I just received this from S&A Digest. Very interesting.
Tom Alston
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Editor's note:
One of the most controversial pieces we published this year was Porter's essay
paralleling America's decline with Detroit's complete economic and political
failure. We received more heated e-mails about this Digest than any in
recent memory. Some called us "racists," though everything in the below essay is
fact. Others agreed with our simple message... A socialist government is
dangerous.
USA: The Next Detroit
By
Porter Stansberry
From the October 28, 2009, S&A
Digest
One of the most important things to remember about
socialism – or coercion of any kind – is it fails eventually because human
beings have an innate desire for liberty and a strong need for personal property
rights. In fact, the origins of government lie in the need of agricultural
communities to protect themselves from violence and theft. So it is particularly
ironic that in more recent times, it is government itself that has more
frequently played the role of bandit.
When you start taxing people at
extreme rates to pay for socialist "benefits," when you start telling them which
schools their children must attend, when you start giving jobs away to people
based on race instead of ability... you quash human freedom, which bogs down
productivity... and if continued for long enough, leads to social collapse.
I find it perplexing that only 20 years after the collapse of the Berlin
Wall, the West continues to implement laws that mimic all of the failed policies
of our former "communist" foes. In fact, our current president won the election
by promising to "spread the wealth around." But... truth be told... we don't
have to look to Eastern Europe or the Soviet Union to find a society destroyed
by coercion, socialism, and the overreaching power of the State. We could just
look at Detroit...
In 1961, the last Republican mayor of Detroit lost
his re-election bid to a young, intelligent Democrat, with the overwhelming
support of newly organized black voters. His name was Jerome Cavanagh. The
incumbent was widely considered to be corrupt (and later served 10 years in
prison for tax evasion). Cavanagh, a white man, pandered to poor underclass
black voters.
He marched with Martin Luther King down the streets of
Detroit in 1963. (Of course, marching with King was the right thing to do...
It's just Cavanagh's motives were political not moral.) He instated aggressive
affirmative action policies at City Hall. And most critically, he greatly
expanded the role of the government in Detroit, taking advantage of President
Lyndon Johnson's "Model Cities Program" – the first great experiment in
centralized urban planning.
Mayor Cavanagh was the only elected official
to serve on Johnson's task force. And Detroit received widespread acclaim for
its leadership in the program, which attempted to turn a nine-square-mile
section of the city (with 134,000 inhabitants) into a "model city." More than
$400 million was spent trying to turn inner cities into shining new monuments to
government planning. In short, the feds and Democratic city mayors were soon
telling people where to live, what to build, and what businesses to open or
close. In return, the people received cash, training, education, and health
care.
The Model Cities program was a disaster for Detroit. But it did accomplish its
real goal: The creation of a state-supported, Democratic political power base.
The program also resulted in much higher taxes – which were easy to pitch to
poor voters who didn't have to pay them. Cavanagh pushed a new income tax
through the state legislature and a "commuter tax" on city workers.
Unfortunately, as with all socialist programs, lots of folks simply
don't like being told what to do. Lots of folks don't like being plundered by
the government. They don't like losing their jobs because of their race.
In Detroit, they didn't like paying new, large taxes to fund a largely
black and Democratic political hegemony. And so, in 1966, more than 22,000
middle- and upper-class residents moved out of the city.
But what about
the poor? As my friend Doug Casey likes to say, in the War on Poverty, the poor
lost the most. In July 1967, police attempted to break up a late-night party in
the middle of the new "Model City." The scene turned into the worst race riot of
the 1960s. The violence killed more than 40 people and left more than 5,000
people homeless. One of the first stores to be looted was the black-owned
pharmacy.
The largest black-owned clothing store in the city was also
burned to the ground. Cavanagh did nothing to stop the riots, fearing a large
police presence would make matters worse. Five days later, Johnson sent in two
divisions of paratroopers to put down the insurrection. Over the next 18 months,
an additional 140,000 upper- and middle-class residents – almost all of them
white – left the city.
And so, you might rightfully ask... after five
years of centralized planning, higher taxes, and a fleeing population, what did
the government decide to do with its grand experiment, its "Model City"? You'll
never guess...
Seeing it had accomplished nothing but failure, the
government endeavored to do still more. The Model City program was expanded and
enlarged by 1974's Community Development Block Grant Program. Here again,
politicians would decide which groups (and even individuals) would receive state
funds for various "renewal" schemes. Later, Big Business was brought into the
fold. In exchange for various concessions, the Big Three automakers "gave" $488
million to the city for use in still more redevelopment schemes in the
mid-1990s.
What happened? Even with all of their power and all of the
money, centralized planners couldn't succeed with any of their plans. Nearly all
of the upper and middle class left Detroit. The poor fled, too. The Model City
area lost 63% of its population and 45% of its housing units from the inception
of the program through 1990.
Even today, the crisis continues. At a
recent auction of nearly 9,000 seized homes and lots, less than one-fifth of the
available properties sold, even with bidding starting at $500. You literally
can't give away most of the "Model City" areas today. The properties put up for
sale last week represented an area the size of New York's Central Park. Total
vacant land in Detroit now occupies an area the size of Boston – Detroit
properties in foreclosure have more than tripled since 2007.
Every
single mayor of Detroit since 1961 has been a Democrat. Every single mayor of
Detroit since 1974 has been black. Detroit has been a major recipient of every
major social program since the early 1960s and has received hundreds of billions
of dollars in government grants, loans, and programs. We now have a black,
Democrat president, who is promising to do to America as a whole what his
political mentors have done to Detroit.
Those of you with a Democratic
political affiliation may think what I've written above is biased or false. You
may think what you like. But there is no way to argue that what the government
has done to Detroit is anything but a horrendous crime. You may think what I've
written above is merely a political analysis. Perhaps so, but politicians drive
macroeconomic policy. And macroeconomic policy determines key financial metrics,
like the trade-weighted value of a currency and key interest rates.
The
likelihood America will become a giant Detroit is growing – rapidly. Politicians
now control the banking sector, most of the manufacturing sector (including
autos), a large amount of media, and are threatening to take over health care
and the production of electricity (via cap and trade rules). These are the
biggest threats to wealth in the history of our country. And these threats are
causing the world's most accomplished and wealthy investors to actively short
sell the United States – something that is unprecedented in my experience.
Regards,
Porter Stansberry
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