Australia’s car industry is leaving the party. Ford has said its goodbyes, Holden hasn’t announced it as such but it has put on its jacket and is looking for its keys.

For the Australian economy it’s barely a blip. But in certain parts of the country, it will be felt keenly.

On Thursday night I heard George Galster speak. He is a fifth generation Detroiter and a professor of urban planning at a university inside the blighted core of Detroit. In the week in which the city of Detroit was made formally bankrupt, his message was amazing.

A “mortropolis,” is what Galster calls Detroit. There’s outer suburbs, overwhelmingly occupied by white people, around an “inner city” occupied by black people. The latter is the official “City of Detroit” with its tumbling revenue base.

But the inner city is not what I expected.

Detroit, 233 Touraine Rd.
Click here for Street view of Grosse Pointe

Detroit’s fanciest suburb, Grosse Pointe (above), actually has higher urban density and is less leafy than much of the abandoned inner city:

Detroit 5511 Ellery St
Click here for Street View of the core

The abandonment is on a scale I never imagined. On some streets 10 per cent of the original houses remain. I’m thought an abandoned city would mean lots of boarded up houses. They exist but the decline has lasted so long many streets are mainly vacant lot.

I strongly recommend visiting Detroit to see what it’s like, if only on Google Street View. I note Street View visited in the midst of a lush spring or summer. I suspect Detroit in winter, under several feet of snow, would look and feel very different.

The effect of the hollowing out of inner Detroit is a lack of density. It means insufficient services (shops, streelights, footpaths, frequent public transport). According to USA today, “its citizens wait on average more than 58 minutes for the police to respond to their calls, compared to a national average of 11 minutes.”

Former Packard Car plant

But as fewer and fewer people live in the centre, it also becomes an issue for fewer and fewer people, and political pressure falls. Detroit’s population has shrunk by 26 per cent since 2000.

A section of inner Detroit, near Wayne State university, is gentrifying. There’s a contemporary art museum, MOCAD, surrounded by a few new looking apartments and some coffee shops.

Someone is marketing a four storey, ten bedroom mansion there for $2.5 million. Ten minutes drive away you can buy this two storey house for a dollar. The blighted area is many times larger than the few blocks of gentrification.

Back to Australia. I do not for a moment suggest Adelaide will end up anything like Detroit. I proffer the example to suggest economists are due a bit of reflection.

“Markets will adjust,” goes the mantra. And there’s evidence they do. The former Mitsubishi plant near Adelaide now hosts a high-tech business. I believe in the long-run, Australia is best served by not paying money to special interests.

Made in Adelaide
Made in Adelaide

But the Latrobe Valley in Victoria shows that markets don’t adjust fast enough to prevent human suffering.

When the state-owned electricity companies were sold, unemployment in Victoria’s east shot up.  It still suffers lower employment, lower average earnings, and lower levels of education than the rest of the state (PDF in link). IN 2011, 35 per cent of the state seat of Morwell was in the bottom decile for access to economic resources, according to the ABS.

An official state government report found Holden employed 2700 people in Adelaide directly and 5,600 including suppliers. Adelaide is not a one-company town – its wounds will heal. But suburbs north of Adelaide, around Holden in Elizabeth, will need extra help to prevent civic decline that would worsen the plight of freshly unemployed residents.

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Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.