Sufficient affluence/sustainable economy (Episode Two)

By John F. Sase, Ph.D.
Gerard J. Senick, General Editor
Julie G. Sase, Copy Editor
William A. Gross, Researcher

Prologue

Last month, we began this series of articles by stating that we are a nation of laws. As human beings, we will pass on someday. However, our laws will continue to live onward if protected and nurtured. Our society needs more policymakers who have studied Law thoroughly in order to preserve the good laws that exist, overturn the bad ones, and to develop new law to serve us more fully. When we contemplate the tasks of building or redeveloping a sustainable economy in our urban environment and beyond, we turn our thoughts to the talents, skills, and knowledge needed to accomplish the work from a human base and perspective.

We started by looking through the glass darkly into our ancient past. There, we found a city plan inherited from ancient times in that Detroit is a radial monocentric city. Our urban structure sprawls outward along paths that extend from a central hub like wooden spokes on a wagon wheel. In our search for our urban roots, we looked back 12,000 years to a time when mastodons and other large animals tread along our now well-worn paths.

Furthermore, we considered our predecessors, the Hopewell culture, that flourished in Michigan and Ohio from approximately 500 BCE to 1400 CE. They built more than one thousand mounds in the Midwest region, including a few dozen in Wayne County. Then, we looked at our system of major roads that we developed along the same paths traveled by the Hopewell people. This month we move forward through time to explore our preceding economies in the Detroit region that laid the foundation for our current culture through the recent centuries.

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Urban Growth in Search of Sufficient ­Affluence in a Sustainable Economy

In order to understand the economics of any urban area or region, it is important to know about their progressive development and accumulation of capital. We need to retrace the history of successive industries that developed here in order to understand the economics of Detroit more fully. Let us begin by regarding the coureur des bois “runners of the woods,” the seventeenth-century independent entrepreneurial traders who came to the Midwest from France by way of Quebec. They came to exchange various European items with the Native Americans for beaver pelts. The “runners” then would wholesale the pelts to exporters through Quebec who would ship them to the waiting fur and felt markets in Paris. In France, the pelts would be used whole for coats, muffs, and gloves, while the shaven hairs went to form felt hats and other articles. As Detroit developed, those in the fur trade began to add value to the pelts by tanning the hides here in the area that became known as Trapper’s Alley; now this area is in the heart of Greektown. The local industry also removed the hair from hides and packed it for later production in Europe. The fur trade continued to help Detroit through the British occupation as well as the American and French Revolutions. As time progressed, the availability of fur-bearing animals in the wild decreased. Meanwhile, the Paris market was disrupted by the French Revolution as fewer heads remained to wear fine felt hats.

The fur trade in Michigan waned as the lumber industry rose to succeed it. Following the American Revolution, home-building boomed in the original thirteen states. Unfortunately, three centuries of settlement along the eastern seaboard had depleted the supply of virgin timber severely. Therefore, the young nation became more and more dependent on the Northwest Territories of the interior for lumber. Under the command of General Anthony Wayne and his chief officer Colonel Jean-Francois Hamtramck, Detroit controlled the virgin forests throughout Michigan and Wisconsin. With the aid of rivers like the Au Sable flowing amply through the timberlands to the Great Lakes, a new economy developed from harvesting trees and then shipping out the cut lumber by way of wooden sailing vessels and, later, by steamship.

With the development of the modern steam engine by Scottish inventor and mechanical engineer James Watt, steamboats and steam-engine trains made it possible to move greater weight more quickly and at a lower cost per ton between the Atlantic Coast and the inland ports of the Great Lakes biome. With the shipment of raw and semi-finished materials out of the region and finished goods back in, the economy of Southeast Michigan grew rapidly. However, economists measure the greater success of urban areas in terms of the value added to outgoing products. This cargo moved through the closed system of the four western Great Lakes to Erie, Pennsylvania. From there, goods were transferred to barges. These goods then were moved through the Erie Canal, which opened in 1825 and linked the Lakes to New York City via the Hudson River.

