Detroit’s Bankruptcy – Robocop Comes of Age

I talk a lot about the unpredictability of the economic future – and especially the unpredictability of the prices of financial assets. But somehow the extraordinarily prescient writers of the movie series Robocop knew that Detroit’s bankruptcy was coming.

26 years ago, Robocop hit the theaters. The movie was about a police officer who had been declared legally dead and made into a cybornetic “crime prevention unit” by a private company. He wasn’t legally considered an officer after becoming Robocop, he was considered a piece of “equipment,” like any other machine or computer. It was all part of a larger scheme for this private company to eventually take over the city of Detroit, which looked as though it was slipping into bankruptcy. The plot is actually quite interesting, with themes that touch on capitalism, technology, privatization, corporate governance, public services and unions. Much better done than most mindless action movies.

Apparently to some movie writers during the 1980s, Detroit’s financial trajectory was clear.

Failure must be an option

I see Detroit’s bankruptcy as a positive. If the writers of Robocop saw this coming in the mid 1980s, then it has been brewing for a long time. Something in that city eventually needed to change, and perhaps this bankruptcy will finally provide the impetus for real change – not just sweeping problems under the rug and kicking the can down the road.

What would be worse than a bankruptcy in a city like Detroit? Well, for starters….a bailout of a city like Detroit. In my book, bailouts are a lot scarier than bankruptcies. And I am somewhat amazed and encouraged by the fact that there doesn’t seem to be a bailout proposal coming out of Washington.

Bankruptcy is a necessary part of the financial system and of capitalism. If you believe in capitalism, you have to believe in bankruptcies. My opinion is that there haven’t been enough bankruptcies over the past 5 years, especially with regards to Europe. Hopefully Detroit will shake out to provide some sort of positive example for other public entities (like Greece) to follow. Granted, Greece is a very different story with the currency issue, but something needs to change there.

Photo by Kelly Bailey