Global Research

The following lecture was delivered at the Michigan State University (MSU) Detroit Center on April 19, 2013. This event was sponsored by the African American and African Studies Program’s Emerging Black Studies Scholars project. The audience was composed of MSU graduate students as well as their counterparts from Wayne State University, professors and community leaders. Earlier in the day Azikiwe had taken the students on a “corporate devastation tour” of sections of Detroit. Students were later debriefed on the tour during dinner prior to the lecture. 

Detroit is a city that has been in the national and world news once again. Since March, when Gov. Rick Snyder declared a so-called “financial emergency” in Detroit, therefore setting the stage for the appointment of an “Emergency Manager”, many press reports drew a direct connection between the recent corruption trial of former Mayor Kwame Kilpatrick and businessman Bobby Ferguson. In fact just prior to Snyder’s declaration, Kilpatrick and Ferguson were found guilty of numerous corruption charges in the months-long federal trial.

Of course the corporate and government-controlled media has never focused on who are the real culprits in the underdevelopment and consequent destruction of Detroit and other majority African American municipalities in Michigan. These media entities fall back on the same notions that have prevailed inside the United States since the period of Reconstruction, i.e. that African American political leadership is inherently corrupt and inefficient rendering them incapable of managing the affairs of governments locally, statewide and nationally.

Beginning in the late 1990s the city was the focus of one of the largest swindles in the history of the U.S. Predatory lending schemes targeted African American and Latino communities in a massive profit-making project that involved the highest echelons of finance capital in collusion with the federal, state and local governments.

African Americans were deliberately lured into first home buyer and refinancing programs which the banks knew well in advance would result in massive home losses and the wholesale leveling and cleansing of neighborhood and cities. These predatory lending programs in many cases were racist in character by only providing subprime loans to African Americans and Latinos even if they qualified for what was considered as conventional mortgages.

The largest and most profitable banks and insurance companies were involved in these efforts. Even though many of the mortgage loans appeared to originate from small real estate and finance companies, over a period of time the servicing of these loans wound up with some of the oldest and well-established banks such as JPMorgan Chase, Bank of America, the Royal Bank of Scotland (Charter One), Wells Fargo, The Bank of New York Mellon Trust and others.

The forces behind these fraudulent mortgage packages were so-called securitized trusts and hedge funds many of which are based on Wall Street in New York City. The mortgages were bundled up in exotic financial instruments and backed up by multi-billion dollar firms such as American International Group (AIG). Utilizing credit default swaps these trusts and funds bet on the fact that there would be monumental and unprecedented foreclosures and reaped trillions of dollars in profits based upon the failure and destruction of municipalities throughout the country.

In late 2006 and early 2007 these schemes began to unravel. Two Detroit-based attorneys associated with the Michigan Emergency Committee Against War & Injustice (MECAWI) began to receive request to defend hundreds of people from eminent foreclosure.

What they discovered shortly was that people had been placed in adjustable rate mortgages (ARMs) where they would start off paying a relatively manageable amount in a monthly payment only to see these installments rise precipitously over a brief period of time. Eventually the homeowner would not be able to make payments, they would fall behind and then a series of late fees and penalties would take hold leading to default, foreclosure and seizure by the banks.

Many of these foreclosures and evictions were illegal even according to the rules set out by the banks themselves. Options that should have been available to lower payments and work out agreements with the banks were disregarded in the mad rush for repossession of the homes.

It later became clear that there were greater incentives for the banks to foreclose on these borrowers than work with them to resolve the payment issues. Most of these fraudulent mortgages were insured at the inflated rates of the mortgage as opposed to the actual market rate of the properties which were rapidly declining in value. When foreclosure occurred the banks would be paid the full value plus penalties and fees by the insurers therefore making profits on both ends.

What helped fuel the predatory lending frenzy was also the false notion that property values would continue to rise in perpetuity. Lenders would tell borrowers that they could always refinance and get lower interest rates and more cash.

This of course turned out to be a big lie because as soon as the system began to unravel in 2007 and property values plunged, no lender would be willing to refinance. People were stuck with homes that were declining in value with high unreasonable mortgage payments surrounded by communities that were being destroyed through the crisis.

