DETROIT

What do you do if the population of the area you are supposed to run falls from 1.8 million to a mere 700,000 over a period of roughly 50 years, the fate that has befallen Detroit since the 1950's. In the Middle Ages, a king would presumably round up the remaining serfs and hike off to war in the neighbouring territory, aiming to kill the men and bring back the women and children as the basis for new population growth. Since such tactics are frowned upon in the 21st century, American mayors have to come up with something else. In Detroit's case, that was bankruptcy, the biggest municipal default in U.S. history.

Detroit made its name as a magnet for people wanting to work in the booming car industry. In the 1950's the big three of G.M., Ford and Chrysler made nearly all of the cars sold in the U.S., and a fair proportion in the rest of the world as well. In the mobile, post-war world, many of those workers were blacks getting out of the segregated southern states. They in turn formed the cultural base for Detroit's other great claim to fame, the Motown record label and associated music.

50 years later, the car industry has declined drastically, a general problem for Detroit that has been exacerbated by two specific ones. First, as incomes rose, families upped sticks and moved to the suburbs; today, only 30% of the jobs within the city are held by residents. Since most American cities' primary source of revenue is property taxes, this shifted income away from Detroit to the counties surrounding it. The second was chronic mismanagement in City Hall. Instead of adjusting services to the revenues coming in, politicians of all stripes went on gaily promising benefits to all, while doing nothing to prevent suburban flight. Detroit's debt today is estimated to be more than US$18 billion, or US$27,000 for every single resident. Roughly half of that figure represents the unfunded pension liabilities of municipal employees.

The state of Michigan has now stepped in and appointed an emergency manager. His job will be to cut a deal with creditors that a judge will accept. Assets will inevitably be sold, including the city's fine art collection. Lots of people will lose money or entitlements or both. But only then will there be a chance that Detroit can start to get back on its feet.

Detroit is admittedly an extreme case. But it does provide a very real confirmation that bad management (whether of businesses, countries, charities or any other organisation) does lead to bad results.

Walter Blotscher