Notes on the Detroit Bankruptcy

bankruptcy

1. Looking back, it was all but inevitable. Kevyn Orr, who was appointed to be Detroit’s emergency manager by Governor Rick Snyder back in March, is a bankruptcy lawyer. He was selected to fix the city, and everything looks like a nail when you’re holding a hammer. Orr himself likened bankruptcy to a hammer of sorts, stating at a press conference that “in each restructuring I’ve been in, I’ve heard the same thing: This is a crisis. . . . Not at all. This is a tool.” The question, then, is what does this tool do.

One thing such tools do is produce winners and losers. Before filing for bankruptcy, Orr sat down with the city’s creditors to try to get them to voluntarily take a hit on what they were owed. Most of these creditors, which include “wealthy investors, money market bonds, bond funds, insurance companies, banks, hedge funds, and debt-traders,” would have received 10 cents on the dollar. Underfunded pension claims, however, would have received less than the 10 cents offered to the Wall Street counterparts. From the perspective of the emergency manager, not all debt obligations are created equal. Some, goes this line of thinking, can be squeezed harder than others. Although this proposal was rejected, the same logic continues to operate in the actual bankruptcy filing: retirees will take the hit while Wall Street gets paid first. And for corporations, of course, it’s an opportunity. “Crisis,” in other words, is never evenly distributed.

Moreover, even positing an equivalence between large bondholders and pension funds is like comparing apples and oranges for at least two reasons. First, these bondholders will invariably have forms of insurance (such as swaps) on their positions, which means that even in the event of a total default they will still receive some form of payment. Pension holders, on the other hand, do not. Second, bonds are truly debt instruments—investors know they carry risks, which is why they buy them—while pensions are essentially wages. Pensions are not IRA investments and should not be treated as such. By comparing the two sets of creditors, we impose a level of risk on pension funds that they did not carry for their original recipients, to whom they were sold as forms of deferred compensation.

2. Many activists, organizers, and especially liberal politicians have identified the emergency manager as the target of criticism and protest, arguing that his dictatorial powers—he is unelected and can override the decisions of the city’s elected officials at will—have been the critical element of the bankruptcy arrangement. This claim parallels the argument laid out by Naomi Klein in her well-known book The Shock Doctrine. Neoliberal reforms and austerity, she writes, are so unpopular that politicians can’t implement them through normal democratic procedures. Crisis, however, provides the opening and the opportunity to ram them through.

This is a compelling argument, especially to progressive-minded commentators, but at least in this case it is deeply misguided. The crisis in Detroit has little to do with “democracy”—the business-as-usual form of party politics dominated by corporate interests. In fact, “democracy” is what got us into this mess in the first place. Even beyond Detroit’s headline-catching ex-mayor Kwame Kilpatrick (elected in 2002 and currently awaiting sentencing on a new round of felony convictions), city governance has been notoriously corrupt, not to mention astonishingly incompetent. Since 2005, for example, the city has turned to Wall Street for help in funding its pension obligations—essentially kicking the can down the road—in exchange for what by now has added up to $474 million in fees alone.  That’s more than enough to pay off the city’s current budget deficit, estimated at about $380 million.

Another example is the infamous revenue-sharing deal signed between the city and the state back in 1998. The idea was for Detroit to gradually reduce its income taxes, which were deemed by the state government to be too high, by a third, from 3 to 2 percent. In return, the state would contribute $333.9 million annually for a period of nine years. While the city kept its part of the bargain, the state—run at different times by members of both political parties—did not. As a result of this arrangement, Detroit lost out on about $700 million between the loss of tax revenue and the state’s declining contributions. Again, that’s almost double the city’s current deficit.

However much what’s happening in Detroit seems to resonate with the popular notion of disaster capitalism, no solution will be found in getting rid of the emergency manager and restoring authority to elected officials. We can’t vote capital out of office. To focus on the sphere of official politics is to fundamentally misrecognize the terrain on which this conflict is being fought.