The Decline in Wages for African American Workers

Let us now look at some underlying factors that are clearly related to the crisis of housing in the urban areas like Detroit. Since the 1970s wages have been on the decline inside the United States.

With large scale de-industrialization in Detroit and other cities throughout Michigan, the problem of structural unemployment has become pronounced. This problem in fact goes back to the 1950s when the general myth exist of an expanding economy with a burgeoning middle class is still promoted in the mass media and popular culture.

In Detroit industrial jobs were being lost in the 1950s and 1960s as census reports document. This was taking place at the same time as the large-scale migration of African Americans into the city of Detroit was increasing when many working class and middle class whites were fleeing the city for the suburbs.

By the time of the 1967 Rebellion the decline in the city was well underway. Unemployment and underemployment was a major problem among youth in the African American community in Detroit in 1967 when approximately 40 percent of the city was black.

There was a minor recession in 1969 and in 1971, the Nixon administration embarked upon its anti-inflation program that took the U.S. off the gold standard. By 1973-74 major changes in the economic structures of the country resulted in plant closing and lay-offs.

The October 1973 Egypt-Israeli war prompted the Arab oil embargo that brought about additional shocks in the petroleum industry which resulted in price hikes and shortages in fuel. The problems of large-scale unemployment began during this period in the city of Detroit and in other industrial centers around the country.

In 1975 there was a major restructuring of the world economic system. An even greater degree of de-industrialization began to occur where millions of people were thrust into economic uncertainty and social displacement.

These developments occurred within a broader international context that had a tremendous impact on the U.S. 1975 was same year that the Vietnam War and the influence of Washington collapsed in Southeast Asia.

Also that same year the independence of Angola and Mozambique crippled a major ally of the U.S. within NATO, Portugal, whose government was plunged into crisis in Europe. These factors were compounded with the fall of the Nixon administration the year before and the revelations surrounding the role of domestic intelligence services hampered the ability of the state to exercise the degree of repression that had been common since the Cold War between 1947 and 1974.

When jobs are lost and people move from cities this impacts the tax base and the very existence of small and medium size businesses. The rate of profitability even among the large multi-national corporations declined during the mid to late 1970s therefore perpetuating the cycle of joblessness and increasing impoverishment.

In the city of Detroit the subprime mortgage phenomenon and the consequent foreclosure and eviction crisis had a compounding effect on the city’s tax base. The 2000-2010 Census figures indicate that some 237,000 people were forced out of the city of Detroit.

Many of these people were by-products of the economic devolution of the city and the country. There were 150,000 foreclosures in Detroit during this period and the simultaneous loss of jobs and the decline in real wages proved to be even more devastating to the city.

Another dimension of this crisis related to the fiscal health of the city of Detroit is the municipal finance problems that have been developing over the last decade. With the decline in tax revenue and revenue sharing from both state and federal governments, the city was forced to rely on borrowing through disadvantageous loans and bond issues.

Recently- released documents under a Freedom of Information Act (FOIA) lawsuit filed by the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs has brought about the exposure of the fraudulent activity carried out by the same banks that drove nearly a quarter-of-a-million people out of the city through mortgage lending and home seizures. The use of credit default swaps in municipal finance has resulted in the complete financial ruin of the city.

The existence of $16.9 billion in long-term debt for the city of Detroit stems directly from these same bond issues and loans held by Bank of America, U.S. Bank, USB and others. The emergency manager laws, both Public Act 4, that was overturned through a statewide referendum last November, and the new law, Public Act 436, allows for EMs to tear up labor contracts and vendor agreements but does not allow the debt supposedly owed to the banks to not be paid.

In other words, the EM laws provide a pseudo-legal rationale for the dictatorship of the banks over the city. Even though the people throughout the state of Michigan voted down Public Act 4, Snyder and his cohorts in Lansing re-instituted an even worse law giving it immunity from repeal by the electorate.

Nonetheless, the existence of emergency management will not result in the improvement of city services, the advent of new jobs which pay a living wage or the empowerment of the working class and the nationally oppressed. In fact it is doing just the opposite.

