A while back, Yglesias reflected on the fortunes of Detroit and America’s immigration difficulties and wrote:
There are clearly insurmountable logistical, legal, practical, constitutional, and political obstacles to doing this but I canâ€™t help but think that with 165 million people around the world telling Gallup theyâ€™d like to permanently relocate to the United States that it would be possible to find 1.3 million people whoâ€™d be interested in permanently relocating to Detroit and bringing the city back up to its peak population level. Economic and governance opportunities in Detroit are poor by American standards (or even by Italian standards) but theyâ€™re great compared to what youâ€™ll find in Haiti, Gaza, Myanmar, Chad, or Nicaragua. Thereâ€™s discussion of trying to turn Detroit into some kind of hub for wealthy immigrants who are just trying to escape a bad political situation, but thereâ€™s simply a limited number of such people, and the real opportunity is in thinking bigger and creating a kind of Detroit Special Migration Zone that would become a diverse, bustling hub of economic opportunity for the worldâ€™s poor while providing new taxpayers for Detroitâ€™s government, new customers for Detroitâ€™s businesses, and a new source of value for Detroitâ€™s property owners.
Would this work, and would it be a good idea? I’m inclined to say no, for several reasons. One is the obvious logistical question: once you import a million or so immigrants into a country with free internal labor mobility, how do you keep them in one of the most depressed cities in the nation? We’d then be using tons of resources to prevent people from violating the terms of their green cards, despite the fact that those violations would be good for them and the American economy as a whole.
Assuming we could keep them there, I question whether we’d want to do so. It’s worth reflecting on the American experience with push immigration versus pull immigration. Most waves of American immigration have involved pull factors; newcomers are often fleeing bad situations at home, but they choose to come to America largely because of the relentless ability of the American economy to add jobs. There was almost no limit to the extent to which New York City could employ people in the late 19th and early 20th century, and so New York had no trouble sucking in labor, using it productively, and in doing so machining waves of immigrants into upwardly mobile Americans.
Fast forward a few decades and you find a situation in which the industrialization of southern agriculture is pushing millions of young black workers off the land and into unemployment. These workers then move northward in droves, only to find that urban centers are deindustrializing while whites are moving to suburbs. As such, black populations are left in relatively jobless ghettos, which become engines of poverty rather than upward mobility.
The Detroit experiment Matt imagines looks much more like the latter scenario than the former. New immigrants would create their own demand to some extent, but that’s not enough to drive upward mobility in the absence of productive industry.
I think it’s useful to use this experiment as an opportunity to talk about the different ways a city can fail. One particular pathology is the death by shrinkage. There are a couple of different angles to this. I’ve talked about fiscal death spirals before. If a dislocation of some sort causes wealthier residents to leave a city, then a smaller tax base is left to support services and infrastructure. This implies either a cut in service spending or an increase in taxes, either of which may encourage more people to leave, further shrinking the tax base. These dynamics play out in other ways. If you have a given housing stock and population begins to shrink you rapidly develop an excess supply of homes. This leads to downward pressure on home prices, which has several effects. First, it reduces property tax receipts which contributes to the bad fiscal situation. Second, falling property values reduce homeowner incentives to invest in maintenance and improvement, which ultimately leads to deterioration of the housing stock. Falling prices will also attract households that are more sensitive to housing costs, which will tend to be poorer households and those with lower levels of human capital. And that, in turn, will reduce the economic return of locating in a declining area. In urban places, failure can be self-perpetuating. I think it’s this dynamic that Matt has in mind in suggesting the immigration solution. But there are other kinds of failure.
There is geographic failure, which Ed Glaeser has described here and which Paul Krugman discussed in his Nobel Prize acceptance speech. Urban economies are based on various efficiencies and externalities that are associated with specific technologies. The set of technologies that made co-location of industrial enterprises in urban centers a desirable thing has been completely replaced. Cities built on the success of those industrial agglomerations have collapsed. Cities with more complex economies built on industry AND other, human-capital intensive activities have survived and thrived. A city needs a purpose. Now, if a home market is large enough (or if there are very large successful markets nearby) that purpose can simply be serving the local market — acting as a regional headquarters for business and finance, local consumption needs, and so on. The fate of cities is tied up with the fate of their neighbors.
The thing that complicates this calculation in a modern economy is that often the important geographical factor is the location of lots of skilled people. A city will be successful if it happens to be located on top of a concentration of human capital. A city like Detroit, which has lost its industrial economy (for the most part) and which lacks a concentration of highly-skilled workers finds itself in a bind. If highly-skilled workers most want to be around other highly-skilled workers, how does a city without highly-skilled workers attract them? Stepping back a bit it’s worth asking whether, at a societal level, we should want to help shrinking cities attract people. If people want to be around other people, then it’s not necessarily a good thing to have too many successful cities (though of course it’s all but impossible to know what the “right” number of cities is).
At any rate, Matt’s plan could somehow get at the chicken-egg problem that is human-capital oriented growth. If a wave of immigrants succeeded in generating a few productive communities, then those communities might attract additional migrants (particularly if the influx of immigrants also addressed the death by shrinkage problem described above).
Then you have what might be called institutional failure, in which a city’s institutions become so intertwined with a particular failing state that no improvement is impossible. I’ve suggested before that Michigan’s governmental institutions are so caught up in support of the automobile industry and related businesses that they are unable to support measures which might lay the groundwork for a real Detroit economic renaissance. Everything the government does to hold failing businesses afloat locks up important resources — land, labor, capital, institutional support — which might otherwise go to growing sectors. Similarly, interest groups may seize control of local governments and take steps to fight off efforts to re-invest in a city, if the potential growth from re-investment is seen as destabilizing to the local balance of interests. To take just one example, a number of churches in the District have fought revitalization efforts in the city and allowed their property holdings to fall into disrepair (forgoing lots of revenue in the process) out of a doomed effort to fight new growth and preserve their historical hold on parts of the local government.
The immigration proposal could conceivably address this issue by totally destroying the existing balance of institutional power. An influx of hundreds of thousands of new residents would change local politics immediately, creating new constituencies, some of which would favor drastically different approaches to urban policy and growth.
So Matt’s policy could conceivably address all of these kinds of failure. But does that add up to success? I remain somewhat skeptical, and not just because of the logistical issues I originally pointed out. The real key to success, it seems to me, is the presence of a concentration of human capital. It’s hard for me to imagine that an influx of a million low to moderately skilled workers could power an urban regeneration. That, for better or worse, is that nature of the current polarized economy. Now you could invite the immigrants and have in place a program to train them. Obviously, there’s a lot to be said for that approach (in general, not just where this policy experiment is concerned). But gone are the days, I think, when masses of middle-skilled workers power metropolitan economies.