Furthermore, the Erie Canal was a boon to trade. It facilitated the growth of Detroit and the adjoining region as the lumbering boom commenced during the second quarter of the 19th Century. From the flow of lumber wealth, large amounts of capital accumulated in the form of tools, wagons, ships, and infrastructure. The companies of lumber barons Augustus Palms, David Whitney, and others built the fortune that led to the next phase of industrialization in Detroit. Though the lumber industry remained very active until the fourth quarter of the 19th Century, it diminished after the first growth of trees had been cut. The absence of a lack of modern forestry-management delayed a second growth to mature, thus reducing the flow of timber supply by the late 1800s.

A series of industries developed incrementally. Within each industrial cycle, Detroit and Michiganders realized periods of sufficient affluence and parlayed accumulated wealth into the next era of our economic development. Detroit did not fall apart when the fur-trapping/trading boom subsided around 1800. Instead, the human experience and accumulated capital lent itself to an era of lumbering that helped to build the young United States. When the lumbering boom declined during the decades following the Civil War, the more extensive steel-rail and rolling-stock industries eclipsed the preceding Timber Era (see Silas Farmer’s book “The History of Detroit and Michigan,” S. Farmer & Company, 1884).

The value that is added locally in the manufacturing process leads to more employment in occupations that encompass a higher level of skills. The economic goal is to produce finished products for final consumption that possess a high value-to-weight. However, before reaching such a level of industrial development, Detroit would need to go through its rite-of-passage by producing high-value intermediate goods for final producers. As a result, the city would emerge as the world capital for the production of track and railcars to supply builders and operators of railroad systems. First, Detroit would supply the eastern railways in the years preceding and during the Civil War. After the war, it supplied the railroad companies that pushed western expansion to the Pacific Coast.

Detroit has a desirable location along a large waterway. Steel-rail production that employed the then-new Bessemer process (developed in Germany in 1855) required an abundance of flowing water since this process uses the water to cool the hot steel. At its apex, Detroit annually produced the greatest footage of steel-rail in the world. Also, the Michigan Car Works and the Peninsula Car Works built freight and passenger rolling-stock to complement the steam locomotives that were turned out by Baldwin of Philadelphia, PA; the American Locomotive Company of Schenectady, NY; and other companies.

The manufacture of complex products contributed to the development of the educational infrastructure in the fields of engineering and allied disciplines at the University of Detroit, the University of Michigan, and other schools. Mathematics and trades education also filtered down to the high-school curriculum. In addition to the manufacture of rails and rolling-stock, companies erected massive railyards and repair “sheds.” Surviving sites such as the Livernois Yard in Southwest Detroit complemented other early industries in their demand for skilled labor. With the push to the western shores completed by 1890, the demand for railroad products subsided. However, the industry continued beyond its heyday as it produced rails for short lines and sidings and rolling-stock for replacement orders as well as for reduced amounts of new orders.

Following the decline of rail production around 1890, the shorter-lived iron-stove industry helped the world to convert from cooking over an open hearth to using modern appliances. At this point, Detroit emerged as the Stove Capital of the World. All the while, visionaries were experimenting with the creation of automobiles. The industry that grew around these early experiments became a major game-changer. Cars would replace the horse and its obvious pollution by placing electric and internal-combustion engines and drive-trains into carriages and wagons (see Clarence M. Burton’s book “History of Wayne County and the City of Detroit, Michigan,” S. J. Clarke Publishing Company, 1930).

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The Age of Excessive Affluence  and Poverty

The City of Detroit grew rapidly during its second great industrial wave, the Automotive Age, which began in the late 1800s. This wave would define the manufacturing character of the city for more than a century. The auto industry brought many positive benefits. However, it also carried hidden costs that we continue to experience. The redundant stereotyping of Detroit as the dying automotive capital negates a series of production booms and busts throughout the history of the city that spans more than 300 years.