Just on April 16, the Detroit City Council in a majority vote of 5-2 agreed to allow Jones Day law firm, which Kevyn Orr the EM worked for until recently, to implement a contract worth at $3.2 million to ostensibly work toward the restructuring of the debt. It is quite obvious that any restructuring will not be in the interests of the people of Detroit but to further disempower and enslave the workers and oppressed in perpetual debt and dictatorship under the financial institutions.

It was revealed in the limited debates surrounding the Jones Day contract that this law firm is involved representing the same banks that hold the municipal debt for Detroit. How can they represent the people of Detroit when they are in league with their mortal enemies?

Jones Day was involved in the Chrysler bailout and bankruptcy of 2009. Although the General Motors and Chrysler restructuring are championed by the corporate media as a success, the fact of the matter is that tens of thousands of people lost their jobs during the process including production workers and car dealerships which were closed in mass.

These small and medium-sized dealerships were not only shut down but their employees such as salespersons, clerks and mechanics were also thrown out of work. Workers who remained in production were subjected to a wage freeze even in the skill trades and the establishment of a two-tier pay structure serves only to impoverish younger workers coming in who are making half of what older workers are and in addition is designed to break down class solidarity within the unions by harboring differing wage scales between new recruits and veterans.

In Detroit since the advent of David Bing and the majority 5-to-6 right wing bloc in 2009, the city has abolished over 4,000 municipal positions. Municipal workers have been subjected to 10 to 20 percent pay cuts, benefit slashing and now are facing the possibility of having their pensions seized by the EM and his backers in the financial sector.

Mind you all of this was done absent of emergency management. When we listen to the pronouncements of the majority bloc within City Council in Detroit that they are acting with the interests of the people in mind, it only exposes the self-serving actions of this clique which is far removed from the needs of the people.

City pension funds are a source of revenue that can be taken over by the EM. Approximately $5-6 billion in these funds may be the next pot of money to be robbed from the municipal employees in order for these resources to be handed over to Wall Street.

Within the context of the discussions and reports printed by the corporate media and broadcast over the radio and television there is never any questions raised about the failure of finance capital and the federal government to create jobs and small business but to do just the opposite. Today the banks are sitting on $2 trillion in cash but will not invest in job creation because it is more profitable for these entities to invest in production and services overseas where wages are lower and benefit scales are often nonexistent.

The Plight of Detroit Within a Broader National Context

What is often projected in the corporate media as well is the notion that Detroit is the only city facing such a crisis. This could never be further from the truth because cities and suburbs throughout Michigan and the U.S. are in a similar situation.

Since Detroit is a majority African American city and has a heroic history of labor and national struggles, the tendency is to make it appear as if the people themselves through their trade unions and community organizations are the cause of the suffering, blight and debt. However, one only has to drive through suburban communities and witness some of the same problems related to home foreclosures, the closing of small businesses and the evisceration of municipal and educational services.

In various cities throughout the U.S. including Stockton and San Bernardino, California, Providence, Rhode Island, Jefferson County, Alabama, Harrisburg, Pennsylvania, Suffolk County, New York and others, municipalities are facing similar problems. In Stockton, which has filed for Chapter 9 bankruptcy protection, the creditors represented by the banks and bond insurers recently attempted to declare that there was no financial crisis and that the city should pay them first and disregard the pension funds and municipal employees.

The same arguments are being made throughout the U.S. The banks are setting policy for the cities by demanding and acquiring first lien on all tax dollars that should be going toward maintaining municipal services, pensions and schools.

Some fifteen years ago Detroiters were being told that the building of casinos would generate the necessary revenue that could bring the city back from the decades of decline resulting from capital flight, population decline and the erosion of the urban infrastructure. However, the situation today is represented by the fact that the banks are claiming billions in debt from the City of Detroit and consequently the financial institutions take tax revenue from the casinos which are placed with a trustee in order to pay off obligations to these same elements of capital.

The Complicity of the Federal Government in the Destruction of the Cities

The tendency of blaming local communities for their own problems often overlooks the role of the federal government in the present crisis. In regard to housing it is clear that for the last two decades the Congress and the administration has systematically worked to eradicate low-income public housing.

