If nothing else, Detroit's bankruptcy marks the symbolic closure of an era when heavy industry dominated the American economy and, through its factories, the United States dominated the world.
We think of our time as a period of wrenching change, but it's not in the same league with the tumultuous transformations of the late 19th and early 20th centuries. In these turbulent decades, the country went from a predominantly rural society of farmers and small businesses to an urban nation of massive enterprises and crowded cities.
In 1870, three-quarters of the population was rural; by 1910, that was barely half. In 1870, there were no cities with more than 1 million people and only two with more than 500,000. By 1910, there were three with more than a million and five with between 500,000 and 1 million.
The rush to industrialize catapulted Chicago, Cleveland, Buffalo, Pittsburgh and St. Louis into major economic centers, as the nation became dotted with steel mills and industrial plants. Detroit was a relative latecomer, emerging as the car-making hub between 1900 and 1930. Its population exploded from 286,000 to almost 1.6 million.
The great irony of Detroit's bankruptcy is that it seems to suggest the obsolescence of central cities when just the opposite is true. As economist Edward Glaeser of Harvard notes, many cities have undergone a renaissance: Boston, New York, Philadelphia, Seattle, San Francisco and others. All have stubborn concentrations of poverty, but many have benefited from gentrification and stronger job markets. High energy costs, a backlash against commuting, lower crime and cities' vibrancy have renewed their appeal.
In the countless Detroit post-mortems, many potential villains have emerged: the ineffectiveness of Coleman Young, mayor from 1974 to 1994; white flight (from 1970 to 2008, the white portion of the city's population fell from 56 percent to 11 percent); and costly government workers' pensions. But at bottom, Detroit's failure resulted from its success. It became a prisoner of its dependence on the auto industry.
In the 1950s and '60s, most Americans - not just people in Michigan - took the dominance of the Big Three for granted. General Motors, Ford and Chrysler commanded about 90 percent of the vehicle market. Who could challenge them? The result was a plausible and self-serving business model: high wages, generous fringe benefits and job security.
But high costs, shoddy quality and mediocre management made the companies vulnerable to foreign competition from imports and non-unionized plants, generally in the South.
Employment eroded. Worse, the auto industry's model shaped the state's labor market and policies. By 1978, average hourly earnings in Michigan were 32 percent higher than the national average. Michigan had an anti-business reputation.
Can Detroit reinvent itself? It's now caught in a vicious cycle. Dismal city services deter growth. The crime rate is five times the national average. In 2011, Detroit had 344 murders; Cleveland had only 74; Pittsburgh, 44. But the city can't raise already-high taxes without also threatening growth. By reducing debt and pension payments - though hurting creditors and retirees - bankruptcy might break this cycle.
But there's no quick fix. What Detroit teaches is that those who deny economic change often become its victims.