Fall of Detroit-Lessons for Singapore

Detroit, one of the largest and most thriving cities in the US a few decades back, recently filed for bankruptcy. The economic and social troubles of the city were well known and had been going on for quite a few years. Detroit recently became the largest city in the US to file for bankruptcy.

Why Detroit failed

In the early 1900s, when the city was growing rapidly, the fact that it was located right on the banks of the Detroit River and close to Lake Erie contributed significantly to its economy. However, the city does not lie along the route that connects the cities where raw goods like iron ore and coal are produced anymore. Lake Erie is also not a major route of transportation anymore and everyone is by passing Detroit. The failure of the auto industry is also a major reason for the downfall of Detroit.

The auto industry was booming in the 50s and all the cars used in the US were made in the US. Later on, competition entered from other countries and they were able to avoid troubles from unionization by running operations in right-to-work states. Under the United Auto Workers union negotiations, workers were entitled to plush benefits, health benefits and retirement plans and could stay with the company even without any work.

This led to many companies moving away or setting shop in southern states where labour was much cheaper, taxes were lower and land was cheaper. The fact that Detroit was solely dependent on the auto industry served the biggest blow to its economy when that industry crashed. Racism and the general mistrust between the different ethnic groups also led to the middle class moving to the suburbs leaving the center to become a cesspool of crime and violence. Peculiarly, ethnic groups in Detroit never integrated and people fled the city to quieter suburbs as the practice of block busting grew.

Can this happen to Singapore?

The fall of Detroit has important lessons for large cities all over the globe. Singapore is the financial and technological hub of Asia with some of the largest companies in these sectors located there. Although it does not solely depend on one industry like Detroit, a crisis in the financial or technology industries could affect the entire economy. The government needs to make sure that these two sectors are properly insured against crisis. Also, labour can be expensive in Singapore and although they are highly skilled labour, Singapore is facing stiff competition from China and India where labour costs are much cheaper. Also, the labour force in these countries is becoming increasingly skilled, which could become a major blow to Singapore.

Moreover, Singapore has one of the most ethnically diverse populations in the world. Ethnic tensions between groups can lead to people leaving the city in droves and companies being wary of starting operations in the city. Although the different ethnic groups are well integrated in Singapore, the government must make sure that any tensions are quickly dispelled.

Singapore is also a major port city being the transit point between various economic powerhouses in Asia. Climatic changes may cause the sea level to rise negating the geographical advantage enjoyed till date. As trade routes are changing and nations are looking for cheaper ways to transport goods, Singapore’s ports are being by-passed. The reduction of traffic through its harbors can affect the city’s economy Singapore continues to depend heavily on its ports. Raw material suppliers are also changing with reserves depleting and raw materials being found in new countries and their shipping routes do not involve Singapore. The North Sea route is ice free all year round and could possible be an alternative route for shipping as a result of over crowding in the Malacca Straits.

In the air transport sector, as long haul flights and other modes of transportation are being discovered, Singapore is being by-passed. There are already flights between Australia and London that completely by-pass the city.

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