Thursday, July 25, 2013

Atlas Shrugged, Detroit Disregarded It

I have written several times about Ayn Rand's Atlas Shrugged.  Here is a post that I wrote about the book just before the movie Atlas Shrugged, Part II arrived in theaters last October.

If you ever wanted an example of life imitating art then consider this article by Daniel Hannan in The Telegraph that starts this way.

You thought Atlas Shrugged was fiction?
Look at this description of Detroit from today’s Observer:
What isn’t dumped is stolen. Factories and homes have largely been stripped of anything of value, so thieves now target cars’ catalytic converters. Illiteracy runs at around 47%; half the adults in some areas are unemployed. In many neighbourhoods, the only sign of activity is a slow trudge to the liquor store.
Now have a look at the uncannily prophetic description of Starnesville, a Mid-Western town in Ayn Rand’s dystopian novel, Atlas Shrugged. Starnesville had been home to the great Twentieth Century Motor Company, but declined as a result of socialism:
A few houses still stood within the skeleton of what had once been an industrial town. Everything that could move, had moved away; but some human beings had remained. The empty structures were vertical rubble; they had been eaten, not by time, but by men: boards torn out at random, missing patches of roofs, holes left in gutted cellars. It looked as if blind hands had seized whatever fitted the need of the moment, with no concept of remaining in existence the next morning. The inhabited houses were scattered at random among the ruins; the smoke of their chimneys was the only movement visible in town. A shell of concrete, which had been a schoolhouse, stood on the outskirts; it looked like a skull, with the empty sockets of glassless windows, with a few strands of hair still clinging to it, in the shape of broken wires.
Beyond the town, on a distant hill, stood the factory of the Twentieth Century Motor Company. Its walls, roof lines and smokestacks looked trim, impregnable like a fortress. It would have seemed intact but for a silver water tank: the water tank was tipped sidewise.
They saw no trace of a road to the factory in the tangled miles of trees and hillsides. They drove to the door of the first house in sight that showed a feeble signal of rising smoke. The door was open. An old woman came shuffling out at the sound of the motor. She was bent and swollen, barefooted, dressed in a garment of flour sacking. She looked at the car without astonishment, without curiosity; it was the blank stare of a being who had lost the capacity to feel anything but exhaustion.
“Can you tell me the way to the factory?” asked Rearden.
The woman did not answer at once; she looked as if she would be unable to speak English. “What factory?” she asked.
Rearden pointed. “That one.”
“It’s closed.”

What is really incredible is that Ayn Rand wrote these passages in 1957.  At that time Detroit had the highest per capita income in the United States.  Today Detroit is in bankruptcy and Washington, DC has the highest per capita income in the country.  DC's average per capita income is actually 75% higher ($30,000 per year) than the national average.  It is also almost $17,000 higher than Connecticut which has the highest per capita income of the 50 states.  I don't think even Ayn Rand could have foreseen that much income disparity developing.

Interestingly, the last Republican mayor of Detroit (Louis Miriani) assumed office in 1957.  He was replaced by a Democrat in 1962 and the Democrats have ruled Detroit ever since.

A few facts about the hole  chasm that Detroit is in.

  • Less than half of the residents of Detroit over the age of 16 are working

  • 40% of the city's street lights don't work

  • 2/3 of the city's ambulances are not in service

  • The murder rate in Detroit is 11 times higher than it is in New York City.

  • Two-thirds of the parks in the city of Detroit have been permanently closed down since 2008

  • $9.2 billion out of total debt obligations of $18 billion for Detroit is owed to the city's retirees for pensions and health benefits but this number is probably understated due to unrealistic future return assumptions 

  • Total property tax and income tax revenue for the 2012 fiscal year was less than $500 million.  The city brings in another $170 million in casino revenues.  The rest of the city's revenues are state and federal grants and water and sewer revenues

  • The pension fund is estimated to need annual contributions of $200 million to $350 million. The city spent $177 million on retiree health costs last year. Compare those numbers to the tax revenues and you can readily see the problem

If the Atlas Shrugged parallel above is not enough for you, also consider this passage in the book that I wrote about last July.

You might remember Barack Obama's view of entrepreneurship and success from last year's campaign.

"If you’ve got a business -- you didn’t build that.  Somebody else made that happen."
Compare Obama's words to this dialogue in Atlas Shrugged that makes the same argument as to why the government is justified in heavily taxing and regulating a successful entrepreneur named Rearden...

“He didn’t invent iron ore and blast furnaces, did he?”
“Rearden. He didn’t invent smelting and chemistry and air compression. He couldn’t have invented his Metal but for thousands and thousands of other people. His Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.”
She said, puzzled, “But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?

Every time I read that passage it puts a chill up and down my spine.

The warning signs for Detroit have been there for many, many years. Atlas Shrugged a long time ago when it saw what was going on. The problem was that the people of Detroit disregarded it. That has brought them to where they are today.

I feel sorry for what lies ahead for the people and the pensioners of this late, great city. I lived just outside Detroit 50 years ago when it was in its heyday.  It is sad to see how far it has fallen.  However, you need more makers than takers in any society.  You can only borrow so much.  You can only withstand so much corruption. You can't continually put public sector unions ahead of the public interest. Eventually you hit the wall.

Detroit has hit the Wall.  Who was driving?

We need to pay close attention to what transpires in Detroit and the pain that results as this bankruptcy resolves itself.  It will not be pretty.  For example, before the bankruptcy filing the city was looking for a deal to cut pensions and health benefits by 90%!

I can only hope that we don't look at what has happened to Detroit, simply shrug, and continue doing the same things for our nation at large.

We should learn that when 'Atlas Shrugs' or 'Detroit Goes Down The Drain' it is time to pay attention.

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