Detroit has gone bankrupt

Article Date: 20 July 2013


Detroit has gone bankrupt, but it’s not the first place to do so..

From the US city of Cleveland, Ohio to the Canadian province of Newfoundland, plenty of areas have gone bust before.

Detroit has filed for bankruptcy. For the city that was once the centre of the planet’s automobile industry and that gave us Motown and techno, it is the sad conclusion of a long decline. But it is not the end. Cities with 700,000 people living in them can’t just be sold or abandoned, and many places around the world have been bankrupt before. Below are just a few examples:

Cleveland, Ohio

Following flamboyant mismanagement of its public finances, in 1978 Cleveland became the first city in America to go bust since the Great Depression, earning it the nickname “The Mistake on the Lake”. Since then, the Rock and Roll Hall of Fame and a new stadium for the Cleveland Browns American football team have been built. Although the population continues to fall, it is beginning to rebrand itself as “Comeback City”.

Akaike, Japan

In February 1992, 3.17bn yen in debt, Akaike became the first municipality in Japan to be declared bankrupt. A coalmining centre on the country’s southern tip, it could not survive the gradual transition to oil and was finished off by the financial crash. A decade later, however, it was declared solvent again, following a period of central-government restructuring which raised taxes and cut wages and investment. Now the town has merged with several others to be reborn as Fukuchi, a small tourist centre noted for its mountain and its pottery.


A big southern Italian city with a long history of shipping and steelmaking, Taranto was nevertheless declared bankrupt in 2006 with debts of €637m. Its mayor, Rossanna Di Bello, was sent to jail. The city has also been called the most polluted place in western Europe, owing to the emissions from its factories, which continues to damage its reputation and threaten the jobs that remain.


When, in 1933, this Canadian province became crippled by war debts and the Great Depression, it found a solution that is probably not available to Detroit. It chose, effectively, to become a British colony again. The preferred term was “Commission Government”, which meant that Britain took on responsibility for Newfoundland’s debts, while a panel of British governors ran the place as they saw fit. Following a referendum, it became a Canadian province again in 1949.

Jefferson County

This region of Alabama, which includes the city of Birmingham, was the largest local government municipality to become bankrupt before Detroit. That was only a year and a half ago, in December 2011, when the financial crisis brought an end to the county’s struggle with $4bn worth of debts from corrupt deals to finance its sewers. At this stage, Jefferson’s experience looks encouraging. It seems likely to agree a deal to repay its creditors a portion of what they’re owed and exit bankruptcy before the end of the year.

  • Detroit
  • United States
  • Michigan
  • US economy
  • Economics
  • US economic growth and recession
  • Bankruptcy and IVAs
Leo Benedictus
Source: Government Online

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