Is Michigan in economic trouble again? A quarter-century ago, it was one of the states hardest hit by the recession of the early 1980s, and seemed headed for disaster. But in the 1990s Michigan's economy rebounded. For most of a decade it led the nation in the number of new factories and factory expansions, and the quality of Michigan products was vastly better than a generation before. It was one of America's premier laboratories of innovation, busy expanding high-skill manufacturing while rethinking and downsizing government programs, just as it was once busy inventing the mass-production factory economy and then developing the giant industrial labor union and its version of the American welfare state. It was a manufacturing state that has transformed itself in line with the nation's movement from an industrial to a post-industrial economy, from domination by big units--big business, big labor, big government--to growth increasingly driven by small units--small businesses, individual workers, flexible government. Now that achievement suddenly seems threatened. From 1993 up through October 2000, Michigan's unemployment rate was lower than the nation's in almost every month. Then, with the national recession, unemployment shot up above the national average, as might be expected in a manufacturing state. But the national recovery that took hold in 2003 did not seem to take hold in Michigan. Unemployment averaged 5.3% in 2001 and 6.2% in 2002, about 0.5% above the national average--not alarming for a recessionary period. But Michigan's unemployment was 7.3% in 2003 and 6.8% in 2004--about 1.3% above the national average; Michigan was the only state to lose jobs in 2004. In December 2004 Michigan unemployment spiked to 7.3%, 1.9% above the national average and the third-highest in the nation--perhaps just a blip, but not a good sign. To explain this, the natural tendency is to fall back to looking at the problems of the Big Three auto companies. But Michigan's achievement in the 1990s seemed to be moving beyond dependence on just three big firms, toward a more diversified and dispersed economy. It would be unfortunate if that achievement proves ephemeral.
Michigan's roots go back to the Tocquevillian decade of the 1830s, when Alexis de Tocqueville visited Michigan and when it achieved statehood. These two peninsulas, explored and named by French explorers (which explains why Mackinac is pronounced with a silent final c and Michigan with a ch pronounced like sh), were settled in a rush by Yankee migrants from Upstate New York, who cut down trees and built farms and neat New Englandish towns complete with schools and colleges. Politically, Michigan was full of reformers who hated slavery, manned the Underground Railroad, promoted temperance and in 1855 gave Michigan a constitution that banned (as it does to this day) capital punishment. Michigan was one of the birthplaces of the Republican Party, which was founded in Jackson in 1854 (Ripon, Wisconsin, also stakes a claim as the party's birthplace) and swept the state in the elections later that year. Until 1929, Michigan was one of the most Republican states in the nation.
Michigan also developed an industrial economy. Its Lower Peninsula was mostly covered with trees, and lumber was the first boom industry on which Michigan overrelied; forests were clear-cut or swept by blazes like the 1881 fire that burned out half the Thumb. In the late 1800s, huge copper deposits were discovered on the Keweenaw Peninsula, which juts from the Upper Peninsula into icy Lake Superior; immigrants from Italy and Finland, Cornwall and Croatia came to work in the mines. Then came the auto industry. A combination of accident and shrewdness, of bankers willing to finance auto startups and the prickly genius of Henry Ford, ensured that America's fastest-growing industry for the first 30 years of the 20th century was centered in Michigan. Detroit became a boomtown--the nation's fastest-growing metropolitan area after Los Angeles--zooming from 426,000 in 1900 to 2.2 million in 1930 (it was 4.2 million in 2000). The auto industry drew labor from the Outstate Michigan, from southern Ontario and from the farms of Ohio and Indiana. During World War II and after, it brought whites from the Kentucky and Tennessee mountains and blacks from Alabama and Mississippi. It attracted Poles and Italians, Hungarians and Belgians, Greeks and Jews. This influx of a polyglot proletariat eventually changed Michigan's politics. The catalyst was the Great Depression of the 1930s and the company managers' desire to use machines efficiently, treating employees as extensions of machines and with great distrust. The results were the 1937 sit-down strikes organized by the new United Auto Workers (UAW); management and labor fought, sometimes literally, for pieces of what both sides feared was a shrinking pie. The UAW won and organized most of the companies after Democratic Governor Frank Murphy refused to send in troops to break the illegal strikes. In the years that followed, autoworkers became a heavily Democratic voting bloc.
Michigan politics became a kind of class warfare, conducted with a bitterness that split families and neighbors. The union mostly won, because demographics benefited the Democrats: autoworkers and post-1900 immigrants produced more children than did Outstate Yankees or management. After Walter Reuther's election as UAW president in 1947, voters elected young, liberal G. Mennen Williams governor in 1948. By 1954, the Democrats, closely tied to the UAW, seemed to have become the natural majority in the state. As growth continued, economic issues became less bitter; by the early 1960s, the class-warfare atmosphere had dissipated. A Republican former auto executive, George Romney, was narrowly elected governor in 1962, and Henry Ford II joined Reuther in backing Lyndon B. Johnson in 1964. Romney and his successor, William Milliken, accepted the welfare-state policies endorsed by the UAW leadership and the Democrats. The state government was one of the nation's most generous, and not just to the poor and the unemployed: it supported one of the nation's most distinguished and extensive higher education systems, built state parks and recreation areas, and pioneered efforts to end racial discrimination.
