DETROIT— BLOSSOM TO BANKRUPTCY

Topics: Automotive industry, Crime, General Motors Pages: 5 (1561 words) Published: March 18, 2014

DETROIT—
BLOSSOM TO BANKRUPTCY

CONTENTS

Introduction-------------------------------------------------------------------3 Financial Crisis--------------------------------------------------------------3 Loss of Population----------------------------------------------------------5 Industry Problem------------------------------------------------------------6 High Violent Crime Rate---------------------------------------------------7 Conclusion--------------------------------------------------------------------8 References--------------------------------------------------------------------9

INTRODUCTION
The motor city—Detroit, announced its application for chapter 9 federal bankruptcy protection on 18 July, 2013, which means this city collapsed. This issue aroused people’s attention all around the world. The reason why people felt surprised was Detroit was a famous city which was dependent on the United States automobile industry, which was one of the fastest developing cities that attracted workers from all over the world with its’ highest-paid salaries compared with other cities in United States.(Sugure.T.J.1996). In addition, Detroit has linked to the international market and production more closely before 1970. (Zukin.S.1991). however currently, after decades of economic decline, Detroit has become the country’s largest-ever bankruptcy case which has more than $18 billion of liabilities. What hanged between the blossom city and bankruptcy and what led to this resulted can be summarized in some aspects. This essay will consider the main reasons which led to the collapse of the city. These are the loss of population, the financial crisis, the loss of competitiveness in the automobile industry and high violent crime. Detroit was considered to be a boom town which could survive any crisis. However, it will be demonstrated that some problems caused an unprecedented collapse in the city economy. Financial crisis

The most significant cause which resulted in the city’s collapse is the financial crisis in Detroit’s government and society. Ira Hammerman, who play the senior managing director and general counsel roles in the Securities Industry and Financial Market Association, has predicted that Detroit will lead to financial bankruptcy proceeding because of the obligation bonds. (Glazier.K.2013). The reason for this prediction depends on a long period unbalanced income and expenditure, which has been shown in the statement of “the city spent $100 million more than it took in every year since 2008, on average.” (Dolan.M.2013). Besides, the city government was also under the pressure of the debt obligations at $18.5 billion, which was the largest debt amount to compare with other main US cities such as about $1.9 in New Orleans e.t. Despite of the difficulty of the city manager, the residents in Detroit also faced many troubles in their daily life. They earned the lowest median household income ($25,193) compared with other 30 largest cities in United States. (Rana.F., Mary.C.M., Doron.L.P., Eliana.D.& Claire.M.2013) Therefore, financial difficulties brought a significant number of serious effects which led to the city collapse. One of the most significant effect of the financial crisis was the unemployment rate in Detroit, which became the peaked number at 18% (more than double the national average), that led to retirees far outnumbering the city’s current workforce. What is more, with the increased number of retirees, city managers had to face the pressure of pension liabilities. In order to solve this crisis, government doubled pension plans up to $96 billion in 2011. (Rana.F., Mary.C.M., Doron.L.P., Eliana.D.& Claire.M.2013). As the resulted of government increased the budget to pay for pensions, the shortage of liquid capital aggravated the financial crisis which resulteded in the economic collapses in Detroit.

Loss of population
The loss of resident and labour has brought negative effects to...

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Dolan.M.(2013). The Wall Street Journal.Record Bankruptcy For Detroit.July 19.2013.
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Mcmanus.W.,Senter.J.R.,Curtin.R.&Garver.M.S.(2009).The Demographic Threat To Detroit ’ S Automakers. Journal Of Targeting, Measurement And Analysis For Marketing (2009) 17, 81 – 92. Doi: 10.1057/Jt.2009.8 .
Sugrue.T.J.(1996).The Origins Of The Urban Crisis. Introduction. Princeton University Press.
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