This week, David Atkins and Lynn Parramore, writing at Alternet, each told the story of the downfall of Sears. Once an American institution with over a century of successfully providing goods and services to the nation, Sears has fallen into a state of business failure free fall. The company has been hemorrhaging customers, seeing its profits plummet, and its reputation nosedive. If there is anyone who deserves credit for the company’s demise, it is the Ayn-Rand loving, libertarian Eddie Lampert, recently ranked #2 on the Forbe’s list of America’s worst CEOs. Mr. Lampert’s decision to embrace the economic philosophy of Friedrich von Hayek, beloved among libertarian conservatives, means that he scorns investment in infrastructure, education, or the labor force. Instead, his concerns are always with austerity, budget reduction, and the bottom line. He believes in the free-market, corporate largesse, and greedy self-interest. These beliefs led him to implement an organization of his company whereby he broke it into over 30 smaller components and then basically told them that they needed to compete with each other in a cutthroat atmosphere to earn more profits. The result? Individual units within the corporation began undermining each other. Parramore notes, “Units competed for ad space in Sears’ circulars, and since the unit with the most money got the most ad space, one Mother’s Day circular ended up being released featuring a mini bike for boys on its cover.” Yes, that sounds like excellent business acumen; mini-bikes are famously popular gifts for mothers. Employees became disheartened to the point where Sears was ranked the 6th worst place to work in America by AOL Jobs.
Meanwhile, this week also brought news that the City of Detroit tried to file for bankruptcy under the direction of its state-appointed, anti-democratic “emergency manager,” only to be rebuffed by a judge’s ruling. How does Detroit’s situation relate to Sears’s sad demise? Both are facing the specter of Randian objectivism, free market fanaticism, dehumanization of ordinary people, and an abdication of corporate responsibility. As the workers at Sears have been forced into cutthroat competition, so too, have Detroit’s residents been asked to compete over insufficient and scant resources.
There is no question that Detroit has been struggling for decades. As a rust-belt city dependent on manufacturing, it has faced the same woes as many other cities in the region as our country’s manufacturing jobs were shipped overseas. However, the historical dependence of Detroit on the auto industry has meant that its well-being has been tethered to the whims and welfare of the American auto corporations. As the business infrastructure of the city aged, rather than investing in and developing new factories, these corporations opened up plants in other parts of Michigan, Ohio, Canada, etc. They left behind massive, abandoned factories that not only pepper the city with dangerous, broken-down eyesores, but also left the city with a dramatic loss of jobs. With little other choice remaining, residents of the city departed by the millions seeking employment. Many of those who remained were simply too poor to relocate. The city government was left with an ever-decreasing tax base to maintain its functioning, falling more and more into debt. Instead of taxing the remaining corporations and businesses within the city, Detroit was essentially blackmailed into giving them colossal tax breaks under threat of seeing the businesses pick up and move. The State of Michigan has also been withholding funds that it is supposed to give Detroit through revenue-sharing, restricting their access even further to necessary resources.
The commonalities between what is happening to Sears and what is happening to Detroit are that both are now being subjected to right wing ideology, Ayn Rand philosophy, and von Hayek’s austerity economics. The results for each are similar. People will unnecessarily suffer. Damage will eventually need to be undone. And people will have to learn the hard way what a failure these poisonous schools of thought really are.
According to reports, the emergency manager, Kevyn Orr, and his cohorts, wealthy businessmen and corporations, have big plans for Detroit. They can’t wait to implement their conservative fantasies of privatizing and cutting city services, busting unions, selling off public assets, and laying off public employees. The citizens of Detroit have already seen 20% of their city’s workforce cut by their Democratic, multi-millionaire mayor, David Bing. In a place that suffers from a severe lack of jobs (there is one job for every four residents), more layoffs is just what the community needs. Among the upcoming plans approved by Orr are service shut-offs to neighborhoods determined to be too poor or under-populated for private investment to be profitable. The city’s unsung assets, including the Detroit Institute of Arts, Belle Isle Park, and even the animals at the Detroit Zoo, have all been appraised and are ready for sale to private interests. Public services ranging from transportation to garbage collection and water treatment will soon be privatized and in the hands of for-profit corporations.
The winners in the bankruptcy filing will be Detroit’s creditors on Wall Street. Orr has already made arrangements to pay Bank of America, UBS, and Merrill Lynch 75 cents on the dollar, allowing them to take in $340 million. If you are a bank or other financial institution that has done business with Detroit, this bankruptcy will not nullify Detroit’s obligation to pay you. Arrangements have been made. The same level of concern for ordinary citizen creditors who are owed money via their pensions is non-existent. The bankruptcy is expected to include a dismissal of obligations to pension holders. Other winners in Detroit’s bankruptcy include the wealthy investors bribing a limping city for its last penny. Detroit is actually going to subsidize businesses that want to build upscale housing and chip in $286 million to the building of a sports arena for the Little Caesar’s owner, Mike Ilitch, whose net worth is nearly $3 billion. Meanwhile, there is no demand by the city to fine corporations for the miles and miles of land soaked in industrial pollution (Detroit’s 48217 zip code is the third most polluted in the country).
Detroit’s situation is ugly. It has had corrupt leaders in the past. It has dealt with exorbitantly high unemployment rates. The infrastructure is crumbling. Any potential tax revenues it might have been able to collect to fill empty coffers are unavailable, because unconcerned and exploitative businesses jockey for subsidies rather than being willing to actually chip in to benefit the city. Wealthy vultures circle the city’s many assets. And instead of hope, the city has Governor Rick Snyder, an emergency manager, suspended democracy, corporate scavengers, widespread unemployment and poverty, and Wall-Street friendly bankruptcy efforts. Alarmingly, as we noted, Detroit is just a test-case for the right wing to begin spreading this ideology far and wide.