Save the industry, save the city

A comparative analysis of Detroit and Tolyatti.- The Russian word “monogorod” (pl. monogoroda) refers to cities whose economy relies on the competitiveness of a single company or factory. Yet monogoroda, also known in English as monotowns, are not strictly a Russian phenomenon. Namely, monotowns can be found in the U.S. and in Canada. The aim of this study is to underline the similarities between Russian monogorod Tolyatti, in Samara Oblast (Volga region), and American single-industry town Detroit from a socioeconomic perspective.

Anglais

Tolyatti and Detroit are both dependent on the automotive industry and this overreliance has had a dreadful impact of the living conditions of local residents.

Hero to Zero

Tolyatti and Detroit have fallen from grace shortly after reaching the status of Motor city superstars. Oil and financial crunches as well as the lack of economic diversification are components of their steep fall from prosperity to misery.  Today, Tolyatti and Detroit are still running an obstacle race on the motor track of foreign competition.

Tolyatti

During the Soviet era, hundreds of monogoroda were created in the U.S.S.R. Now that the Soviet planned economy has collapsed, single-industry towns are plagued by instability and insecurity. To this day, they struggle to adapt to liberal market dynamics and to the Russian post-socialist economic system. It is a known fact that their production costs are very high due to outdated technology and poor infrastructure. Moreover, major economic and social problems arise in Russian single-industry towns as they are particularly susceptible to market fluctuations. Currently, there are 333 monogoroda in Russia.

Tolyatti was built by the Soviet youth organization (Komsomol) on the banks of the Volga River around AvtoVAZ in the 1960s. The new town bears the name of the Italian Communist Party leader Palmiro Togliatti. AvtoVAZ, whose trade name is Lada, was established in collaboration with Fiat. The Russian automobile manufacturer is the largest company in the automotive industry of Eastern Europe and Russia. Today, AvtoVAZ is part of the Renault-Nissan Alliance, which is why Western models have flooded the Russian market. Yet Lada has maintained its dominant market share.

Tolyatti is a young city, historically and population-wise. It is one of the most populous cities in Russia: its population increased from 12,000 to more than 700,000 inhabitants in only 60 years. Today, Tolyatti has a population of 719,544 people and is the largest Russian city amongst those which are not the administrative center of a federal subject.

Detroit

In the late 19th century, many single-industry towns appeared in the United States, primarily in the industrial areas of the Midwest. Detroit is perhaps the best known. Economic decline and social chasm have indeed earned the city the most tragic side of fame.

Detroit, also known as “Motor City” or “Motown”, was surfing a wave of prosperity after World War I, driven by the rise of the auto industry. In the 1950s, people moved to Detroit to work for the Big Three auto companies: Ford, General Motors and Chrysler. Detroit’s automobile industry played a chief role in the American “Arsenal of Democracy” supporting the Allied powers during World War II. Accordingly, many ships of the United States Navy were named after Detroit. At the time, the American “Motor City” was “home to the most innovative, cutting-edge dominant industry in the world.” Detroit reached its population peak in the 1950s, approximately 1, 85 million of inhabitants.  The migration of African Americans into the city was a catalyst of further economic development. However, segregation soon rippled into Detroit. Ruthless racial incidents arose between 1945 and 1965, without mentioning Detroit’s violent riots in 1967. Soon thereafter came foreign competition together with Detroit’s steady decline. When the car business started staggering, Detroit witnessed a massive exodus of white residents. As such, according to a 2013 report from the U.S. Federal Reserve Bank of Cleveland, “the city's population dropped by more than 40 percent between 1970 and 2006.” Alarmingly, from 2000 to 2010 alone, Detroit lost a quarter-million residents.

Notwithstanding Detroit’s population decline, the American “Motown” is the fourth largest city in the United States. It has the greatest number of inhabitants in the U.S. state of Michigan and is the largest city on the border between the United States and Canada. Today, Detroit has a population of 713,777 people and is disproportionally black (83 percent).

Overreliance on a single industry

Tolyatti’s and Detroit’s overreliance on the auto industry is striking. In recent years, the impact of replacing assembly-line jobs with machinery has caused the loss of tens of thousands of jobs in both cities. From a socioeconomic perspective, the consequences of such a process are disastrous.

