Introduction
The largest in state history is the bankruptcy of Detroit, which was forced to declare the need for protection from creditors on July 18, 2013. At that time, the municipality’s debt was estimated at $18 billion. The bankruptcy was preceded by a long decline of what was once one of the most successful American cities. The rise and fall of Detroit are considered to be the rise and fall of the US auto industry. However, protracted racial conflict and errors in urban policy also led to the city’s collapse.
The rapid development of the automobile industry forced out most other sectors, and the municipal economy became highly specialized. The anti-crisis plan, which included cutting pension payments, writing off part of the value of bonds, and even selling off the local museum’s art collection, reduced the region’s debts. Globalization plays a significant role in the city’s development after its bankruptcy because trade and popularization will help the city rise.
The Effects of Globalization
The first positive effect of globalization can be considered the North American Free Trade Agreement, or NAFTA. NAFTA had a positive impact not only on the economy of Detroit but also on the economy of the whole country until July 1, 2020. Thus, the main positive feature of the United States from the creation of NAFTA was the possibility of expanding exports and creating new jobs, with a decrease in production costs from exporting labor-intensive and capital-intensive industries to Mexico. Thus, Mexico increased foreign investment in the US, which undoubtedly positively impacted Detroit, the most industrial city in the US.
The Implementation of USMCA Instead of NAFTA
As mentioned, NAFTA lasted until July 1, 2020, when USMCA replaced it. The most changes implemented by the agreement are in the auto industry, which is directly connected with the economics of Detroit. From 2020, all vehicles must be constructed with 75% of parts made in the US, Mexico, or Canada to avoid being subject to tariffs (Villarreal & Fergusson, 2020). Most vehicles produced in North America must be built by workers who earn at least $16 an hour. By concluding this agreement, the United States consolidated its economic periphery for years, tying neighboring Canada and Mexico closer to itself and strengthening the North American integration bloc.
Globalization’s Drawback
In addition to the advantages of globalization, there are also disadvantages. It is worth going back a little and remembering that globalization became one of the reasons for the onset of the crisis and the subsequent bankruptcy of Detroit. Auto industry globalization, which stimulated the departure of businesses and residents from the city of Detroit’s fiscal situation, was generated by a complex interplay of factors, including institutional racism and auto industry globalization, which stimulated the departure of businesses and residents from the city (Presbey, 2019). Such ambiguity of globalization can be scary and make one think that history will repeat itself. But nowadays, the city’s economic situation is being monitored, and the US government will not allow a repeat of the events of ten years ago.
Conclusion
Globalization helps the city to recover and grow after bankruptcy and realize its full potential. Summarizing the above, one can conclude that globalization, while having many positive aspects, with insufficient supervision, can lead to disaster. This tremendous force can lift a city or an entire state or lead to a situation similar to Detroit in 2013. In any case, the current positive impact of globalization on the city is beyond discussion.
References
Presbey, G. M. (2019). Globalization and the Crisis in Detroit. Perspectives on Global Development and Technology, 14(1-2), 261-277. Web.
Villarreal, A. M., & Fergusson, I. F. (2020). NAFTA and the United States-Mexico-Canada Agreement (USMCA). Congressional Research Service Report. Web.