Detroit test drive by Shea Howell

Thinking for Ourselves

By Shea Howell

Detroit test drive

October 28, 2014


shea fbAlmost every media account of the Detroit bankruptcy process begins with the word “historic. As we enter the final stages, we are also told that the process has been surprisingly quick and smooth. The Detroit News called it “fast paced” and reported on how pleased Kevyn Orr and Jones Day are with their ability to defy the predictions that this would be “drawn-out battles that could have stretched for years.”

The media rarely talks about what historic means. One way to answer that question is to look to the past. Municipal bankruptcy used to be rare, with less than 500 in the entire history of the country. There is little precedent to guide judges as they approach complicated issues of rights, responsibilities, and conflicting jurisdictions.

But if we look to the past, we will miss the very real future that is unfolding not only for Detroit, but for the rest of the world.

Across the globe, in the halls of corporate power and financial manipulation, the Detroit case is being considered as important example of the kind of legal frameworks needed to force deep austerity plans on people in the name of restructuring debt. Key to those legal frameworks is the elimination of public, democratic decision making.

The single all powerful authority for our bankruptcy, Kevyn Orr, will not be in the city during these last days of bankruptcy. He is moving on. He will be in Modena, Italy speaking at a Global Restructuring Conference. Early reports bill his speech as one that shares the Detroit success. Describing Orr as the man  “tapped to lead Detroit through its massive Chapter 9 bankruptcy,” conference organizers explain the importance of Detroit. They say, “While Detroit is not a sovereign, its largely consensual reorganization stands as evidence that politically charged government workouts can be achieved if procedures exist to foster a negotiation.”

Those of us in Detroit know how hard we have fought against those “procedures.” In fact the entire state voted against the “procedures” designed to impose emergency managers, only to have Governor Snyder and his legislature pervert the will of the people.

Now we are facing the consequences of a city given away to corporate interests. And we are seeing a new industry being born by those who will profit from this municipal rape.

Jones Day and company are likely to walk away from this 18 month experience with $100 million in their pockets. Another way to think of this is Jones Day earned in less than two years more than what it would cost the city to maintain Belle Isle for 20.

Meanwhile, their New York offices are hosting conferences on how to handle bankruptcy in Puerto Rico. Leveraging their Detroit experience, Jones Day is aggressively pursuing the bankruptcy business.

And this business is evolving in ways that threaten the basic values of civil society. The Global Restructuring Organization, hosting Mr. Orr, is not some academic organization thinking about legal theories. It aims to become a new global authority, much like the World Bank, to oversee the international processes for the restructuring of sovereign debt.

Judge Cecilia Morris, the chief judge of the U.S. Bankruptcy Court for the Southern District of New York and one of the group’s founders, said in an interview with Reuters said that we need a formal system to deal with sovereign debt. “When a sovereign is in stress, the options are to do nothing and see how it plays out, which sounds horrible, or do what Argentina did, to try to restructure with no judicial umbrella,” said Morris.  The Global Restructuring Organization (GRO) wants to provide that “umbrella.”  The values they intend this emerging global authority to reflect are embodied in the comparison they invoked.  Its organizers hope will become the “Davos of restructuring,” Morris said.

We who have resisted this process since the beginning have an enormous responsibility to make clear that Detroit Restructuring has been accomplished by cruel and unjust violations of human rights, from the shutting off of basic necessities to the shutting off of democracy. No one should think the closing of this bankruptcy is the end of the fight for a more democratic, compassionate future.