3. To some extent, then, the fiscal crisis facing Detroit is the result of misguided priorities, ethical lapses, and effective spin on the part of the ruling elite. This last point is worth considering. There is good reason to be skeptical, for example, about the emergency manager’s “massively inflated” claims about the extent of the city’s pension liabilities:

Pension liabilities are enormously important but imaginary numbers based on projections about a combination of factors. Perhaps the most important of these is the discount rate, which in turn is usually based on the bond market. Using a higher discount rate makes liabilities seem smaller, and vice versa. The power to define that rate confers the right to define a pension’s viability.

Orr has played a savvy game around Detroit’s discount rate. In his creditors’ report, he noted that the old discount rate yielded a funding gap of just under $700 million, while using “more realistic assumptions” would boost the liability nearly five-fold to $3.5 billion. By repeating that number in talking to the press, without ever revealing the methodology behind it, Orr has mainstreamed the notion that the pensions face a funding crisis that demands emergency tactics.

That being said, the decline of Detroit is not only “imaginary”—it is also objective. Popular discourse about the city is so oversaturated with knowing assertions and lamentations about factory automation, outsourcing, white flight, and population decline that at times a sense of skepticism automatically kicks in, lending support to the counterargument that, if only we could reorganize our priorities or (the politicians say) vote someone else into office, the problem could be resolved. Unfortunately, this is not the case. What is happening in Detroit is one result of the reorganization of the global economy that began in the late 1960s and early 1970s. The “golden age” of manufacturing is long gone and it’s not coming back. The terrain of conflict in Detroit, then, is not democracy but capitalism. (Another way to put it would be to say that the only way the question of democracy enters into the picture is not in the form of political representation but workplace organization: “What kind of a society gives a relatively tiny number of people the position and power to make corporate decisions impacting millions in and around Detroit while it excludes those millions from participating in those decisions?”)

DETROIT, Mich. — The most segregated city in America, Detroit's inner city is almost exclusively black, except for a small Hispanic corner in the southwest called "Mexicantown." The suburbs like Grosse Pointe, Dearborn, and Ferndale are heavily white.

4. The bankruptcy petition filed by Orr includes a statement of approval signed by Governor Rick Snyder, which identifies population decline as one of if not the key element responsible for the fiscal state in which the city finds itself today. “Mr. Orr’s letter and prior report put in stark reality the dramatic impact of the City’s plummeting population. . . . The City’s population has declined 63% from its peak, including a 28% decline since 2000. That exodus has brought Detroit to the point that it cannot satisfy promises it made in the past. A decreasing tax base has made meeting obligations to creditors impossible” (p. 15). The statement does not note, however, the racial dynamics of these demographic changes. As many critics have observed, what happened in Detroit was an exodus not of a general population but specifically of the white population, which fled to the suburbs (with its tax dollars) beginning in the 1940s and 1950s. It was fueled formally, by racist policies like redlining—in 1941, a segregation wall was even built off 8 Mile Road to separate the white neighborhoods from the black ones—and informally, by varied and violent configurations of discrimination and fear. Today, Detroit’s population is still 83 percent black.

While that exodus has decimated the city’s tax base, it has also produced stunning concentrations of wealth just beyond its municipal lines. According to Forbes, there are seven billionaires living in the metro Detroit area. For example, Dan Gilbert, the owner of the mortgage company Quicken Loans who has been buying up massive amounts of downtown real estate, is worth $3.5 billion. While many in the media call him a hero who’s going to “save” Detroit, he’s not accumulating the built environment out of kindness—he’s in it for the money. Coincidentally, that’s precisely the amount of the city’s entire pension liabilities if we assume Orr’s sketchy calculations are correct. There is plenty of wealth in southeast Michigan—we just have to know where to look for it.

5. Which brings us to targets. Pleas to authorities will accomplish nothing, as the authorities are by design not accountable to the public. But even politicians who are nominally accountable will not listen—they are accountable only to the needs of the market. An offensive strategy must be creative, identifying points in the circuit at which the immaterial flows of capital through and around the city (e.g. debt) become material and concrete, able to block, break, or take.

