Bankrupting cities – the US’s new cut-and-run scheme

$18 billion – that is the cost of Detroit’s debt.

$18 bn – that is the cost of Detroit’s debt, as revealed on Thursday when the city filed for bankruptcy, setting a new record in the US. This figure is a gentle reminder of America’s inequality – consider, not only that 30 of the nation’s billionaires could single-handedly pay off Detroit’s debt, but the news comes amid a gloat of optimism in the US.

US jobs figures – the most scrutinised of monthly data in the world’s largest economy – has beaten all expectations in June, May and April (monthly payroll gains averaging 196,000). Other good-news data has encouraged Ben Bernanke, the US Federal Reserve Chairman, to “taper” quantitative easing and equities are topping unknown heights.

But all this means nothing for the citizens of Detroit, or at least those 78,000 who remain in the city, down from two million in its 1950s heyday. Along with the citizens of America’s other bankrupt cities – Stockton, Mammoth Lakes and San Bernardino – they are the dead weight that America must cut in her struggle to the surface of economic buoyancy.

The message is harsh, yet simple – economic recovery is not universal and struggling cities must pay for their own recovery. How many more American cities, then, will we see go bankrupt as the inequality spits ever further? And what if this US tactic caches on in Europe – could we see a bankrupt Nottingham or Liverpool? (Admittedly, America’s Chapter 9 bankruptcy is not quite as dramatic as "bankruptcy" in the UK).

For Detroit, though, this means many more years representing America’s blue collar bust; the demise of industry and the heartland of sub-prime mortgages, while the rest of the country gets back on its feet.  When asked by CNBC if Detroit’s bankruptcy will affect markets, Steve Brice, Chief Investment Strategist of StanChart replied “markets seem to shrugging it off quite significantly”. 

However, to end on a positive note, this filing completes Detroit’s fall from grace. Here on, things can only get better in America’s industrial heartland.  

Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

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New Digital Editor: Serena Kutchinsky

The New Statesman appoints Serena Kutchinsky as Digital Editor.

Serena Kutchinsky is to join the New Statesman as digital editor in September. She will lead the expansion of the New Statesman across a variety of digital platforms.

Serena has over a decade of experience working in digital media and is currently the digital editor of Newsweek Europe. Since she joined the title, traffic to the website has increased by almost 250 per cent. Previously, Serena was the digital editor of Prospect magazine and also the assistant digital editor of the Sunday Times - part of the team which launched the Sunday Times website and tablet editions.

Jason Cowley, New Statesman editor, said: “Serena joins us at a great time for the New Statesman, and, building on the excellent work of recent years, she has just the skills and experience we need to help lead the next stage of our expansion as a print-digital hybrid.”

Serena Kutchinsky said: “I am delighted to be joining the New Statesman team and to have the opportunity to drive forward its digital strategy. The website is already established as the home of free-thinking journalism online in the UK and I look forward to leading our expansion and growing the global readership of this historic title.

In June, the New Statesman website recorded record traffic figures when more than four million unique users read more than 27 million pages. The circulation of the weekly magazine is growing steadily and now stands at 33,400, the highest it has been since the early 1980s.