Commentary: Bankruptcy Won’t Stop Detroit’s Innovative Entrepreneurs

7/26/13Follow @XconomyDET

On Wednesday, the city of Detroit celebrated its 312th birthday. Incidentally, that makes it older than the United States itself by 75 years. A city doesn’t endure for more than three hundred years (and sometimes thrive, lest we forget the 20th century) without a little grit, a lot of innovation, and an abundance of the kind of ingredients—land, water, culture, industry—that make up iconic cities. And make no mistake, Detroit is iconic. Love it or hate it, Detroit is one of the great American cities, which is one reason the nation is so gripped by our newest challenge: bankruptcy.

Before we delve into that particular can of worms, a bit of historical perspective: Detroit’s official motto is Speramus Meliora; Resurget Cineribus, which translates to “We hope for better things; it will arise from the ashes.” Now, a city doesn’t choose that simultaneously grim and hopeful motto without having overcome an obstacle or two. In fact, Detroit has been “reborn” at least twice, according to records from the Detroit Historical Society and historicdetroit.org.

The Great Fire of 1805, a mere 104 years into Detroit’s existence, was sparked by hot ashes from a baker’s tobacco pipe. The city didn’t have a paid, professional fire department, so Detroit’s wooden structures burned. The city was leveled by that afternoon. Incredibly, nobody died. Perhaps more incredibly, Detroiters didn’t abandon the smoking ruins where their city used to be and set up camp on a different spot down the Detroit River. Quite the opposite; they redesigned their city with the streets of Washington, DC, as an inspiration.

By the 1880s, Detroit was a city ruled by a corrupt political machine that desperately needed reforms. Voters elected as mayor a businessman with no political experience—a trend that has remained popular to this day—named Hazen Pingree, one of the biggest shoemakers in the Midwest. Pingree ended up being a terrific mayor who fought tirelessly for the best interests of city residents. He was thusly re-elected several times and happened to be in charge when the Panic of 1893 swept the nation.

The Panic of 1893 devastated Detroit. By 1894, the city’s “poor fund” was empty. Factories were shuttered, unemployment skyrocketed, crime was rampant, and residents were going hungry. Sounds familiar, doesn’t it? But it’s Pingree’s response that earned him the fourth spot on the Top 10 U.S. Mayors of All Time list, as ranked in the 1999 book The American Mayor by Melvin Holli. In particular, Pingree initiated a large-scale public works program and sent teams searching house-to-house to find needy citizens who might benefit from being a part of it. (By the way, we have this public works program to thank for Belle Isle being the lovely park that it is today.)

Pingree also opened the city’s vacant land, much of it held speculatively, to the public and appealed to them to transform it into urban farming operations. The response was overwhelming. The Detroit Free Press wrote in 1935 that Pingree, “the dynamic mayor of a city not yet dynamic, turned to the lowly potato as Detroit’s weapon to fight the depression of the ’90s. Pingree’s potato patches broke the back of hunger. They were nationally acclaimed and copied. They revealed a city of boundless energy and industry unwilling to live on doles.”

Hazen Pingree finally left the Detroit mayor’s office to serve as Michigan’s governor in 1896. The city of Detroit, as we all know, went on to become a global industrial powerhouse and the fourth largest city in the United States. Feeling better about the bankruptcy yet? Surely it won’t be solved by the lowly potato, but that same 1890s spirit of boundless energy and industry is alive and well in today’s Detroit. We write about it here at Xconomy every week. And while those occupying seats of power in today’s Detroit haven’t shown any Pingree-esque leadership yet, we do have an election coming up where we’ll choose a new mayor and elect a city council by district for the first time in 100 years.

Now, back to the bankruptcy. I’m not a financial analyst, so I’ll simply say it’s an unmitigated mess, no doubt, and one that is decades in the making. If I were a pensioner, I’d be livid. There are so many lawsuits flying around that I can barely keep track of the headlines. And there’s no question that the bankruptcy is demoralizing p.r. for a city and state that have been working hard to claw their way back from the turmoil of the recession.

But, here’s my opinion: Bankruptcy is also a relief, and a chance to restructure the city’s finances in a way that might finally deliver services to residents in a way most modern cities take for granted. And I’m far from the only person who feels that way.

Leslie Smith, president and CEO of the startup incubator TechTown, said to me, “Think, if we’re able to build this robust of [an innovation] network” with virtually no participation from city government, “imagine how it will be with a functioning municipality.”

The truth is, Detroit will never reach its full potential until the city gets its financial house in order. No matter how many tech companies or upscale grocery stores are launched here, there is no truly reborn Detroit as long as huge portions of the city have no streetlights, city buses are woefully late and often dangerous, neglected parks and residential areas remain choked with weeds and knee-high grass, and vacant and crumbling homes are left open to the elements, both human and natural.

I thought it was an interesting proposition when emergency financial manager Kevyn Orr wanted to load a bus with bankers and take them on a tour of Detroit’s failing neighborhoods so those money men could see the enormity of what this city is facing as part of the pre-bankruptcy negotiations. When I’m visiting my fiancé’s mother at her east side home, I drive through those same parts of town Orr had in mind and wonder, does Obama know about this? Am I still in America, I ask myself, because the scale of the municipal neglect is utterly shocking. Do we really value the people who live in these parts of town so little? Is this how we, as city, a state, and a nation, are going to let our great American cities rot once they’re no longer profitable and tax revenue has slowed to a trickle? Because if that’s the case, I have news for you: Detroit is merely the first national domino to fall.

I’m a Detroiter, which means I am ultimately a cock-eyed optimist. The revitalization efforts underway here were led by philanthropic organizations, entrepreneurs, billionaires, and a very committed and engaged citizenry rather than city government, which means this bankruptcy, at worst, is not likely to impede Detroit’s emerging tech/innovation ecosystem and the positive changes that ecosystem has brought. Indeed, Xconomist Josh Linkner, Detroit Venture Partners’ CEO and managing partner, also told me he feels that Detroit’s bankruptcy is an important step forward for the city and the region. “It actually symbolizes finally taking care of business and focusing on the future,” he said.

Whatever that future brings, like Detroiters did in 1805 and again nine decades later, we’ll simply put our heads down, get back to work, and try not to let what’s happening at city hall and in bankruptcy court stop us from doing our jobs and being productive citizens. And if this city could get its government to be a fully functioning partner in the growing revitalization efforts, then we’ll show the world once again exactly what it means to rise from the ashes.

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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  • All Hat, No Cattle

    Buffalo and Pittsburgh suggest that enlightened leadership and a hardworking citizenry can invent economies that work with shrunken populations. Detroit has had breathtakingly bad leadership, and economic innovation is pretty thin on the ground. Unburdening untenable debt opens the possibility for success; leaders and innovators must grasp the opportunity for Detroit to become viable.