What about, say, the Goldman Sachs aluminum scam? The other day, the New York Times published an article on the notorious Wall Street firm, which has coordinated muni bond sales for Detroit that were good for Goldman and bad for the city. By purchasing a company based in the Detroit area called Metro International, Goldman has been able to acquire a stranglehold on the world aluminum market.

The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back-and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

(…)

Only a tenth of a cent or so of an aluminum can’s purchase price can be traced back to the strategy. But multiply that amount by the 90 billion aluminum cans consumed in the United States each year — and add the tons of aluminum used in things like cars, electronics and house siding — and the efforts by Goldman and other financial players has cost American consumers more than $5 billion over the last three years, say former industry executives, analysts and consultants.

Unlike the financial trades in which Goldman tends to deal, these warehouses are material and can be mapped. Blockading the warehouses, preventing the trucks from making one section of the loop, could cause a backup throughout, bringing the circuit of aluminum ingots—and the generation of profits—to a grinding halt. Interrupting this movement would be one small way of putting pressure on Goldman, and our blockade could last until the firm cancels the debt owed to it by the city of Detroit. The response to the bankruptcy must not be indirect, based on misplaced faith in political representatives, but direct, by intervening in the everyday operations of an economy that increasingly concentrates more wealth in the hands, and cities, of the few and leaves behind pockets of poverty and devastation.

(thx for the graffiti)

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We Created It, Let’s Take It Over

A standoff in Newark

Whether you are a student, a welfare rights activist, laid off, a union member, a teacher, an anarchist, or a concerned citizen, we all have come together to form Occupy Detroit for two reasons: because it is clear that the world around us, the world of the state and of capitalism, no longer work and because all traditional forms of politics, the parties, government, NGOs, no longer work either.

So we came together, occupied, and in less than a month, we have done things, such as learn how to self-govern, how to feed and care for one another and for those society has abandoned, and most importantly, how to take space, hold it and refuse to back down—all things that they, the state, the politicians, the 1%, and all those who live off the status quo, said could not be done.

But what is an occupation as a form of politics? What is our occupation in Detroit? And where is it going? First, to occupy means to take back what is ours: the parks, the city, the buildings, the street, the space both public and private—all this was built with either our hands or our money, on our backs, and as such to occupy means to take back what is rightfully ours. The occupations then have nothing to do with politics as usual, with parties, with the state (and their armed enforcers, the police), with NGOs. The occupation is then a force, its own force, our force, the power of direct democracy and direct action that says enough is enough and that is willing to fight for those who have been left behind, locked up, left to die. All of us who have participated in the occupation know what this force feels like: it’s the rush when we come to a consensus in a GA, or solve a complicated logistical problem in camp, or take the street and hold it against police threats during a march. This is the power of us, the power of the people.

If the occupation is a force what does it do? Or why is different than a welfare-rights organization, a union, a NGO, or a political party? The reason why the occupy movement is the most exciting social movement in the United States in many years is that it takes and holds space and most importantly it challenges the state. Why have cops beaten occupiers in Oakland, Denver, Atlanta, and New York? Why have city and state governments raided occupy camps in places too numerous to count with violence that has filled all of us with deep sadness and rage inside? It is because the state, the 1%, and the powers that be are afraid. This means we are doing something right. This means they are afraid that we will not be satisfied with a park, but will want a school, a factory, a bank. They know they have completely fucked over this country and they are afraid we are going to rise up and do something about it.