Tolyatti

The Russian automaker “is everything for Tolyatti. The city's well-being depends on the well-being of AvtoVAZ”. In Tolyatti, one out of every seven residents works for AvtoVAZ. However, the Russian company is in great need of reform. Manufacturing analyst Sevastyan Kozitsyn of the BrokerCreditService investment firm noted that AvtoVAZ models cannot compete as “most of them were designed in the period between the 1960s and the 1980s. In the last century.” Not surprisingly, the global financial crisis had a dreadful impact on the industrial complex of the city of Tolyatti in 2009. By the end of 2009, the overall debt of AvtoVAZ was estimated at 80 billion rubles. The automaker’s profitability was also impacted negatively by gas prices ticking higher in 2010.  Further, Russian car sales dropped heavily in 2013 due to the ongoing crisis. As one can logically expect, the social costs of the automaker’s lack of competiveness are huge: thousands of workers have been fired, some approaching retirement age, wages are being cut, and shifts are being reduced.

Tolyatti is the poorest city of Samara Oblast: 57% of its population is poor; 13% of young men are critically poor. For comparison, the poor in Vladivostok account for only 22% of the population. In Tolyatti, the level of registered unemployment is increasing but still remains relatively low, around 1.26%. However, the average monthly salary hovers around 21 446 rubles (343, 14 EUR) whereas pensions only reach 12 000 rubles (192, 00 EUR). Moreover, wages are not rising but falling as prices steadily go up. This is why the likelihood of social unrest in Tolyatti is extremely high according to Russian sociologists. In addition, Tolyatti’s automotive industry has been poisoned by corruption since the dismantlement of the Soviet Union. Gangsters are the protagonists of organized crime in the city, which has witnessed a wave of violent crimes: from 1998 to 2004, Tolyatti fell prey to a mafia killing spree resulting in 110 commissioned killings. Among the victims were five journalists.

Detroit

Detroit has long been going down a slippery slope to financial disaster. Due to the oil crises in the 1970s, Washington started blaming the single-industry city for air pollution, safety, and fuel economy problems. It was a “public relations nightmare”. Following the second oil shock in 1979 “the large rapid rise in the cost of gasoline caused America’s love affair with the automobile to go sour.” Simultaneously, buyers started purchasing small and efficient cars. Japan had the best models. As for Detroit consumer products, they had lost attractiveness as in the case of outdated Russian Ladas. Thus “the Japanese were selling about one of every four cars sold in the United States” in the 1980s whereas Chrysler and Ford were considering to pull out of North America as foreign competition was causing profits to plummet.

Thomas J. Sugrue, an American historian, noted that Detroit “is an extreme case of problems that have afflicted every major old industrial city in the U.S.” In short, the city has suffered from “steady disinvestment, depopulation and an intensive hostility between the city, the suburbs and the rest of the state” for more than 60 years. It suffered more than other cities because it didn’t diversify, Kevin Boyle, a Detroit historian, pointed out. In other words “Detroit's singular reliance on an auto industry that stumbled badly and its long history of racial strife proved a disastrous combination, and ultimately too much to overcome. All of the nation's industrial cities fell, but only Detroit hit bottom.” The end result is catastrophic: Detroit filed “the single largest municipal bankruptcy in American history” on July 18, 2013. It was staggering under a debt estimated at $18-20 billion in unpaid bills.

Energy crises along with the skyrocketing prices of oil have had devastating social consequences on Detroit: deserted city blocks, broken street lights leaving areas of the city in total darkness, rats outnumbering humans, unemployment rates reaching 25% (today 19%) and residential vacancy rates accounting for 27.8% by 2010 are only a few aspects of the city’s economic downturn. What is even more distressing is the high level of poverty: 37% of Detroit’s inhabitants live below the poverty line. In these difficult circumstances, many residents do not pay taxes. This traduces into “financial starvation” for Detroit as well as into a never-ending struggle to maintain social services. On another note, Detroit has been an unstable region for decades displaying record suicide and murder rates. It was home to the deadliest riot of the 1960s, became the U.S. murder capital in 1971, and was the 7th murder capital of America in 2014.

Federal response

The Russian government understands as clearly as the White House that anti-crisis programs must be adopted to save Tolyatti and Detroit respectively. Yet saving single-industry towns is a great challenge and federal initiatives are often inefficient.

Tolyatti

While economic sclerosis is growing in the country, Moscow is designing projects to promote economic diversification of monogoroda which suffer from underinvestment by federal authorities and have been hit hard by the financial crisis in 2009. Consistent with the above, the Kremlin is planning to save the auto industry in Tolyatti with subsidies of up to 271 billion rubles ($8 billion) by 2016. The rescue plan includes financial support for research and development, labor market inclusion and social security. In the federal plan for the development of Tolyatti, the city’s thorny problems are stressed: the dependence on volatile world commodity prices, the speed and depth of recession, low domestic demand, and the inability to reform. Generally speaking, the main problem hampering the development of Tolyatti is undoubtedly the lack of economic diversification and rigid dependence on the automotive industry. Simply put, the survival of Tolyatti depends on the survival of AvtoVAZ.