Most of the public housing projects which were built for people during the 1930s, 1940s and 1950s have been razed. In Chicago the Robert Taylor Homes, the Ida B. Wells Homes and the Cabrini Green complexes have all been shut down and demolished.

In Detroit the Brewster Projects and the Jeffries have been torn down and replaced with housing that most poor and low-income people cannot afford. The promised new housing for the most marginalized sections of the working class has never materialized in the U.S.

Of course these projects were designed from the beginning for racist purposes. With the migration of African Americans from the rural areas of the South to the urban North and West, there was resistance to housing integration that was fostered heavily by the ruling class.

This policy served at least two purposes: they contained the African American and Latinos communities in confined geographic areas and at the same time it provided the political capacity to convince the white working class and middle class that they were somehow superior to the nationally oppressed groups due to the better conditions of residence and services they were allocated. This concerted division of the working class inside the U.S. created the conditions for the ultimate crushing of the trade unions and the evolution of a genuine people’s movement that could cut across racial lines.

Nonetheless, the dumping of millions of people with the major shift in housing policy in the 1990s exacerbated the homeless problem as well as fostered the decline of the cities through the forced remigration of African Americans back to the South and to working class suburbs surrounding the large urban areas. With removal of low-income housing, many people could not afford to live in the cities and as a result of this phenomenon it prompted the gentrification of the cities where the upper middle class and wealthy sectors were able to come in to re-occupy sections of the central cities.

The problem with these policies is that the capitalist system is in deep crisis. Consequently, the financial interests are not in a position to invest the necessary money to actually rebuild the cities in their own images.

We have seen the beginning of such programs in cities like Washington, D.C. and New York. Yet with the economic crash of 2007-2008, it has been stalled if not completely abandoned.

Any keen observer of the cities can see clearly that the crisis has manifested itself all over the country. The advent of the Sequester earlier this year will make matters worse since it is impacting the federal civil service and even homeland security.

It was announced just recently that some 300 people at the now-privatized Detroit Medical Center will be laid-off as a direct result of the Sequester. Other government programs such as Head Start which assist poor children are subjected to cuts as results of the massive budget cuts in Washington.

In regard to the problem of foreclosure and evictions the federal government is heavily responsible due to its failure to regulate the banks and to prosecute them for their fraudulent activities. Attorney General Eric Holder announced earlier this year that the banks were too big to prosecute. Five years ago the Congress and the ruling class were saying that the banks were too big to fail.

However, the people inside the U.S., particularly the oppressed African and Latino nations are being driven deeper into poverty. Neither political party is working as an advocate for these social elements within the population or the working and so-called middle classes as a whole.

There has been the establishment of various programs that are ostensibly designed to assist people facing foreclosure and eviction. Yet there is no real enforcement provision within these programs and consequently the banks have no obligation to participate.

During the height of the foreclosure crisis the federal government essentially “nationalized” the mortgage industry through the takeover of Fannie Mae and Freddie Mac. The tax dollars of working people made good on all the so-called “toxic loans” held by the banks.

In the fall of 2008, the Secretary of the Treasury Henry Paulson came before the Congress with a three-page double-spaced proposal requesting over $700 billion in a bailout for the banks. The popular sentiment throughout the U.S. was to reject this proposal because: why should these banks be bailed out of the crisis when it was created by them?

The proposal was eventually adopted with the indispensable support of the Democratic Party and the-then Senator Barack Obama who was on the verge of being elected to the presidency. In addition to the bailout of the banks, the Federal Reserve Bank provided trillions in liquidity to the financial institutions buying the same type of bad assets which shielded the system from collapse.

However, nothing was ever offered to the people of the U.S. The foreclosure programs were a sham and the problems of unemployment, underemployment and increasing poverty have remained over the last five years.

Today with Fannie Mae and Freddie Mac in control of most mortgages in the U.S., people are now being evicted by the federal government. These entities in many cases are far worse than the banks in regard to the efforts to prevent home seizures.

Another important point in regard to the role of the federal government in the current crisis is the failure of the administration and Congress to stimulate the economy and create jobs. There are two federal laws on the books which mandate that the government steps in to generate jobs in an economic crisis: the Full Employment Act of 1946 and the Humphrey-Hawkins Bill of 1979. Nonetheless, these laws have never been enforced by Congress or any subsequent administration including Barack Obama’s.