But what does it mean to rise up and do something about it? What are we rising up against? And why? For us, if the occupation is going to be something other than a party, a union, an organization for rights, it is going to have to fight for ourselves and those others who truly bare the full brunt of the 1% and the city and state governments that enforce their order. It means fighting for those who have been evicted and occupying their homes again. It means taking over closed schools and running them. It means taking over more parks, more buildings, until everything has been liberated, until all of society is run by neighborhood GAs, until we all make collective decisions about where the money goes, how education works, how we will live and care for one another. It is easy to see in Detroit that the state and city governments have failed. What’s more difficult to see is that as city and state governments fail, they inevitably become more repressive, and call in the cops to maintain order. Austerity, the “cuts,” are not actually cuts: they are not cutting, but shifting resources. For every dollar cut from social programs, from education, another dollar goes into the military budget, riot gear for cops, new prisons.

Michigan is only one of four states that spends more on incarceration than on higher education. In 2008, Michigan spent $2.08 billion on corrections, 1/5 of total spending from the general fund. In the city of Detroit, 1 in 25 of all adults are locked up. On the city’s eastside, in Brewer Park, 1 in 7 adult males is either behind bars or under supervision. Detroit provides the black and brown bodies for the prisons that are Michigan’s “New Economy,” structurally, the city has to offer up into the “pipeline” a certain number of bodies each year, so that conservative lawmarkers in the hinterlands can tout “job creation” with each new prison or prison employment. To this we say HELL NO. It is easy to see the abandonment of the city by the state; but we must also see and understand that this order of things can only be maintained through force. The young men of Brewer Park do not voluntarily line up in front of the prisons each morning, begging to be let in. They are put there, by a city, by a state, that no longer cares. We in Occupy Detroit are a force that opposes them. This is what it means to rise up, it means to fight, it means to take back the city and our neighborhoods from a corrupt and decadent power structure. Planting a garden is not going to dislodge them from power, nor liberate our city.

The visual evidence (abandoned buildings, train stations, schools) for the failings of the politicians, civic leaders, the 1%, is everywhere, but we must also confront the widespread repression that occurs daily, which can take direct forms like cops arresting youths or financial forms like the gentrification of Midtown which is being sold to all of us as “redevelopment.” That’s not redevelopment—redevelopment would be us as Detroiters deciding what gets to happen to our city—not funneling more money into the pockets of rich developers and their accomplices in the city government and saying that’s the best we can do. We have demonstrated in Occupy Detroit that that is not the best we can do, that there is another way, and that way is to occupy everything, to take back what is ours, to say we the people call the shots, we the people can best decide how to love and care for one another. You say more gentrification, more cops, more prisons, more foreclosures, attack the unions, more repression, we say ALL POWER TO THE OCCUPATIONS.

Right now, in Occupy Detroit we are facing two important challenges. The first is the looming eviction on Monday. The second is the winter. Both of these questions turn around the issue of what does it mean to occupy? Where are we going as an occupation, what are our goals? These are complicated conversations and ones that will require much thought, care, and debate. However, we’d like to make two points. First, there is no question that we should fight for the camp, we should resist and defend ourselves. It all comes down to a question of how much does the occupation matters to you. Do you have a comfortable life you can go back to? Or do you stand and fall with this movement, is it so important to you that you are willing to say “no, I refuse, I will fight for this space”? If we stay and we defend our space, our occupation, the force the city uses to evict us will be a black eye, and everyone will see that we are serious, that we are willing to fight for something we believe in, and they will join us in even greater numbers than before. If we lose and are evicted, we should come back the next day and everyday until we have taken back what is ours.

The second question, of what to do in the winter, is more complicated. It depends on how strong we are, how much space we can hold. Are we strong enough to take and hold a building throughout the winter? Would we be better served by maintaining a small presence in the park and staging temporary, symbolic occupations around the city (Cobo Hall, City Hall, etc) while organizing the neighborhoods into GAs? These are complicated strategic and tactical issues which will take much conversation to sort out. What is clear is that moving into private office space, paying rent, simply means that we have ceased to be an occupation and have become politics as usual, just another organization promising to make the city better, while turning a blind eye and refusing to fight against the daily repression occurring all around us.

