Saturday, January 02, 2010

Memorial to a once great city

Ever wonder what the effects of anti-individualist policies are? Atlas Shrugged gives the definitive answer, but there are also more narrow, concrete examples all around us today. Detroit, with its massive union culture and entitlement mentality, has gone from being an industrial powerhouse to a dangerous city in rapid decline. Diana links to these poignant photos of a city destroyed by its philosophy.


Blogger Galileo Blogs said...

Those are disturbing images. They don't seem quite real, almost like scenes from a post-apocalyptic movie. Unfortunately, they are real.

New York City in the 1970s must have felt like this. The city lost a million of its people, businesses fled, crime exploded, and acres of buildings were abandoned.

2:55 PM  
Blogger Amit Ghate said...

Thanks for posting that Galileo. I knew about the crime and general deterioration in cleanliness, etc., but I wasn't aware that that many people had left NYC in the '70's. I wonder if the high tax climate will cause another such emigration?

7:04 PM  
Blogger Galileo Blogs said...

New York dropped from around 8 million to 7 million people in the 1970s. Today it is around 8.3 million. The 1980s was a Renaissance decade for New York, and that continued into the 1990s and 2000s. Taxes were a huge part of the cause of the 1970s malaise and of the 1980s recovery.

In the 1960s, New York conceived of the bright idea of taxing the worldwide profits of corporations based in the city through a "unitary tax." The "goods were here" in terms of major corporations headquartered here. A huge plurality of the Fortune 500 companies were headquartered in New York, companies such as U.S. Steel, Philip Morris, etc.

Well, the "goods" left in the 1960s and 1970s, moving their headquarters outside of the city, leaving behind firms in a much smaller number of industries: finance, media, law, etc.

New York also imposed a city income tax in the post-World War II period, adding to the state income tax. It also raised the sales tax to the highest level in the country.

All of this was to pay for a plethora of city (and state) welfare programs, such as public housing and cash assistance to all sorts of people. This city spending was in addition to the federal welfare programs.

Another factor that helped destroy the city in the 1970s was rent control. Coupled with the historically-high inflation in the 1970s, thousands of landlords discovered that their legally-capped rents would not cover their costs and they abandoned acres of housing. Many of them also intentionally set their buildings afire to collect insurance.

It was a bad story and a bad decade, but the turn-around came with Mayor Ed Koch who *cut* income tax rates for individuals and businesses. He was a Democrat, which shows that good or bad policies are not the province of any particular political party.

Mayor Dinkins was a setback after Koch and the early 1990s saw a new crime wave. Then everything began to steadily get better. Mayor Giuliani pursued some good policies, particularly with regard to crime.

Other, national factors helped, in particular the fact that Wall Street is in New York. When global factors increased the profits of Wall Street firms, New York benefited. Luckily for New York, it hadn't yet chased out the Wall Street firms during its decades of high taxes. Therefore, when those firms made more money, their employees spent money in the city and it continued its Renaissance.

All of this has brought New York back to the verge of a "goods are here" mentality once again. Mayor Bloomberg, despite being a Republican, grew spending at a fantastic rate. The City Council has raised taxes on top income earners. We shall see what happens. However, there are still strong forces for good, such as Police Commissioner Ray Kelly who has continued bringing crime rates down to low levels not seen since the early 1960s.

New York offers parallels to Detroit, with one big difference. Detroit can do what New York did: cut taxes and improve the efficacy of its policing. However, the national context does not favor Detroit as it did New York. Detroit's national business is (was) the dying automobile industry. It did not have Wall Street, as New York did.

Nevertheless, if Detroit continues bad policies, it will only hasten its decay; if there is to be any hope of recovery, it will not come from more Washington subsidies. Detroit and Michigan need to get their own house in order.

[Note: The facts and figures are from memory, so they might be inaccurate, but the gist is correct.]

5:49 AM  
Blogger Amit Ghate said...

Thanks for that excellent elaboration, Galileo!

8:51 AM  
Blogger Richard said...

Steven Crowder of PJTV lived in Detroit for a while, and has done short documentary (13 min) called "Detroit in Ruins, Crowder Discovers No Town in Motown".

It is much more demonstrative of the tragic state of Detroit than the still pictures communicate.

1:23 PM  
Blogger Amit Ghate said...

Thanks Richard. I'll try to watch it in the next few days.

4:26 PM  

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