When Obama got in office in 2009 he immediately rushed through Congress a so-called stimulus bill. According to the prevailing wisdom at the time it was designed to create at least two million jobs and jump start the national economy.

Most of the money went right back into the same hands that were responsible for the crisis. State governments utilized the funds to address the budget deficits and very few jobs were actually created.

Detroit represents an excellent example of the failure of such policies. There was confusion from the beginning as to where the stimulus money was. The administration of Dave Bing said it was being held by the state and the state said virtually nothing.

In reality the people of Detroit remained heavily unemployed, underemployed and poor. The few repairs done on the streets and roads had no sustainability since we still have the worse roads of any city in the country.

The schools continued to close and the municipal government and education system fell deeper into debt. With the advent of emergency management, despite appeals from local Democratic Party politicians and operatives, the White House and the Justice Department have remained silent on the question of the imposition of dictatorship in Detroit, the most predominately African American municipality in the U.S.

Since Obama has been in office there has not been any program designed to improve the conditions of African Americans, Latinos and other nationally oppressed groups. These groups are suffering the worse from the economic crisis with unemployment and poverty rates that are continuing to increase.

Perhaps the most egregious aspect of the failure of the federal government to address the crisis of the cities involves the role of the Pentagon and Homeland Security budgets as a mechanism for draining resources from the working people. Inside the U.S. the Defense budget has grown by leaps and bounds over the last two decades totaling in excess of $700 billion annually.

If the Defense budget is coupled with the Homeland Security budget, these two expenditures are well over $1 trillion per year. These are resources that could be utilized to rebuild the cities and reemploy people inside the country through national development projects that would benefit the most oppressed and marginalized segments of society.

Nevertheless, any discussion of lowering the defense and homeland security budgets is attacked as being unpatriotic and threatening the well-being of people in the country. The fact of the matter is that the overall decline in living standards in America is the direct result of the policies of Wall Street, the carrying out of unnecessary and imperialist wars in Afghanistan, Iraq, Haiti, Palestine, Yemen, Libya, Syria, Somalia and Colombia has not only wasted trillions but have killed and maimed hundreds of thousands of youth in the U.S. as well as millions in these contested geo-political regions.

After the so-called end of the Cold War during the early 1990s there was discussion about a purported peace dividend. What actually happened was that new enemies were cited as a justification for further militarization and interference in the internal affairs of peoples largely within the Global South.

Moreover, after September 11, 2001, the repressive apparatus of the state broadened its domestic focus from repressing, prosecuting and imprisoning African Americans and Latinos to carrying out the same policies towards people of Middle Eastern, South Asian descent as well as Muslims in general.

This level of repression is partly designed also to justify the wars of aggression abroad. If the state can convince people inside the U.S. that there is both a domestic as well as foreign threat then draconian laws such as the USA Patriot Act, the Military Commissions Act and the National Defense Authorization Act (NDAA) can be passed and the Guantanamo Bay detention camp and its counterparts can remain open in perpetuity.

These wars of occupation and genocide must be ended for any genuine reconstruction of the cities to take place. The acceleration today of other forms of warfare involving drones and special strike forces must be seen for what they are: the continuation of a failed attempt to exert U.S. hegemony over the majority of peoples throughout the globe.

The Detroit and Municipal Crisis Within a Global Context

These problems that exist in Detroit and throughout the U.S. are not confined to this country. All over Europe the economic crisis is worsening and it is the banks that are at the root of the decline.

The situations in Greece, Spain, Portugal and other European states perhaps mirror what will be taking place here in a very short period of time. In these Southern European states, official unemployment figures are well above 25 percent and the increase in poverty is staggering.

Even in supposedly more developed nations in Europe such as France, Britain, Germany and Belgium, conditions are worsening for working people, youth and the senior citizens. The recent bank panic in Cyprus is a reflection of the failure of the so-called bailout in Europe as well.

