Preliminary Reform Requirements
To build a high performing and competitive economy which can generate sustainable wealth, reform will have to take place at two levels: the structural and mental.
First, the structural reforms. Based on my revealed preferences for an open economy, I identify a few as the most important.
- Fiscal Policy: All levels of government must adopt a conservative fiscal policy, with the intent of maintaining a balance between government revenues and spending. Thus, government spending on non-essential items must be curtailed, with the bulk of spending going towards education, healthcare, social welfare, and some public good type long term infrastructure investments.
- Monetary Policy Reform: Detroit must be given operational and legal independence from government so that it can properly set monetary policy. Maintaining price stability is of utmost importance.
- Trade Reform: Detroit must become a diversified export economy. The focus on the automotive and nursing industry will not be sufficient to meet the city’s financing needs. Government must remove all impediments such as anti-competitive laws, subsidies that favor importers, reduce tariff and non-tariff barriers, and open Detroit’s borders to imports and exports alike. For Detroit to become a successful trading city, a mental shift is required to embrace the idea that one trades in order to expand one’s consumption choices. Thus, Detroiters, government and citizens alike, will need to rethink our attitudes to entrepreneurs, who are responsible for creating wealth. In so doing, we would be locating ourselves within a time-tested framework, which show a clear positive relationship between higher non-mineral exports and a better standard of living.
Attitudinal ReformSecond, a different attitude has to be embraced. To move from being one of the most miserable city in America, to one which possesses a high performance economy, a number of vital mental shifts have to occur. First, our city and state lawmakers in Detroit must admit that it should not dictate the economic choices her citizens will make. Instead, it must create the legal environment for them to exercise their own choices and have these respected. The role of the state should be that of a humble participant in frank dialogue about prosperity, and not as a domineering partner. Of course, to reach that position, the Detroiters must be willing to admit that its approach to economic development thus far has been flawed, and it is willing to concede the stage to private actors. Second, and equally important, private actors must accept the responsibilities and challenges that come with successfully running a free, open economy.
To build competitive advantage in Detroit
Putting both set of issues, structural and attitudinal, together, forces a profound question: can black owned and operated Detroit firms succeed on the world stage? Can the introduction of a free market and free trade help us build prosperity in Detroit? Should we not expect a rise in unemployment, poverty enslavement to the outside world? Would Detroit not be better off if we turned inwards and handed control of the economy to the government, or its representatives? No, I argue. With her shrewd, innovative, entrepreneurial and hardworking cultures, Detroit would be better off opening its economy to full international trade and creating a free market inside her geographical borders. However for that effort to be successful, we as a city must come to terms with a number of flaws we have.
In Search of The Rising Sun Economy
As we debate how it is we shall reverse the legacy of recent poverty, I am confident that this approach will be useful to Detroit’s citizens, corporate community, labor movement, and government officials for the following reasons. For too long, we have blamed each other for the city's economic crisis. While city government has taken steps to correct some flaws, and in the process liberalized significant portions of the economy, something key is yet to undergo a systemic change: popular attitudes about the source of prosperity, wealth and job creation, and their impact on poverty reduction. In many minds, the government still retains responsibility for job creation. That should not be. And how then shall we create such wealth? We return to the themes I earlier hinted at: the need to build a free market economy, in which individual entrepreneurs, who trust each other, organize in firms of all sizes, to create prosperity and jobs. We must all enter into partnerships for creating prosperity. To be successful, we must identify common goals, commit to a long–term perspective, invest in human resources, and assign new leadership roles for business leaders and policymakers; every stakeholder thus must have a discernible role in generating prosperity.
Openness, political and economic, should not create fear in our minds. Quite to the contrary. It is a keen opportunity for us to rebuild our economy and break the cycle of poverty. We can do whatsoever we set our minds to, so long as we do our homework! Our challenge is to move beyond the current structure of society and develop a more dynamic system that encourages innovative entrepreneurs and rewards merit. Given the slide in our city reputation in national and international affairs and business, we will have to go many extra miles to ensure that we regain our credibility. For those who believe Detroit possesses a rightful place in the world, you are wrong. Respect is earned not handed out for free. Detroit will gain long lasting credibility by building a conservative appraoch to government and open economy that challenges the norm. We must learn to challenge the world and push out the frontiers of human achievement.