ten o’clock dramas on TV.  I enjoy the speculation and the intrigue.  What’s that you say?  That’s the News!  I thought that was a reality show!

Well in Kilpatrick’s situation maybe a reality show is not a bad idea.  Everyone I run into thinks that he has this stash of money but I think that he needs time to make some money.  I think that he is more interesting than Rod Blagojevich and a Kwame Kilpatrick show would be a cross between The Apprentice and Jersey Shore (The G Remix).

So will Kwame go to jail or will he come up with the money to stay out of jail?  Will Sam Riddle avoid Jail on the new charge of secretly seeing his ex-girlfriend?  Can Powerhouse Attorney Jeffery Feiger help?  We will find out on the next episode of “As Detroit Turns.”