The European Central Bank is working like the Federal Reserve and the national government in the U.S. to make sure that the banks get paid whatever these institutions claims is owed to them by the people. In Spain the constitution of the country was changed to guarantee payment to the banks.

Africa continues to be a source of mineral wealth and cheap labor for the imperialists. The formation of the U.S. Africa Command (AFRICOM) in 2008 has accelerated military intervention on the continent.

Part of what is driving the intervention into Africa even under the Obama administration is the efforts to block the People’s Republic of China from developing greater partnerships with the African states. The Forum on China and Africa Cooperation (FOCAC) has been existence since 2000 holding five summits in both China and Africa. China is now the largest trading partner for the African continent.

The Obama administration announced in December that it was deploying some 3,500 troops to nearly three dozen states in Africa. The U.S. has set up drone and Central Intelligence Agency (CIA) stations in several African countries.

In Libya during 2011, the U.S. led a war of regime change that resulted in the deaths of 50,000-100,000 people, the displacement of two million, and the theft of over $160 billion in national wealth. Today Libya is in chaos and this confusion and destabilization has spread to Mali where France is currently involved in another war under the guise of fighting terrorism.

These U.S. and NATO wars will continue unless there is a mass movement in the U.S. and Europe that works with the peoples of Africa to put a stop to these senseless interventions. There should be genuine partnerships developed with Africa which benefits both the peoples of the U.S. and those of the continent.

There is a world economic crisis that is worsening and it up to the current generation to not only analyze it but to organize and mobilize for its reversal. A world system based upon the needs of the people is the only real solution to the current decline.

Challenges for the Emerging Black Studies Scholars

The economic and social crises in the U.S. and the world today must be the principal focus of the Emerging Black Studies Scholars. It is up to the current generation to not only analyze these problems but to come up with solutions through engagement with the masses.

In the current period the very existence of human society is at stake. Wars and threats of war remain too real to contemplate with the proliferation of nuclear armaments and repressive governmental systems that are designed to maintain the global status-quo.

Dr. W.E.B. Du Bois, the great legendary scholar and activist who lived nearly century of a life of intellectual inquiry and political struggle wrote in 1952 that “Our present economic problem stems from the fact that while production is increasingly a social process, the distribution of its results still remains largely a matter of the individual judgment of persons who happen to have the power or who seize the power to decide, and on the basis of concepts of property and income which no longer correspond to fact.” (In Battle for Peace, p. 169)

Du Bois went on to note that “The paradox which consequently upsets the labor world is that despite the indispensable co-operation of laborers, managers and capitalists, inventors and thinkers in current industry, when the results and increasingly valuable results are distributed, most of the laborers get less than is necessary for decent life, while many of the capitalists get more than is necessary for decent life, while many of the capitalists get the power to direct the use of the residue for any purpose which they choose.”

This fact of the world economic system is even more of a truth today than it was 60 years ago. The futures of the world peoples including those of the U.S. are definitely at stake with the burgeoning conflict between the ruling classes and the overwhelming majority of people on the planet.

The questions remains: will we survive and prosper or be further driven down by the one percent? The ruling class interests have nothing to offer the working people and nationally oppressed other increased exploitation, degradation and poverty.

Consequently we have no other choice than to join the forces for progress and a peaceful future without hesitation. As intellectuals we have an added commitment to work towards the genuine liberation of our people and humanity in general.

We must utilize our skills for the benefit of society. We must join existing movements for change and create new ones that address the pressing and burning issues of our times.

In actuality there is no real alternative. What we are seeing today is the decline of an economic system that has outlived its usefulness for the world and even its own social class.

This is why the ruling class today offers no solutions to national and world problems. There are no plans to end poverty, to create full-employment, to educate all babies being born and their adult counterparts, to end war, racism and national oppression.

All we need to do is to read the editorials of the leading corporate newspapers, journals and websites. All of their rhetoric and propaganda is self-serving and limited to the securing of the world’s resources and labor for the benefit of the ever-shrinking elite which lacks foresight and courage.

It is up to us to articulate a future for human society. It is our task to show the way for the eradication of social evils and the building of a world where our children and grandchildren will be proud to live in and have a positive outlook for the future.

Abayomi Azikiwe Editor, Pan-African News Wire