Against Outrage

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The news didn’t come in the middle of the night as we expected, but in the morning, at a reasonable hour EST. Hundreds of riot cops had raided the encampment at Oscar Grant Plaza, wildly swinging their batons and firing tear gas and beanbag rounds into a crowd made up of our friends, comrades, and allies who had for the last two weeks taken over and transformed dead space into the Oakland commune.

Our initial reaction was outrage, an intense hatred of the police and all those who look away, who justify their actions, who volunteer platitudes like, “They’re just doing their job.” Anger rose up inside of us. How could they—we growled indignantly, clenching our teeth—shoot teargas at innocent protesters?  What could possibly justify this show of militarized force? Is this really what democracy looks like?

And then we took a step back and started to think about outrage.

To feel outrage, we must hold that there are appropriate channels through which social conflict can be mediated and resolved. We must see the state as accountable to our needs and desires, effective and efficient in its provision of necessary services. We must forget that we are privileged, that in our privilege we are just like everyone else. That those who experience state terror at the hands of the police somehow deserve it. To feel outrage, we must believe that violence is the exception.

But it isn’t. Accountability is nothing more than a gilded myth: as the “Occupy” movement has recognized, the 1 percent has so taken hold of the political system that politics as such can no longer be said to exist. We are living under the rule of austerity capital. There will be no more necessary services, just as there is no more accountability. In Detroit, we know there’s no going back to that golden age of the welfare state, of union jobs, of a “comfortable” middle class life. Those jobs, and their conditions of possibility, are long gone. And even if we could, would we really want to return to a system that depended on the institutionalization of war, sexism, and racism to reproduce itself? These days, in any case, Michigan is cutting off welfare payments to those who’ve been unable to find work for four years and canceling programs that help poor families pay their heating bills in the winter. And winter, forecasted to be one of the coldest on record, is fast approaching.

To feel outrage is to give ourselves away. For those who face the brutality of the police every day of their lives, those who are stopped and frisked on the street, those who are arrested for inhabiting the wrong neighborhoods and the wrong skin color, those whose family members have been stolen by the prison-industrial complex, understand that the police are the foot soldiers of capital. To serve and protect—the 1 percent.

So. We have to smother our outrage, train ourselves to recognize the police for what they are, both rationally and affectively. It is only when we no longer feel outrage that we will be able to move beyond a reactive politics which traps us in endless cycles of legal battles, jail support, and internal investigations that never lead anywhere worthwhile. We must expect them. What Boston, New York, Atlanta, and especially Oakland have taught us is what we should have already known—that the cops are coming for us. All we can do is learn to defend ourselves, to move quickly. And to attack first.

* * *

At the march on Bank of America last week, which started from the occupation at Grand Circus Park and moved through downtown Detroit on a bright crisp fall day, we found ourselves astonished. Not at the 500 plus persons filling the normally deserted streets, not at the palpable joy in the air (the joy of realizing that we were no longer alone in trials and fears in this age of austerity, and the joy of finding a long-longed for family, filled with true care and love). Rather it was one moment, brief, and in the context of the brilliant and massive amount of organizational work that has occurred in the last two weeks perhaps easily overlooked: at one point in the march the police decided to intervene, to test us, and tried to force the march onto the sidewalk. They shouted threateningly, their cars darted at marchers, they revved their engines menacingly, but at the front of the march a man, holding his young infant daughter faced the police and refused to leave the street. He refused. He would not be moved. And in the face of his resolve the police relented, and the march followed him, shouting, singing, laughing in the streets.

His eloquent gesture said two things: this space is occupied and it is ours. If our movement is to become worthy of the name, we will have to learn two lessons. First, to be against outrage and the exceptionalism that it entails. From the state and the cops, we expect nothing but what they have already shown us: tear gas, rubber bullets, armored vehicles, all the technologies of foreign wars come home. And second, that occupy means to take and to hold space; that first we take a park, then the street, then the schools, then the banks, until what was built by all of us truly belongs to all, no gods, no masters.

Solidarity with Occupy Oakland!

Yrs in struggle,

Some communizers occupying Detroit