This system, which had seemed eternal, came crashing down with the collapse of the domestic auto industry after the oil shock of 1973. Union-management relations had been static since 1941, and there had been no major technological changes in American autos since the automatic transmission in 1940. Michigan incomes had grown as Americans grew more affluent; the one-car household became the two-car household, and consumers enjoyed the tail fins and chrome of new car styling. But in 1979, this big-unit economy went bust. It became startlingly clear that the Big Three automakers and the UAW did not have a captive market, Americans did not have to buy a new full-sized American-made car every two or three years, and foreign competitors were producing better and cheaper cars that were more responsive to changes in gas prices and consumer preference. Big business and labor, so well adapted for growth in the quarter century after World War II, proved poorly adapted for the quarter century that followed. Auto employment in Michigan fell from 437,000 in October 1978 to 289,000 in October 1982. Chrysler nearly went bankrupt, Ford was in financial distress, and General Motors posted its first losses in years.
The collapse of the big-unit economy after 1979 forced the state to experiment. The first to try was Governor James Blanchard, a Democrat elected in 1982 with a record of supporting big units. His major achievement in eight years in Congress was managing the Chrysler bailout in the House. Blanchard worked to build a small-unit economy; he was proud of his efforts to stimulate high-skill, capital-intensive, flexible manufacturing, and he used $750 million of state pension funds as venture capital for manufacturers of items from tape drives for microcomputers to fiberglass coffins. Dodging his traditional labor allies, Blanchard made it clear that Michigan must learn how to nurture growth and that workers, instead of seeking more vacation and earlier retirement, would have to hustle and work harder than ever before.
The second experiment came from John Engler, the Republican who beat Blanchard in 1990 and was resoundingly re-elected in 1994 and 1998. Engler believed in less government activism and industrial policy; he cut or held the line on every state program but education. In three terms he cut taxes more than 30 times; welfare rolls were cut by more than two-thirds. Engler pressed for public school choice and charter schools, changing state pensions from defined benefits (which produce huge liabilities for the state and a sense of entitlement in employees) to defined contributions (which reduce the state's future expenses and empower employees to act as investors). Throughout the second half of the 1990s, the economy boomed. The auto industry, once an employer of thousands of low-skill workers, became high-tech; the number of unionized auto workers fell to 250,000 in 2000, but jobs required much higher skills and auto workers' earnings averaged $60,000. With the auto companies requiring high standards and speedy turnaround from subcontractors, Michigan became the home of almost all the nation's auto parts engineering centers and of much of the nation's large-scale manufacturing experts. Michigan's population rose 7% in the 1990s after staying even in the 1980s; median household incomes rose 5% after inflation. Large parts of the state--the western and northern suburbs of Detroit, greater Grand Rapids, the northwest corner of the Upper Peninsula--were unmistakably booming. But there was one notable exception: the city of Detroit. Detroit's population fell to 951,000 in 2000, almost exactly half its 1,849,000 in 1950. Starting with the riot of 1967, crime rates in Detroit were enormously high for 25 years, and much of the city simply vanished--houses abandoned or burned down, commercial frontage with nearly 100% vacancy rates, the downtown a beleaguered fortress surrounded by blasted-out square miles. Detroit rebounded in the 1990s and after: crime and welfare rolls were down, new stadiums and a gambling casino were built downtown and old theaters refurbished.
The election results show how Michigan politics has changed. From the 1930s through the 1980s, politics divided Michigan between labor and management, and between the Detroit metro area and Outstate. In 1960, John Kennedy carried three-county metro Detroit 62%-38% and Richard Nixon carried Outstate 60%-39%, for a 51%-49% Kennedy victory. In 2004 John Kerry carried the three-county metro area 56%-43% while George W. Bush carried the rest of the state, which now casts 61% of the vote, by only 52%-47%, for a 51%-48% Kerry victory. Kerry's lead in the metro area came almost entirely from the city of Detroit, which cast only 7% of the state's votes but voted 94% for Kerry. In the industrial Michigan of 1960, economic status--and more specifically, union membership or non-membership--tended to drive party preference. In the post-industrial Michigan of 2004, economics played some role, but more often cultural attitudes drove voting behavior. Kerry carried affluent Oakland County, where many upscale voters moved toward the Democrats in the 1990s on cultural issues. Bush carried Macomb County, historically more blue collar and Democratic, though pretty affluent now, which in the 1970s and 1980s trended away from Democrats on cultural issues. The Grand Rapids area, with its large Dutch-American population and many Christian conservatives, voted heavily Republican. The industrial Flint, Saginaw and Bay City areas, where unions remain relatively strong, voted heavily Democratic, as did the areas around Lansing, the state capital, and Ann Arbor, home of the University of Michigan. The Upper Peninsula, historically Democratic, voted for Bush. In Detroit and heavily Democratic areas, turnout in 2004 increased relatively little over 2000; it increased most in the suburban ring around Detroit, but not enough for Bush to overtake Kerry. Overall the state is closely divided. If Democrats at the top of the ticket carried Michigan in 2000, 2002 and 2004, Republicans have retained majorities in the state legislature and, with help from a Republican districting plan, in the U.S. House delegation. Michigan remains one of the nation's prime political battlegrounds.