After a quarter-century of struggle, the Detroit auto companies hit their stride in the 1920s, limped through the 1930s, became the Arsenal of Democracy in the 1940s, and ruled as the dominant firms in the 1950s. In the 1960s, the economies of Europe and Japan, which had been crippled by war, re-entered the global marketplace. The boom phase of the automotive industry only lasted from the 1920s through the 1960s, a period of just fifty years. This current industry only reflects a small part of the economic history of Detroit, which spans many centuries. Now, in the second decade of a new millennium, Detroit is searching for its next “big hit,” though it continues to retain a significant vestige of its automotive industry.

The auto industry had begun in the 1880s and 1890s. Though it held hope for future prosperity, production was limited to the output of many start-up firms, which were staffed by a few employees each. Typically, they built vehicles in small shops that often stood attached to the homes of company owners. As of 1905, there were more than 340 car companies in Detroit that had emerged from the wagon and carriage industries. However, most of these small firms survived for no more than a year as entrepreneurs would combine, split, and recombine with other solo producers. This pre-boom phase of the Automotive Age lasted until the beginning of the First World War in 1914. This period of experimentation, invention, and innovation would not flourish fully until the 1920s.

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Sufficient Affluence for Some and  Sustainable Economy, Sometimes

As we noted earlier, through the expansion and contraction of glaciers many millennia ago, nature designed Michigan as a hub for transportation. This hub has supported the manufacture as well as the import and export of a series of products over the centuries. The automotive boom has been only one of such industries during the past three centuries. In order to continue the turnaround of Detroit in its present condition, the city must take stock of its assets, including location, accumulated capital, skilled labor, and various elements of infrastructure. By doing this, Detroit can plan for and support its recovery and growth for a subsequent boom period. Perhaps the next industry also will be in the field of transportation. Maybe it will emerge as something different that will thrive upon the current base that has developed over the centuries to its present state. Replicants? Spinners (flying cars)? Starships? Teleportation machines? Let’s think outside of the box.

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Takeaway

We hope that we have entertained our audience with an enjoyable and meaningful introduction to local history. In forthcoming episodes, we will explore the major events that formed the horns of the present dilemma in the City of Detroit and its surrounding suburban ring. We present this information to the law community because the City of Detroit continues to need your help. You, our readership, are highly educated and socially engaged. Do you have a vested interest in the next phase of development? If so, then we look to you to be teachers, mentors, and problem-solvers in this endeavor of the commonwealth. By using your skills, you can impact the future of Detroit and help it to achieve its full potential, both now and in the future. Therefore, we hope that this series of articles will provide you with some of the tools to assist you in this endeavor of creating sufficient affluence through a sustainable economy.

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A PDF copy of this article will be posted at http://www.saseassociates. com/legalnewscolumn.html. We continue to post videos related to our monthly column on www.YouTube.com/SaseAssociates in the Legal News Features playlist.
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Dr. John F. Sase has taught Economics for more than three decades and has practiced Forensic and Investigative Economics since the early 1990s. He earned an M.A. in Economics and an MBA at the University of Detroit and a Ph.D. in Economics at Wayne State University. He is a graduate of the University of Detroit Jesuit High School. Dr. Sase can be reached at 248.569.5228 and at drjohn@saseassociates.com. You can find his educational videos of interest to attorneys at www.youtube.com/ saseassociates.
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Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a Supervisory Editor at Gale Research Company (now Cengage) for over twenty years. Currently, he edits books for publication and gives seminars on writing and music. Mr. Senick can be reached at 313.342.4048 and at www.senick-editing.com. You can find some of his writing tips at www.You Tube.com/SenickEditing.
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Julie G. Sase is a freelance copyeditor and proofreader. She earned her degree in English at Marygrove College and her graduate certificate in Parent Coaching from Seattle Pacific University. As a consultant, Ms. Sase coaches clients, writes articles for publication, and gives interviews to various media. Ms. Sase can be reached at Julie@royaloakparentcoaching.com.