Monday, July 02, 2007

Detroit: The Fiscal Capital of Michigan by Akindele Akinyemi

Detroit’s ability to win—and not just compete—in the global economy depends in part on our having the world’s most efficient capital markets. Substantial reforms in this area will be required for Detroit to continue to be the most successful economy in the world and the best source of high paying jobs with enough economic growth to sustain the Baby Boomers and their children when they retire.

Substantial reform will also be required if Detroit is to become the financial capital of the world for African Americans.

Last year, the U.S. financial exchanges attracted barely one third the share of the volume of global initial public offerings that they had in 2001, while the share by European exchanges expanded by 30 percent over the same period. A 2005 press report by the London Stock Exchange attributed one reason for its success by citing that “about 38 percent of the international companies surveyed said they had considered floating in the United States. Of those, 90 percent said the onerous demands of the new Sarbanes-Oxley corporate governance law had made London listing more attractive.” And just last month, Europe’s financial exchanges (including Russian and the east European markets) surpassed the U.S. in stock market value for the first time since the First World War.

These are indications that Detroit is becoming a less and less desirable place to do business for companies that in a global economy have increasingly attractive alternatives of where to locate and where to seek capital financing.

In financial markets, as in other areas, Detroit has no choice but to transform or decay. We must make the bold changes required to enable our capital markets to flourish and our economy to win in the global marketplace or we will cede our leadership position to others.

Capital markets reflect the underlying real pace of progress in Detroit that has been driven by the discoveries of scientists and technologists, brought to the marketplace by entrepreneurs in the form of products and services. We have flourished and lead the world because we have provided an efficient capital markets system to finance the aggressive development and marketing of the opportunities created by science and technology. Countries that have ignored these opportunities or hamstrung their financial markets have fallen behind in standards of living and quality of life.

Detroit is facing a serious challenge to our economic superiority for the first time since we surpassed Great Britain around 1840. Over the last 160 years we have been the most dynamic economy in the world. While Germany and Japan could challenge us in some areas, they were simply not big enough to compete with America in everything. Now we are faced with the economic rise of China and India, countries whose populations are larger than our own. Detroiters will have to be four times as productive just to match them in overall economic activity.

Yet, Detroit has the ability to continue its leading economic position—even in an increasingly competitive global economy, if we can adopt the domestic reforms necessary so we can take advantage of the economic opportunities presented by dramatically expanding scientific knowledge.

Maintaining efficient capital markets is the key to being able to maintain and expand this scientific and technology based entrepreneurial creativity that will make Detroit the most successful and prosperous economy in the world.

The entrepreneurial character of Detroit’s economy is being endangered by too much regulation, unconstitutional assertions of power by city actors, and a lawful employment litigation system.

Detroiters do not have to settle for decaying gracefully. We have it within our power to change. The "D" can get even bigger and wealthier, along with the rest of America. But it will require citizens who are willing to put an end to the status quo and demand real change from their political leaders in both Detroit and Lansing.

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