It can rightfully be assumed that the way federal subsidies will be distributed on the regional level and the efficiency in which the anti-crisis program will be carried out will have a decisive impact on the fate of Russian monogoroda. Should the positive outcome of Togliatti’s rescue program be slow to come, migration remains an option for local inhabitants. Indeed, those wishing to seek a better life elsewhere can obtain federal subsidies in accordance with the government’s re-population programs of the Russian Far East. Given that the Russian Far East is one of the most sparsely populated areas in the world, its demographic trends have raised federal concerns. However, this region’s appeal for Russian migrants is uncertain and debatable.

Detroit

The success of Michigan depends on the economic recovery of its largest city: Detroit. Presently, officials are facing the challenge to shrink the once glorious American Motown. This is not an easy task given the quantity of dilapidated properties and empty lots. Furthermore, it seems that the political will to rebuild Detroit is lacking. Nonetheless, federal aid has been granted to Detroit since December 2008. Under President George W. Bush, $25 billion in aid was spent to rescue the car industry. Also, the industry rescue was a key element of President Barack Obama’s reelection campaign. This is why President Obama poured $80 billion into General Motors and Chrysler Group, thus preventing the outright closure of both companies.  In 2014, it was estimated that “the U.S. government lost $9.26 billion on the auto industry rescue.” However, this loss is limited compared to the adverse effects of protracted bankruptcy which would “cost the state an estimated $270 million in social safety net costs over 20 years.” On a related issue, there is no present provision for Detroit’s federal bailout. Eliminating the city’s debt would create a precedent which could foster hope for federal bailout in other local U.S. governments on the edge of bankruptcy. This scenario is probably what the federal government intends to avoid.

If repopulating the Russian Far East is a priority for Moscow, the repopulation of Detroit is essential to Michigan. To achieve this, the Governor of Michigan, Rick Snyder, called for “an infusion of 50,000 immigrants as part of a program to revitalize Detroit, and signed an executive order creating the Michigan Office for New Americans” in January 2014. However, as the writer for Breitbart News John Hayward puts it, the architects and supporters of this idea “whistle past the immense social-services cost of ushering in fifty thousand impoverished refugees.” Moreover, problematic relocation plans go unmentioned. On the other hand, it should not be forgotten that the living conditions for the people of Detroit are dramatic and could not possibly be any better for Syrian refugees. Let’s recall, for example, that Detroit residents have faced water shutoffs this year. Water access was shut off by the City of Detroit to “delinquent residential customers” who were behind on payments. In October 2014, the UN rights experts had already stressed: “The Detroit Water and Sewerage Department has for months been disconnecting water services from households which have not paid bills for two months, and has sped up the process since early June, with the number of disconnections rising to around 3,000 customers per week. As a result, some 27,000 households have had their water services disconnected so far this year.” Many Detroit residents cannot afford to pay their water bills due to sky-high poverty and unemployment rates. Besides, the water shutoffs constitute a violation of the basic human rights of Detroit citizens, the UN human rights experts observed.

The scourges of single-industry towns

Monotowns are very grim places to live indeed. Poverty goes hand in hand with drug trafficking and the spread of deadly epidemics. This applies both to Tolyatti and Detroit.

Tolyatti

-Krokodil

Historically, Tolyatti has been the gateway to Europe for Afghan heroin. Currently, it is also a major hub for Krokodil traffickers. Krokodil, Russian for “crocodile” has devastating effects. Making use of Krokodil turns the skin scaly, like a crocodile’s. Rotting sores later appear. In short, the drug eats addicts up. Eventually, they end up rotting to death after their flesh goes grey and peels away leaving bones exposed.

Thousands of Krokodil addicts live in Tolyatti on an estimated two million in the Russian Federation, mostly concentrated in isolated Russian regions. Krokodil, which appeared in Russia about a decade ago, is the homemade “drug for the poor”: a batch costs roughly $10. Krokodil is made of codeine from headache pills, petrol and acid, which are all household poisonous ingredients. Being a Krokodil addict is a full-time job given that cooking the drug takes 30 minutes while a high only lasts from 30 to 90 minutes. Apparently, Krokodil is tougher to quit than heroine and is also quicker to kill. Drug rehabilitation for Krokodil patients is a very painful process: “With heroin withdrawal, the main symptoms last for five to 10 days. After that there is still a big danger of relapse but the physical pain will be gone. With krokodil, the pain can last up to a month, and it's unbearable. They have to be injected with extremely strong tranquilizers just to keep them from passing out from the pain.”

Most Krokodil addicts were once heroin addicts who couldn’t afford their next hit. Hence, they unwillingly converted to Krokodil and experienced a horrific sensation. In this respect, a krokodil addict mentioned: "You can feel how disgusting it is when you're doing it, […] you're dreaming of heroin, of something that feels clean and not like poison. But you can't afford it, so you keep doing the krokodil. Until you die.”

The Kremlin reacted to the Krokodil epidemic by closing websites containing homemade drug tutorials. Yet the government failed to introduce an important measure quickly: to make codeine-based tablets available only on prescription. Besides, the benefits for pharmaceutical companies were huge as the new deadly drug boosted the sales of codeine-based tablets by dozens of times in Russia.

-HIV

“Injecting drug use (IDU) is the predominant mode of HIV transmission in Russia”. More than 90% of HIV cases are due to drug injecting with contaminated needles. More than 1% of the population is affected by the HIV-epidemic in Samara Oblast. Half of the cases are in Tolyatti. Not surprisingly, most Krokodil patients are HIV positive. In Tolyatti, the HIV epidemic has been explosive since 1999. Given that Tolyatti’s population is young and extremely poor, the city has recently become an important “AIDS Town in Russia”. In short, this chilling status unmistakably reflects Togliatti’s past and present scourges.

Detroit

-Heroin and cocaine

The U.S. state of Michigan is particularly exposed to drug smuggling. This is because it is located between the drug markets of Chicago and New York; its shared international border with Canada also makes Michigan susceptible to drug trafficking. A key source location for illicit drug trafficking is Detroit. The two main drugs that can be found in Detroit are heroin and cocaine. Heroin admissions in Michigan mainly concern the young. In 2013, an increase in treatment admissions for African Americans was detected.

Illegal drug distribution has progressively replaced the weakened car empire. This social evil has been a chief feature of Detroit for a long time. Let’s recall that “in the spring of 1972 the bureau of narcotics sent John Sutton to Detroit on a special assignment to infiltrate and bring down the city's largest black heroin dealers.”

-HIV

According to official statistics “From January to October 2013, people with newly diagnosed HIV infection continued to be disproportionately living in the six-county metropolitan Detroit area; 60 percent were from metropolitan Detroit, an area that constitutes only 43 percent of Michigan’s total population.” Moreover, the diagnosed HIV cases were disproportionately male (81 percent) and African-American (60 percent). The risk factor reported by seven percent of newly diagnosed HIV patients was drug injection sometimes combined with high-risk sexual behaviors.

Conclusion

The comparative analysis of Tolyatti and Detroit from a socioeconomic perspective has yielded interesting results. High population density is a key feature of single-industry towns. Roughly the same number of inhabitants live in Tolyatti and Detroit today. However, if Detroit’s population is declining, Tolyatti’s remains rather stable. The socioeconomic situation in both cities is extremely alarming yet two main differences can be highlighted. First, the population in Tolyatti is poorer than in Detroit (57% under the poverty line versus 37%). Conversely, the Russian single-industry city wasn’t hit hard by unemployment like the American motor town (1.26% in Togliatti versus 19% in Detroit). Presumably, low wages in Tolyatti can clarify this discrepancy. Second, Detroit has filed municipal bankruptcy whereas Tolyatti has not. Accordingly, the Russian government seems to be more efficient in keeping its monogorod afloat than the White House, which has essentially injected money into saving the automotive business without saving the city. On another note, programs to enhance the local population’s living conditions have not proven very successful neither in Detroit nor in Tolyatti. Hence, criminality and drug trafficking are the dark sides and consequences of poverty. They add up to human rights violations in Detroit concerning water shutoffs and to the Russian government’s inability to put an end to the Krokodil epidemic. Further, Tolyatti and Detroit are a demonstration of the fact that a city cannot survive without diversifying in the current economic system. In any case, the ultimate victims of economic isolation are local residents, whether they are living in depopulated areas with no water in Detroit or injecting poisonous substances into their veins in Tolyatti. In both cities, some look ahead to the future and see nothing to look forward to. To reverse this tendency, consistent federal programs promoting social rights as well as a strong political are needed in both countries so as to pull monotowns, such as Detroit and Tolyatti, out of social and structural misery.

Annick Valleau

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